Summer Avalanche New IG Debt Issuance Forecast-Mischler Comment
August 4, 2017   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner-08.04.17- Summer Avalanche New IG Debt Issuance Forecast 

Below is the opening extract from Quigley’s Corner aka “QC”  Friday, Aug 4 2017  weekend 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 is one of three distinctive market comment 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 email: rkarr@mischlerfinancial.com or via phone 203.276.6646


Investment Grade New Issue Re-Cap – Summer Avalanche of New IG Debt Issue Forecast for Next Week

Today’s IG New Debt Issuance & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

The Best and the Brightest: IG DCM Syndicate Forecasts and Sound Bites for Next Week 

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

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 August 2nd               

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

 

Today’s Friday IG Corporate dollar DCM featured  2 issuers that priced 2 tranches between them totaling $650mm as of this writing. The SSA space was quiet today. Please note that I scribed the below Best & Brightest IG Corporate primary market data download piece early this morning, so the data does not include today’s Murphy Oil and TC Pipelines deals.

Thanks! –RQ (In case you left early en route to the beach, the DJIA reached yet another new intra-day high today!)

As for next week, well British American Tobacco’s $49bn purchase of Reynolds American looks like it will manifest itself as the Company announced fixed income investor meetings for an expected mega cross currency transaction across USD, Euro and Sterling.  The Senior Unsecured dollar-denominated portion will feature joint leads Bank of America/Merrill Lynch, Barclays, Citigroup, Deutsche Bank and HSBC. The three tranches could potentially raise $25b dollar equivalent. I am also hearing “chatter” of another big issuer lurking.  We all know that after next week, it begins the traditional summer slowdown period. . But before that, the big push is on, so rest up this weekend, as next week’s syndicate midpoint average forecast calls for $34.29b to price.  Factoring in that average amount to the $21b priced thus far in August would bring the MTD total to $55.29b. The forecast for August is $79.10bn so that would leave $23.81b to get done across the last three weeks of the month or an average of $7.93b.  This ASSUMES that next week will reach the midpoint average forecast. I happen to think we could see $40b next week, which would push the average of each of the last three weeks of August down to $6bn.

But, before we all go away with our families, re-energize this weekend because next week will be a big one.  Read all about it below from the pros who price all the deals in our IG dollar DCM.  We’ll first review today’s primary and secondary market talking points, the growing geopolitical risk factors in our world, take a glance at the weekly and monthly IG primary market volume tables and then it’s onto the masters, maestros and mavens of syndicate who price all the deals in our IG dollar DCM.
Ready?.SET?..R-E-A-D!

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

  • The IG Corporate WTD total is 110.84% of this week’s syndicate midpoint average forecast or $27.986b vs. $25.25b.
  • MTD we’ve priced 26.55% of the syndicate forecast for July or $21.00b vs. $79.10b.
  • There are now 5 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • The average spreads across 2 of the 19 major industry sectors tied their post-Crisis lows. That’s 10.53% of the sectors.
  • BAML’s IG Master Index widened 1 bp to +109 vs. +108.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.04 vs. 1.03.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +152 vs. +151.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.6b on Thursday versus $19.9b on Wednesday and $19.6b the previous Thursday.
  • The 10-DMA stands at $17.4b.

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
Asian Political Tensions
·   N. Korea launches ICBM on 7/28. Jong-Un claims Hwasong-14 missile can reach any location on the U.S. continent. UN projects worst famine in NOKO in 17 yrs; last one killed 2mm (8% of population).  Fear that NOKO may use nuclear intel/systems as barter for food w/”suspect” nations. U.S. has already sanctioned certain Chinese banks to pressure the PRC to use more influence over NOKO which has failed. U.S. lofts Trident missile in Pacific Ocean in response. China insiders say PRC does not have the influence on NOKO that the U.S. thinks it does.
ELEVATED
BREXIT Fallout
·   U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. France pressing for $115b equivalent.
Venezuela – civil unrest as Maduro dictatorship claims bogus election outcome favors unlimited powers and a new constitutional assembly in elections that U.S. and key LATAM nations will not acknowledge. Caracas named most dangerous city in the world with highest murder rate. VZ gov’t stopped publishing crime stats a decade ago. Dictatorship in our Western Hemisphere. U.S. Tsy. freezes Maduro family assets.
CAUTION
“U.S. political gridlock”
·   Trump financial, healthcare, tax and infrastructure reform challenges & consensus GOP support to pass legislation questioned; Mueller expanding FBI probe into Trump with federal grand jury issuing subpoenas.

·   U.S. Senate sanctions Iran for missile testing and supporting terrorism; also expands sanctions against Russia in 98-2 vote. Russia in expansion mode.

·   GCC Crisis as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base, severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.

·   Italian debt-to-GDP ratio is 133% – world’s 3rd highest.

·   Despite destroying the Caliphate, ISIS will be scattered across a wider MENA region and Europe.

·   Cybercrime, ransomware, viruses & hacking are winning cyber wars. The latest attack hit four continents, law firms, food companies, power grids, pharma & gov’ts (Ukraine & Russia).

·   Central banks shrinking balance sheets/higher volatility in 2H17; ECB dovishness; low rates persist.

·   Renewed tensions along the India-Pakistan cease fire line dividing Indian-controlled Kashmir.

MODERATE ·   China hard landing – rising corporate debt have the OECD and IMF concerned.
MARGINAL
2018 U.S. Recession
·   Increased chance of 2018 U.S. recession in light of recent very hawkish Fed-speak?; “Maybe” one more rate hike in 2017; lack of inflation and $4.5 trillion balance sheet unwind are concerns.

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

IG Corporate New Issuance This Week
7/31-8/04
vs. Current
WTD – $27.986b
August 2017 vs. Current
MTD – $21.00b
Low-End Avg. $24.21b 115.60% $78.37b 26.80%
Midpoint Avg. $25.25b 110.84% $79.10b 26.55%
High-End Avg. $26.29b 106.45% $79.83b 26.31%
The Low $15b 186.57% $60b 35.00%
The High $35b 79.96% $100b 21.00%

 

The “Best and the Brightest” Syndicate Forecasts and Sound Bites re New IG Debt Issuance Next Week 

 

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 21 of those participants are among 2017’s YTD top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted. 

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years! That’s 2014, 2015 and 2016 !!   

The preface to the weekly canvass of the top fixed income syndicate desk teams begins with the following background-
Entering this morning’s Friday session, here are this week’s IG new issue volume talking points:   

  • The IG Corporate WTD total outperformed once again with issuance 108.26% of the syndicate midpoint average forecast or $27.336b vs. $25.25b.
  • MTD we have now priced 25.73% of the syndicate projection for August IG Corporates or $20.35b vs. $79.10b.
  • Entering today’s session, the YTD IG Corporate-only volume is $862.833b vs. $843.591b on August 3rd, 2016 or 2.28% more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,054.568b vs. $1,077.377b on August 3rd, 2016 or 2.16% less than the year ago total.

Entering this morning’s session, here are the five key primary market driver averages from the 42 IG Corporate-only deals that priced this week: 

  • NICS:  0.06 bps
  • Oversubscription Rates: 3.34x
  • Tenors: 11.96 years
  • Tranche Sizes: $651mm
  • Spread Compression from IPTs to the Launch: <18.56> bps

Here’s how this week’s critical primary market data compares against last week’s entering this morning’s session: 

  • Average NICs tightened 1.62 bps to an average 0.06 bps vs. 1.68 bps across this week’s 42 IG Corporate-only new issues.
  • Over subscription or bid-to-cover rates, the measure of demand, slightly increased by 0.04-times to 3.34x vs. 3.30x. 
  • Average tenors contracted by 1.07 years to an average 11.96 years vs. 13.03.
  • Tranche sizes decreased by $861mm to $651mm vs. 1,512mm. Last week featured the $22.5bn 7-part transaction for AT&T which boosted the average tranche size.  
  • Spread compression from IPTs to the launch/final pricing of this week’s 42 IG Corporate-only new issues widened by 2.59 bps to <18.56> bps vs. <21.15>.
  • Standard and Poor’s Investment Grade Composite Spreads widened 2 bps to +152 vs. +150 bps.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 2 bps to 1.04 vs. 1.02 bps. 
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +109 vs. +108. 
  • Spreads across the four IG asset classes widened 2 bps bps to 6.00 bps vs. 4.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors also widened 2.36 bps to 9.89 vs. 7.53 bps also as measured against their post-Crisis lows.
  • For the week ended August 2nd, Lipper U.S. Fund Flows reported an inflow of $1.485b into Corporate Investment Grade Funds (2017 YTD net inflow of $79.114b) and a net inflow of $20.818m into High Yield Funds (2017 YTD net outflow of $6.663b).
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 50 deals that printed, 26 tightened versus NIP for a 00% improvement rate,  13 widened (26.00%), 9 were flat (18.00%) and 2 were not available (4.00%) or N/A.

Entering today’s Friday session here’s how much we issued this week:

  • IG Corps: $27.336b
  • All-in IG (Corps + SSA): $31.986b

And now ladies and gentlemen, it’s time for the guy-in-the corner, to ask today’s question, “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

Thank you in advance for your time and contribution!

The “Best and the Brightest” in Their Own Words

Above is the opening extract from Quigley’s Corner aka “QC”  Friday, August 4, 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 is one of three distinctive market comment 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 email: rkarr@mischlerfinancial.com or via phone 203.276.6646

*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 daily 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-08.04.17- Summer Avalanche New IG Debt Issuance Forecast