PEMEX Prints USD 5.5bil 3-Part; Eye On Investment Grade Credit Spreads
December 7, 2016   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner 12.06.16 – PEMEX Prints USD 5.5b 3-Part for Pole Position in Day’s Debt Issuance


Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

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

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 30th    

Investment Grade Credit Spreads by Rating

Investment Grade Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline – $303.84 Billion in Cumulative Enterprise Value!

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

3 IG Corporate issuers priced 7 tranches between them totaling $7.65b today bringing the WTD total to $13.975b or over 78% of this week’s syndicate midpoint average forecast calling for $17.87b.  MTD we’ve issued $28.905b or nearly 70%% of the $41.52b estimate.  PEMEX printed a $5.5b three-part Senior Notes transaction that accounted for 72% of today’s IG primary market volume. SSA issuance was once again absent for the third consecutive session.

 

Global Market Recap

 

  • S. Treasuries – Closed mixed for the 2nd day but today the curve was steeper.
  • Overseas Bonds – JGB’s mostly red. Bunds & Gilts lost. Strong Peripheral bid.
  • 3mth Libor – Set at its highest yield (0.95083%) since May 2009.
  • Stocks – Small gains heading into close led by the NASDAQ.
  • Overseas Stocks – Big bank rally in Europe. Asia more green than red.
  • Economic – Trade deficit cuts into GDP. Factory orders & economic optimism strong.
  • Overseas Economic – EU GDP inched higher & strong German factory orders.
  • Currencies – Bounce back day for the USD. USD outperformed all of the Big 5.
  • Commodities – Down day for commodities including crude oil.
  • CDX IG: -1.78 to 70.11
  • CDX HY: -6.60 to 375.61
  • CDX EM: -8.58 to 256.24

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • CBL & Associates LP upsized today’s 10-year Senior Notes new issue to $400mm from $300mm at the launch.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues, including today’s KeyCorp Pfd., was <29.32> 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 tightened 1 bp to +128 vs. +129.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +175 vs. +176.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14.0b on Monday versus $25.0b on Friday and $16.9b the previous Monday.

 

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

 

IG Corporate New Issuance This Week
12/05-12/09
vs. Current
WTD – $13.975b
December 2016
Forecasts
vs. Current
MTD – $28.905b
Low-End Avg. $16.78b 83.28% $40.87b 70.72%
Midpoint Avg. $17.87b 78.20% $41.52b 69.62%
High-End Avg. $18.96b 73.71% $42.17b 68.54%
The Low $10b 139.75% $30b 96.35%
The High $25b 55.90% $60b 48.17%

 

 

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

 

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
New Issue Concessions <1.05> bps 3.53 bps 4.5 bps 3.62 bps <3.60> bps
Oversubscription Rates 4.16x 3.38x 2.99x 2.78x 4.26x
Tenors 15.09 yrs 10.84 yrs 12.14 yrs 11.28 yrs 13.31 yrs
Tranche Sizes $575mm $711mm $929mm $1,039mm $692mm
Avg. Spd. Compression
IPTs to Launch
<19.43> bps <17.60> bps <16.07> bps <17.69> bps <22.96> bps

 

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
CBL & Associates Baa3/BBB- 5.95% 12/15/2026 400 +375a N/A +375 +375 JPM/JEFF/USB/WFS
PEMEX Baa3/BBB+ FRN 3/11/2022 1,000 3mL+equiv 3mL+equiv 3mL+365   BAML/CITI/JPM/MIZ/MS
PEMEX Baa3/BBB+ 5.375% 3/13/2022 1,500 6.00%-low 6.00%
6.125%a
5.625%a (+/-12.5) 5.50% +366.4 BAML/CITI/JPM/MIZ/MS
PEMEX Baa3/BBB+ 6.50% 3/13/2027 3,000 7.00%-low 7.00%
7.125%a
6.75%a (+/-12.5) 6.625% +423.3 BAML/CITI/JPM/MIZ/MS
PNC Bank NA Aa2/A+ FRN X/XX/2018 400 3mL+equiv 3mL+equiv 3mL+40 3mL=40 BARC/GS/MS/PNC
PNC Bank NA Aa2/A+ 1.70% X/XX/2018 600 +low 70s/+72.5a +65a (+/-2) +63 +63 BARC/GS/MS/PNC
PNC Bank NA Aa2/A+ 2.55% X/XX/2021 750 +mid/high 80s
+86.25a
+77a (+/-2) +75 +75 BARC/GS/MS/PNC

           

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.29 1.28 <0.01>
IG27 71.894 69.54 <2.354>
HV27 143.865 143.40 <0.465>
VIX 12.14 11.79 <0.35>  
S&P 2,204 2,212 8
DOW 19,216 19,251 35  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $7.65 bn DAY: $7.65 bn
WTD: $13.975 bn WTD: $13.975 bn
MTD: $28.905 bn MTD: $34.655 bn
YTD: $1,273.667 bn YTD: $1,613.401 bn

 

Lipper Report/Fund Flows – Week ending November 30th    

     

  • For the week ended November 30th, Lipper U.S. Fund Flows reported an outflow of $1.302b from Corporate Investment Grade Funds (2016 YTD net inflow of $41.464b) and a net inflow of $341.7m into High Yield Funds (2016 YTD net inflow of $4.939b).
  • Over the same period, Lipper reported a net inflow of $339.2b into Loan Participation Funds (2016 YTD net inflow of $561.5m).
  • Emerging Market debt funds reported a net outflow of $188.9m (2016 YTD inflow of $5.743b).

 

Investment Grade 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 25.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/05 12/02 12/01 11/30 11/29 11/28 11/25 11/24 11/23 11/22 1-Day Change 10-Day Trend PC
low
IG Avg. 135 135 135 136 136 136 136 136 136 137 0 <2> 106
“AAA” 75 75 75 75 75 75 75 75 75 77 0 <2> 50
“AA” 82 83 83 84 84 83 84 84 84 84 <1> <2> 63
“A” 107 107 107 108 108 108 108 108 108 108 0 <1> 81
“BBB” 173 174 174 175 177 177 177 177 177 178 <1> <5> 142
IG vs. HY 323 329 327 331 333 330 328 330 330 333 <6> <10> 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 31.89 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/05 12/02 12/01 11/30 11/29 11/28 11/25 11/24 11/23 11/22 1-Day Change 10-Day Trend PC
low
Automotive 121 122 122 123 123 123 124 124 124 123 <1> <2> 67
Banking 125 126 125 125 126 126 126 126 126 126 <1> <1> 98
Basic Industry 175 176 175 177 175 175 175 175 175 176 <1> <1> 143
Cap Goods 100 101 101 102 101 101 102 101 101 102 <1> <2> 84
Cons. Prod. 109 110 109 110 110 110 111 111 111 111 <1> <2> 85
Energy 175 177 177 180 181 180 181 180 180 181 <2> <6> 133
Financials 155 155 154 155 157 157 157 157 157 157 0 <2> 97
Healthcare 118 118 118 119 118 118 119 119 119 119 0 <1> 83
Industrials 137 137 137 139 139 139 139 140 140 140 0 <3> 109
Insurance 146 147 146 147 147 147 147 147 147 147 <1> <1> 120
Leisure 135 135 135 135 135 134 135 135 135 135 0 0 115
Media 159 160 159 161 161 160 161 161 161 161 <1> <2> 113
Real Estate 144 144 144 144 142 142 143 143 143 143 0 +1 112
Retail 116 116 116 117 117 117 118 119 119 119 0 <3> 92
Services 128 128 128 128 127 127 128 128 128 128 0 0 120
Technology 110 110 110 112 112 113 113 113 113 114 0 <4> 76
Telecom 165 166 165 166 167 167 168 169 169 169 <1> <4> 122
Transportation 135 135 135 136 135 135 136 135 135 135 0 0 109
Utility 135 136 135 135 135 135 136 135 135 136 <1> <1> 104

 

New Issue Pipeline

Above is the opening extract from Quigley’s Corner aka “QC”  Tuesday December 6 2016 edition 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: 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, 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.

PEMEX Prints USD 5.5bil 3-Part; Eye On Investment Grade Credit Spreads