美股-信贷策略-信贷市场展望与策略：美国高级战略与CDS研究

1、Credit Market Outlook & StrategyUS High Grade Strategy & CDS ResearchNorth America Credit Research28 February 2019High Grade StrategyFebruary has been calm bonds after three volatile months. We maintain our modestly bearish on spreads year-end. This view is driven the gradually slowing trend in and

2、global growth and the resulting downward pressure on corporate earnings. What is notable in is that credit have steepened. Both the 5s10s and 10s30s curves are near two-year peak levels of steepness. In the long end, 30yr bond supply and corporate tender/extension trades have contributed to this, bu

3、t the curve is still about 5bp too steep, in Evidence overseas demand in February shows some moderation from the strong January trend. Still, data in the first months the year is supportive spreads and a reversal from outflows in4Q18.Credit DerivativesThe CDX.HY on-the-run index experienced a third

4、default, the most in an on-the- run index since 2012. An increase in single-name risk and spread dispersion in CDS has led to underperformance CDX.HY CDX.IG. Short-dated junior Mezzanine tranches offer attractive carry and roll-down compared to indices and cash bonds. CDX.IG is trading at its five-m

5、onth tight, outperforming bonds and CDX options put spreads look interesting as low-cost hedges. Windstream CDS credit event affects all CDX.HY indices since Series12.FeatureHow much BBB debt will fall to HY? We look to history, market pricing, and our analysts foranswers.Trade TrackerWe recommend t

6、aking profit on the CDX.IG put ladder recommended in January a gain $14,609 (+1% ROI / +6% IRR). Since our last publication, our Trade Tracker is up $112,724. Over the last 12 months, performance is up $1,072,314 (+5.2% ROI / +28.0% IRR).Chart of the week: The JULI spread has been range bound in Feb

7、ruary so far, trading between 152-157bpbpJULI SpreadbpJULI SpreadUS High Grade Strategy & Credit Derivatives ResearchEric Beinstein AC(1-212) 834-4211 HYPERLINK mailto:eric.beinstein eric.beinsteinDominique Toublan(1-212) 834-2370 HYPERLINK mailto:dominique.d.toublan dominique.d.toublanPaul Glezer(1

8、-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.xieJ.P. Morgan Securities LLC180160140120100Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Source: J.P. Morg

9、anSee page 29 for analyst certification and important disclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatmay a of the of as a HYPERLINK / Table of Contents HYPERLINK l _bookmark0 Summary and Outlook3 HYPERLINK l _bookmark1 HighG

10、radeStrategy3 HYPERLINK l _bookmark2 The High GradeWeekAhead10 HYPERLINK l _bookmark3 CreditDerivatives15 HYPERLINK l _bookmark4 Feature19 HYPERLINK l _bookmark5 How much BBB debt will falltoHY?19 HYPERLINK l _bookmark6 Trade Tracker20 HYPERLINK l _bookmark7 HighGradeAnalytics22 HYPERLINK l _bookmar

11、k8 Sectorrecommendations22 HYPERLINK l _bookmark9 JULI sector statisticsandperformance25 HYPERLINK l _bookmark10 CreditDerivativesAnalytics26 HYPERLINK l _bookmark11 HG CDS-bond basisacrossbuckets26 HYPERLINK l _bookmark12 Previous Featured Articles27 HYPERLINK l _bookmark13 USEconomic Calendar28Sum

12、mary and OutlookHigh Grade StrategyFebruary has been calm for HG bonds after three volatile months. We maintain our modest bearish view on spreadsJULI has traded in a 152-157bp range in February with one day to go and closed yesterday at 154bp. It has been a mostly range bound month so far, with the

13、 index 4bp tighter after a strong 21bp rally in January. The JULI yield is about unchanged in the month as the UST curve also had low volatility but drifted up modestly. Bond supply with one day to go in the month totals $98bn, slightly above the $95bn four- year average for February. This follows J

14、anuary, which was modestly below thefour-year average to bring YTD supply to about the same as last year and about the same as the four-year average for Jan-Feb. On the month the Financial vs. Non- Financial spread moved by 1bp to -2bp, and the BBB-A spread moved -2bp to 73bp. Overall it has been an

15、 uneventful month in HG credit after three months of extreme volatility.Exhibit 1: The JULI spread has been range bound in February so far, trading between 152-157bpExhibit 2: YTD supply is relatively flat y/y as February catches up with stronger monthly supply from a modest JanuarybpJULI SpreadbpJU

16、LI Spread$bn1231061201474yr Avg Gross Issuance (2015-2018) 2019 Gross Issuance11898095989095849430Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecSource for both: J.P. Morgan, Dealogic.Exhibit 3: The BBB vs. A Non-Financial spread has been stable this month,

17、after BBB outperformance in JanuarybpBBB vs A Non-Financial ex EM SpreadbpBBB vs A Non-Financial ex EM Spread8070605040Jan-18 Mar-18May-18Jul-18Sep-18Nov-18Jan-19Exhibit 4: Financials moved tighter than non-Financials during the YE sell-off and have held onto these gains in the 2019 rallybpFins vs N

18、on Fins Duration Adjusted SpreadbpFins vs Non Fins Duration Adjusted Spread7531-1-3-5Jan-18Mar-18 May-18Jul-18Sep-18Nov-18Jan-19Source for both: J.P. Morgan, Dealogic.What is notable in February is that credit curves have steepened. The 5s10s curve has steepened 4bp to 43bp, which is around the stee

19、pest it has been since September 2016. In yield terms the curve steepened by 6bp to 0.61%, the steepestsince February 2018. The 10s30s curve has steepened as well, by 5bp to 45bp. This is its steepest since September 2018. In yield terms, it has steepened by 5bp to 0.83%. The 10s30s spread curve is

20、now 5bp too steep versus our model. Lower long- end UST yields, some weak earnings from a few large-cap issuers with long-end bonds outstanding, and some tenders/exchanges that resulted in longer end bond issuance all have contributed to the long-end spreadunderperformance.Exhibit 5: The Non-Financi

21、als ex EM 10s30s curve is 5bp toosteep versus ourmodelExhibit 6: The 5s10s curve has also steepened and is around the steepest since September 20165550454035302550bpNon-Financials ex EM 5s10sJULI Non-Fins 10s30s SpreadbpNon-Financials ex EM 5s10sModel4540353025Jan-16Jul-16Jan-17Jul-17Jan-18Jul-18Jan

22、-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Source for both: J.P. MorganWe continue with our modestly bearish bias on spreads. This is because global growth data continue to come in below expectations of a few months ago. We forecast 1Q GDP growth at 1.5%, which would be the fourth quarter of decline fro

23、m the peak of 4.2% in 2Q18. For the rest of 2019 we expect GDP growth to stay mostly in the 1.5-2.0% range. Related to this, UST yields (and therefore the JULI yield) are at the lower end of recent ranges. The corporate earnings picture is mixed with some important misses from companies that have do

24、ne recent M&A deals and have significant debt outstanding. Consensus earnings estimates for 1Q19 are actually slightly negative now for the S&P 500 (1Q19 vs. 1Q18), highlighting the headwinds facing HG issuers. Over the month of March this may become a headwind to equities and spreads.Exhibit 7: Exp

25、ectations are for a meaningful decline in S&P500 revenue growth in 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 4Q19Source: J.P. Morgan, J.P. Morgan US Equity Strategy.So far this

26、 year the combination of weaker economic growth and the increasing expectation of weaker corporate earnings has not had an impact on spreadsthey tightened in both January and February. We believe this is primarily due to the attractive starting point for spreads on Jan 1. Now that spreads have unwou

27、nd 25bp of the 35bp sell-off they experienced in Nov-Dec 2018, we believe further tightening will be harder to come by.The risk to this view near term is that pending political events turn more (trade talks, primarily), and some recent US economic indicators have turned more positive. UST yields hav

28、e risen over the past couple of days on this stronger economic data, is supportive for spreads. March is usually an active month of issuance with four-year average supply of $120bn. This could be a negative, but if UST yields stay up and economic data is OK then this supply will likely be readily ab

29、sorbed.HG bond funds saw modest inflows last month, well below those of Jan 2018 and 2017Last week the final fund flow data for January were released. HG bond funds (ex- short term) reported inflows of $7.9bn in January. This is a positive development as it follows several months of strong outflows

30、from HG bond funds in the last few months of 2018. There were outflows of $23.9bn in December, $17.5bn in November, and $24.7bn in October. In 2018, fund flows averaged an outflow of$860mn per month as there were modest inflows last year prior to 4Q. Note that in 2017 HG bond funds had average month

31、ly inflows of $24.0bn, so while the return to a trend of inflows this January is positive, it was at a rate still well below that in 2017.Internationally domiciled HG bond funds (ex-short term) also picked up this past month with an inflow of $2.9bn. In 2018, internationally domiciled HG bond funds

32、reported outflows in 11 of 12 months, and this resulted in an average outflow of$1.7bn per month for the year.Exhibit 8: There were $7.9bn of inflows into HG bond funds in January. This is well below $31.1bn in January 2018 and $14bn in 2017, but a positive turn after strong outflows in 4Q18Exhibit

33、9: Internationally domiciled USD HG funds had inflows in January 2019 after four quarters of outflows in 2018$bnInternationally Domiciled USD HG Bond Fund Flows (incl short term)17$bnInternationally Domiciled USD HG Bond Fund Flows (incl short term)$bn201712720162020192018-3-81Q163Q161Q173Q171Q183Q1

34、81Q19Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecSource for both: J.P. Morgan, EPFR Global.Short-term bond funds had inflows of $5.8bn. This figure was $1.0bn the prior month, $11.4bn in November, and $2.2bn in October. In 2018, short-term HG bond funds reported an average inflow of $4.9bn per mo

35、nth. The turn to positive fund inflows to overseas domiciled USD HG bond funds is consistent with the positive trend reported by TRACE in overseas demand. Specifically, net dealer selling to investors in the NY overnight hours is running at $194mn/day YTD. This compares to $84mn/day in 4Q18 and a $7

36、8mn/day average for all of2018.Long-end bond supply remains heavy at the start of theyearThe 10s30s curve spread for Non-Financials is 45bp steep. It has been steepening since reaching a low of 32bp in mid December 2018 and is now at the wide end of its 32-45bp two-year range. The spread curve was t

37、oo flat over most of the past two months but is 5bp too steep according to our model, which is based on UST yieldsand JULI spreads. Heavy long-end supply helps explains this underperformance of the 30yr spreads. YTD the longer end (11-30yrs) Non-Financial bond supply is 34% of bond issuance. This is

38、 above the full-year average for this percentage for the past eight years.30yr (21yr+) 19%6%30yr (21yr+) 19%6%20yr (11-21 yr)19%4%10yr18%4%7yr5yr3yr20%6%24%10%31%34%31%27%33%8%19%9%18%10%19%9%16%16%15%18%21%9%11%13%100%75%50%25%0%20152016201720182019Source: J.P. Morgan, Dealogic.In addition, recent

39、issuer liability management trends have lengthened the duration of bonds available to investors. YTD about $19bn of bonds have been tendered, about$7bn of bonds saw their par amount increased, and at least $9bn make-whole calls have been announced. Companies have issued new debt further out the curv

40、e to replace the shorter duration tendered bonds. Adjusting the maturity distribution of new issuance including the impact of tenders brings the percentage of 20+yr Non- Financial bond supply to nearly 40%.Demand-side trends suggest a steeper curve too. We estimate pension funding status is currentl

41、y at 91.6%, down from 92.3% on average in 1H18. Therefore, pension funds are likely less driven to add credit exposure, which tends to be in the long end. Also, the long-end JULI yield is currently 4.72%, which is down from a peak of 5.08% on November 30, 2018. The average price of 30yr bonds has ri

42、sen from $99.3 to $104.3 over this period. These lower yields/higher prices are likely to discourage the broader long-end investor community from pushing spreads much lower as well.Evidence of overseas demand in February shows some moderation trend from a very strong JanuaryOverseas demand for US HG

43、 has slowed in recent weeks from the surge observed in January but is still above levels seen in 2018. We use overnight net dealer selling as one gauge of overseas demand. This is based on TRACE transactions reported in the overnight New York hours and disseminated by TRACE at 8am. Dealers net sold$

44、141mn/night in February on average so far. This is below the January figure ($233mn/night) but above the 2018 average ($78mn/night).We believe that a contributing factor to the January surge and persisting, yet slower, overseas demand in February is the stabilization in FX hedging costs incurred by

45、overseas investors. A pause in the Fed hiking cycle puts a hold on the diverging rate policy that drove the cost of FX hedges up throughout 2018 and prior. We expect hedges to cheapen a few bp into midyear for Japanese, Taiwanese, and Euro-based investors and to become slightly more expensive into y

46、ear-end (by 21bp, 8bp, and 8bp, respectively).Exhibit 11: FX hedging costs have stabilized. We expect the cost of hedges to cheapen by a few bp into midyear for Japanese, Taiwanese, and Euro-based investors-400-350-300-250-200-150-1000EUR/USD 3m FX Hedge Cost, Annualized, bp TWD/USD 3m FX Hedge Cost

47、, Annualized, bp JPY/USD 3m FX Hedge Cost, Annualized, bpJan-16Jul-16Jan-17Jul-17Jan-18Jul-18Jan-19Source: J.P. Morgan.Fund flows into and out of internationally domiciled funds offer another measure of foreign demand for US HG. The trend is similar to what the overnight TRACE trading data shows. In

48、ternationally domiciled HG funds had $2.9bn of inflows in January. This compares to outflows of $1.7bn/month in international HG funds on average in 2018. We will only have complete figures for February 2019 in a few weeks, but so far these funds have seen $1.6bn of inflows this month.US Economic Su

49、mmaryLast week our economists argued that a fundamental shift was underway at the Fed whereby its monetary policy strategy was moving toward an average inflation targeting framework. Speeches by Fed officials on Feb 22 give them more confidence in that call. Later at the same conference Fed Vice-Cha

50、ir Clarida discussed the Feds upcoming June review of its strategies, tools, and communications. Of these, the most fundamental topic under review was its strategies for achieving its monetary policy objectives. Clarida stated that the main question relating to strategies is whether the Fed should c

51、ontinue to treat past inflation misses as “bygones” or should it try to make up those misses. So one possible outcome of the review is they stick with existing strategy. While possible, our economists suspect the Fed wouldnt be asking this question if they didnt already have some sense that a differ

52、ent way forward may be warranted. The other possible outcome is that the Fed adopts a makeup strategy. The first example of such a strategy that he mentioned was average inflation targeting. While still far from a sure thing, our economists continue to see average inflation targeting as the directio

53、n in which Fed monetary policy is traveling. They also believe that they will continue to hear more about average inflation targeting in the run-up to the June review.Two questions Clarida did not ask were: how would aiming for an inflation overshoot interact with the Feds financial stability object

54、ives? And, what framework should guide monetary policy before the review is complete, particularly if individual FOMC members have some idea about their preferred future framework? Itll be interesting to hear if they start to say anything about the first question. The answer to the second question m

55、ay have been provided following the January FOMCmeeting.Read the full note HYPERLINK /research/content/GPS-2924551-0 here.EmploymentInitial claims increased 8,000 to 225,000 during the week ending February 23 from a figure for the prior week that was revised slightly higher. The latest figure matche

56、d our economists forecast but was a modest disappointment relative to consensusexpectations. Elsewhere in the claims report, continuing claims jumped 79,000 to 1.805mn during the week ending February 16, reaching the highest figure reported since last April. The claims data have been choppy in recen

57、t weeks, which is not unusual for this time of year given regular noise in the data along with the volatility that often occurs around holidays like Presidents Day.Exhibit 1: Initial claims increased 8,000 to 225,000 during the week ending February 234wk average7004wk average600500400300200100070809

58、1011121314151617Source for both: Department of Labor, ISM, J.P. MorganExhibit 2: Real GDP increased 2.6% saar in 4Q18, a decent end to a solid year for growth (3.1%)%ch, saarQuarterly Real GDP Growth%ch, saarQuarterly Real GDP Growth420-2111213141516171819Real GDPReal GDP increased 2.6% saar in 4Q18

59、, a decent end to a solid year for growth (3.1%). The 4Q growth figure beat expectations, but the upside surprise was related to trade and inventories. Growth in real domestic final sales (more of a core growth component) was just slightly below our economists forecast at a decent 2.6% saar. While g

60、rowth was strong in 2018, our economists feel confident that things will downshift early in 2019. For one thing, the 2.8% 4Q growth in real consumption was right in line with their forecast that assumed that real spending fell 0.4% samr in December, so the trajectory for spending probably was very w