Investment Grade Bond Research - September 9, 2019

CONSUMER BORROWING RISES IN JULY as Americans racked up credit card debt surging 11.2 percent. Additionally, borrowing increased at the fastest rate in almost 2 years. Overall consumer credit growth clocked in at 6.8 percent up from 4.1 percent in June. Home purchasing sentiment ticks higher as mortgage rates fall upon global uncertainty, “We do expect housing market activity to remain relatively stable, and the favorable rate environment should continue supporting increased refinance activity,” Fannie Mae chief economist Doug Duncan. The 10-year note rose 7.8 basis points. S&P -0.17%, DOW +0.07, NASDAQ -0.56%.

AT&T BONDS TRADED NOTABLY HIGHER ON MONDAY following activist investor Elliot Management, a hedge fund, disclosed a $3.2 billion stake.  The fund sent a letter to AT&T explaining its Activating AT&T Plan and the opportunity ahead as it believes the stock is “deeply undervalued”. WTI Crude advanced2.49 percent rallying after the new Saudi Energy minister pledges to maintain output cuts, “Its almost certain that policy will not change,” said one OPEC official. Saudi Arabia, the world’s largest oil exporter has taken a back seat pumping out less than 10 million barrels a day significantly less than the OPEC allotment.  ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-yield edged out high-grade. Among high-yield bonds showing topmost price gains at appreciable volumes traded,  Whiting Petroleum Corp. (USD) 6.625% 1/15/2026 made analysts' 'Conviction Buy' list (See the chart below for AT&T bonds below) Corey Mahoney

 

Key Gainers and Losers	Volume Leaders
+   AT&T Inc. 4.55% 3/9/2049 + 0.4%   AT&T Inc. 4.5% 3/9/2048 + 0.6% -   AT&T Inc. 4.35% 3/1/2029 -0.0%	AT&T Inc.   4.55% 3/9/2049

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.01% -0.07% 0.68% 2.30% 10.13% 9.92% Mining 0.01% -0.20% 1.35% 4.97% 12.36% 11.22% Construction 0.05% -0.17% 0.83% 4.80% 9.96% 9.52% Manufacturing 0.08% -0.26% 1.43% 5.20% 10.84% 10.16% Transportion, Communication, Electric/Gas 0.10% -0.40% 1.67% 6.72% 14.29% 13.59% Wholesale 0.02% -0.17% 1.33% 4.83% 12.21% 10.65% Retail 0.09% -0.29% 1.65% 6.12% 12.49% 12.02% Finance, Insurance, Real-Estate 0.05% -0.16% 1.02% 3.76% 9.41% 9.70% Services 0.09% -0.29% 1.56% 4.96% 10.87% 11.17% Public Administration 0.07% -0.01% 0.67% 1.92% 4.80% 5.98% Energy 0.02% -0.23% 1.26% 5.14% 12.80% 11.33%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Plains All American Pipeline LP (USD) 3.55% 12/15/2029 (09/09/2019): 1000MM Senior Unsecured Notes, Price at Issuance 99.801, Yielding 3.57%. 2. Principal Fin Gobal (USD) 2.5% 9/16/2029 144A (09/09/2019):400MM Secured Notes, Price at Issuance 99.325, Yielding 2.58%.

NEW ISSUANCE WATCH: on 09/06/19 participants welcome a $500M new corporate-bond offering by
Spirit Realty LP. The most recent data showed a significant flow into fixed income ETFs for the month of August, with a net inflow of $14.0 billion.

 

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)	SuperValu Inc. (5Y Sen USD MR14) San Miguel Corp. (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Murphy Oil USA Inc., Electronic Arts Inc., AutoData, PaySimple Inc., Nike Inc., US Foods Inc.

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 held below 19 bp (basis points), as of 09/09/19
• Net positive capital flows into high-yield ETFs & mutual funds

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