Jobs report lifts high yield and equities; O&G propped by expected production extension; Hertz rises on Manheim report – Mid-Day Commentary

The Labor Department’s jobs report for May released this morning sent the debt and equity markets – especially for travel-related and COVID-19-exposed names – flying high, according to two sellside analysts and a trader. 

“A rising tide lifts all boats. The market is up on the whole, especially the names that were dragging,” one of the analysts said.

Non-farm payrolls for the month increased 2.51m, compared to an expected decline by 7.5m and a 20.6m decline in April, according to the report. The unemployment rate fell to 13.3% from 14.7% in April. The rate was expected to rise to 19% for May. 

“Just frothy. Everything is being lifted. Whatever you got. It was that way all week. Now the jobs numbers have made [the market excessively bullish],” an additional source said.

Despite the good news, the US isn’t out of the woods yet, added a credit strategist, highlighting a 17m hole in private-sector non-farm payrolls.

Airborne

Still, when it comes to high-yield trading today, investors pounced on the positive aspects of the macro data as being good indicators for a host of aerospace borrowers. Among them, Boeing’s USD 3.5bn 5.93% senior unsecured notes due 2060 traded up to 120.5, compared to trades at 118.2 yesterday. Meanwhile, the company’s stock rose 17.3% on the day to USD 216.19 per share for a market cap of USD 121.54bn. 

Bombardier’s USD 1.2bn 6% senior unsecured notes due 2022 traded at 84.25 this morning for a 14.094% yield compared to 78.5 to yield 17.5% yesterday, according to MarketAxess. 

American Airlines’ USD 750m 5% senior unsecured notes due June 2022 traded at 77.5 for a 19.2% yield compared to 71.5 to yield 23.89% yesterday. The company’s stock traded today at USD 19.88 per share for a market cap of USD 8.43bn, up 18.9% from yesterday’s close. 

United Airlines’ USD 400m 4.25% senior unsecured notes due 2022 traded at 89.4 this morning for a 9.458% yield, up from 86 to yield 11.286% yesterday. The company’s stock traded today at USD 45.10 per share for market cap of USD 13.13bn, up 15.35% from yesterday’s close. 

In turn, new issues from Royal Caribbean Cruises and L Brands are also seeing a surge in bond trading levels. 

Royal Caribbean’s USD 1bn 9.125% senior unsecured notes due 2023 traded at 104.25 for a 7.404% yield this morning after being issued at par yesterday, according to MarketAxess. The company’s stock traded today at USD 68.84 per share for a market cap of USD 14.41bn, up 19.33% from yesterday’s close. 

L Brands’ new USD 500m 9.375% senior unsecured notes due 2025 traded at 107 for a 7.672% yield this morning after being issued at par yesterday, according to MarketAxess. The company’s stock traded today at USD 19.74 per share for a market cap of USD 5.48bn, up 10.56% from yesterday’s close. 

Loan market

The leveraged loan market still suffers from retail fund outflows, which are about USD 22bn through May, but the index has recovered in bifurcated form, said a portfolio manager. 

The average prices for double B and single B loans are 95 and 93 respectively, but the triple C market still languishes in the mid-70s. Clearly the buyside is being selective in their exposure but broadly, the leveraged loan market has recovered to 90 from a low of 76 in March, the portfolio manager said.

The rally has given the CLO market confidence to issue new deals, said the portfolio manager. Zais, Onex and HalseyPoint priced deals this week, according to Creditflux, an affiliate publication. CVC priced new deals in Europe and the US over the past few weeks while CIFC is targeting a post-coronavirus tight of 170bp on its triple A tranche, according to Creditflux.

“We are seeing CLOs pick-up so these new issues aren’t just warehouses that were problems for banks and CLOs that needed to be worked out,” said the portfolio manager.

While sources for loan demand are picking up, supply is still down and won’t return until sponsor activity picks back up. LBO lending is down 46% year to date and total institutional lending is down 16% year to date, said the portfolio manager.

Oil patch

In tandem with better jobs numbers, crude oil prices rallied today on the news that OPEC is expected to extend production cuts through July, according to two buysiders.

WTI crude traded up to USD 39.07 per barrel, up 4.44% from yesterday’s close. Brent crude rose 5.2% to USD 42.07 per barrel. 

Occidental Petroleum’s USD 1.5bn 3.5% senior unsecured notes due 2029 traded up to 74.5 this morning to yield 7.369% from 71.75 yesterday, according to MarketAxess. The USD 750m 4.1% notes due 2047 traded up three points to 62.9 to yield 7.266% from 59.9 on 3 June. The company’s stock traded today USD 19.4 per share for a market cap of USD 17.7bn, up 23.7% from yesterday’s close.

QEP Resources’ USD 332.3m 6.875% senior unsecured notes due 2021 jumped to 92 this morning for a 19.106% yield compared to 81 on 4 June, according to MarketAxess. Its stock is trading at USD 1.49 per share for a market cap of USD 359.6m, up 37% from yesterday’s close.

Whiting Petroleum’s USD 1bn 6.625% senior unsecured notes due 2026 traded at 13.5 compared to 12 on 27 May, according to MarketAxess. Its stock is trading at USD 1.13 per share for a USD 103.3m market cap, up 33.6% from yesterday.

Oasis Petroleum’s USD 834.5m 6.875% senior unsecured notes due 2022 traded at 22.5 this morning after changing hands at 18.25 on 1 June. The company’s stock traded today at USD 0.84 per share for a market cap of USD 269.31m, up 50.8% from yesterday’s close.

Overdrive

Two weeks after filing for bankruptcyHertz bonds and stock got a boost from the Manheim Used Vehicle Value Index, a benchmark for the used auto market, according to two analysts.

Wholesale used vehicle prices increased 8.96% month-over-month in May. The report also showed recovering retail results for vehicle sales. 

Hertz’s USD 800m 5.5% senior unsecured notes due 2024 jumped to 31.5 from trades at 22.75 yesterday (4 May), according to MarketAxess. The USD 500m 6.25% senior unsecured notes due 2022 traded today at 26.25, compared to 23.75 yesterday. The company’s stock traded today at 2.97 per share for a market cap of USD 423.325m, up 98.33% from yesterday’s close.

2020 Debtwire

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