Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$0.9 billion and year to date flows stand at -$50.1 billion. New issuance for the week was $0.3 billion and year to date HY is at $162.5 billion, which is -37% over the same period last year.

(Bloomberg) High Yield Market Highlights

  • U.S. junk bonds had the worst day since February 9, with a loss 0.6 percent yesterday. CCCs led the downward spiral, with the biggest drop since February 2016.
  • CCCs return was -0.958%
  • YTD return turned negative for first time since early February
  • Yields hit a fresh 30-mo. high after biggest rise in eight months
  • CCC yields at 2 year high of 11.34% after biggest increase in two months
  • Single-B yields spiked to a 30-month high, steepest jump in eight months
  • Volatile stocks, falling Treasury yields, declining oil, rising VIX weigh on junk bonds
  • S&P 500 lost 3% in intra-day trading before rebounding to close little changed
  • VIX jumped 25% in early trading before stabilizing to close up 2.2%
  • Oil also volatile, sliding 5% intra-day amid uncertainty over OPEC’s decision on cutting supply, before recovering to close down 2.7%
  • Issuance drought continued in high yield with no issues added to calendar
  • November priced just $5.13b, slowest 11th month since 2008, least for a month since Dec. 2015
  • YTD supply is $163b, lowest since 2009

(Reuters) U.S., China agree on trade war ceasefire after Trump, Xi summit

  • China and the United States agreed to a ceasefire in their bitter trade war on Saturday after high-stakes talks in Argentina between U.S. President Donald Trump and Chinese President Xi Jinping, including no escalated tariffs on Jan. 1.
  • Trump will leave tariffs on $200 billion worth of Chinese imports at 10 percent at the beginning of the new year, agreeing to not raise them to 25 percent “at this time”, the White House said in a statement.
  • “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries,” it said.
  • “China has agreed to start purchasing agricultural product from our farmers immediately.”
  • The two leaders also agreed to immediately start talks on structural changes with respect to forced technology transfers, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture, the White House said.

(Bloomberg) Qatar to Leave OPEC as Politics Finally Rupture Oil Cartel

  • Qatar said it will leave OPEC next month, a rare example of the toxic politics of the Middle East rupturing a group that had held together for decades through war and sanctions.
  • Qatar, a member since 1961, is leaving to focus on its liquefied natural gas production, Energy Minister Saad Sherida Al-Kaabi told a news conference in Doha on Monday. He didn’t mention the political backdrop to the decision: dire relations with Saudi Arabia, which has led a blockade against his country since 2017; and a rhetorical onslaught from U.S. President Donald Trump against the cartel.
  • Qatar is OPEC’s 11th-biggest oil producer, accounting for less than 2 percent of total output, so its departure may not have a significant impact on discussions this week to cut production in conjunction with allies including Russia. Yet it sets a troubling precedent for a group that prides itself on putting shared economic interests above external politics — even extreme events like the Iran-Iraq war in the 1980s or Saddam Hussein’s 1991 invasion of Kuwait.

(Business Wire) The GEO Group Signs Contract Extension for the Continued Management of the Junee Correctional Centre in Australia

  • The GEO Group, Inc. announced that its subsidiary, The GEO Group Australia Pty Ltd has signed a five-year contract extension with the State of New South Wales, Corrective Services for the continued management and expansion of the Junee Correctional Centre.
  • GEO Australia has managed the 790-bed Centre for over 25 years since its opening in 1993. The Centre is currently undergoing a 489-bed expansion project which will bring its total capacity to 1,279 beds during 2019. The five-year agreement will be effective from April 1, 2019 through March 31, 2024, with annual revenues of approximately $51 million.
  • George C. Zoley, Chairman of the Board and Chief Executive Officer of GEO, said: “We appreciate the trust placed in our company by the State of New South Wales, which is a reflection of our long-standing partnership with the Corrective Services at the Junee Correctional Centre. We are looking forward to working with the Department of Justice to further strengthen our 25-year partnership.

(CAM Note) Moody’s upgrades the debt of Diamondback Energy

  • The unsecured debt was upgraded one notch and the outlook is stable.
  • Moody’s completed a rating review that was started nearly six months ago after Diamondback announced an acquisition for Energen Corp.
  • Moody’s noted a larger Diamondback that is financially stronger and has greater capital and operational flexibility as reasons for the debt upgrade.