Sell-Side FI Syndicate Desks Sound Off: New IG Debt Issuance Forecasts
February 3, 2017   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner 02.03.17– Fixed Income Syndicate Seers Forecast Next Week’s New IG Debt Issuance

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

Global Market Recap

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

The Best and the Brightest” –  Syndicate Forecasts and Sound Bites for Next Week 

This Week’s IG New Issues and Where They’re Trading

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 25th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

It was a very welcome no print Friday today.  It gives me an opportunity on behalf of Team Mischler to thank Microsoft, AT&T and Apple for inviting us to serve this week on their multi-tranche transactions.  Thanks also to the leads who worked with us at HSBC – on Microsoft; Citigroup – on AT&T  and Goldman Sachs on Apple. All greatly appreciated!

But I know why you all checked in this evening – it’s to hear what the soothsayers of syndicate say about next week’s investment grade corporate new issue volume.  They all once again participated in my survey and their numbers and thoughts await you below.  Next week there is a lack of any earth shattering, market moving economic data and although Fed members will be speaking here and there it opens the door for further issuance.  Considering the very strong market tone that we’re going out with today in which 75% of this week’s IG Corporate new issues are tighter to MUCH tighter, I’d have to once again take the upside of forecasts.  But heck, we all know you want to hear from the top 23 under writers so, let’s first re-cap the day and then it’s on to the “Best and the Brightest” that syndicate has to offer. 

IG Primary & Secondary Market Talking Points

  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 36 deals that printed, 27 tightened versus NIP for a 75.00% improvement rate while 6 widened (16.75%) and 3 were flat (8.25%).
  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $2.657b into Corporate Investment Grade Funds (2016 YTD net inflow of $12.354b) and a net inflow of $412.595m into High Yield Funds (2016 YTD net inflow of $291.062m).
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.21.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +166 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $22.5b on Thursday versus $21.6b on Wednesday and $21.2b the previous Thursday.
  • The 10-DMA stands at $20.5b.

 

Global Market Recap

  • U.S. Treasuries – Rallied after Employment then sold off hard on Trump regulation talk & Williams.
  • Overseas Bonds – Wild day for JGB’s. Core Europe better & balance struggled.
  • Stocks – Strong rally in the U.S. Europe closed higher & Asia lower.
  • Economic – U.S. Employment Report was mixed while the other data was solid.
  • Overseas Economic – China & Japan data weaker. Europe data was a mixed bag.
  • Currencies – USD traded better overnight than it did during the NY session.
  • Commodities – Crude oil small gain & gold small loss. Copper & natural gas were weak.
  • CDX IG: -1.55 to 63.99
  • CDX HY: -22.66 to 323.55
  • CDX EM: -3.93 to 226.36

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
1/30-2/03
vs. Current
WTD – $44.575b
February 2017
Forecasts
vs. Current
MTD – $12.575b
Low-End Avg. $20.96b 212.67% $90.65b 13.87%
Midpoint Avg. $21.63b 206.08% $91.96b 13.67%
High-End Avg. $22.30b 199.89% $93.26b 12.48%
The Low $10b 445.75% $85b 14.79%
The High $27b 165.09% $120b 10.48%

 

The Best and the Brightest” –  IG Fixed Income Syndicate Forecasts and Sound Bites for Next Week 

 

The investment grade fixed income new issuance forecast question posed to the “Best and the Brightest” FI syndicate desk professionals early this morning was framed as follows:

Well, here’s what we did this week:

  • January 2017 broke the all-time, all-in monthly volume record $227.283b vs. $213.40b (May 2016).
  • WTD, we surpassed the syndicate midpoint average forecast with a 2.12x bid-to-cover rate or $44.575b vs. $21.63b. (206.08%!)
  • February MTD we priced over nearly 14%% of the syndicate forecasts in just two days $12.57b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $242.358b which simply means we are on pace to price $2.644 Trillion in 2017!  HOOOAH. That won’t happen but it’s nice to put things in their proper perspective. 

Here are this week’s five IG Corporate-only key primary market driver averages after the close of yesterday’s:

  • NICS:  <0.87> bps
  • Oversubscription Rates: 3.12x
  • Tenors:  11.60 years
  • Tranche Sizes: $1,311mm
  • Spread Compression from IPTs to the Launch: <19.77> bps


Here’s how this week’s performance data compares against last week’s:

  • NICs tightened 2.00 bps to <0.87> bps vs. 1.13 bps.
  • Over subscription or bid-to-cover rates contracted by 0.17x to 31.12x vs. 3.29x. 
  • Average tenors extended dramatically by 4.93 years to 11.60 years vs. 6.67 years.
  • Tranche sizes increased by $466mm to $1,311mm vs. $845mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 28 IG Corporate-only new issues tightened by <1.57> bps to <19.77> vs. <18.20> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 2 bps to +166 vs. +164.
  • Week-on-week, BAML’s IG Master Index widened 2 bps to +128 vs. +126. 
  • Spreads across the four IG asset classes widened 2.00 bps to 21.00 vs. 19.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors widened 1.20 bps to 25.20 vs. 24.00 bps also against their post-Crisis lows.

Corporate America has posted earnings.  Lots of issuers have exited blackouts.  Next week we have a very light calendar insofar as economic data releases are concerned.  Japan’s Abe meets with President Trump but that’s not until a week from Saturday.  There are several Fed members that will be speaking next week but we are in a steady-as-she-goes mode and I strongly suspect a big week next week.    

And now after my work and thoughts I ask you my favorite question of the week gift to you I ask, “what are your numbers and thoughts for next week’s IG Corporate new issue volume.

Thank you very much! -Ron”

 

The “Best and the Brightest” in Their Own Words

 

……..……and here are their formidable responses:*

 

*Responses to the QC weekly canvass of the top 23 investment bank fixed income syndicate desks are available only via direct email to distribution list recipients of Quigley’s Corner.

 

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
2/06-2/10
Low-End Avg. $23.74b
Midpoint Avg. $24.72b
High-End Avg. $25.70b
The Low $15b
The High $35b

A Look at How the Voting Brackets Broke-Out for Next Week

 

Next Week
2/06-2/10
1: 15b
1: 15-20b
2: 20b
3: 20-25b
9: 25b
4: 25-30b
1: 30b
1: 31b
1: 30-35b

 

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 weekend and enjoy the Super Bowl!

Ron Quigley, Managing Director & Head of Fixed Income Syndicate

 

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

 

Here is this week’s day-by-day re-cap of the five key primary market driver averages for IG Corporatesonly followed by this week’s and the prior five week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/30
TUES.
1/31
WED.
2/01
TH.
2/02
FRI.
2/03
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
New Issue Concessions 7 bps 5.36 bps N/A <2.82> bps N/A <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps N/A
Oversubscription Rates 2.68x 2.89x N/A 3.71x N/A 3.12x 3.29x 2.40x 2.85x 2.45x N/A
Tenors 14.11 yrs 12.37 yrs N/A 9.15 yrs N/A 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs N/A
Tranche Sizes $1,983mm $1,179mm N/A $967mm N/A $1,311 yrs $845mm $1,123mm $927mm $859mm N/A
Avg. Spd. Compression
IPTs to Launch
<17.22> bps <19.54> bps N/A <21.88> bps N/A <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps N/A

 

This Week’s IG New Issues and Where They’re Trading

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 36 deals that printed, 27 tightened versus NIP for a 75.00% improvement rate while 6 widened (16.75%) and 3 were flat (8.25%).

Issues are listed from the most recent pricings at the top working back to Monday at the bottom.  Thanks! –RQ

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
Apple Inc. Aa1/AA+ FRN 2/08/2019 500 3mL+equiv 3mL+equiv 3mL+8 3mL+8 3mL+7/5
Apple Inc. Aa1/AA+ 1.55% 2/08/2019 500 +60a +40a (+/-2) +38 +38 34.5/32
Apple Inc. Aa1/AA+ FRN 2/07/2020 500 3mL+equiv 3mL+equiv 3mL+20 3mL+20 3mL+17/15
Apple Inc. Aa1/AA+ 1.90% 2/07/2020 1,000 +65a +50a (+/-5) +45 +45 43/41
Apple Inc. Aa1/AA+ FRN 2/09/2022 1,000 3mL+equiv 3mL+equiv 3mL+50 3mL+50 3mL+45/43
Apple Inc. Aa1/AA+ 2.50% 2/09/2022 1,500 +80a +60a (+/-2) +58 +58 58/56
Apple Inc. Aa1/AA+ 3.00% 2/09/2024 1,750 +100a +80a (+/-5) +75 +75 71/69
Apple Inc. Aa1/AA+ 3.35% 2/09/2027 2,250 +110a +90a (+/-2) +88 +88 83/81
Apple Inc. Aa1/AA+ 4.25% 2/09/2047 1,000 +140a +120a (+/-5) +115 +115 111/109
Johnson Controls Int’l. PLC Baa1/BBB+ 4.50% 2/15/2047 500 +170a +150a (+/-5) +145 +145 139/138
PNC Financial Services A3/NR FRN 8/07/2018 575 N/A N/A N/A 3mL+25 3mL+24/23
Standard Industries Inc. Ba2/BBB- 5.00% 11/15/2026 500 low 5.00%
5.125
N/A N/A +253 254/250
US Bancorp A3/BBB+ 5.30% PerpNC10 1,000 5.625%a 5.35%a (+/-5) 5.30% $100.00 283/278
Province of Ontario Aa2/AA- 2.40% 2/08/2022 2,500 MS +44a MS +42 MS +42 +49.35 46.5/44.5
AT&T Inc. Baa1/A- 3.20% 3/01/2022 1,250 +150a +135a (+/-5) +130 +130 125/123
AT&T Inc. Baa1/A- 3.80% 3/01/2024 750 +175a +160a (+/-5) +155 +155 150/147
AT&T Inc. Baa1/A- 4.25% 3/01/2027 2,000 +195a +185a (+/-5) +180 +180 170/168
AT&T Inc. Baa1/A- 5.25% 3/01/2037 3,000 +235a +225a (+/-5) +220 +220 207/204
AT&T Inc. Baa1/A- 5.45% 3/01/2047 2,000 +250a +245a (+/-5) +240 +240 229/226
AT&T Inc. Baa1/A- 5.70% 3/01/2057 1,000 +275a +270a (+/-5) +265 +265 257/252
Bank of NY Mellon Corp. A1/AA- 2.60% 2/07/2022 1,250 +90a +80a (+/-5) +75 +75 74/72
Bank of NY Mellon Corp. A1/AA- 11NC10 2/07/2028 1,000 +110-115/+112.5a +105a (+/-5) +100 +100 97/93
Commw’th. Bk. of Australia Aa2/NA FRN 8/03/2018 200 N/A N/A N/A 3mL+35 3mL+37/35
National Rural Utilities Coop. A1/A+ 2.95% 2/07/2024 450 +85-90/+87.5a +75-80 +75 +75 73/71
Seagate HDD Cayman Baa3/BBB- 4.25% 3/01/2022 750 +high 200s
+287.5a
+250a (+/-10) +240 +240 248/243
Seagate HDD Cayman Baa3/BBB- 4.75% 3/01/2024 500 +low 300s
+312.5a
+285 (+/-10) +275 +275 280/275
Crown Castle Int’l. Corp. Baa3/BBB- 4.00% 3/01/2027 500 +175-180 +160a (+/-3) +157 +157 157/155
Microsoft Corp. Aaa/AAA 1.85% 2/06/2020 1,500 +60a +45a (+/-5) +40 +40 35/33
Microsoft Corp. Aaa/AAA 2.40% 2/06/2022 1,750 +70a +55a (+/-5) +50 +50 47/46
Microsoft Corp. Aaa/AAA 2.875% 2/06/2024 2,250 +90a +75a (+/-5) +70 +70 59/57
Microsoft Corp. Aaa/AAA 3.30% 2/06/2027 4,000 +100a +90a (+/-5) +85 +85 77/75
Microsoft Corp. Aaa/AAA 4.10% 2/06/2037 2,500 +115a +105a (+/-5) +100 +100 88/87
Microsoft Corp. Aaa/AAA 4.25% 2/06/2047 3,000 +130a +120a (+/-5) +115 +115 106/104
Microsoft Corp. Aaa/AAA 4.50% 2/06/2057 2,000 +155a +145a (+/-5) +140 +140 129/126
USAA Capital Corp. Aa1/AA FRN 2/01/2019 350 3mL+high30s/
+37.5a
3mL+23-25 3mL+23 3mL+23 3mL+23
IFC
(tap) New Total: $750mm
Aaa/AAA FRN 12/15/2021 250 N/A 3mL+13a 3mL+13 3mL+13 3mL+15/14

 

Indexes and New Issue Volume

Please note that the below index levels are as of 4:30pm ET.
*Denotes new tight.

 

Index Open Current Change
IG27 65.548 63.605 <1.943>
HV27 138.23 138.31 0.08
VIX 11.93 10.95 <0.98>
S&P 2,280 2,297 17
DOW 19,884 20,071 187
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $44.575 bn WTD: $47.325 bn
MTD: $12.575 bn MTD: $15.075 bn
YTD: $184.958 bn YTD: $242.358 bn

 

Lipper Report/Fund Flows – Week ending January 25th     

     

  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $2.657b into Corporate Investment Grade Funds (2016 YTD net inflow of $12.354b) and a net inflow of $412.595m into High Yield Funds (2016 YTD net inflow of $291.062m).
  • Over the same period, Lipper reported a net inflow of $991.469m into Loan Participation Funds (2016 YTD net inflow of $4.760b).
  • Emerging Market debt funds reported a net outflow of $21.098m (2016 YTD inflow of $144.504m).

 

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 21.00 bps wider versus their post-Crisis lows.

Above is the opening extract from Quigley’s Corner aka “QC”  Friday Feb 03, 2017 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest 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.   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 02.03.17– IG Fixed Income Syndicate Seers Forecast Next Week’s New Issuance