Investment Grade Bond Research - September 4, 2019

U.S. TRADE GAP SHRANK IN JULY as exports rebound causing the deficit to decline by 2.7 percent. Industrial supplies lead the drop in imports falling by 7.4 percent month over month. “The ongoing trade war between the world’s largest economies has hurt China perhaps more than the U.S. but a few signs of a slowdown have now emerged in the U.S. too.” The 10-year note lost 0.4 basis points. S&P+0.84%, DOW +0.68, NASDAQ +1.09%.

CRUDE OIL SURGES 4.38 PERCENT as analysts forecast a reduction in U.S. supplies following uplifting economic data reporting China’s service sector expanded at a faster than anticipated. In the U.S. supplies declined for the third straight week. “Oil prices however remain focused on the trade war and the longer we don’t see a date scheduled for a face-to-face meeting between Chinese and U.S.” ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Florida Power & Light (USD) 5.125% 6/1/2041  made analysts' 'Conviction Buy' list. (See the chart below for Florida Power & Light bonds below.) Corey Mahoney

 

Key Gainers and Losers	Volume Leaders
+   AT&T Inc. 4.5% 3/9/2048 + 1.5%   EQT Corp. 3.9% 10/1/2027 + 0.8% -   Walt Disney Co. 1.8% 6/5/2020 -0.1%	Altria Group Inc.   4.8% 2/14/2029 Apple Inc.   FLT% 2/9/2022

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.11% 0.23% 1.32% 2.54% 10.37% 9.90% Mining -0.03% -0.26% 1.99% 4.92% 12.58% 11.13% Construction 0.03% -0.03% 1.58% 4.86% 10.35% 9.80% Manufacturing 0.03% -0.17% 2.29% 5.52% 11.21% 10.12% Transportion, Communication, Electric/Gas 0.01% -0.22% 3.02% 7.01% 15.17% 14.03% Wholesale 0.07% 0.14% 2.03% 5.09% 12.61% 11.04% Retail 0.08% -0.20% 2.68% 6.02% 12.68% 11.61% Finance, Insurance, Real-Estate 0.04% -0.07% 1.66% 3.84% 9.55% 9.54% Services 0.02% -0.19% 2.68% 5.47% 11.96% 11.92% Public Administration 0.04% 0.00% 1.04% 1.77% 4.72% 5.83% Energy -0.04% -0.29% 2.03% 5.00% 13.03% 11.21%   Total returns (non-annualized) by rating, market weighted.

New Issues

New Issues [Continued]

1. Deere & Co. (USD) 2.875% 9/7/2049 (09/03/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.96, Yielding 2.88%. 2. Alexandria Real Estate Equities Inc. (USD) 2.75% 12/15/2029 (09/03/2019): 400MM Senior Unsecured Notes, Price at Issuance 99.842, Yielding 2.77%. 3. Willis North America Inc. (USD) 3.875% 9/15/2049 (09/03/2019):550MM Senior Unsecured Notes, Price at Issuance 99.595, Yielding 3.9%.

NEW ISSUANCE WATCH: on 09/03/19 participants welcome a $500M new corporate-bond offering by
Deere & Co. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 8/16/19, with a net outflow of $4.07 billion.

 

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Hertz Corp. (5Y Sen USD XR14) Hovnanian Enterprises Inc. (5Y Sen USD MR14)	Cable & Wireless Communication (5Y Sen USD CR14) SuperValu Inc. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Electronic Arts Inc., AutoData, PaySimple Inc., Nike Inc., US Foods Inc., Duerre Group

OVERALL CREDIT MARKET: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 was 18 bp (basis points), as of 09/04/19
• Net positive capital flows into high-yield ETFs & mutual funds

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