CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended February 22nd, taxable bond funds posted a net inflow of $3.987bn. The weekly average inflow thus far in 2017 remains just north of $4bn per week. Per Bloomberg, investment grade corporate issuance through Thursday was $13.925bn. February issuance stands at $75bn, while year-to-date investment grade issuance has now topped $231bn, up about 21% year-over-year.

(Bloomberg) Fitch Upgrades Pioneer Natural Resources to ‘BBB’

• The upgrade reflects Fitch’s view that the company will be able to execute its medium-term growth targets given its competitive full-cycle breakeven oil price, favorable hedge position and policy, and strong liquidity position, while reducing gross debt and maintaining a leverage profile generally consistent with or better than similarly rated North American (N.A.) exploration and production (E&P) peers. Fitch’s base case currently forecasts that in 2019 Pioneer’s core Permian production will exceed 300 thousand boe per day (mboepd), gross debt/EBITDA will be below 1x, and liquidity will remain strong.

(Bloomberg) Merck Takes $1.9B Writedown as Hepatitis C Market Shrinks

• Merck & Co., one of the U.S.’s biggest drugmakers, will write down most of what it paid for a promising, experimental hepatitis C drug in 2014, partly because of the extreme success of other new therapies has left a shrinking market.
• In a filing Thursday, Merck said it would take a $2.9 billion charge, or $1.9 billion after taxes, on uprifosbuvir, which it bought in 2014 in its $3.9 billion acquisition of Idenix Pharmaceuticals Inc. and is still in clinical trials. Merck said it now values the drug at $240 million.
• The market for treatments for hepatitis C, a virus that attacks the liver and can lead to cirrhosis or liver cancer, has been declining recently, with fewer patients to treat following major breakthroughs in science that brought to market highly effective, fast-working cures.

(Bloomberg) HP’s Earnings Show the PC Market Is Finally Starting to Recover

• Prior to HP Inc’s January quarter earnings report, there were already plenty of signs that the hard-luck PC market was beginning to stabilize. Shipment estimates from major research firms, as well as earnings reports from the likes of Microsoft, Intel, AMD, Seagate and Western Digital, pointed to a market whose sales declines were narrowing considerably from the steep levels seen during the first half of 2016.
• HP’s numbers went beyond that, however. They suggest the steady arrival of compelling new hardware and form factors, together with an aging installed base and favorable annual comparisons, is positioning the PC industry to deliver positive growth over the near-term.
• HP Inc., which contains the former Hewlett-Packard’s PC and printing businesses, reported fiscal first quarter revenue of $12.68 billion (up 4% annually) and adjusted EPS of $0.38. The former trounced a consensus analyst estimate of $11.83 billion, while the latter slightly beat a $0.37 consensus.
• HP also guided for second quarter EPS of $0.37 to $0.40, in line with a $0.38 pre-earnings consensus. Fiscal 2017 (ends in October) EPS guidance of $1.55 to $1.65 was reiterated.
• Shares rose 8.6% to $17.60 on Thursday, hitting their highest levels since the old HP broke up in late 2015.