Quigley’s Corner 11.01.17 FOMC Rate Decision Talking Points “Unchanged!”
Investment Grade US Corporate Debt New Issue Re-Cap
Today’s IG Primary & Secondary Market Talking Points
Global Market Recap
Syndicate IG Corporate-only Volume Estimates For This Week and October
FOMC Rate Decision Talking Points: Unchanged (as Expected)
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
Rates Trading Lab
New Issues Priced
Indexes and New Issue Volume
Lipper Report/Fund Flows – Week ending October 25th
IG Credit Spreads by Rating
IG Credit Spreads by Industry
New Issue Pipeline
M&A Pipeline Highlights
Economic Data Releases
The “QC” Geopolitical Risk Monitor
As you all know, Mischler Financial Group, Inc. is our great nation’s oldest Service Disabled Veteran broker dealer and as such our veteran give-back initiatives are prolific and lay at the core of our shared ethos here at Team Mischler. I would appreciate it if you could all take a moment to read about our 2017 Veteran’s Day Month Pledge from my CEO Dean Chamberlain just before my evening sign-off below. It is with great appreciation that Mischler Financial is able to “give-back” the fruits of our labor throughout the year and it is all thanks to you the issuers and accounts who elect to do business with us to address the need for best-in-class capital market services and your own internal diversity/veteran procurement initiatives. It means everything to each of us here at Mischler and the non-profit organizations we support. Thank you all very much! –RQ
Investment Grade New Issue Re-Cap
Today the IG dollar DCM hosted 3 issuers across 5 tranches totaling $2.50b. The SSA space was inactive today.
Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate estimates:
- The IG Corporate WTD total is 83.16% of this week’s syndicate midpoint average forecast or $21.323b vs. $25.64b.
- MTD we’ve priced 2.59% of the syndicate forecast for October IG Corporate new issuance or $2.50b vs. $96.38b.
- There are now 7 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 3 IG Corporate-only new issues that displayed price evolution was <27.33> bps.
- BAML’s IG Master Index widened 1 bp to +101 vs. +100.
- BAML’s IG Master Index saw the “AA” tied its post Crisis low of +58 for the third session in a row while the “A” class held its post Crisis low of +78 for the sixth consecutive session.
- The Transportation industry sector set a new post Crisis low of +104.
- 2 of the 19 major IG sectors tied their post Crisis lows as follows: Banking (+84) and Energy (+132).
- Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 0.95 vs. 0.94.
- Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +142 vs. +143. The +140 reached on July 30th 2014 represents the post-Crisis low.
- Investment grade corporate bond trading posted a final Trace count of $21.1b on Tuesday versus $16.3b on Monday and $23.4b the previous Tuesday.
- The 10-DMA stands at $18.7b.
Global Market Recap
- Treasury November Refunding: More supply in the front end coming in 2018 (February).
- FOMC Statement – Upgraded growth (solid from moderate) & no change on inflation.
- U.S. Treasuries – Closed mixed with the curve flattening the story.
- Overseas Bonds – JGB’s unchanged to better. Bunds little changed & Gilts weaker.
- 3mth Libor – Set at 1.38483% the highest since January 2009.
- Stocks – Mixed heading into the close. Gave up big morning gains (reached ATH’s).
- Overseas Stocks – Nikkei 21 year high. EM 6 year high. Europe 2 year high.
- Economic – More positive economic data.
- Overseas Economic – China unchanged, Japan mixed & U.K. data solid.
- Currencies – USD better bid vs. Euro, PND & Yen but weaker vs. CAD & AUD.
- Commodities – Crude oil traded at high since January before rolling over. Metals bid.
- CDX IG: +0.45 to 52.60
- CDX HY: +0.24 to 310.32
- CDX EM: +0.55 to 174.91
*CDX levels are as of 3:30PM ET today.
-Tony Farren
Syndicate IG Corporate-only Volume Estimates For This Week and October
| IG Corporate New Issuance | This Week 10/30-11/03 |
vs. Current WTD – $21.323b |
November 2017 | vs. Current MTD – $2.50b |
| Low-End Avg. | $24.74b | 86.19% | $95.28b | 2.62% |
| Midpoint Avg. | $25.64b | 83.16% | $96.38b | 2.59% |
| High-End Avg. | $27.65b | 77.12% | $97.48b | 2.56% |
| The Low | $15b | 142.15% | $75b | 3.33% |
| The High | $35b | 60.92% | $130b | 1.92% |
FOMC Rate Decision Talking Points: Unchanged (as Expected)
Once again rates were left unchanged by the Fed, however there is more color on the $4.5 trillion balance sheet (b/s) unwind. Here’s all you need to know:
Policy:
- The Fed left rates unchanged in the 1%-1.25% range, voting unanimously to so.
- The Board left the discount rate unchanged at 1.75%.
- Expects the economy to evolve in a way warranting gradual rate hikes.
Economy:
- Economic activity is rising at solid rate despite recent storms.
- Fed says storms are unlikely to alter the economy’s medium-term course.
- Repeats risks are roughly balanced, while watching inflation closely.
Employment:
- The labor market continued to strengthen while unemployment declined.
- Repeats that market-based inflation compensation gauges are still low.
Inflation:
- Inflation for items other than food and energy remained soft.
- Repeats that it sees inflation stabilizing at around 2% in the medium-term
The U.S. Federal Open Market Committee November 1st Statement in its Entirety
Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
The balance sheet normalization program initiated in October 2017 is proceeding.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles.
The “QC” Geopolitical Risk Monitor
Above is the opening extract from Quigley’s Corner aka “QC” Wednesday Nov 1 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.
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