BofA: Top corporate bond ideas list for June

Analysts at Bank of America revealed their list of June’s Top US High-Grade Ideas in a note Monday.

The list comprises corporate bond and/or loan recommendations and represents a collection of the bank’s best investment ideas from the universe of bonds and loans covered by its Global Research US fundamental HG credit research analysts.

“We expect the picks to outperform or underperform their relevant benchmarks, and they could be based on particularly attractive or unattractive expected total return due to potential market and/or business-related catalysts, interest carry, yield-to-redemption, and/or value based on spread and/or yield relative to credit quality,” write analysts.

Bank of America has released its top high-grade bond ideas list for June, featuring six key recommendations.

This list, curated by the Head of BofA US Credit Research, highlights corporate bonds and loans expected to outperform or underperform their relevant benchmarks due to various market and business-related catalysts.

The selection process focuses on attractive or unattractive expected total returns, considering factors like interest carry, yield-to-redemption, and value based on spread or yield relative to credit quality. The June list comprises six issuer recommendations, each rated as Overweight (OW) by analysts.

The six Overweight picks are:

AbbVie (NYSE:): “We see ABBV having the ability to fill the Humira gap both through pipeline development and M&A capacity if need be. We expect ABBV to trade 5 bps behind pharma peer AstraZeneca.”

AutoNation (NYSE:): AutoNation has a strong business profile that is resilient to economic downturns,” wrote analysts. “We see the credit as a low risk BBB- name, with some compression opportunity compared to our BBB index.”

ConAgra Brands (CAG): “We see +20-30bps spread discount relative to BBB peers and see room for spreads to tighten given firm company commitment to IG ratings and cost savings & productivity efforts underway to combat near-term volume pressures.”

Dick’s Sporting Goods (NYSE:): “We see DKS as an advantaged omni-channel sporting goods retailer, outgrowing the competitive athletic apparel, footwear & equipment sector with mid-single-digit percentage EBITDA growth thru FY26.”

Diamondback Energy (NASDAQ:): Analysts think “FANG bonds should trade at a significant premium to Occidental Petroleum (OXY), which has substantially higher risk involved with its approximate multiyear de-leveraging plan post its recent M&A deal.”

Truist Financial Corp. (NYSE:): “We see favorable risk-reward in TFC bonds following the removal of several overhangs,” wrote analysts. “Super regional banks continue to trade at a discount (+18 bp) to GSIBs vs. ~40 bp inside GSIBs in 2022 on average.”

According to analysts, these credit ratings reflect a three-month time horizon.