Fortune CEOs Vote With Their Feet and “Take the High Road”
August 17, 2017   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner Debt Market Comment- 08.16.17- Fortune CEOs On President Council(s) No Longer Ask “Should I Stay or Should I Go?”-Trump Says “You’re Fired!” Minutes Before Planned En Masse Resignations

“We here in America, hold in our hands the hope of the world, the fate of the coming years; and shame and disgrace will be ours if in our eyes the light of high resolve is dimmed, if we trail in the dust the golden hopes of men.” -Theodore Roosevelt

Below is the opening extract from Quigley’s Corner aka “QC”  Wednesday, Aug 16 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  provides objective debt capital market and investment corporate debt commentary and geo-political analysis, it 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 investment grade 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-
WTD and MTD IG Corporate Volumes Now Both Eclipse Syndicate Forecasts

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

Fortune CEOs Hold the Trump Card – “QC” Commentary

Knowing the Past for the Future” – A Look at a Decade’s Worth of September IG Corporate and SSA Issuance

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 9th               

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates  Trading Lab

Tomorrow’s Calendar

Investment Grade New Issue Re-Cap – WTD and MTD IG Corporate Volumes Now Both Eclipse Syndicate Forecasts

Today’s IG Corporate dollar DCM hosted 3 issuers across 6 tranches including VMware’s $4bn three-part across 3s, 5s and 10s for day total of $5.75b.

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 now 107.25% of this week’s syndicate midpoint average forecast or $28.85b vs. $26.90b.
  • We eclipsed the average syndicate forecast for August IG Corporate-only volume having priced 118.11% or $93.425b vs. $79.10b.
  • There are now 5 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 6 IG Corporate-only new issues, was <23.46> bps.
  • BAML’s IG Master Index tightened 1 bp to +114 vs. +115.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.10 vs. 1.11.
  • Standard & Poor’s Investment Grade Composite Spread tightened 3 bps to +157 vs. +160.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15b on Tuesday versus $12.5b on Monday and $17b the previous Tuesday.
  • The 10-DMA stands at $15.3b.

 

The “QC” Geopolitical Risk Monitor – Addition to the “High Alert” Risk Table Comes Fast & Furious

 

Risk Level/Main Factor Geopolitical Risks
HIGH
1.) Break Between Corporate America & Trump Admin.

2.) North Korea

 **HIGH RISK EVENT ADDITION** – Members of Trump’s Strategic and Policy Forum have made a joint decision to disband the group. Trump agreed to disband his Manufacturing Council as a result.  When an event negatively impacts a company’s public perception it is “game over.” Corporate America’s business leaders are now abandoning Trump. This in response to the President’s replies to the riot that took place in Charlottesville, VA. over the weekend in which one person was killed and dozens injured. Without corporate support, GOP will not coalesce to promote Trump’s agenda.

Monday 8/31 begins joint U.S. & S. Korean military exercises. It is the world’s largest computerized command control implementation and will involve over 80,000 U.S. and South Korean troops.
CIA Director Mike Pompeo cites U.S./NOKO tensions have subsided saying “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Rhetoric reached height on Friday 8/11 w/ Trump saying “U.S. military solutions are in place, locked and loaded” matching his earlier statement this week that “North Korea best not make any more threats to the United States or they will be met with fire and fury like the world has never seen.” Russia’s Foreign Minister Lavrov says his country “does not want to see North Korea with nuclear weapons.” On Th. 8/10 NOKO announced its plan to “pre-emptively strike on Guam in mid-August.” Trump’s reaction, “Maybe my ‘fire and fury threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s 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).  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. China insiders say PRC does not have the influence with NOKO that the U.S. thinks it does. U.S.’s NOKO strategy quickly changing from containment on the Korean peninsula to defending the Hawaii, Alaska and the continental United States and more offensive in nature. NOKO adding miniature nuclear warheads to its ICBMs. Asian allies now justified to build up militaries. China in precarious position given South China Sea Islands.

ELEVATED
BREXIT Fallout
Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. Many geopolitical strategists point to the India/Pakistani border conflict as one of if not the most volatile. Both are nuclear capable.

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. Companies prepping for hard BREXIT & 2 years of weak growth.

CAUTION
“U.S. political gridlock”
Trump financial, tax and infrastructure reform challenges & consensus GOP support to pass legislation in doubt after repeal and replace defeat. Dems revamping & revising their message.Mueller expanding FBI probe into Trump. Congress and Senate back in session on Tuesday, September 5th following August recess. Increasingly tense political environment.

On June 15th U.S. Senate sanctions Iran for missile testing and supporting terrorism; also expands sanctions against Russia in 98-2 vote. Iran launches missile into space in response on 7/28.  U.S. levies additional sanctions on Iran in response to launch.

June 9th: 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.

Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe.

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

Central banks shrinking balance sheets/higher volatility; low rates persist; slow inflation pick-up.

Venezuela – civil unrest continues against Maduro dictatorship. U.S. Tsy freezes Maduro family assets. Trump considering more than mere sanctions and “won’t rule out military option.” Risk of VZ default.  4th largest exporter of oil to U.S. behind Canada (#1), Saudi Arabia (#2) & Mexico (#3).

MODERATE China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns.
MARGINAL
2018 U.S. Recession
Increased chance of 2018 U.S. recession; “maybe” one more rate hike in 2017; lack of inflation and $4.5 trillion balance sheet unwind are concerns. Market expecting unwind announcement by Fed in September.

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

IG Corporate New Issuance This Week
8/14-8/18
vs. Current
WTD – $28.85b
August 2017 vs. Current
MTD – $93.425b
Low-End Avg. $26.17b 110.24% $78.37b 119.21%
Midpoint Avg. $26.90b 107.25% $79.10b 118.11%
High-End Avg. $27.62b 104.45% $79.83b 117.03%
The Low $15b 192.33% $60b 155.71%
The High $40b 72.125% $100b 93.425%

 

CEOs Hold the Trump Card – “QC” Commentary

“We here in America, hold in our hands the hope of the world, the fate of the coming years; and shame and disgrace will be ours if in our eyes the light of high resolve is dimmed, if we trail in the dust the golden hopes of men.” -Theodore Roosevelt

Today, the White House Strategic and Policy Forum disbanded. Blackstone Group CEO Steven Schwarzman played point for the high powered Forum that has suffered from the resignations of numerous participating CEOs in light of Trump’s recent statements concerning the Charlottesville incident. Schwarzman, representing the Forum issued the following statement [which Trump since disputed]:

“We believe the debate over Forum participation has become a distraction from our well-intentioned and sincere desire to aid vital policy discussions on how to improve the lives of everyday Americans. As such, the President and we are disbanding the Forum.”

With a sub 40% Presidential approval rating and the abandonment by his fellow Corporate America CEO base, Trump is in hot water.  He will now lose additional and desperately needed support from the GOP in both the House and Senate to achieve any of his agenda and campaign promises.  Politicians are fickle. Having lost the recent Repeal and Replace vote by one, this latest debacle is a tell-tale sign of things to come.  It came swiftly and with the support of Corporate America’s finest leaders.  Corporations have long histories and took decades to get to where they are. They have a fiduciary responsibility to their shareholders and diverse customer base to keep their companies operating smoothly and efficiently. Any disruption to that is unacceptable.

Today was not about EPS or EBITDA. Rather, it was about American morals, ethics and values that are and should always be the foundation of the world’s most diverse society and are reflective of the customers who, in turn are the reason businesses exist.  Whether one has an account at J.P. Morgan or drives a Ford, or shops at Walmart or turns on and off the light switches in Chicago as a Commonwealth Edison customer, the engine that drives the companies of the greatest nation on our planet are its people.  As the top dog, President Trump hopefully learned an important lesson today. I believe he meant well, but it certainly didn’t come out that way and we now officially have a Presidency in crisis.

You often read here in the “QC” about Corporate America’s Diversity and Inclusion initiatives. It’s a story I am always proud to tell when we are on an issuer’s new issue transactions.  I work here at our great nation’s oldest Service Disabled Veteran broker-dealer whose certification falls under the umbrella of diversity and inclusion.  The fact remains that Corporate America has spoken today from its top leadership.  As I always recount here, great companies and great initiatives start from the “top down.”  That IS leadership. They led today.

I will also, however, add that those who opposed Trump from the get go are most assuredly happy about this latest chapter in Trump’s controversial seven month old Presidency. The media, to be fair folks, has quite frankly been relentlessly, ruthlessly and consistently focused on pinning Trump into a corner to elicit a reaction.  Well, they got the reaction they wanted these past several days when Trump went off the reservation in his inimitable way, which was subsequently manifested in the disbanding of the Forum and Manufacturing Council.  Rookie mistake perhaps, but when one is the President, there is no such thing as a rookie mistake.

From the onset I have always said that Trump’s election will either serve as a wake-up call to Washington political dysfunction to teach both parties that they are on watch to cross the aisle to get things done OR Trump will succeed and turn the Washington establishment on its head and usher in a new populist leadership.  It appears today that the former should be everyone’s main focus in our wounded nation amidst a host of very dangerous global event risk events all playing out at the same time.  Corporate America, however, and as always, looks very good and highly responsible, which may be the reason why the stock market has held in throughout today’s session.

When America is on the same page NOTHING can stop it.

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

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.

Syndicate IG Corporate-only Volume Estimates for the Remainder of August & September

Above is the opening extract from Quigley’s Corner aka “QC”  Wednesday, August 16 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.

Fortune CEOs On President Council(s) No Longer Ask “Should I Stay or Should I Go?”-Trump Says “You’re Fired!” Minutes Before Planned En Masse Resignations