Banks Dominate Day’s Debt Issuance; JPM, UBS, NWB, Legg Mason; Mischler Comment
August 4, 2016   //   by Mischler MarCom   //   Debt Market Commentary, Recent Deals  

Quigley’s Corner 08.03.16-Bulge Bracket Banks Dominate Day’s Debt Market Issuance.

 

Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

 

Another big day for IG primary issuance as 8 IG Corporate issuers tapped our dollar DCM to price 12 tranches between them totaling $11.50.  SSA assisted with 2 issuers, 2 deals and $1.75b bringing the all-in IG day total to 10 issuers, 14 tranches and $13.25b. WTD we’ve now priced 67% more than this week’s IG Corporate issuance estimates. MTD we have already issued 71% of the total amount projected for August…….after just three days!

             

Global Market Recap

 

  • S. Treasuries – Mixed & little changed. JGB sell off calms. Bunds/Gilts little changed.
  • 3mth Libor – Set at highest yield since May 2009 (0.77760%).
  • Stocks – The Dow snaps its 7 session losing streak.
  • Overseas Stocks – Europe bank stocks rallied. Nikkei & HS hit & . China higher.
  • Economic: US data today was solid (ADP & ISM non-manufacturing)
  • Overseas Economic: China mixed, Japan better & Europe mixed tilted to upside
  • Currencies: USD outperformed 4 of the Big 5. The Euro struggled today
  • Commodities: Good day for the CRB & crude oil but a down day for the metals
  • CDX IG: -1.83 to 75.01
  • CDX HY: -8.35 to 409.04
  • CDX EM: -4.17 to 260.25

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points – Mischler Co-Manages for JPM and UBS

 

  • Mischler served as a Co-Manager on today’s J.P. Morgan Chase & Co. 5NC4.  The 5NC4 structure gained much attention in today’s marketplace.  Thank you Team JPM Treasury Janeene Balmir and Adam Berg as well as JPM Syndicate’s Bob LoBue, Nick Balzano and Tom Monaghan.  Mischler served as a Co-Manager on today’s UBS Group Funding (Jersey) Ltd. two-part 5yr FXD/FRN. Thank you Team UBS. Many thanks to Bill Coughlin and his Treasury/Funding Team as well as Todd Mahoney, Igor Grinberg and Chelseay Boulos for working with me on securing our underwriting liability today for distribution throughout our middle markets network. It’s always greatly appreciated and makes a big difference in helping us to build the nation’s oldest Service Disabled Veteran broker-dealer in a value-added way. Thanks for your commitment to social responsibility today.
  • Columbia Property Trust Operating Partnership LP increased its 10-year Senior Notes new issue at the launch to $350mm from $250mm and 5bps tighter than the tightest side of guidance.
  • Legg Mason Inc. bumped up its 40NC5 $25 par Junior Subordinated Notes new issue to $500mm from $150mm.
  • NWB Bank, in the SSA space, upsized today’s tap of its 2.375% due 3/24/2026 to $250mm from $100mm. The new total amount outstanding is $1.25b.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 12 IG Corporate new issues was 14.96 bps.

 

Syndicate IG Corporate-only Volume Estimates for This Week and August

 

IG Corporate New Issuance This Week
8/01-8/05
vs. Current
WTD – $43.90b
August 2016 vs. Current
MTD – $43.90b
Low-End Avg. $25.13b 174.69% $60.48b 72.59%
Midpoint Avg. $26.22b 167.43% $61.13b 71.81%
High-End Avg. $27.30b 160.81% $61.78b 71.06%
The Low $15b 292.67% $45b 97.56%
The High $45b 97.56% $75b 58.53%

Have a great evening!
Ron

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s a review of this week’s key primary market driver averages for IG Corporates only through Tuesday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
8/01
TUES.
8/02
AVERAGES
WEEK 7/25
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
AVERAGES
WEEK 7/04
New Issue Concessions 1.16 bps 2.08 bps 1.23 bps 3.95 bps 0.82 bps 0.73 bps
Oversubscription Rates 2.48x 2.77x 3.63x 3.42x 4.73x 3.82x
Tenors 15.70 yrs 13.54 yrs 13.45 yrs 7.95 yrs 9.58 yrs 9.72 yrs
Tranche Sizes $1,671mm $750mm $875mm $1,482mm $887mm $770mm

 

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

For ratings I use the better two of Moody’s, S&P or Fitch.

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Barclays PLC Baa3/A- FRN 8/10/2021 650 3mL+equiv 3mL+equiv 3mL+211 3mL+211 BARC-sole
Barclays PLC Baa3/A- 3.20% 8/10/2021 1,350 +220-225 +215 the # +215 +215 BARC-sole
Barclays PLC
(tap) New total: $2.05b
Baa3/A- 5.20% 5/12/2026 800 +340a +330 the # +330 +330 BARC-sole
Columbia Property Trust Baa2/BBB 3.65% 8/15/2026 350 +mid 200s
(+250a)
+225a (+/-5) +215 +215 JPM/MS/WFS
Legg Mason Global A.M. Baa2/BB+ 5.45% 40NC5 500 5.625%a 5.45% the # 5.45% $100.00 MS(phys)BAML/CITI/JPM/WFS
Owens Corning BBB-/BBB- 3.40% 8/15/2026 400 +225-237.5 +195a (+/-5) +190 +190 BAML/CITI/WFS (a)/GS (p)
UBS Group Funding Jersey A-/A FRN 2/01/2022 500 3mL+equiv 3mL+equiv 3mL+153 3mL+153 UBS-sole
UBS Group Funding Jersey A-/A 2.65% 2/01/2022 2,000 +165a +160 the # +160 +160 UBS-sole
Vale Overseas Limited BBB-/BBB 6.25% 8/10/2026 1,000 low/mid 6.00%a N/A 6.25% +470.3 BB/BNPP/BRAD/CITI/MS
Westlake Chemical Baa3/BBB+ 3.60% 8/15/2026 750 +225-237.5 +212.5-225 +212.5 +212.5 DB/GS (a)/JPM (p)
Westlake Chemical Baa3/BBB+ 5.00% 8/15/2046 700 300-312.5 287.5-300 +287.5 +287.5 DB/GS (a)/JPM (p)
J.P. Morgan Chase & Co. A3/A+ 2.295% 5NC4 2,500 +130-135 +125 (+/-2) +123 +123 JPM-sole

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
IBRD Aaa/AAA 1.125% 8/10/2020 1,500 MS+9a MS+9a MS+9 +35.3 BAML/BMO
NWB (tap)
New total: $1.25b
Aaa/AAA 2.375% 3/24/2026 250 MS+47a MS+47a MS+47 +34.6 TD

 

Lipper Report/Fund Flows – Week ending July 27th     

 

  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).
  • Over the same period, Lipper reported a net outflow of $15.422m from Loan Participation Funds (2016 YTD net outflow of $5.389b).
  • Emerging Market debt funds reported a net inflow of $1.382b (2016 YTD inflow of $3.717b).

 

IG Secondary Trading Lab

 

  • BAML’s IG Master Index was unchanged at +150.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +195 versus +194.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.3b on Tuesday versus $13b Monday and $16.8b the previous Tuesday.
    The 10-DMA stands at $15.6b.
  • The top three most actively traded IG-rated issues were led by MSFT 3.70% due 8/08/2046 with 77% client and affiliate flows.
  • MSFT 3.45% due 8/08/2036 finished second with client sales two-times purchases.
  • MSFT 3.95% due 8/08/2056 placed third with client selling outweighing buying by 1.6-times.

 

New Issue Volume

 

Index Open Current Change
IG26 76.833 74.941 <1.892>
HV26 206.915 200.05 <6.865>
VIX 13.37 12.86 <0.51>
S&P 2,157 2,163 6
DOW 18,313 18,355 42
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $11.50 bn DAY: $13.25 bn
WTD: $43.90 bn WTD: $45.90 bn
MTD: $43.90 bn MTD: $45.90 bn
YTD: $855.091 bn YTD: $1,090.627 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications July 29 —- <3.5%> <11.2%> —-
ADP Employment Change July 170k 179k 172k 176k
Markit US Services PMI July 51.0 51.4 50.9 —-
Markit US Composite PMI July —- 51.8 51.5 —-
ISM Non-Manufacturing Composite July 55.9 55.5 56.5 —-

 

Rates Trading Lab

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 100-00+ 100-19 99-24 101-14 106-08
RESISTANCE LEVEL 99-31 100-16+ 99-21 101-10 105-12
RESISTANCE LEVEL 99-296 100-11+ 99-14 101-00 104-28
         
SUPPORT LEVEL 99-26 100-02+ 99-01 100-14+ 103-30
SUPPORT LEVEL 99-246 99-30+ 98-29+ 100-09+ 103-19
SUPPORT LEVEL 99-222 99-266 98-24 100-02+ 102-31

 

Tomorrow’s Calendar

 

  • China Data: BOP Current Account Balance Non-Cumulative, Foreign Reserves
  • Japan Data: Foreign Bond & Stock Buying
  • Australia: Retail Sales
  • EU Data: Nothing Scheduled
  • S. Data: Claims, Cons Comf, Jun Fact Ords, Jun Dur Goods
  • Supply: Spain 5 & 13y, Spain 3yIL, France 10, 16, 19y, France 11 & 13yIL
  • Events: ECB Monthly, U.K. MPC
  • Speeches: Iwata, Kaplan

Above is the opening extract from Quigley’s Corner aka “QC”  Wednesday Aug 3 2016 Edition distributed via email to clients of Mischler Financial, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer, the QC observations is one of three distinctive research content pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate bond new issuance and market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline.

To receive Quigley’s Corner, please contact Ron Quigley, Managing Director and Head of Fixed Income Syndicate via email: rquigley@mischlerfinancial.com or via phone.

*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones Newswire, IFR, Informa Global Markets, Internal Mischler, LCDNews, Market News International, Prospect News, Standard & Poor’s Ratings Services, Stone & McCarthy Research, Thomson Reuters and of course, a career of sources, contacts, movers and shakers from syndicate desks to accounts; from issuers to originators; from academicians to heads of research, and a host of financial journalists, et al.

Mischler Financial Group’s “U.S. Syndicate Closing Commentary”  is produced weekly by Mischler Financial Group. No part of this document may be reproduced in any manner without the permission of Mischler Financial Group. Although the statements of fact have been obtained from and are based upon sources Mischler Financial Group believes reliable, we do not guarantee their accuracy, and any such information may be incomplete.  All opinions and estimates included in this report are subject to change without notice.  This report is for informational purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security.   Mischler Financial Group, its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation of this report, may from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as market-makers or advisors or brokers in relation to the securities (or related securities, financial products, options, warrants, rights, or derivatives), of companies mentioned in this report or be represented on the board of such companies. Neither Mischler Financial Group nor any officer or employee of Mischler Financial Group or any affiliate thereof accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.  “Mischler Financial” Group and the Mischler Financial Group