Bonds suffered Tuesday as newfound confidence sent stock prices rising after European leaders edged a step closer to agreement on a plan that would prevent Greece from having to face increasing funding costs. Bond investors would be spared should they volunteer to roll debt over and technically preventing default. U.S. corporate markets were weaker as company paper slavishly got dragged down by the prospect of rising government bond yields. Nokia’s recent abandonment of its earnings outlook did it no favors and the ensuing storm looks challenging to navigate.
Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/p.php?f=daily_analysis.
Investment Grade -
Nokia Corporation (NOK) – Today’s Fitch downgrade for Nokia adds to the maelstrom the company faces in terms of competitive pressures. The two-notch ratings change leaves the company hovering one step above junk status and there could be more on the horizon as Fitch set the outlook to negative. Even by dropping its Symbian operating system in favor of Microsoft’s Windows, Fitch points to a lack of available products within its suite for testing maintaining pressure on its handset business and representing a challenge to cash flow. Investors ditched Nokia’s paper today about as fast as Fitch says customers are switching to cheaper Android handsets along with iPhones. Nokia’s May 2019 issues came under the surgeon’s knife as investors cut it out of their portfolios with $24mm trading as the price slid by $4.07 per $1,000 invested. The yield surged to 5.42% for a horrendous 68 basis point gain on the day while Nokia’s May 2039 maturity saw its yield jump by 42 pips to yield 6.91%. By way of consolation its share price remained relatively stable trading between gains and losses in a narrow 10-cent range at around $6.57.
Apache Corp. (APA) – Oil and gas producer Apache could be set to boost exports of liquefied natural gas to meet rising Asian demand according to a company officer. The company’s first LNG export plant is located at Kitimat in Canada and the company hopes to export most of its five-million tonnes per year to Asian buyers. Apache produces surplus gas from its shale gas fields and hopes growing cities in the Far East will be a perfect destination. A broker upgrade from Raymond James, who raised its recommendation from ‘outperform’ to ‘strong buy’ helped boost its share price by 1.5% to $119 Tuesday. Nevertheless Raymond James lifted its price target from $155 to $190. Meanwhile Apache paper was well-traded with $20mm face value exchanged among investors. Investors appeared to be buyers on dips on what was otherwise a bearish day for bonds with yields rising against the backdrop of a rally in equity prices. The yield on Apache’s September 2040 paper rose to 5.27%.