美股-信貸市場-信貸展望與策略：美國高級戰(zhàn)略與CDS研究

1、Credit Market Outlook & StrategyUS High Grade Strategy & CDS ResearchNorth America Credit Research14 March 2019High Grade StrategyHG bond spreads have been in a narrow 151-156bp range over the past month and closed Wednesday at 153bp. We believe the market is balanced between less supportive credit

2、trends and more supportive technical factors, though there are some positive and negative technical factors. On the technical side the most important negative has been lower UST yields. This has brought HG bond yields down by 8bp MTD to 4.24%, a low since May, 2018. Another negative related to this

3、is a decline in the after hedge yield for overseas investors in USD credit. On the positive side CDX.IG is at the tight end of its recent range and LQD is trading above fair value, evidence of strong demand for credit risk. Also, supply is trending below last year in March as it did in Jan-Feb. Ther

4、e are several weeks until earnings reporting season. This should be closely watched given forecasts of weaker revenue and EPS trends even as stocks and spreads have performed well YTD. We upgrade Utility Holding Companies to Overweight from Neutral.Credit DerivativesCDX.IG rolls 20th. There are name

5、 changes between Series. expect Series 32 to trade 7bp wider than Series 31. This compares to a fair value difference of 8bp. CDX.HY rolls March 27th. The provisional list currently has 9 name changes. CDX indices had a strong ahead the roll. CDX.IG is trading at it is tightest level since the Serie

6、s 31 roll in September. However, CDX.IG has underperformed iTraxx over the month. We expect upcoming roll technicals to be more favorable than iTraxx Main. CDX option put ladders look interesting as cost hedges. The Windstream auction has been delayed to April3rd.Trade TrackerSince last publication,

7、 our Trade Tracker is up $4,667. Over the last 12 months, performance is up by $1,205,024 (+5.1% ROI / +28.4%IRR).JULI 10yr spread (bp)y = -47.54x + 286.36 R = 0.38JULI 10yr spread (bp)y = -47.54x + 286.36 R = 0.386m regressionCurrent10yr UST yield (%)200US High Grade Strategy & Credit Derivatives R

8、esearchEric Beinstein AC(1-212) 834-4211 HYPERLINK mailto:eric.beinstein eric.beinsteinPaul Glezer(1-212) 270-8185 HYPERLINK mailto:paul.x.glezer paul.x.glezerPavan D Talreja(1-212) 834-2051 HYPERLINK mailto:pavan.talreja pavan.talrejaSheila Xie(1-212) 834-3036 HYPERLINK mailto:sheila.xie sheila.xie

9、J.P. Morgan Securities LLC1801601401201002.82.9Source: J.P. MorganSee page 30 for analyst certification and important disclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatmay a of the of as a HYPERLINK / Table o

10、f Contents HYPERLINK l _bookmark0 Summary and Outlook3 HYPERLINK l _bookmark1 HighGradeStrategy3 HYPERLINK l _bookmark2 The High GradeWeekAhead13 HYPERLINK l _bookmark3 CreditDerivatives18 HYPERLINK l _bookmark4 Trade Tracker22 HYPERLINK l _bookmark5 HighGradeAnalytics23 HYPERLINK l _bookmark6 Secto

11、rrecommendations23 HYPERLINK l _bookmark7 JULI sector statisticsandperformance26 HYPERLINK l _bookmark8 CreditDerivativesAnalytics27 HYPERLINK l _bookmark9 HG CDS-bond basisacrossbuckets27 HYPERLINK l _bookmark10 PreviousFeatured Articles28 HYPERLINK l _bookmark11 USEconomic Calendar29Summary and Ou

12、tlookHigh Grade StrategyHG bond spreads have been in a narrow 151-156bp range over the past month and closed Wednesday at 153bp. This follows the strong 24bp rally from YE until mid- February. We believe the market is balanced between less supportive credit trends and more supportive technical facto

13、rs, though there are some positive and negative factors in both credit fundamentals and technicals to highlight. On the technical side the most important negative has been lower UST yields. This has brought HG bond yields down by 8bp MTD to 4.24%, a low since May, 2018. UST yields have declined on t

14、he back of the weak CPI report this week and some uncertainties over Brexit in the UK. More broadly GDP growth data has been weak, with downside risks to JPMs 1.5% 1Q19 US GDP forecast. Below we review several drivers and signals for the near term direction of HG bonds below.bpJULI spreadbpJULI spre

15、ad200Exhibit 2: HG bond yields have drifted lower on declining spreads and UST yields%JULI yield%JULI yield1804.71604.41404.11203.8100Jan-18 Mar-18 May-18 Jul-18Sep-18 Nov-18 Jan-19 Mar-193.5Jan-18 Mar-18 May-18 Jul-18Sep-18 Nov-18 Jan-19 Mar-19Source: J.P. Morgan4Q earnings reporting season will be

16、 interesting to watch. Both equity and credit markets have done well this year even as GDP growth is expected to be slower in 2019 than 2018, and equity analysts are forecasting weaker earnings. JPM is forecasting 4.1% nominal GDP growth in 2019 compared to 5.2% in 2018. Equity analysts forecast tha

17、t the decline in revenue q/q which was evident in 4Q will persist for the next few quarters. Perhaps these weaker results are already in market expectations but given the recent rally in stocks there is greater room for disappointment. These earnings reports are still a month away and over that peri

18、od progress on China trade may support markets, but we continue to believe that slower growth, and its impact on earnings (and maybe on UST yields) will weigh on HG bond spreads as the year progresses. In our 4Q HG Credit Fundamentals report we review these trends from a credit market perspective (m

19、ore details below).Exhibit 3: Expectations are that S&P slowdown in revenue growth that was evident in 4Q18 will persist though 201910.0%8.6%10.0%8.6%8.7%S&P 500 Sales GrowthEstimates7.7%8.4%5.4%5.8%6.2%4.9%5.2%4.5%4.7%8.0%6.0%4.0%2.0%0.0%1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19So

20、urce: JP MorganPositive signals for HG bond spreads near term:CDX.IG is near the tight end of its range, outperforming HG bonds. CDX.IG has traded in a 58-65bp range over the past month and closed yesterday (Mar 13) at 58bp. In contrast the JULI spread has been between 151-156bp over the same period

21、 and was 153bp on March 13. CDX.IG has unwound all of its widening in 4Q18 while JULI spreads are 19bp wider than they were on September 28th last year.Some outperformance of CDX.IG is logical as it is less influenced both by bond supply and by the decline in UST yields. The fact that CDX.IG is trad

22、ing well is a signal that credit sentiment is positive, and that bonds specific factors are contributing to relative underperformance of cash.Exhibit 4: CDX.IG has rallied strongly and has unwound all its 4Q widening, while HG bonds are still 19bp wider than on Sep 28th last yearbpCDX.IG on-the-run

23、indexbpCDX.IG on-the-run index9080706050Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19Source: JP MorganHG bond supply is running below last years trend. Through February HG bond supply was $206bn. This is 5% below the Jan-Feb total last year. The primary driver of lighter supply was less issuance from F

24、inancials, particularly European banks. The average March supply has been $120bn over the past four years, and MTD supply is $65bn. This is on track to modestly below the usual March trend, continuing the YTD favorable technical of lighter supply. April average supply has been $89bn over the past fo

25、uryears.Exhibit 5: HG bond supply has been lighter than last year at this time, a positive market technical$bnHigh Grade New issuance$bnHigh Grade New issuance201820190JanFebMarAprMayJunJulAugSepOctNovDecSource: JP MorganThe A-BBB relationship has been very stable. It has traded in a 72-74bp range o

26、ver the past month. If the market were becoming more concerned about credit risk there would likely be some widening and flight to quality evident, but this has not been the case. That said, the significant spread widening of BBs vs BBBs in 4Q has persisted even as spreads overall have rallied in 20

27、19.Exhibit 6: The spread difference between A and BBB bonds has been very stable YTD. The 4Q18 widening in this relationship has not been unwound even as spreads have ralliedbp bp BBB vs A Non-Fins ex EM spread gap80706050Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19Source: JP MorganLQD is trading at a

28、 premium to fair value, though this premium has narrowed recently. Generally this premium/discount is a reasonable predictor of near term spread direction. This is because LQD trades more actively than the underlying bonds in its index, so LQD moves more quickly than the average spread of the 1889 u

29、nderlying bonds.Exhibit 7: LQD continues to trade at a modest premium to NAV$LQD premium/discount to NAV$LQD premium/discount to NAV0.30.1-0.1-0.3-0.5Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19Source: JP MorganNegative signals for HG bond spreads near termLower UST yields and lower HG bond spreads. U

30、ST yields are on the low end of their recent range, as are HG bond yields. The JULI yield on Wednesday closed at 4.24%, a low since May 2018. YTD the JULI yield is down by 32bp and the index total return is 3.17%. 10yr bonds and 30yr bonds have returned 3.87% and 4.44% YTD, respectively. Some profit

31、 taking from yield based investors is to be expected and there is some evidence of this. Over the long term there is little correlation between UST yields and HG bond spreads, but over shorter time horizons this negative correlation is evident.%UST 10y yield UST 30y yield%UST 10y yield UST 30y yield

32、Exhibit 9: There is not a strong correlation between UST yields and HG bond spreads, but spreads are trading tight to this relationship3.0JULI 10yr spread (bp)y = -47.54x + 286.36 R = 0.386m regression10yr UST yield (%)Sep-18Oct-18Nov-18Dec-18Jan-19Feb-2.82.9Source: J.P. MorganE

33、xhibit 10: As a result HG bond yields are trending down and are 32bp lower YTD% % JULI overall yield3.5Jan-17May-17Sep-17Jan-18May-18Sep-18Jan-19Source: JP MorganDealers were net buyers of bonds in the overnight hours this week for the first time in 2019. Dealer net buying or selling of bonds in the

34、 US overnight hours is a good proxy for overseas demand. Every day this year until this week there was dealer net selling an average of $182mn/day. January was very strong at$233mn/day and then it slowed somewhat. The fact that dealers were net buyers of a small out of bonds, rather than sellers, re

35、flects cooling foreign demand, we believe. We believe this has been driven by both the strong total returns on HG bonds YTD and the calendar with some quarter end selling. Both Japan and Singapore end their fiscal years at the end of March. With strong YTD returns in USD credit this quarter investor

36、s from those countries have incentive to take profits. However, historically there is no clear seasonal pattern of dealer net buying around this time of year.Exhibit 11: Dealers were net buyers of HG bonds in the US overnight hours this week for the first time YTD. This is a reflection of overseas i

37、nvestor selling.Net Dealer Sells Volume/night, $mn-130Net Dealer Sells Volume/night, $mn-1302000-200-4001-Jan 8-Jan 15-Jan 22-Jan 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb 5-Mar 12-MarSource: JP MorganNew issue performance has been flat. Over the past 10 days $62bn of bonds were issued. On average these bon

38、ds have performed in line with the market since they were issued. This suggests there was little concession in the issues, a sign of strong demand for the primary market. But it also argues that investors are being too aggressive and will pull back. On average in 2018 new issued outperformed the ind

39、ex by 5bp in the 10days after they were issued, so the recent flat performance of new bonds is unusual.Exhibit 12: Recently issued HG bonds have performed in line with the broader marketbp bp New Issue Performance over the past 10days100-10-20Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19Source: J

40、P MorganUSD HG yields have fallen at a significantly faster pace than FX hedging costs for most foreign investors. A decrease in the relative value proposition of US HG credit after hedging for FX is likely negatively impacting overseas demand. The realized yield overseas investors earn has decrease

41、d from mid-January when demand was strong. This has been mostly driven by a decrease in US HG corporate bond yields.Japanese investors can earn a realized yield of 106bp currently. This is down 33bp from 139bp in mid-January. The annualized cost of a 3m FX hedge has decreased 3bp and the yield on 7-

42、10yr US HG bonds has decreased by 37bp. Similarly, the realized yield pickup for European investors has decreased by 35bp to 114bp since mid-January. The USD/EUR 3m FX hedge cost has increased by 3bp while the yield of US HG credit across the curve decreased 31bp since mid-January. The value proposi

43、tion for Taiwanese investors has been relatively stable, however. The realized yield is now 206bp, 9bp lower since mid-January. Long end US HG yields have decreased by 27bp but a cheapening of FX hedges by 18bp partially offsets this.Exhibit 13: The pickup in US HG credit vs European HG credit remai

44、ns negative USD-EUR Yield Pickup (3m FXhedge)USD cheapEUR cheap500-50-100Feb-15Nov-15Aug-16May-17Feb-18Nov-18Exhibit 14: The pickup in US credit vs Yen credit has moved to zero as US bonds yields have declined while the FX hedging costs has been stableUS HG - Yen HG Corp Yld Pickup (Rolling 3m Rates

45、 Hedge), bp180US HG - Yen HG Corp Yld Pickup (Rolling 3m Rates Hedge), bp160140120100806040200Feb-15Nov-15Aug-16May-17Feb-18Nov-18Source: J.P. MorganMarch Client SurveyWe conducted our March investor survey this week. Investors views on HG bond spreads over the coming month were relatively unchanged

46、 since our last survey, though with less conviction in both directions. 37% of investors expressed a neutral near-term spread outlook. This is an 11% increase from last month and the highest neutral percentage since October 2018. 31% of investors expressed a bearish near- term spread outlook and 31%

47、 of investors are bullish on near-term spreads, down 5% and 7% from last month, respectively.The portion of low cash holdings increased 1% to 17% which was the first increase since October 2018. Those with high cash holdings increased to 15% from 13% the month prior.HG credit fundamentals as of 4Q18

48、 show modest deterioration and the highest level of leverage yet in our history. We asked investors how they are planning to adjust the credit quality of their portfolios. 40% plan to move up in quality as they are concerned about credit risk increasing. 8% expect to move down in quality, as they be

49、lieve credit risk concerns are overdone. The remaining 53% plan to maintain their current balance of credit risk.Spread curves are at/near their steepest levels in two years, with both the 5s10s and 10s30s curves around 45bp steep. We asked investors how they view this situation. 44% believe that th

50、ere is value in extending duration and taking advantage of the steep curves, while 50% do not see value in extending duration as they believe that curve steepness is justified given the UST curve and credit concerns. The remaining 6% believe that spread curves will steepen further and they are maint

51、aining a current short curve position or shortening their portfolios further.ISDA has proposed revisions to the Credit Derivatives Definitions to address issues related to narrowly tailored credit events. Specifically, they propose that a Failure to Pay credit event must be related to deterioration

52、in credit worthiness. We asked investors how important these issues have been to them and whether the changes will have an effect on their trading activity in single name CDS. 65% indicated that they are not active in single name CDS and do not expect that these changes will lead them to be more act

53、ive even if implemented. Of those who regularly trade CDS, 37% said this issue has not had a material impact on their activity in the product. 57% said they welcome the proposed changes and believe that this change will increase their trade activity in the product, and 6% said the proposed changes w

54、ill have a negative impact and will cause them to trade the product less if implemented.Exhibit15:MostinvestorsareholdingmodestamountofcashExhibit 16: Near terms spread outlook remained relativelyunchangedCash indexOutlook index6.0Cash indexOutlook index5.04.03.02.01.00.42001 2003 2005 2007 2009 201

55、1 2013 2015 2017 2019-2001 2003 2005 2007 2009 2011 2013 2015 2017 2019Source: J.P. MorganCash Index = (High + Med) / (Low + Med); Outlook Index = (Positive + Neutral) / (Negative + Neutral)4Q18 HG Credit Fundamentals Report publishedWe published our 4Q18 HG credit fundamentals last week (see HYPERL

56、INK /research/content/GPS-2936840-0 here). Based on 4Q18 earnings reports HG credit metrics were stable y/y but deteriorated modestly excluding the commodities sectors. The commodities sectors credit metrics improved sharply last year with higher oil prices, helping to offset deterioration in other

57、sectors in the total market figures. Ex-commodities leverage for the non- Financial HG issuers in our sample rose by 0.1x to 3.0 x, a new peak in ourhistory.Interest coverage (ex-commodities) also deteriorated by 0.3x to 10.3x. This is still a strong figure, but it has been trending lower for five c

58、onsecutive years.The deterioration in credit metrics ex Commodities was driven to a significant extent by M&A, as well as by weaker trends in Utilities. There were 8 issuers in 2018 where Debt increased by more than $10bn due to M&A, and the leverage for these issuers increased by 1.0 x y/y, debt we

59、ighted. If one excludes these 8 issuers leverage would have been lower by 0.2x y/y instead of flat y/y. We are not arguing that one should exclude these issuers in thinking about HG credit metrics, but highlighting that the overall deterioration in leverage y/y has been driven by voluntary decisions

60、 companies rather than market factors. In Utilities the negative impacts of tax reform revenue and a high level of capex have led to a notable deteriorationinExhibit 17: Credit Metrics Summaryboth leverage and coverage, and we expect the metrics to deteriorate more in 2019 before some recovery in 20