FOMC Minutes-Distilling the Minutiae; Mischler Debt Market Comments
January 5, 2017   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner 01.04.17 – FOMC Minutes; Distilling the Minutiae and Market Reaction(s)

Today’s Issuers: American Airlines (NYSE:AMR); Citigroup Inc (NYSE:C); Credit Suisse Group; Ford Motor Credit Corp (parent NYSE:F); Toyota Motor Credit Corp TMCC (parent NYSE:TM) and…

Investment Grade New Issue Re-Cap – U.S. and Europe Posting Prolific IG Volume Totals – 7th Busiest IG USD Primary Day in History

Global Market Recap

Credit Suisse AG $4.5b two-part 6NC5 and 11NC10 Senior Notes Deal Dashboard

FOMC Minutes Brought to You by Our Fighting Irishman Mr. Tony Farren

FOMC Voting Line-Up for 2017 from 2016

IG Primary & Secondary Market Talking Points

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending December 28th     

IG Credit Spreads by Rating

IG Credits by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar


To tell you how busy the IG primary markets have been today, let’s first go to Europe of all places, where it would seem things might appear a bit better than anticipated resulting in issuers’ fear of higher rates sooner rather than later.  You all know what I feel about Europe’s geopolitical situation (I’m in the Bear camp), but the market likes to be way ahead of the curve.  The result, according to my longtime friend and former BNP Paribas colleague, Mr. Paul Cohen, who heads Bloomberg Editorial in London, “this week’s European IG issuance stands at €29.93b exceeding by 89%, London syndicate expectations for the entire week after only just two days and the highest new issue volume since March 16th and only the third time in three years that more than €22b dollar priced during a single session.” Additionally he said, “Europe priced its first sovereign issue today for Ireland – a €4b long 20-year.”  I call that “getting off the fence” to take full advantage of the current rate environment. We know how market players react, from issuers to bankers and traders and sales – they want to be ahead of the pack. Europe clearly has a long and bumpy road ahead of itself, but for today that’s a staggering issuance statistic across the pond.

Conversely, we here in the U.S. of A. have much more substantial evidence of an improving economy with promise for our future.  However, don’t be fooled by today’s FOMC Minutes (more on that later). Rates aren’t going up merely on Trump’s promises, rather once in office, the Beltway needs to show it can get things done.  With Republicans owning the White House, Senate and Congress the expectation is that great change may come fast and furious but don’t get too far ahead of yourselves.  Rate hikes will be a slow crawl folks. Remember that!  

Regardless, as a result, today was the 7th busiest day for all-in IG dollar new issuance.  That’s right, we priced a total of 7 IG Corporate issuers across 22 tranches totaling $22.785b.  Meanwhile 2 SSA issuers joined the fray, issuing 3 tranches between them totaling $5.75b bringing the staggering record all-in IG day total to 9 issuers, 25 tranches and $28.535b.  The all-in (IG Corporates plus SSA) WTD total is now $48.435b. In terms of IG Corporate-only WTD volume, we have priced over 39% of the syndicate midpoint average forecast for all of January or $108.41b.

My advice? Be smart, look good and continue issuing.

Mischler was grateful to once again secure a part in this great start to the New Year, having served as an active Co-Manager on today’s $4.5b two-part from Credit Suisse Group AG in the form a 6NC5 and 11NC10 Senior Notes new issue. Let’s first look at the Global re-cap and then I’ll show you the CS Deal Dashboard.

I also encourage you to ask Paul Cohen, who is located in London, to add you to his disty list.  If you are already on Bloomberg, it’s free and you’ll be glad you did.  So, send him a message or chat. He’s an all-around great guy.  He’ll be happy to keep you in touch with IG primary market stats and commentary from across the pond and “Yes” he is part of the Ed, Bob and Lisa show who do what he does but they do it here in New York.  Note also that Paul is a very seasoned originator/banker and he can talk-the-talk and hold his own with any of my “QC” readership. See that?  Another value-added suggestion from the guy-in-the-corner.


Global Market Recap


  • The FOMC Minutes were not as hawkish as the December Meeting.
  • U.S. Treasuries – Mixed & little changed.
  • Overseas Bonds – JGB’s mixed/steeper. EU more red than green. Supply tomorrow.
  • 3mth Libor – Set over 1% (1.00511%) for the first time since May 2009.
  • Stocks – NASDAQ leading U.S. stocks higher (3:30pm).
  • Overseas Stocks – Europe closed mixed. Big rally for Nikkei. China higher.
  • Economic – Vehicle sales looked to be very strong.
  • Overseas Economic – Higher EU CPI. Better economic data in Europe, China & Japan.
  • Currencies – The USD weaker was vs. all of the Big 5. Strong session for ADXY Index.
  • Commodities – Good day for the CRB, crude oil, copper & wheat.
  • CDX IG: -2.27 to 63.40
  • CDX HY: -7.21 to 338.48
  • CDX EM: -6.45 to 233.39

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

-Tony Farren



Credit Suisse AG $4.5b two-part 6NC5 and 11NC10 Senior Notes Deal Dashboard


Trading at
the Break
6NC5 +185a +165 the # +165 +165 <20> bps 11 bps 163/161 <2>
11NC10 +205a +185 the # +185 +185 <20> bps 2 bps 183/180 <2>


The 11NC10 relative value study pointed to the outstanding CS 4.55% due 4/17/26 which was quoted T+166bp (G+170).  The 10s/11s curve is worth about 4 bps getting you to T+174 implying an 11 bp NIC on this tranche.


The 6nc5 tranche comped best to the Credit Suisse  CS 3.45% due 4/16/2021 that was T+130bp (G146) pre-announcement.  Accounting for 5 bps for the 4s/5s curve and tagging on another 12 bps for the 5s/6s curve lands fair value at T+163 pointing to a 2 bp NIC versus today’s 11NC10 +165 final spread level.


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


CS  Issue Tranche Size Final Book
6NC5 $1.75b $4.7b 2.69x
11NC10 $2.25b $6.4b 2.84x


Final Pricing – Credit Suisse Group AG
CS $1.75b 3.574%% 6NC5 1/09/2023 callable 1/09/2022 @ $100.00 to yield 3.574% or T+165  MW +25

CS $2.25b 4.282% 1/09/2028 callable 1/09/2027 @ $100.00 to yield 4.282% or T+185  MW +30


FOMC Minutes Brought to You by Our Fighting Irishman Mr. Tony Farren


  • About half of FED officials included fiscal policy in their forecasts.
  • Many officials stressed uncertainty on fiscal policy effects.
  • Numerous officials judged the FED might need to raise rates faster.
  • Fed officials endorse gradual rate hikes as upside risk debated.
  • Weighed upside risks to growth from fiscal policy.
  • Several saw a stronger U.S. dollar holding down inflation.
  • Officials were split on the inflation outlook.
  • Almost all officials expected a labor market overshoot.
  • FED: downside risks included a stronger U.S. dollar and weakness abroad.
  • Need improved confidence could boost investment.
  • Housing market data signaled firmer residential investments.
  • Sighted continued moderate consumers spending gains.
  • Noted that businesses are more optimistic on their outlooks.
  • Fed officials saw rising communication challenge on the rate path.


Tony’s Take: Deep Dive Into Rates – Expectations vs. Reality


  • The FOMC’s Minutes were not as hawkish as the market perceived the FOMC to be on Fed day (December 14th).
  • The roughly half of FOMC Members that took fiscal policy into account prior to its being introduced must have expressed the more optimistic view in their Dots and not their forecasts for growth, employment and inflation. The economic forecasts were very little changed in December from September.
  • One critical factor is the market has not focused enough on is that the 2017 FOMC will not be nearly as hawkish as the 2016 FOMC was. The biggest hawk on the 2017 FOMC is Vice-Chair Fischer. I sent out a piece on the 2017 vs. 2016 FOMC yesterday at 11:45 am……oh you missed that? Well my good firned the guy-in-the-corner has been kind enough to re-print it for you below.


Take a look …………………..


FOMC Voting Line-Up for 2017 from 2016


The FOMC takes a dovish turn in 2017 from 2016. A better description for the 2017 might be a less hawkish FOMC than 2016. In 2017 the FOMC will add 2 doves and 2 neutral voters and they will be replacing 1 dove, 2 hawks & 1 neutral. The neutral voter (Bullard) had entered 2016 known as a hawk. 3 of the 4 voters in 2016 that are being replaced in 2017 were dissenters at FOMC Meetings in 2016 and all 3 favored rates hikes when the FOMC remained on hold. In an interesting twist, 3 of the new voters in 2017 are the most recently appointed Regional Fed President’s –  Patrick Harker (Philadelphia/July 1, 2015); Robert Kaplan (Dallas/September 8, 2015) and Neel Kashkari (Minneapolis/January 1, 2016). In 2017 out of the current 10 voting members (currently 2 open Fed Governor seats) there will be 6 doves, 1 hawk & 3 neutral voters. Last year (2016) there was 5 doves, 3 hawks & 2 neutral voters.

Here are the details:


New Voters 2017 Dove / Hawk
Charles Evans (Chicago) Very Dovish
Patrick Harker (Philadelphia) Neutral (possible hawkish lean)
Robert Kaplan (Dallas) Neutral
Neel Kashkari (Minneapolis) Dove


New Voters 2017 Dove / Hawk
James Bullard (St. Louis) Neutral (formally hawkish)
Esther George (Kansas City) Very Hawkish (lived up to reputation)
Loretta Mester (Cleveland) Hawk (lived up to reputation)
Eric Rosengren (Boston) Dovish (formally known as very dovish)


The 2017 Line-Up
Doves (6): Yellen, Brainard, Tarullo, Dudley, Evans & Kashkari
Hawks (1): Fischer
Neutral (3): Powell, Harker & Kaplan


Who the Heck  is Tony Farren?  Well, for Starters…

Interesting stuff isn’t it?  Think twice about the rush to hike folks!  And do yourselves another favor please, when you sign on to Bloomberg tomorrow morning look up Tony Farren and ask him to put you on his disty list. Here’s why I say that – I’ve worked right next to “Rocket” Spinella, Chris Garavante and Tommy Lynette on Danny Napoli’s best-in-class Treasury desk at Mother Merrill back in the day. In fact, that team was so good that Tom Hanks sat next to those guys for a couple days to prep for his role as the Master of the Universe when he starred in Brian De Palma’s “Bonfire of the Vanities.”  I happened to be about 10 feet away sitting on corner desk (go figure) of the IG Corporate Institutional trading desk across from another Wall Street legend Mr. Seth Waugh.  Joe Moglia (net worth $1.2b according to monte Burke’s book) sat behind me in institutional sales.  To this day he’s the best motivator on the planet.  Talk about Wall Street celebs, there’s a lot of them right there.  I was lucky and fortunate enough to be around them.  That’s not to mention syndicate etc.  I know I know……relax, I never cease to amaze people.  Anyway, Hanks wanted to know how the phone screens worked, the mannerisms and language used on a real-time Treasury desk for his role as Sherman McCoy so he picked the best and busiest on the street and so it goes.

Here’s my point – out of all that talent that surrounded me especially on the govie desk, Tony Farren is a sharp and experienced market player ( and an ND grad) and could be right in the mix with those people during “those” times.  He’s here at Mischler and is a foundational part of our UST team not to mention a wealth of knowledge.  Reach out to him and ask him to add you to his disty list. Take what you want and leave the rest. Everything he sends out is great stuff.  You’ll be glad you did.  Heck, the guy makes me look good to.  There’s a reason why I added in his Global Market Re-Cap every night and this evening’s Farren intel is a good example of the great stuff you might be missing out on.  Do it.  That’s right I’m talking to YOU. Just do it. Thanks! RQ. 

IG Primary & Secondary Market Talking Points

  • American Airlines Inc. upsized today’s two-part EETC pass through certificates new issue to $536.811m from $404.943m on the Class “AA” tranche and $248.627 from $187.553m on the Class “A” tranche.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 22 IG Corporate-only new issues was 14.45 bps.
  • BAML’s IG Master Index tightened 2 bps to to +128 vs. +130.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +122 vs. 1.23.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +168 vs. +169.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.8b on Tuesday versus $2.5b on Friday and $5.7b the previous Tuesday.
  • The 10-DMA stands at $7.9b.


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


IG Corporate New Issuance January 2017
vs. Current
MTD – $42.685b
Low-End Avg. $107.87b 39.57%
Midpoint Avg. $108.41b 39.37%
High-End Avg. $108.96b 39.17%
The Low $80b 53.36%
The High $145b 29.44%


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, 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 Tuesday’s session followed by the averages over the prior six weeks:

WEEK 12/26
WEEK 12/19
WEEK 12/12
WEEK 12/05
WEEK 11/28
WEEK 11/21
New Issue Concessions N/A 1.76 bps N/A N/A <0.50> bps 4.26 bps 3.53 bps 4.5 bps
Oversubscription Rates N/A 2.62x N/A N/A 2.41x 3.68x 3.38x 2.99x
Tenors N/A 7.53 yrs N/A N/A 10.67 yrs 9.21 yrs 10.84 yrs 12.14 yrs
Tranche Sizes N/A $796mm N/A N/A $708mm $760mm $711mm $929mm
Avg. Spd. Compression
IPTs to Launch
N/A <16.96> bps N/A N/A <17.17> bps <22.24> bps <17.60> bps <16.07> 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.



Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
American Airlines Inc. Aa3/AA 3.65% 2/15/2029 536.811 3.875%a 3.70%a (+/-5) 3.65% +120 CITI/CS/DB(a)MS/GS+(p)
American Airlines Inc. A2/A 4.00% 2/15/2029 248.627 4.125% 4.00%a (+/-5) 4.00% +155 CITI/CS/DB(a)MS/GS+(p)
Citigroup Inc. Baa1/A FRN 1/10/2020 1,000 3mL+equiv 3mL+equiv 3mL+79 3mL+79 CITI-sole
Citigroup, Inc. Baa1/A 2.45% 1/10/2020 1,500 +110a +100a (+/-2) +98 +98 CITI-sole
Citigroup, Inc. Baa1/A 3.887% 1/10/2028 2,750 +162.5a +145a the # +145 +145 CITI-sole
Credit Suisse Group AG BBB+/A- 3.574% 1/09/2023 1,750 +185a +165 the # +165 +165 CS-sole
Credit Suisse Group AG BBB+/A- 4.282% 1/09/2028 2,250 +205a +185 the # +185 +185 CS-sole
Ford Motor Credit Corp. Baa2/BBB FRN 1/09/2020 1,000 3mL+equiv 3mL+equiv 3mL+100 3mL+100 BARC/CACIB/CS/JPM/MIZ
Ford Motor Credit Corp. Baa2/BBB 2.681% 1/09/2020 1,250 +140a +125a (+/-5) +120 +120 BARC/CACIB/CS/JPM/MIZ
Ford Motor Credit Corp. Baa2/BBB 3.81% 1/09/2024 750 +175a +160a (+/-3) +157 +157 BARC/CACIB/CS/JPM/MIZ
Lloyds Banking Group Baa1/A+ 3.00% 1/11/2022 1,500 +130a +115 the # +115 +115 GS/HSBC/LLOYD/MS/WFS
Lloyds Banking Group Baa1/A+ 3.75% 1/11/2027 1,250 +160a +145a (+/-5) +140 +140 GS/HSBC/LLOYD/MS/WFS
National Australia Bank Ltd. Aa2/AA- FRN 1/10/2020 250 3mL+equiv 3mL+equiv 3mL+59 3mL+59 CITI/MS/NAB/RBC
National Australia Bank Ltd. Aa2/AA- FRN 1/10/2022 500 3mL+equiv 3mL+equiv 3mL+89 3mL+89 CITI/MS/NAB/RBC
National Australia Bank Ltd. Aa2/AA- 3.50% 1/10/2027 750 +120a +110a (+/-2) +108 +108 CITI/MS/NAB/RBC
National Australia Bank/NY Aa2/AA- 2.25% 1/10/2020 1,000 +90a +80a m(+/-2) +78 +78 CITI/MS/NAB/RBC
National Australia Bank/NY Aa2/AA- 2.80% 1/10/2022 1,000 +100a +90a (+/-2) +90 +90 CITI/MS/NAB/RBC
Toyota Motor Credit Corp. Aa3/AA- FRN 1/09/2019 400 3mL+equiv 3mL+equiv 3mL+26 3mL+26 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- 1.70% 1/09/2019 850 +60a +52a (+/-2) +50 +50 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- FRN 1/11/2022 300 3mL+equiv 3mL+equiv 3mL+69 3mL+69 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- 2.60% 1/11/2022 1,200 +80a +72a (+/-2) +70 +70 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- 3.20% 1/22/2027 750 +low 90s/+92.5 +82a (+/-2) +80 +80 BNPP/CITI/JPM(B&D)MIZ/TD



Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Asia Development Bank Aaa/AAA 1.75% 1/10/2020 3,000 MS +8a MS +8a MS +8 +28.05 CITI/GS/JPM/NOM
Asia Development Bank Aaa/AAA 2.,625% 1/12/2027 1,000 MS +38a MS +38 MS +38 +23.75 CITI/GS/JPM/NOM
Bank of Montreal Aaa/AAA 2.50% 1/11/2022 1,750 MS +low/mid 60s
MS+60 MS +60 +61.2 BMO/BARC/HSBC/TD


Indexes and New Issue Volume


Index Open Current Change
IG27 65.669 63.476 <2.193>
HV27 141.03 137.58 <3.45>
VIX 12.85 11.85 <1.00>
S&P 2,258 2,271 13
DOW 19,882 19,942 60



IG Corporates




Total IG (+SSA)

DAY: $22.785 bn DAY: $28.535 bn
WTD: $42.685 bn WTD: $48.435 bn
MTD: $42.685 bn MTD: $48.435 bn
YTD: $42.685 bn YTD: $48.435 bn


Lipper Report/Fund Flows – Week ending December 28th     


  • For the week ended December 29th, Lipper U.S. Fund Flows reported an inflow of $1.620b into Corporate Investment Grade Funds (2016 YTD net inflow of $46.95b) and a net inflow of $592.117m into High Yield Funds (2016 YTD net inflow of $11.275b).
  • Over the same period, Lipper reported a net inflow of $923.798m into Loan Participation Funds (2016 YTD net inflow of $6.261b).
  • Emerging Market debt funds reported a net outflow of $38.770m (2016 YTD inflow of $3.721b).


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 20.00 bps wider versus their post-Crisis lows!


ASSET CLASS 1/03 1/02 12/30 12/29 12/28 12/27 12/23 12/22 12/21 12/20 1-Day Change 10-Day Trend PC
IG Avg. 128 130 129 128 128 128 129 129 129 129 0 <1> 106
“AAA” 70 71 71 70 70 71 71 72 72 72 0 <2> 50
“AA” 79 80 80 79 79 80 80 80 80 80 0 <1> 63
“A” 103 104 103 103 103 103 103 103 104 104 0 <1> 81
“BBB” 164 166 164 163 164 164 164 164 165 165 0 <1> 142
IG vs. HY 285 292 292 290 287 282 287 288 290 290 0 <5> 228


IG Credit Spreads by Industry

Above is the opening extract from Quigley’s Corner aka “QC”  Wednesday January 04 2017 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 veteran-owned broker-dealer. 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.   Veteran-owned broker-dealer 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.

Quigley’s Corner 01.04.17 – FOMC Minutes; Distilling the Minutiae and Market Reaction(s)