Investment Grade Bond Research - October 17, 2019

Written by Corey Mahoney | Oct 18, 2019 4:44:57 PM

U.S. MANUFACTURING DECLINED IN SEPTEMBER as the global economic slowdown starts to take a toll on the economy. Overall production slipped 0.4 percent largely due to a pullback in the mining sector. Homebuilding follows suit retreating from 12 year-highs as housing starts fall 9.4 percent. “It inches them forward to taking out a little more insurance to help support the economy that continues to face the headwinds of reduced world trade from tariffs.”

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JOBLESS CLAIMS RISE MARGINALLY IN OCTOBER ticking higher by 4,000 applications during the week end of October 11^th. A General Motors strike caused a slight increase of claims in Ohio and Michigan however, the impact won’t be seen until the end of the month. United Auto Workers, the General Motors Union delivered a tentative deal including the closure of multiple U.S. plants and a “ratification” bonus to union members. High-yield edged out high-grade. Among high-grade bonds showing topmost price gains at appreciable volumes traded, L Brands Inc. (USD) 6.875% 11/1/2035 made analysts' 'Conviction Buy' list (See the chart above for ADI bonds above.) Corey Mahoney

Key Gainers and Losers

Volume Leaders

+	JPMorgan Chase & Co. 3.702% 5/6/2030	+ 0.1%
	Kraft Heinz Co. 3.75% 4/1/2030 144A	+ 0.2%
-	MPLX LP 5.5% 2/15/2049	-0.0%

AT&T Inc.   4.5% 3/9/2048
Bank of America Corp.   3.559% 4/23/2027
CVS Health Corp.   5.05% 3/25/2048

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	0.19%	-0.09%	1.00%	1.47%	5.84%	6.55%
Mining	-0.01%	-0.52%	0.46%	2.50%	11.72%	11.51%
Construction	0.00%	-0.54%	1.07%	2.69%	8.98%	9.68%
Manufacturing	0.02%	-0.49%	1.01%	3.31%	10.67%	11.14%
Transportion, Communication, Electric/Gas	-0.03%	-0.71%	1.19%	4.08%	13.71%	14.77%
Wholesale	0.05%	-0.38%	0.93%	3.29%	12.31%	11.74%
Retail	0.02%	-0.55%	1.07%	3.82%	12.17%	12.82%
Finance, Insurance, Real-Estate	0.06%	-0.37%	0.86%	2.56%	9.22%	10.25%
Services	0.05%	-0.51%	1.21%	3.37%	10.69%	11.98%
Public Administration	0.06%	-0.31%	0.54%	1.69%	4.77%	6.88%
Energy	-0.01%	-0.55%	0.48%	2.47%	12.00%	11.62%

Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Santander Holdings USA (USD) FLT% 7/21/2023 (10/16/2019): 439MM Senior Unsecured Notes, Price at Issuance 100. 2. Bank of Montreal (USD) 2.05% 11/1/2022 (10/16/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.883, Yielding 2.09%.

New Issues

New Issues [Continued]

1. Santander Holdings USA (USD) FLT% 7/21/2023 (10/16/2019): 439MM Senior Unsecured Notes, Price at Issuance 100.

2. Bank of Montreal (USD) 2.05% 11/1/2022 (10/16/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.883, Yielding 2.09%.

Additional Commentary

NEW ISSUANCE WATCH: on 10/17/19 participants welcome a $1500M new corporate-bond offering by
Toyota Motor Credit Corp. The most recent data showed a money flowed out of highyoutflow ETF/mutual funds for the week ended 9/27/2019, with a net outflow of $258 million.

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Weatherford International LTD (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD CR14)	San Miguel Corp. (5Y Sen USD CR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

Live Nation Entertainment Inc., Berry Plastics Corp., Raytheon Co., Shearer's Foods Inc.

Long-term bond yields are expected to hit a cyclical peak in 2019 given tight fiscal policy and lagging global economies. Europe remains checked by stubbornly low inflationary forces. Positive effects remained in force:

TED spread held below 35 bp (basis points), as of 10/17/19
Net positive capital flows into high-yield ETFs & mutual funds

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