Goldman Sachs Raises the D&I Barbell w 1bil Debt Issuance
October 26, 2016   //   by Mischler MarCom   //   Debt Market Commentary, Recent Deals  

Quigley’s Corner 10.25.16- Goldman Sachs Raises the D&I Barbell


Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard

Goldman Sachs Diversity Dealer Game Changer

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller
New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar


6 IG Corporate issuers priced 7 tranches between them totaling $4.90b bringing the WTD total to $14.75b or 60% of this week’s syndicate midpoint average estimate calling for $25.48b.  But today was all about one deal –  a TLAC deal for The Goldman Sachs Group, Inc.  The deal had much more to do about breaking and shattering new ground for diversity and inclusion.  And you know what?  THAT is the story I’m telling tonight.  Let’s check our various recaps first and then continue scrolling down to another great read from the House of Gold!

Global Market Recap


  • S. Treasuries – USTs closed mixed & little changed with a flatter curve.
  • Overseas Bonds – Core Europe were little changed & JGB’s had small gains.
  • 3mth Libor – Set at the highest yield since May 2009 (0.88567%).
  • Stocks – U.S. red at 3:30pm. Europe closed red except the FTSE. Asia closed higher.
  • Economic – The U.S. data was solid except for consumer confidence (-4.9 points).
  • Overseas Economic – Strong IFO data in Germany but the data in France was weaker.
  • Currencies – USD mixed vs. the Big 5. DXY Index reached highs since early February.
  • Commodities – Good day for gold, copper & silver but not for crude oil.
  • CDX IG: +0.75 to 74.52
  • CDX HY: +2.97 to 400.24
  • CDX EM: -1.13 to 231.09

*CDX levels are as of 3:30PM ET today.

-Tony Farren


IG Primary & Secondary Market Talking Points


  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 15.79 bps.
  • BAML’s IG Master Index was unchanged at +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +_130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +181.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14b on Monday versus $12b Friday and $13.9b the previous Monday.
  • The 10-DMA stands at $15.3b.


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


IG Corporate New Issuance This Week
vs. Current
WTD – $14.75b
October 2016 vs. Current
MTD – $83.345b
Low-End Avg. $24.61b 59.93% $87.83b 94.89%
Midpoint Avg. $25.48b 57.89% $88.59b 94.08%
High-End Avg. $26.35b 55.98% $89.35b 93.28%
The Low $15b 98.33% $75b 111.13%
The High $35b 42.14% $125b 66.68%


The Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard


Trading at
the Break
11NC10 FRNs 3mL+180a 3mL+175 # 3mL+175 3mL+175 <5> +5 3mL+176/174 +1

Here’s a look at the relative value analysis to derive NIC on today’s GS 11NC10 FRNs.

  • The outstanding GS 10yr was G+144 pre-announcement this morning.
  • Add 5 bps for the 10s/11s curve = G+149
  • Add in 16 bps for 10yr mid swaps = G+165
  • Interpolating 10yr m/s to 11yr m/s = 5 bps or G+170 to get an 11yr bullet equivalent.
  • NIC = 5 bps.

………and here’s a look at final book sizes and oversubscription rates:


GS  Issue Tranche Size Final Book
11NC10 FRNs $1b $2.7b 2.7x


Goldman Sachs Final Pricing
GS $1b 11NC10 FRNs due 10/28/2026 @ $100.00 or 3mL+175

goldman sachs-diversity-D&I

Goldman Sachs Diversity Dealer Game Changer: It’s All About Capability & Distribution
What Goldman Sachs did today was something they tried about 18 months ago.  They were experimenting then and carried thru today with the single most formidable ratcheting up of meaningful diversity and inclusion initiatives that I have ever seen before in this space.  What they did, and as I wrote in this morning’s very early deal announcement at 7:47 am ET, was to encourage strong participation among today’s 12 diversity co-managers on their $1bil 11NC10 FRNs.  It was Goldman’s most inclusive transaction.  Everyone started from the same playing field upon today’s announcement. The built-in ‘incentive’ was where the pedal meets the metal so to speak by “rewarding unique orders in addition to each firm’s underwriting liability.” In Mischler’s case, that was 0.5%.  It was all completely about distribution. What that did was send a signal to diversity firms to ratchet up their game and prove their capabilities by delivering on each of their respective promises to provide meaningful incremental/tertiary tier II and III HIGH QUALITY distribution.  These are the true value add elements that separate the wheat from the chaff.

Let me explain the above: Irrespective of industry, and notwithstanding cultural and/or corporate guidelines designed to embrace and advance diversity and inclusion (D&I) initiatives with regard to internal hiring, strategic engagements and/or outsourcing, the fact is Goldman “gets the joke.” Based on my own lengthy tenure on Wall Street, it is clear to me, if not most that GS’s goal is not to simply “check the box” and  arbitrarily select from the myriad of “minority-owned brokerdealers” when they are the Issuer or the lead bookrunner of a particular underwriting. For those who didn’t get the memo, Goldman is a globally-recognized thought-leader i.e. best practices, and when it comes to D&I, they don’t simply ‘check the box’; their internal mandate is to enlist only truly capable firms, not merely those whose owners fall into one of the various minority classifications (e.g. Woman-owned aka WMBEs, African American-owned, Hispanic American owned, Service-Disabled Veteran owned, etc).

At Mischler, we agree with the GS philosophy wholeheartedly. It is imperative to embrace diversity, but the embrace should be driven by capability and excellence, not merely whether the firm is owned by a ‘certified minority’ . It is an approach that Mischler embraces when selecting the Veteran-centric philanthropic organizations that we support year round and during the months of May and November, when we pledge a portion of the entire month profits to honor Memorial Day and Veterans Day. NO enterprise, whether it be a Fortune Corporation/Issuer, a Public Plan Sponsor, a global investment bank, or an Investment Manager that has D&I goals and/or mandates should be ‘checking the box’ without first checking the actual capabilities of the respective service provider!

In the case of today’s $1bil placement, GS remained focused on reviewing their myriad diversity order books and to only select co-manager firms according to an internal and granular set of criteria.  Among other things, Goldman would have the right to scrutinize accounts and reflect their thoughts through their final allocations to each firm.

With our underwriting liability of 0.5% applied to today’s deal size of $1b that equates to $5mm allocation. Assuming we secured our full 5mm underwriting liability (given our typical high quality order books), it would be a tall order to allocate each of several dozen institutional accounts with a meaningful amount of paper.  The prospective allocations would simply not prove meaningful enough to those fund managers. But Goldman wanted to capture new, quality middle markets accounts that include a range of investor profiles, as well as geographically diverse placement opportunities across the globe. Goldman included a good firm today when they called Mischler Financial, the nation’s oldest Service Disabled Veteran broker dealer. We are grateful for the bulge bracket firms who look for the distribution value-add.  That said, one particular firm (shall I say notorious shop?) recently asked us to build a book, encouraged our orders and claimed they’d work together on securing us the best possible allocation, only to give us an otherwise deminimis allocation of bonds once the books were closed.

Before readers infer a sense of sour grapes on the part of this writer, that is not the case.  We’re big boys and girls here and we’ve been to more rodeos than many of our peers insofar as the new issue allocation process. But, as I shared that story with several bulge bracket firms during the past several days, the senior syndicate team members I spoke with genuinely found it “deplorable” that any desk would put a prospective co-manager or selling group member through the exercise of building a book of firm IOIs, only to leave that firm and their accounts with less than crumbs for the effort. In fact, one syndicate head said, “If we know allocations will be very difficult we will always tell you there’s no distribution this go ‘round, but we would NEVER be so egregious to encourage it and then disrespect you like that. It’s plain bad business that hurts what you guys are trying to do and you work so hard at doing it right!”  Indeed! And that story got around folks, but then there is Goldman Sachs–a firm that has historically proven to have honor and integrity whenever interacting with their underwriting group partners.

Conclusion, Goldman did something bold and daring today for diversity and inclusion and for their transaction.  It IS a game changer that incentivizes on a much grander scale.  The message sent is clear – Goldman will partner with you, but you need to work hard at it; you need to deliver and execute consistently and you need to show us quality accounts, solid order books and be able to place the paper when we give it to you.

Who and where are the Mischler investor accounts that participated in today’s GS transaction?  They represented a total of 13 different investor profile types. They exist throughout the United States. They are in the United Kingdom and throughout Europe. They are in Asia, they are in the Caribbean and LATAM.  There were over 3 dozen MFG clients on today’s GS order book.  They are true quality accounts; good, solid, reliable investors who are often crowded out in our new world order by global money managers who pin down most of today’s new issues.  These middle market investors yield too. They want to buy the best, highest-rated IG credits.  They often add to positions in the secondary market.

And, they all showed up today.  I personally thank each and every one of them.  They get the “QC” and they read it.  They understand all the hard labor we expend in this space, and they understand we are led by an executive team that is honorable and financially committed to stick with it for the long haul.  We are called Mischler Financial Group. We’re about a proudly earned certification; we’re about the strongest distribution in the business; we’re about very strong capital, a fantastic operations team that is second to none, and we’re about stellar relationships across the DCM and Syndicate ecosystem. That’s what it takes in today’s competitive landscape and we greatly appreciate the wonderful partnership we share with Goldman Sachs. We’re also grateful for Goldman’s revolutionary transaction today; one that was focused on best-in-class financial industry partners who can help extend the GS brand with integrity and reliability!

Words Count, Most of All These Two Words: Thank You.

Before this “guy-in-the-corner” walks out of his bedroom each morning, I say “thank you”.  It’s important folks.  Sometimes the only prayer we ever have in life is “thank you” and it will be enough.  You know that I mean that.  It’s time for roll call again and it gives me great pleasure to shout out Team Goldman Sachs not only for being there for our firm today, but for Diversity & Inclusion in general.  Thank you to Team GS not for merely moving the needle forward today for inclusive initiatives, but for bulldozing it ahead with a new powerful distribution incentive.  Your trajectory in finding new ways to lend meaning to the mandate never surprises, rather it overwhelms because you are doing great things the right way.  Our firm, and others with proven capabilities grow as a result and all the accounts that participated today in yet another major bank’s TLAC issuance will come to us to execute across myriad other product lines.  So, from the desk of Chairman and CEO Lloyd Blankfein to Jonny Fine; from Tony Shan to Matt Jackson; from Salina Lee and Elizabeth Plunkett to Jason Ghilarducci, you are all part of one team that came together again on deal day to raise the bar for D&I while fortifying your own self-funding with new global investors that cover a diversity of profiles and regions.

Simply said, “Thank you all!”

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller

Mr. Scott Stringer seems like a nice enough fellow. His resume includes being the 44th and current New York City Comptroller and a New York Democratic politician who previously served as the 26th Borough President of Manhattan.  Regarding Mr. Stringer’s recent and LOUD October 16th press request for The Goldman Sachs Group Inc. (among 14 other major companies) to disclose data on the diversity of their suppliers and to increase spending with firms owned by minorities and women and veterans.  The fact is, there is currently no mandate on the part of NYC Comptroller to include SDV-owned broker-dealers, although select managers do informally include such firms. I invite Mr. Stringer and/or his designates to read the “QC.” They’ll find what they’re looking for, which is nothing but a best-in-class procurement initiative in the IG dollar DCM; no, make that Global Debt Capital Markets.

Contrary to the less-than-subliminal context of the above noted press release, Goldman does understand and fully embraces the notion that supplier diversity is the next frontier for companies seeking to manage risk and create sustainable shareowner value. In fact, Goldman has ‘gotten it’ for many years. Starting from inside the office of Chairman and CEO Lloyd Blankfein right on down to the DNA of his top lieutenants like Jonathan “Jonny” Fine, who heads syndicate at the House of Gold, Goldman knows that a broader pool of diverse financial suppliers provides tangible benefits to corporations in terms of price and quality.  In today’s case, their very own company!  As Mr. Stringer said, and I quote, “The Company talks the talk but absent disclosure, it’s impossible to measure the impact of their efforts.”

Mr. Stinger, I’m the guy-in the corner and I’m here to RESPECTFULLY suggest to you that Goldman has not only moved the needle forward for all of D&I in the financial services industry, they are at the cutting edge. Contrary to what you implied in the press statement, and despite the ubiquitous trend of bashing big banks in general, I’d humbly argue that for GS, it’s not all about the money, rather it’s about incentivizing us (minority firms) to grow so that we’re around in the future.  Goldman has created such a meaningful diversity mandate that it has literally helped my firm, Mischler Financial Group, Inc. to become one of the best in the country in the fixed income markets. We are a sustainable proposition. GS has raised the bar in a healthy spirit of competition in the entire diversity space across our industry in order to bring out the best in all of us and our respective platforms.

As opposed to ‘calling out’ GS and challenging their D&I process, we respectfully encourage the NYC Comptroller’s office to take a page from the GS playbook vis a vis the process by which NYC’s pension funds determine how and who they include within their own “minority broker” approvals and respective allocation of order schemes. The NYC Comptroller’s Office does not [yet] recognize Service-Disabled veteran brokerdealers; but does recognize other minority classifications within this industry. At such time as you expand the minority classifications to include SDV-owned/operated BDs,  you’ll discover that Mischler was one of the very first firms to be certified by State of New York in connection with the 2014 NYS legislation that established mandates for NYS agencies to procure from Service-Disabled Veteran owned enterprises. While the NYC Comptroller office has not yet embraced State of New York’s SDV legislation, we are hopeful that you will, and when you do, it will likely prove additive in many ways.

Mr. Stringer, if you’d like more perspective and/or insight about this topic, I’m happy to have a dinner with you. We’ll go “Dutch treat.”   I promise you it’ll be a fun and informative meeting, and I’ll happily share with you the history of outreaches made to your office specific to this subject that have seemingly fallen through the cracks. You’ll have one less thing to check off your “to do” list! Hopefully, our firm will not be penalized for creating ‘greater transparency’ via this “op-ed.”  My contact info is at the bottom of the page.

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.

Have a great evening!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate


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 Monday’s session followed by the averages over the prior four weeks:

WEEK 10/17
WEEK 10/10
WEEK 10/03
WEEK 9/26
New Issue Concessions 2.67 bps 3.31 bps 1.87 bps 4.36 bps 2.71 bps
Oversubscription Rates 2.52x 3.05x 3.28x 4.20x 3.52x
Tenors 6.75 yrs 9.16 yrs 11.51 yrs 12.16 yrs 10.51 yrs
Tranche Sizes $985mm $1,137mm $640mm $523mm $646mm


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.


Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Comm. Bank of Australia Aa2/AA- FRN 11/07/2019 500 3mL+equiv 3mL+equiv 3mL+64 3mL+64 CBA/HSBC/JPM
Comm. Bank of Australia Aa2/AA- 1.75% 11/07/2019 1,000 +90-95 +80 the # +80 +80 CBA/HSBC/JPM
Goldman Sachs Group, Inc. A3/A FRN 11NC10 1,000 3mL+180a 3mL+175 the # 3mL+175 3mL+175 GS-sole
Lennox International Inc. Baa3/BBB 3.00% 11/15/2023 350 +180a +155a (+/-5) +145 +145 JPM/WFS
M&T Bank Corp. Baa2/BBB- 5.125% 11/01/2026 500 5.25%a 5.125% the # 5.125% 3mL+352 CS/JPM/RBC/UBS
National Rural Utilities Coop Fin. Corp. A2/A 1.50% 11/01/2019 300 +65-70 +55a (+/-5) +50 +50 JPM/MIZ/PNC/STRH
Orange SA Baa1/BBB+ 1.625% 11/03/2019 1,250 +80-85 +70a (+/-3) +67 +67 BAML/JPM/MS/MUFG


Indexes and New Issue Volume


Index Open Current Change
LUACOAS 1.30 1.30 0
IG27 73.767 74.537 0.77
HV27 161.385 161.635 0.25
VIX 13.02 13.46 0.44
S&P 2,151 2,143 <8>
DOW 18,223 18,169 <54>



IG Corporates




Total IG (+SSA)

DAY: $4.90 bn DAY: $4.90 bn
WTD: $14.75 bn WTD: $14.75 bn
MTD: $83.345 bn MTD: $126.695 bn
YTD: $1,158.081 bn YTD: $1,481.915 bn


Lipper Report/Fund Flows – Week ending October 19th  


  • For the week ended October 19th, Lipper U.S. Fund Flows reported an inflow of $2.431b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.086b) and a net outflow of $160m from High Yield Funds (2016 YTD net inflow of $11.119b).
  • Over the same period, Lipper reported a net inflow of $514.8m into Loan Participation Funds (2016 YTD net outflow of $1.956b).
  • Emerging Market debt funds reported a net inflow of $621.7m (2016 YTD inflow of $7.333b).


IG Credit Spreads by Rating

The 10-day IG spread performance vs. the T10 across the ratings spectrum and how IG compared versus high yield:

Spreads across the four IG asset classes are an average 26.75 bps wider versus their post-Crisis lows!


ASSET CLASS 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
IG Avg. 135 135 135 135 136 137 136 137 137 137 0 <2> 106
“AAA” 78 77 76 76 76 78 78 79 79 79 +1 <1> 50
“AA” 83 83 83 82 83 84 84 84 84 84 0 <1> 63
“A” 108 108 108 108 109 109 109 110 110 110 0 <2> 81
“BBB” 174 175 174 175 176 176 176 177 177 177 <1> <3> 142
IG vs. HY 325 327 327 331 336 339 336 345 338 338 <2> <13> 228

IG Credit Spreads by Industry

…….and a snapshot of the major investment grade sector credit spreads for the past ten sessions:

Spreads across the major industry sectors are an average 32.21 bps wider versus their post-Crisis lows!


INDUSTRY 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
Automotive 117 117 117 117 117 118 118 119 119 119 0 <2> 67
Banking 127 127 128 128 129 130 129 130 129 130 0 <3> 98
Basic Industry 177 179 179 180 180 180 179 180 179 180 <2> <3> 143
Cap Goods 101 101 101 101 101 102 102 102 102 102 0 <1> 84
Cons. Prod. 105 105 105 104 105 106 106 106 106 107 0 <2> 85
Energy 174 175 175 177 179 179 178 180 180 181 <1> <7> 133
Financials 160 160 161 161 162 163 163 163 163 163 0 <3> 97
Healthcare 114 114 114 114 114 114 114 114 115 116 0 <2> 83
Industrials 136 136 135 136 136 137 137 137 137 138 0 <2> 109
Insurance 154 155 155 155 156 155 155 156 156 156 <1> <2> 120
Leisure 136 135 136 136 137 137 137 137 138 138 +1 <2> 115
Media 157 157 155 155 155 157 157 158 158 159 0 <2> 113
Real Estate 147 147 147 148 148 149 149 148 149 149 0 <2> 112
Retail 115 114 114 114 114 115 115 115 115 115 +1 0 92
Services 128 128 128 128 129 129 129 130 130 130 0 <2> 120
Technology 112 112 112 111 112 113 113 114 114 115 0 <3> 76
Telecom 162 161 156 155 156 157 158 158 158 158 +1 +4 122
Transportation 136 136 137 137 137 137 137 138 138 137 0 <1> 109
Utility 136 137 137 138 138 138 139 139 139 139 <1> <3> 104


New Issue Pipeline

Please note that for ratings I use the better two of Moody’s, S&P or Fitch.

Above is the opening extract from Quigley’s Corner aka “QC” Tuesday October 25, 2016 distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, 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 debt new issuance and secondary 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: 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, S, 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.

Goldman Sachs Raises the D&I Barbell w 1bil Debt Issuance