More From Sandra Nathanson
Must-know update: Redbook Index same-store sales data released
The Redbook Index released the same-store weekly data on Tuesday, March 11, 2014.
Must-know: Why refinancing remains the focus for leveraged loans
Unlike the previous week, last week, issuers swarmed the market with repricing deals. Nearly half of the deals were refinancing.
The demand for 4-week Treasury bills remained subdued last week
A considerable amount of $35 billion was offered for the weekly four-week T-bills auctioned on Tuesday, March 4, 2014.
Case-Shiller 20–city Index continued to favor higher home prices
The Case-Shiller 20-city Index report released on Tuesday, March 25, 2014, also pointed at an improvement in home prices.
Pianalto’s take on the Fed funds rate before the financial crisis
When consumers can borrow at lower interest rates, they can afford to buy more goods and services, and the businesses that supply those goods and services can hire more people.
Investors keep providing liquidity to investment-grade bonds
While issuers’ activity waned last week, many investors continued to pore over the new issues that hit the corporate bond market (LQD).
Must-know leveraged loan update: Issuance increased last week
The primary loan market remained busy with opportunistic issuers coming in to test the investor’s interest for floating interest rate loans.
Why do unemployment and inflation growth hurt consumer spending?
Inflation erodes the value of money people hold, and more importantly, the threat of inflation adds to uncertainty, which makes both the consumer and the corporate less confident about their spending.
Weekly fund flows: High yield bonds and leverage loan ETFs
Investor sentiments favored the U.S. equity and high yield bond market The Vanguard Total Bond Market ETF (BND) has rallied almost 1.5% since the start of the year and was down by 11 bps last week. In line with that, the Power Shares Senior Loan Portfolio (BKLN) ETF, which mainly tracks the leveraged loans, reported […]
Why does the loan market see continued interest from investors?
Last week, the leveraged loan market (BKLN) had an inflow of $411 million compared to $600 million inflows in the previous week.
Why the decline in Treasury rates helped the leveraged loan market
Contrary to high yield bonds (HYG), leveraged loans posted a better-than-expected week.
Comparing leveraged loans and high yield bonds: Investor base
Both leveraged loans (BKLN) and high yield bonds (HYG) have a similar investor base, with the exception of banks in leveraged loans.
Why these 5 states saw the highest home price appreciation
Home prices rebounded 0.8% in December after easing 0.1% the month before. Excluding some monthly volatility, home prices have been in an uptrend.
Why high yield weekly issuance continues to favor suppliers
Last week ended on a similar mood as the previous week. Issuers continued to supply bonds to the hungry market. High yield issuance ended the week 26% higher than the previous week.
Must know: The trading markets available to the investors
Retail investors mostly prefer the secondary market for buying Treasuries as it eliminates a lot of paper work and other administrative hassles.
Why does Sandra Pianalto think the economic progress to be slow?
Although GDP grew at a little under 3.5% in the second half of 2013, up from an average rate of 2% in the past three years, inflation remains at ~1% level, well below the Fed’s long-term target of 2%.
Why dividend recapitalization is the sweet spot for leveraged loans
While M&A activity was still below market prospects, demand for dividend recapitalization deals was mostly strong last week.
Why emerging markets have been so turbulent in recent months
With a huge amount of payments coming due—about $13 billion this year and $16 billion before the end of 2015—Ukraine may require a bailout.
Demand shocks: Why high yield bond funds flows moved up
Know why the high yield bond market rebounded after two weeks of consecutive outflows.
Why did new high yield bond issuance spike last week?
High yield issuance last week rebounded sharply from the past two weeks’ lows. Issuers took advantage of strong market conditions for debt offered at relatively low borrowing costs.
Why is the high yield bond market seeing so much fresh supply?
Strong weeks of issuance signify an overall bullish market. High yield issuance for last week was at its strongest so far in 2014.
Setback: Why did high yield bond fund flows decline last week?
While most of issuers were busy wrapping up the month, a few late comers gazed at the high yield bond market to seize the lower interest rate opportunity.
Must-know weekly bond market outlook: Investors favor high yield
Overall, a good number of issuance came to market last week. However, bond market prices were mainly down, as the yield on ten-year U.S. Treasury and BAML Index soared.
How bond prices, interest rates, and credit spreads correlate
Bond prices and interest rates have an inverse relationship. If an interest rate increases, the price on a bond declines, and vice versa.
Why credit risk is an essential value driver of high yield bonds
Bonds are highly sensitive to credit risk—other than U.S. Treasury securities, which are more prone to interest risk. Credit risk hugely varies.
Spread risk: Why credit ratings are a key risk determinant
Credit ratings assess the credit-worthiness of a borrower and assign a grade based on the borrower’s business operation and financial stability.
Must-know: Why do lower-rated bonds have higher yields?
High yield bonds are further sub-categorized into various grades to distinguish between highly speculative, extremely speculative, and default companies.
An investor’s guide to the US leveraged financial market
According to the Securities Industry and Financial Market Association, SIFMA, the total U.S. fixed income market size is about $38.6 trillion.
Comparing leveraged loans and high yield bonds: Credit rating
Credit rating measures the credit-worthiness of a debtor with respect to its financial and operational stability. Rating agencies such as Moody’s and Standard & Poor’s specialize in rating credit to government agencies and corporates.
Comparing leveraged loans and high yield bonds: Interest rates
Leveraged loans (BKLN) generally pay a quarterly floating rate, quoted as a spread to a benchmark. On the other hand, high yield bonds (HYG) pay a fixed interest rate specified by the bond’s coupon.
Comparing leveraged loans and high yield bonds: Key distinctions
Leveraged loans (BKLN) are almost always secured or backed by a specific pledged asset or some form collateral. On the other hand, high yield bonds (JNK) may be secured or unsecured.
Comparing leveraged loans and high yield bonds: Debt terms
Another item that differentiates leveraged loans from high yield bonds is “covenants,” or the financial health metrics that issuers must adhere to.
Why the outlook for below–investment-grade bonds is positive
The yield on the U.S. ten-year Treasury increased to 2.7% from 2.6% the previous week after Janet Yellen reiterated her plans to continue with tapering.
Why high yield means more interest risk than investment-grade bonds
Other things being equal, bondholders in the fixed income market are essentially exposed to two significant risks: credit risk and interest risk.
Key differences between high yield and investment-grade bonds
Investment-grade corporate bonds (LQD) carry inferior yields compared to high yield bonds (JNK) with the same maturity date.
Why the bid/cover ratio for the 6-month Treasury bills declined
Despite an increase in the six-month Treasury interest rates, last week’s coverage at 4.46x was lower than the previous week’s 4.76x bid/cover ratio.
Why was the 3-month Treasury bill auction strong last week?
Last week, the three-month T-bill interest rate remained neutral in line with the Federal funds rate target.
Why Jeffrey Lacker says the Fed should focus on its dual mandate
Monetary policy is one of two tools the government uses to control the economy. Fiscal policy is the other tool.
Comparing the ICSC, Census Bureau Retail Sales, and Redbook Indexes
The Census Bureau Index is a broad barometer of the retail sales, whereas the Redbook and ICSC Indexes only include chain store sales.
Investors are interested in the long end of the Treasury curve
In contrast to the three-week auction—where lower demand resulted in high yield—the U.S. ten-year Treasury note (TLT) auctioned on Wednesday, March 12, attracted the highest demand in a year.
Why was the short-term T-Bills auction strong last week?
The short-term securities that have already been auctioned last week include four-week, 13-week, and 26-week T-Bills.
Why high yield fund flows stayed positive 6 weeks in a row
High yield bond flows last week posted the straight sixth week of positive inflows, though the pace was lower than the previous week.
Knowing the Treasury discount rate and yields before investing
Investors can take an informed decision by knowing the rate of return on their investment.
Why leveraged loans were all about refinancing last week
Nineteen issuers came to market with an average ticket size of $728 million. This compares to 20 deals that hit the leveraged loan market the previous week, with the average ticket size of $750 million.
Exxon printed investment-grade bonds for the first time in 21 years
Last week, Exxon Mobil issued a five-part $5.5 billion bond consisted of three and five-year fixed and floating rate notes and a ten-year tranche.
Why Chicago’s manufacturing sector is no more a market concern
The CFNAI indicated a positive comeback after two months of poor manufacturing data, which was impacted by severe weather conditions.
Gross domestic product and price inflation impact Treasuries
Last week, the Bureau of Economic Analysis released its quarterly update on U.S. GDP, which indicated a decline in the fourth quarter 2013 GDP at 2.6%.
Why tight bidding for bonds favored issuers and refinancing
Most of the deals last week were in the tight ends of the talk, indicating higher demand for high yield bonds (JNK). The higher demand in turn pushes yields down.
Why did demand for floating-rate paper increase last week?
As expectations for higher interest rates continued, investors centered their focus on floating-rate loans to capitalize on interest rate volatility.
Why mortgage applications plummeted when interest rates increased
Mortgage applications fell 3.5% for the week ending March 21 because mortgage rates spiked.
Why the 7-year Treasury note auction shrugged off rising rates
Seven-year Treasury notes are announced monthly, usually in the third week of the month (on Thursday), and then auctioned the following week.
Why do Pianalto’s economic views as a centrist matter to the Fed?
Pianalto has long supported the Fed’s aggressive policies to lift the economy from recession. She is seen as a centrist whose views reflect those of the Fed’s core decision makers.
Why the consumer confidence rose on the FOMC meeting’s conclusion
The FOMC indicated an expected decline in the unemployment rate at 6.3% for 2014, which has boosted the consumer confidence.
United Airlines launches a $949 million equipment trust certificate
United Airlines (UAL), a leading passenger airline company in North America with a market capitalization of $15.9 billion, issued a $949.5 million enhanced equipment trust certificate.
Why did the durable goods orders beat the analysts’ expectations?
The latest durables orders report exceeded the analysts’ expectations with the headline figures at 2.2% in February 2014, compared to 1.0% growth projected by the analysts.
Why the Treasury bills auctioned last week remained high in demand
The U.S. Treasury Department auctioned $25 billion in three-month bills at a discount rate of 0.045%, down from 0.050% previous week.
Why the weekly auction for the 52-week T-bill was strong last week
The 52-week T-bill was issued at a discount of 0.125%—up from the last month’s discount of 0.120%. The bill is expected to mature on April 2, 2015.
What is driving the high yield bonds’ weekly supply market?
The high yield bond issuance for last week was relatively modest with $7.5 billion bonds printed by 14 issuers.
Why the demand in the high yield bond market rebounded last week
The high yield bond funds flow turned positive last week after a relatively small outflow the previous week, which broke the line of seven straight weeks of inflows.
The leveraged buyouts were hot; refinancing deals saw withdrawals
A total of 18 issuers came to the market with an average ticket size of $911 million last week.
Leveraged loans maintained a 94th straight week of positive inflows
The U.S. leveraged loan market registered a straight 94th week of increase in net investors’ cash flows according to Lipper, a division of Thomson Reuters.
The Redbook and ICSC-Goldman Sachs Retail Indices remain volatile
The weekly snapshot of retail sales compiled by the ICSC-Goldman Sachs and the Redbook Indices indicated that consumer spending was moderate throughout for the first week of April.
Make an informed decision: How to choose the right retail ETF?
There are many retail ETFs in the U.S. tracking the performance of their own benchmark for highly liquid large caps and small caps retail stocks —where should you invest?
Southwestern Energy is 1 of the lowest-cost upstream producers
Southwestern Energy is one of the lowest-cost producers in the upstream energy space in terms of both lifting cost and finding and development cost.
Why follow natural gas industry fundamentals and future prices?
Nearly all of Southwestern’s production is natural gas. So natural gas prices are an incredibly important determinant of revenues and earnings for the company.
Southwestern is among the largest US oil and natural gas producers
Headquartered in Houston, Texas, Southwestern Energy Corporation (SWN) is one of the largest independent natural gas and oil producers in the United States.
Refinancing deals continue to top the high yield bond scoreboard
Refinancing deals allow issuers or corporations to raise additional funds to meet maturing debt obligations or to replace existing high-cost debt with a new low-cost debt.
The Redbook Index release indications: Discount and other stores
Pharmacy sales are not as highly impacted with the decline in the consumer spending as the sales for discount retailers.
How does the Redbook Index help fixed-income and equity investors?
The Redbook Sales Index compiles and analyzes comparable store sales at more than 9,000 stores.
What are the major indicators covered in the Redbook Index?
The Redbook Index tries to provide near-real-time weekly assessments of the consumer buying activity in large retail chain stores.
Why was high yield bond activity little changed last week?
Last week, issuance in the high yield bond market was moderate, at $5.40 billion. This was 400 million less than the previous week’s issuance of $5.80 billion.
Why the FOMC revised the GDP and unemployment rate statistics
Based on the current and future U.S. economic outlook, the committee forecast on GDP and the civilian unemployment rate have been revised downward.
Why the investment-grade bond market declined last week
A total number of 26 issuers accessed the market, with an average ticket size of $1.30 billion.
Opportunity: Southwestern Energy’s 2014 capex plans and guidance
Over 99% of SWN’s production is currently natural gas, so the company is very levered to changes in the commodity’s price.
Why treasury yields increased on the hint of an interest rate spike
On the expectation of the tapering to finish by the end of the year, about 13 FOMC participants indicated at the first Fed funds rate hike in 2015.
How the retail sales index impacts Wal-Mart and other retailers
The retail same-store sales releases this week are some of the major indicators to assess consumer spending patterns.
Why March has seen a moderate rise in New York manufacturing
Every month, the Federal Reserve Bank of New York conducts a survey to gauge current and expected activity trends in the New York manufacturing sector.
The high yield bonds’ preferential pricing: Investor demand drops
Of the total number of deals that hit the market, about 67% of the issuance was refinancing or repricing deals.
An update for high yield bondholders: Why the market fell last week
The high yield bond market activity declined dramatically last week with issuance reaching $5.8 billion.
BB-rated bond deals: The AES Corporation versus Access Midstream
Both the AES Corporation and Access Midstream Partners tapped the high yield bond market and raised $750 million each.
As earnings season picks up, so does investment-grade bond issuance
Earnings season comes four times a year. Each season releases the quarterly earnings of a large number of publicly traded companies.
Why demand for Treasuries is on the rise despite falling rates
Last week (ended February 27, 2014), a range of short-term and long-term U.S. Treasury bills and notes worth $194 billion was issued at auction.
Recommendation: Key high yield and investment-grade bond ETFs
Some well known high yield bond ETFs include the iShares iBoxx $ High Yield Corporate Bond (HYG), the SPDR Barclays Capital High Yield Bond ETF (JNK), and the PowerShares High Yield Corporate Bond (PHB).
Comparing high yield bonds and investment-grade corporate bonds
Ratings are essential from both investors’ and issuers’ points of view. For an issuer, credit rating is a strong reflection of a company’s credibility.
Why is the high yield bond market obsessed with refinancing?
Despite the higher Treasury yield, 12 issuers came to market with an average ticket size of approximately $430 million—mostly to refinance existing debt.
Why did last week’s high yield bond issuance remain subdued?
The week saw higher high yield bond prices. However, high yield bond (HYG) new issuance for the week ended February 14, 2014, plummeted 18% on concerns of the increased U.S. ten-year Treasury yields.
Comparing leveraged loans and high yield bonds: Important ETFs
There are many ETFs that track the high yield bond market. The prominent ones are HYG and JNK, which collectively hold ~95% of the high yield bond ETF market share, and PHB.
Why Southwestern Energy’s midstream operations are significant
SWN notes that as of September 30, 2013, its midstream operations gathered ~2.3 billions of cubic feet of natural gas per day.
Why the Fayetteville Shale is so important to Southwestern Energy
Since SWN began operations in the Fayetteville Shale in 2004, the company has drilled and acquired substantial acreage in the play.