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Primary IG Syndicate Desks Sound Off-Next Week Will…
February 2018      Debt Market Commentary   

Quigley’s Corner 02.16.18 – Best & Brightest Primary IG Syndicate Sound Off

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Economic Data Releases

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

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

Syndicate IG Corporate-only Volume Estimates for Next Week

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

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

Indexes and New Issue Volume

Economic Data Releases           

2018 Lipper Report/Fund Flows – Week ending February 14th

The “QC” Geopolitical Risk Monitor     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

 

Investment Grade New Issue Re-Cap

Today was a welcome no-print Friday ahead of the long three-day weekend! The Best and the Brightest are below with their thoughts and numbers for next week’s IG Corporate new issuance.  It appears that with many kids on spring break next week in what will already be a holiday-shortened work week, the midpoint average supply forecast calls for $18.78b to price.  But why hear it from me when you can simply scroll down below and read their formidable comments and thoughts along with their numbers and/or ranges?  Let’s first run down the recaps for this week and then it’s on to syndicate’s B&B!

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • The IG Corporate WTD total is 50.79% of this week’s syndicate midpoint average forecast or $9.477b vs. $18.66b.
  • MTD we’ve priced 47.28% of the syndicate forecast for February IG Corporate new issuance or $42.067b vs. $88.98b.
  • There are now 6 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index tightened 1 bp to +98 vs. +99. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.93 vs. 0.94.  (+85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +133. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
  • The 10-DMA stands at $19.4b.
  • For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield             Funds (2018 YTD net outflow of $12.164b).
  • Taking a look at the secondary trading performance of this week’s 19 IG Corporate and 4 SSA new issues, of the 23 deals that printed, 9 tightened versus NIP for a 39.00% improvement rate, 6 widened  (26.00%), 8 were flat (35.00%).   

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Import Price Index MoM January 0.6% 1.0% 0.1% 0.2%
Import Price Index ex Petroleum January 0.1% 0.5% <0.2%> 0.0%
Import Price Index YoY January 3.0% 3.6% 3.0% 3.2%
Export Price Index MoM January 0.3% 0.8% <0.1%> 0.1%
Export Price Index YoY January —- 3.4% 2.6% 2.8%
Housing Starts January 1234k 1326k 1192k 1209k
Housing Starts MoM January 3.5% 9.7% <8.2%> <6.9%>
Building Permits January 1300k 1396k 1302k 1300k
Building Permits MoM January 0.0% 7.4% <0.1%> <0.2%>
U. of Michigan Sentiment February 95.5 99.9 95.7 —-
U. of Michigan Current Conditions February 111.1 115.1 110.5 —-
U. of Michigan Expectations February 87.2 90.2 86.3 —-
U. of Michigan 1 Year Inflation February —- 2.7% 2.7% —-
U. of Michigan 5-10 Year Inflation February —- 2.5% 2.5% —-

 

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

 

IG Corporate New Issuance This Week
2/12-2/16
vs. Current
WTD – $9.477b
February 2018 vs. Current
MTD – $42.067b
Low-End Avg. $17.56mm 53.97% $88.28b 47.65%
Midpoint Avg. $18.66mm 50.79% $88.98b 47.28%
High-End Avg. $19.75mm 47.98% $89.68b 46.91%
The Low $10mm 94.77% $70b 60.10%
The High $26mm 36.45% $110b 38.24%

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 19 of today’s respondents are in the top 20 of the new 2018 League table including 21 of the top 25 according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.93% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they are the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they are the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

Here is this week’s geopolitical recap:

North Korea remains the number one ranked geopolitical event risk factor despite niceties during the current Olympics.  That ends on Sunday the 25th after which Kim Jong-Un will revert back to his nuclear ambitions. Equity markets seem to be settling in as the U.S. economy is running on all cylinders. U.S. equity markets have enjoyed their finest week since 2011. Interest rates are expected to rise and perhaps more quickly and higher than anticipated creating a steeper curve and rising yields.  President Trump broke with the GOP tradition of fiscal prudence with his $4.4 trillion 2019 budget to Congress that is unlikely to be enacted as is. March 2nd looms large for the EU’s anchor state, Germany, as the Socialist SPD party votes to approve or reject Angela Merkel’s grand coalition government which is a “marriage of convenience.” A “no” vote means new elections and further political turmoil for the EU’s keystone nation and largest economy. Prime Minister Theresa May has “let the dogs out” as her cabinet members began laying out the U.K’s. post-BREXIT future beginning with Boris Johnson’s speech on 2/14 while avoiding response to questions of a possible Second Referendum. Italy’s center right party continues to hold the lead heading into the March 4th election.  The immigration issue plays a big role in Italian voter sentiment. Italy’s national debt is $2.8 trillion and the banking sector owns $220b of bad loans.

Let’s now take a deep dive into the technical data.  Entering this morning’s Friday session – 

  • The IG Corporate WTD total stands at $18.94b. We priced $6.30b less than the week’s average midpoint estimate of $25.24b or 75.04%.
  • MTD we priced 36.63% of the syndicate projection for February IG Corporates or $32.59b vs. $88.98b.
  • Entering today’s session, the YTD IG Corporate-only volume is $164.975b vs. the $199.658b that priced on Thursday, February 9th, 2017 or 21.02% less than this time last year.
  • The all-in or IG Corporate plus SSA YTD volume is $233.54b vs. $268.558b on Thursday, February 9th, 2017 or $35.02b (14.99%) less than the same time year ago total. 

Here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week.   

o   NICS:  2.62 bps  

o   Oversubscription Rates: 1.96x

o   Tenors: 18.16 years

o   Tranche Sizes: $499mm

o   Spread Compression from IPTs to the Launch: <12.82> bps 

Here’s how this week’s critical primary market data compares against last week’s numbers: 

  • Week on week, average NICs tightened minutely by 0.05 bps to an average 2.62 bps vs. 2.67 bps across last this week’s 17 IG Corporate-only new issues that displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased dramatically by 2.13x to an average 1.96x vs. 4.09x. 
  • Average tenors widened considerably by 3.31 years to an average 18.16 years vs. 14.85 years.
  • Tranche sizes decreased by $324mm to $ 499mm vs. $823mm
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 4.20 bps to <12.82> bps vs. <17.02> bps.
  • Standard and Poor’s Investment Grade Composite Spread widened 1 bp to +133 vs. +132. 
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bp to 0.93 vs. 0.94 week-on-week.
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
  • The 10-DMA stands at $19.4b.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +98 vs. +97.  
  • Spreads across the four IG asset classes widened 1.00 bp week-on-week to 7.25 bps vs. 6.25 bps as measured against its cumulative post-Crisis low.
  • Spreads across the 19 major IG industry sectors widened 0.95 bps to an average 8.37 bps vs. 7.42 bps wider as measured against their average cumulative post-Crisis lows!
  • For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield Funds (2018 YTD net outflow of $12.164b).

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

  • IG Corps: $9.477b
  • All-in IG (Corps + SSA): $13.777b

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

The “Best and the Brightest” in Their Own Words

……..……and here are their responses: (more…)

Investment Grade Debt Issuance Case Study: Exelon
February 2018      Debt Market Commentary   

Quigley’s Corner 02.15.18 – Exelon Inspires Investment Grade Debt Issuance Case Study

Investment Grade New Issue Re-Cap

Explaining EXC 10bp Spread Differential

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

The “QC” Geopolitical Risk Monitor

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending February 7th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

  
Investment Grade New Issue Re-Cap – Better Clearing Levels

Today the IG dollar DCM hosted 3 issuers across 8 tranches totalling $4.575b.  The SSA space was inactive today and with nothing slated.

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • The IG Corporate WTD total is 50.79% of this week’s syndicate midpoint average forecast or $9.477b vs. $18.66b.
  • MTD we’ve priced 47.28% of the syndicate forecast for February IG Corporate new issuance or $42.067b vs. $88.98b.
  • There are now 6 issuers in the IG credit pipeline. 

At the Crossroads of Art & Science: EXC-plaining a 10 bp Spread Differential

mischler-exelon-case-study 

 

 

 

 

 

Last evening I wrote a bit about Exelon’s $800mm CoMed 30-year Global Secured FMBs rated A1/A-/A that priced at T+85 on Monday that printed with a 7 bp NIC. The comp used for the relative was the outstanding CoMed 3.75%s due 8/2047 that were T+78 pre-announcement pegging NIC as 7 bps.  The order book finished at $1.85b for a 2.31x bid-to-cover rate. Those bonds are T+83 bid this afternoon or 2 bps tighter vs. NIP. Some of the reasons for the 7 bp NIC were: 

  • It was an $800mm deal size that needed a bit more to clear
  • Market volatility/uncertainty
  • Exelon has numerous subs that need to issue and we all know that investors have long memories. In other words, do the right thing at an inflection point of sorts in our market and investors will come back to you in spades.

Now let’s fast forward to today, a mere 72 hours later, in which Exelon’s PECO Energy priced a $325mm 30-year that is also a Global Secured FMB rated Aa3/A that priced at T+77. Today’s PECO comp was the outstanding PECO “EXC” 3.70% due 9/2047 that was T+80 pre-announcement nailing NIC on today’s new issue as negative <3> bps. WHOOOOAA!  A 10 bp differential between the two and remember as a 30-year there is no curve adjusting and both entities have direct comparables to use for a relative value study. We all know that relative value is part art and part science!

On Monday 2/12 at 10:27am ET, and in the middle of CoMed’s book build, the VIX or “fear factor” was 29.70 versus this morning’s 2/15 opening session level of 18.50 when PECO was announced. That’s a whopping 37.7% drop in the all-important and eagerly watched VIX volatility index……more dramatic supporting evidence for the final spread level.

And guess what?  Exelon’s Commonwealth Edison deal on Monday was the first utility to issue since the recent historic market gyrations! That nailed it for me. Ahhhhh!  There it is! The search for a resolution in what seemed an illogical endeavor was discovered.  It was a combination of many market ingredients including a dramatic VIX and was all about the utility that opened up the issuance doors for the sector.  A question begot an answer with myriad moving parts and persistence really does pay off. So, to re-cap:

  • EXC’s CoMed deal was an $800mm deal size that needed a bit more to clear
  • Market volatility/uncertainty (re: VIX levels and a 37.7% differential between Monday’s pricing and today’s PECO pricing).
  • CoMed was the first U.S. IG Utility to print since the historic volatility and equity market gyrations.  
  • PECO is +76 bid or 1 bp tighter and CoMed is T+83 or 2 bps tighter.

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 8 IG Corporate-only new issues was <11.31> bps.
  • BAML’s IG Master Index tightened 1 bp to +99 vs. +100. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.94 vs. 0.95.  (+85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bps to +133 vs. +135. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $19.7b on Wednesday versus $19b on Tuesday and $22.8b the previous Wednesday.
  • The 10-DMA stands at $19.4b. 

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

 

IG Corporate New Issuance This Week
2/12-2/16
vs. Current
WTD – $9.477b
February 2018 vs. Current
MTD – $42.067b
Low-End Avg. $17.56mm 53.97% $88.28b 47.65%
Midpoint Avg. $18.66mm 50.79% $88.98b 47.28%
High-End Avg. $19.75mm 47.98% $89.68b 46.91%
The Low $10mm 94.77% $70b 60.10%
The High $26mm 36.45% $110b 38.24%

 

Global Market Recap 

  • U.S. Treasuries – closed mixed with a flatter curve.
  • Overseas Bonds – JGB’s mixed and little changed. Europe mixed with no major moves.
  • 3mth Libor – Set at 1.87250% the highest since December 2008.
  • Stocks – At 3pm stocks had strong gains with the NASDAQ leading the way.
  • Overseas Stocks – Nikkei and HS had strong rallies. Europe also closed higher.
  • Economic – Higher inflation data with weaker economic data for the 2nd day in a row.
  • Overseas Economic – Japan mixed. France unemployment rate improved (big). No inflation in Europe.
  • Currencies – The USD struggles continued. DXY Index approaching a 3-year low.
  • Commodities – CRB, crude oil and copper up (+ $20 this week) and gold small loss.
  • CDX IG: -2.32 to 53.85
  • CDX HY: -11.23 to 328.23
  • CDX EM: -5.30 to 123.35
  • VIX: +0.33 to 19.59

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

Updates are highlighted in BOLD print!

Risk Level/Main Factor Geopolitical Risks
HIGH +
“North Korea”
·        2/15 – The Seoul Olympics kicked off on Fri. 2/09 and conclude Sun. 2/25. Sources tell me to “watch” mid-March thru April as NOKO will be back to its old tricks and the game will ratchet up with newly announced war games along with a much larger allied force participating together. It’s amazing how the world comes together in a spirit of healthy competition to participate in the Olympics.  Events are governed by the standard set of rules and guidelines of each sport. Unfortunately, that’s not how the political world works. When NOKO dictator Kim Jong-Un’s sister, Kim Yo Jong steals the show thanks to an overwhelmingly liberal media at the Seoul Olympics it gives reason to pause. They should be focused on the torture, extermination, enslavement, sexual violence, murder and disappearances that take place every day in North Korean prison camps for starters. We’d all like peace to come to the Korean peninsula but let’s not be naïve. It was nice to see the two Korea’s march under one flag on the opening night of the Olympics but don’t be fooled.  1/25 -North Korea issued a statement encouraging the unification of the Korean peninsula asking all Koreans to “promote contact, travel, co-operation between North and South Korea” and saying it will “smash” all challenges against unification.  1/16 – H.R. McMaster met with Japanese & SOKO security council members concluding recent talks with NOKO are a “diversion.” 1/02 – Kim Jong Un announced, “the entire U.S. territory is within the range of a NOKO nuclear strike.” 11/20 – Pres. Trump announced the U.S. designated NOKO a “state sponsor of terrorism.”
ELEVATED
“Trumponomics”
& The Beltway
·        2/15 –  On 2/12 President Trump broke the GOP trend of fiscal prudence with his $4.4 trillion 2019 budget sent to Congress that is unlikely to be enacted as is. On 2/09 the gov’t. averted a shut-down signing into law along with a $1 trillion spending bill with major hikes to disaster relief, full-year funding for defense, infrastructure and our nation’s opioid crisis. Among major items on Trump’s 2018 agenda – a DACA fix, the Wall, Infrastructure Plan and Welfare Reform. 1/26 – Pres. Trump’s  immigration reform plan proposes a DACA fix by offering citizenship to 1.8mm undocumented immigrants brought to the U.S. as children (Dems asked for 800k) in exchange for restrictions on future immigration and a $25b border defense system and wall along the Mexican border.
CAUTION
German coalition?
BREXIT & Terror
·        2/15 – March 2nd is a key date as Germany’s Social Democrats (Socialist Party) votes to approve or reject the recent grand coalition deal referred to as a “marriage of convenience” with Merkel’s CDU/CSU party to stabilize Europe’s keystone nation and economy. A “no” vote means new elections for the Hinterland and further political tension and turmoil. 2/08 -Angela Merkel sealed a grand coalition deal with the Socialist SPD party but gave up the finance and foreign ministry’s.  Many Merkel CDU party members are upset that Wolfgang Schäuble, the longest ever serving German finance minister and a major architect of today’s Eurozone economy is now gone. The Socialist SPD party envisions a United States of Europe by 2025! Germany is the keystone of the EU and 28% of its GDP.

·        2/15 – PM Theresa May finally has cabinet members providing clarity on a post-BREXIT vision noting Boris Johnson’s speech on 2/14. He expressed an unwillingness for the U.K. to be tied down to EU regulation and alignment in lieu of British “choice”; avoided addressing a potential Second Referendum saying “….let’s not go there.” It w/b tumultuous for the U.K. to vote on any deal resultant from EU negotiations. Said U.K. will leave the Customs Union and called for a national debate on the low-skill immigration problem saying the U.K. should focus on the best indigenous talent. Supports stopping payments to the EU budget and total U.K. control of its immigration policy. Wants no EU political integration and a more global U.K. in line with its history. Refers to BREXIT future as more “hope” than “fear”. 1/01 – UK Parliament voted 309-305 requiring separate Act before BREXIT can be implemented dealing PM Theresa May a major setback in negotiations on the EU divorce bill. The U.K. is targeting an “implementation period” of March and completion by October 2018. U.K. withdrawal from the EU takes place in 3/2019.

·        February 2018 Terror Events and Casualties: 74 terrorist attacks; 180 dead; 453 wounded.

MODERATE
Italian elections, Spain & Pakistan.
·        2/15 – Italy’s center-right coalition party is expected to win the March 4th election with its leaders projecting sufficient votes to govern without a second ballot. Silvio Berlusconi, the man behind the Forza Italia Party but banned from serving due to a tax evasion charge, is calling for the EU to devise a Marshall Plan-like approach with MENA nations to help the latter keep their people from flocking to Italy which is choked by over 630,000 immigrants only 5% of which have the legal right to be there as refugees. Matteo Silvani head of the Eurosceptic Lega supports leaving federalized Europe (backed by Germany’s coalition SPD party). Italy has had 65 gov’ts. in 71 years. Unemployment is 10.8%; youth joblessness is 32.2%. Italy is the EU’s 3rd largest economy and has the world’s 3rd highest debt-to-GDP ratio at 132.5%; its national debt is $2.8 trillion (equiv.) It is the EU’s biggest economic risk. Italy’s banking sector holds $220bn of bad loans.

·        2/08 – Friction increased as the U.S. designated 3 Pakistanis as “global terrorists” linked to Al Qaeda, the Afghan Taliban and Lashkar-e Taiba militant groups. 2/06 – The U.S. gov’t said it would consider lifting its security assistance suspension against Pakistan if that nation took immediate action to alleviate U.S. concerns by focusing on all terrorist organizations “without distinction.” On Jan. 4th Pres. Trump suspended security assistance to Pakistan including $2b in defense aid tweeting on Jan. 1 that the U.S. gave it “$33bn in exchange for lies and deceit” while accusing Pakistan of arming and funding terrorists against U.S. troops.

·        2/10 – Elsa Artadi may wind up as Catalonia’s next President with self-exiled leader Carles Puigdemont possibly governing de facto from Brussels. A special council of the republic is being considered although Catalan law must be changed for that accommodation. Harvard graduate Artadi is Puigdemont’s loyal gal Friday.  Puigdemont currently still faces arrest for charges of sedition should he return to Spain.

MARGINAL
2018 US Recession?
Interest rates &
U.S. market volatility
·        2/11 – U.S. equity markets are currently in the midst of a historic, albeit transparent, efficient and healthy market correction.  Volatility will continue to be exacerbated by hawkish interest rate outlooks in which UST yields swelled to four-year highs. Fears of increased inflation tied to high deficits and lower taxes have weighed on equity markets wiping out an estimated $5 trillion globally. The U.S. economy is doing well, earnings are positive but a correction leaves more room for stocks to plunge in light of valuations. Fed is forecasting 3 hikes in 2018. (Many forecast four hikes). Should the U.S. see 4 rate hikes in 2018 and 3 more in ’19, without inflation, as some are beginning to forecast, the U.S. would be heading straight into a recession.

·        2/06 – Russian Presidential elections were moved to March 18th by Putin to coincide with 4th anniversary of annexation of Crimea.  Vlad Putin’ 87% approval rating effectively assures victory. Question is what happens in the 2024 election? Russian Constitution restricts position to two consecutive terms. Putin got around that issue in 2008 by installing Medvedev with Putin serving as Prime Minister (though he was in control). He could become Speaker of the Duma in 2024 and install someone else and then become President again. At 66 years of age and in good health, expect Putin to be around and in charge for the long haul.

·        1/11 – Cybercrime: Crypto-jacking, PowerShell-based attacks, cybercriminal underground, ransomware, viruses, hacking, worms and malware estimated to cost the world $6 trillion by 2021.

 

 

Have a great evening!
Ron Quigley

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/12
TUES.
2/13
WED.
2/14
AVERAGES
WEEK 2/05
AVERAGES
WEEK 1/29
AVERAGES
WEEK 1/22
AVERAGES
WEEK 1/15
AVERAGES
WEEK 1/08
AVERAGES
WEEK 1/01
New Issue Concessions 3.50 bps 2.10 bps N/A 2.67 bps <0.13> bps 0.43 bps 1.73 bps <0.725> bps <0.79> bp
Oversubscription Rates 1.70x 2.36x N/A 4.09x 2.98x 2.02x 2.15x 3.75x 2.85x
Tenors 11.50 yrs 22.57 yrs N/A 14.85 yrs 13.80 yrs 5.74 yrs 7.43 yrs 8.12 yrs 7.80 yrs
Tranche Sizes $600mm $357mm N/A $823mm $847mm $623mm $1,137mm $747mm $787mm
Avg. Spd. Compression
IPTs to Launch
<14.25> bps <14.10> bps N/A <17.02> bps <17.42> bps <13.87> bps <14.11> bps <19.12> bps <17.01> bps

 

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

Please Note: for ratings I use the better two of Moody’s, S&P or Fitch.

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
CSX Corp. Baa1/BBB+ 3.80% 3/01/2028 800 +110a +95a (+/-5) +90 +90 CITI/JPM/MS/UBS
CSX Corp. Baa1/BBB+ 4.30% 3/01/2048 850 +130a +120a (+/-5) +115 +115 CITI/JPM/MS/UBS
CSX Corp. Baa1/BBB+ 4.65% 3/01/2068 350 +165-170/+167.5a +155a (+/-5) +150 +150 CITI/JPM/MS/UBS
Daimler Fin. North America A2/A FRN 2/22/2021 400 3mL+equiv 3mL+equiv 3mL+45 3mL+45 BBVA/CITI/HSBC/JPM/MIZ/SG
Daimler Fin. North America A2/A 3.00% 2/22/2021 550 +70a +65 the # +65 +65 BBVA/CITI/HSBC/JPM/MIZ/SG
Daimler Fin. North America A2/A 3.35% 2/22/2023 675 +80a +75 the # +75 +75 BBVA/CITI/HSBC/JPM/MIZ/SG
Daimler Fin. North America A2/A 3.75% 2/22/2028 625 +90a +85 the # +85 +85 BBVA/CITI/HSBC/JPM/MIZ/SG
PECO Energy Co. Aa3/A 3.90% 3/01/2048 325 +95a +80a (+/-3) +77 +77 MIZ/USB/WFS

 

Indexes and New Issue Volume              

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new high or tight.

                                                                                                                                               

Index Open Current Change
IG29 56.17 52.971 <3.199>
VIX 19.26 19.13 <0.13>
CT10 2.903% *2.910% 0.007
S&P 2,698 2,731 33  
DOW 24,893 25,200 307
Nasdaq 7,143 7,256 113
OIL 60.60 61.42 0.82  
GOLD 1,350 1,353 3  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $4.575 bn DAY: $4.575 bn
WTD: $9.477 bn WTD: $13.777 bn
MTD: $42.067 bn MTD: $60.117 bn
YTD: $174.452 bn YTD: $247.317 bn

 

2018 Lipper Report/Fund Flows – Week ending February 7th

  

  • For the week ended February 7th, Lipper U.S. Fund Flows reported an inflow of $4.734b into Corporate Investment Grade Funds (2018 YTD net inflow of $19.478b) and a net outflow of $2.743b from High Yield Funds (2018 YTD net outflow of $5.858b).
  • Over the same period, Lipper reported a net inflow of $611.901m from Loan Participation Funds (2018 YTD net inflow of $900.938m).
  • Emerging Market debt funds reported a net outflow of $679.846m (2018 YTD inflow of $3.128b).

(more…)

Municipal Debt New Issuance : Toll Roads in Texas and Sewers in South Florida
February 2018      Muni Market   

Municipal Bond New Issuance Scheduled Week of Feb 05 2018– First Week of Feb is Infrastructure Theme: Toll Roads in Texas and Sewers in South Florida need repair and the municipalities of Harris County, TX and Ft. Lauderdale, FL represent the top municipal debt new issuance deals of the week. In both floats, proceeds will go towards repairs and upgrades in those cities.  

Mischler Muni Market Update looks back to last week’s metrics and provides a curated view towards municipal debt offerings scheduled for this week.  As always, the Mischler Muni Market Outlook provides public finance investment managers, institutional investors focused on municipal debt and muni bond market participants with a summary of the prior week’s municipal bond market activity, including credit spreads and money flows, and a look at pending municipal finance offerings tentatively scheduled for this week’s issuance.

Last week muni volume was about $3.6 billion. This week volume is expected to be about $3.8 billion. The negotiated market is led by $567.2 million of toll road revenue bonds for Harris County, Texas. The competitive market is led by $180.1 million of water and sewer bonds for the City of Ft. Lauderdale, Florida on Tuesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

municipal-debt-new-issue-calendar-mischler

Since 2014 alone, minority broker-dealer Mischler Financial Group Inc.’s  presence across the primary Primary Debt Capital Markets (DCM) space has included underwriting roles in which Mischler has led, co-managed and/or served as selling group member for more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. Mischler is also a federally-certified Service-Disabled Veteran-Owned Business Enterprise (SDVOBE).  Mischler Muni Market updates and Municipal Debt New Issuance outlooks are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

(more…)

FIGs Float Just Fine (CITI, DB, PNC, WBK) ; Mischler Debt Market Comment 011718
January 2018      Debt Market Commentary, Recent Deals   

Quigley’s Corner 01.17.18 – FIGs Float Just Fine (CITI, DB, PNC, WBK)

 “Neither the depth of despondency nor the height of euphoria tells you how long either will last.” Thomas Sowell

 

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points: FIGs in Focus

Syndicate IG Corporate-only Volume Estimates For January

Global Market Recap

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

The “QC” Geopolitical Risk Monitor

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending January 11th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

  

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 7 issuers across 13 tranches totaling $10.70b.  The SSA space added 3 issuers and 3 tranches for $3.75b bringing the all-in IG day totals to 10 issuers, 16 tranches and $14.45b.
Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • The IG Corporate WTD total is 81.98% of this week’s syndicate midpoint average forecast or $23.15b vs. $28.24b.
  • MTD we’ve priced 64.06% of the syndicate forecast for January IG Corporate new issuance or $82.825b vs. $129.29b.
  • There are now 10 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points 

  • Mischler Financial served as a Junior Co-Manager on today’s Citigroup Inc. $1b 21nc20 Senior Unsecured Notes tranche. Thanks and appreciation to Citi Team Treasury/Funding and Syndicate for working with me today. Today’s 21nc20 tranche finished with a $1.9b book for a 1.90x bid-to-cover rate.
  • Mischler Financial also served as a Junior Co-Manager on today’s Deutsche Bank AG/New York Branch $2.15b two-part 3-year Fixed and FRN Senior Notes new issue.  Thank you to Team DB Treasury/Funding and Syndicate for their patronage. Today’s DB 2-part finished with a cumulative 3.375b order book total for an overall oversubscription rate of 1.57x.  The book splits were as follows – FRN: $875mm or 1.35x and the Fixed tranche was $2.5b (1.67x).  NIC was about one nickel or 5 bps on both.
  • TPG Specialty Lending Inc. upsized today’s 5-year Senior Notes new issue to $150mm from $100mm at the launch and after skipping guidance.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 13 IG Corporate-only new issues was <15.52> bps.
  • The “BBB” (+121) asset class set new post-Crisis low.
  • The IG Average (+94), “AA” (+53) and “A” (+73) asset classes all tied their post-Crisis lows.
  • 13 of the 19 major investment grade sector credit spreads (68.4%) either set or tied post-Crisis.
  • These 6 sectors set new post-Crisis lows: Basic Industry (+118), Energy (+122), Leisure (+104), Services (+96), Transportation (+96) and Utility (+100).
  • These 7 Sectors tied their lows: Banking (+79), Consumer Products (+80), Healthcare (+80), Industrials (+98), Insurance (+105), Real Estate (+106) and Retail (+86),
  • BAML’s IG Master Index was unchanged at +94 tying its post-Crisis low.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.89 vs. 0.90.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +131 tying its new post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.7b on Tuesday versus $16.2b on Friday and $20.7b the previous Tuesday.
  • The 10-DMA stands at $17.3b.

 

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

 

IG Corporate New Issuance This Week
1/16-1/19
vs. Current
WTD – $23.15b
January 2018 vs. Current
MTD – $82.825b
Low-End Avg. $27.24mm 84.99% $128.54b 64.44%
Midpoint Avg. $28.24mm 81.98% $129.29b 64.06%
High-End Avg. $29.24mm 79.17% $130.04b 63.69%
The Low $15mm 154.33% $100b 82.82%
The High $36mm 64.31% $150b 55.22%

 

Global Market Recap

 

  • U.S. Treasuries – 7yr leads USTs south. 2yr, 3yr and 5yr traded at high yields in years.
  • Overseas Bonds – JGB’s weaker. Bunds and Gilts little changed. Peripherals mixed.
  • 3mth Libor – Set at 1.73918% the highest yield since December 2008.
  • Stocks – Big rally at 3pm. Dow traded at its all-time high.
  • Overseas Stocks – Asia closed mixed. Europe had a losing day.
  • Economic – Mixed data favoring the upside. Cap U the highest since January 2015.
  • Overseas Economic – Japan core machine orders strong. EU CPI YoY very tame.
  • Currencies – DXY Index hit its low since January 2015.
  • Commodities – CRB traded at its high since November 2015.
  • CDX IG: -0.21 to 47.80
  • CDX HY: -0.54 to 298.76
  • CDX EM: -0.48 to 109.88
  • VIX: -0.16 to 11.50

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

-Tony Farren

 

Have a great evening!
Ron Quigley, Managing Director, 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:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/15
TUES.
1/16
AVERAGES
WEEK 1/08
AVERAGES
WEEK 1/01
AVERAGES
WEEK 12/25
AVERAGES
WEEK 12/18
AVERAGES
WEEK 12/11
AVERAGES
WEEK 12/04
New Issue Concessions 1.20 bps 2.35 bps <0.725> bps <0.79> bp N/A N/A <1.46> bps 1.62 bps
Oversubscription Rates 2.29x 2.97x 3.75x 2.85x N/A N/A 4.64x 3.18x
Tenors 5.30 yrs 7.55 yrs 8.12 yrs 7.80 yrs N/A N/A 11.63 yrs 10.69 yrs
Tranche Sizes $603mm $1,131mm $747mm $787mm N/A N/A $398mm $576mm
Avg. Spd. Compression
IPTs to Launch
<15.80> bps <13.41> bps <19.12> bps <17.01> bps N/A N/A <18.18> bps <16.34> bps

 

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

Please Note: for ratings I use the better two of Moody’s, S&P or Fitch.

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Citigroup Inc Baa1/A 3.142% 5NC4 F-t-F
1/24/2023
2,000 +87.5 N/A +75 +75 CITI-sole
Citigroup Inc Baa1/A 3.878% 21NC20 F-t-F
1/24/2039
1,000 +110a N/A +102 +102 CITI-s
Deutsche Bank AG/NY Baa2/BBB- FRN 1/22/2021 650 3mL+equiv 3mL+83.5a (+/-2) 3mL+81.5 3mL+81.5 DB-sole
Deutsche Bank AG/NY Baa2/BBB- 3.15% 1/22/2021 1,500 +115 +102a (+/-2) +100 +100 DB-sole
PhosAgro Ba1/BBB- 3.949% 4/24/2023 500 4.375%a 4.125a (+/-12.5) 3.95% +156.8 BAML/CITI/JPM/RAFF/REN/SG
SBER/UBS/UNI/VTB
PNC Bank NA A2/A+ FRN 1/22/2021 400 3mL+equiv 3mL+equiv 3mL+25 3ml+25 CITI/GS/JPM
PNC Bank NA A2/A+ 2.50% 1/22/2021 900 +55a +45a (+/-2) +43 +43 CITI/GS/JPM/PNC
PNC Bank NA A2/A+ 3.25% 1/22/2028 700 +85a +75a (+/-2) +73 +73 CITI/GS/JPM/PNC
Toll Brothers Finance Corp. Ba1/BBB- 4.35% 2/15/2028 400 4.50%-4.625% 4.40%a (+/-5) 4.35% $100.00 CITI/DB/MIZ/STRH/WFS
TPG Specialty Lending Inc. BBB-/BBB- 4.50% 1/22/2023 150 +225a N/A +212.5 +212.5 BAML/CITI/HSBC/JPM/STRH
Westpac Banking Corp. Aa3/AA- FRN 1/25/2021 500 3mL+equiv 3mL+equiv 3mL+34 3mL+34 BAML/GS/MS/WSTP
Westpac Banking Corp. Aa3/AA- 2.65% 1/25/2021 1,000 +65a +55a (+/-3) +52 +52 BAML/GS/MS/WSTP
Westpac Banking Corp. Aa3/AA- 3.40% 1/25/2028 1,000 +100a +90a (+/-3) +87 +87 BAML/GS/MS/WSTP

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Dexia Crédit Local Aa3/AA 2.50% 1/25/2021 1,500 MS +low 30s
+32.5a
MS +29a MS +27a +45.90 BARC/CITI/GS/HSBC/SG
EDC Aaa/AAA 2.50% 1/24/2023 1,250 MS +11a MS +10a (/-1) MS +10 +15.55 BAML/BMO/CACIB/JPM
Kommuninvest Aaa/AAA 2.375% 4/22/2021 1,000 MS +6a MS +5a MS +4 +24.35 CITI/NOM/NORD/TD

 

Indexes and New Issue Volume              

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new all-time high or tight.

                                                                                                                                               

Index Open Current Change
IG29 48.007 47.998 <0.009>
VIX 11.66 11.91 0.25
CT10 2.538% 2.591% 0.053%  
S&P 2,776 *2,802 26  
DOW 25,792 *26,115 323
Nasdaq 7,223 *7,298 75
OIL 63.73 64.09 0.36  
GOLD 1,326 1,327 1  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $10.70 bn DAY: $14.45 bn
WTD: $23.15 bn WTD: $26.90 bn
MTD: $82.825 bn MTD: $121.675 bn
YTD: $82.825 bn YTD: $121.675 bn

 

2018 Lipper Report/Fund Flows – Week ending January 11th

     

  • For the week ended January 11th, Lipper U.S. Fund Flows reported an inflow of $4.186b into Corporate Investment Grade Funds (2018 YTD net inflow of $5.151b) and a net inflow of $2.651b from High Yield Funds (2018 YTD net inflow of $2.837b).
  • Over the same period, Lipper reported a net outflow of $12.514m from Loan Participation Funds (2018 YTD net outflow of $209.799m).
  • Emerging Market debt funds reported a net inflow of $1.532b (2018 YTD inflow of $2.005b).

 

IG Credit Spreads by Rating

(more…)

Municipal Debt Market New Issue Outlook-Mischler Muni Market Update
January 2018      Muni Market   

Muni Bond New Issuance Scheduled Week of Jan 16 2018  via Mischler Muni Market Update looks back to last week’s metrics and provides a curated view towards municipal debt offerings scheduled for this holiday-shortened week.  As always, the Mischler Muni Market Outlook provides public finance investment managers, institutional investors focused on municipal debt and muni bond market participants a summary of the prior week’s municipal bond market activity, including credit spreads and money flows, and a view of pending municipal finance offerings tentatively scheduled for this week’s issuance.

Last week muni volume was about $3.1 billion. This holiday shortened week volume is expected to be about $3.4 billion. The negotiated market is led by $898.1 million for the Sales Tax Securitization Corporation, Illinois. The competitive market is led by $220.7 million tax exempt and taxable bonds for the University of Kentucky on Wednesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image belowmunicipal-debt-new-issue-calendar-mischler

Since 2014 alone, minority broker-dealer Mischler Financial Group Inc.’s  presence across the primary Primary Debt Capital Markets (DCM) space has included underwriting roles in which Mischler has led, co-managed and/or served as selling group member for more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. Mischler is also a federally-certified Service-Disabled Veteran Owned Business Enterprise (SDVOBE).  Mischler Muni Market updates are provided as a courtesy to institutional clients of Mischler Financial Group, Inc. (more…)

Holiday Time Is Over-Municipal Debt Offerings Pick Up
January 2018      Muni Market   

Muni Bond New Issuance Scheduled Week of Jan 08 2018  via Mischler Muni Market Update looks back to last week’s miniscule metrics ($0.8bil new issuance) and provides view towards municipal debt offerings scheduled for this first full week of 2018.  As always, the Mischler Muni Market Outlook offers public finance investment managers, institutional investors focused on municipal debt and muni bond market participants a summary of the prior week’s municipal debt activity, including credit spreads and money flows, and a curated view of pending municipal finance offerings tentatively scheduled for this week’s issuance.

Last week muni volume was about $0.8 billion. This week volume is expected to be about $3.8 billion. The negotiated market is led by a trio of taxable deals, $500 million for Stanford Health Care, $410 million for Commonwealth Financing Authority (PA) and $219 million for Illinois Finance Authority. The competitive market is led by $600 million general obligation bonds for the Commonwealth of Massachusetts on Tuesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

municipal-debt-market-mischler-comment

Since 2014 alone, minority broker-dealer Mischler Financial Group Inc.’s  presence across the primary Primary Debt Capital Markets (DCM) space has included underwriting roles in which Mischler has led, co-managed and/or served as selling group member for more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. Mischler is also a federally-certified Service-Disabled Veteran Owned Business Enterprise (SDVOBE).  Mischler Muni Market updates are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.  (more…)

Investment Grade Debt Issuance Day 1 2018 – Mischler Debt Capital Mkt Comment
January 2018      Debt Market Commentary   

Quigley’s Corner 01.02.18 : Investment Grade Debt Issuance Day 1 2018

 

Investment Grade New Issue Re-Cap : First Day of 2018 Finds (5) Issuers | $7.35b Floated

Today’s IG Primary & Secondary Market Talking Points – Setting New Post-Crisis Lows 

Syndicate IG Corporate-only Volume Estimates For January

Global Market Recap

The “QC” Geopolitical Risk Monitor : My Button is Bigger Than Your Button!

Key FOMC Dates for 2018

Hawks vs. Doves: A Look at the FOMC Voting Line-up for 2018 from 2017

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 December 27th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

 

Investment Grade New Issue Re-Cap – Nice Kick-Off to 2018!

First up- a very Happy New Year to you and welcome back to the “QC.”  This first edition of 2018 serves up the usual daily data you’ve come to expect with today’s specials in the form of key U.S. Monetary Policy tables as a handy reminder for you as well as a tracking of Fed Hawkish and Dovish voting members given the shifts and changes of the FOMC Regional Presidents. But first let’s run down the familiar order of all things primary related in our IG dollar DCM and focus on investment grade debt issuance day one of 2018:
Today the IG dollar DCM hosted 5 issuers across 10 tranches totaling $7.35b.  The SSA space was quiet today.

Both the S&P 500 and Nasdaq closed at new all-time highs while the recovery in global manufacturing continued on its upward trajectory.
CDX IG29 was at a new tight as of 4:45pm ET.

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • MTD we’ve priced 5.68% of the syndicate forecast for January IG Corporate new issuance or $7.35b vs. $129.29b.
  • There are now 7 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points – Setting New Post-Crisis Lows 

  • Today two of Berkshire Hathaway Energy Company’s four new tranches, the long 10s and long 30s, launched 2 bps tighter than the tightest side of guidance.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 10 IG Corporate-only new issues was <18.20> bps.
  • The IG Average (+98), “AAs” asset class (+55) and “As” (+76) all tied their post-Crisis low.
  • Of the 19 major industry sectors, a total of 7 (36.8%) tied their post-Crisis lows as follows: Banking (+81), Consumer Products (+83), Energy (+131), Industrials (+103), Insurance (+107), Real Estate (+110) and Retail (+91) all set new post-Crisis lows.
  • BAML’s IG Master Index widened 1 bp to +99 from +98.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.93.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +137 and again tying its post-Crisis low set on Wednesday, December 20th, 2017.
  • Investment grade corporate bond trading posted a final Trace count of $2.4b on Friday versus $5.5b on Thursday and $4.1b the previous Friday.
  • The 10-DMA stands at $8.7b.

 

Syndicate IG Corporate-only Volume Estimates For January

 

IG Corporate New Issuance January 2018 vs. Current
MTD – $7.35b
Low-End Avg. $128.54b 5.72%
Midpoint Avg. $129.29b 5.68%
High-End Avg. $130.04b 5.65%
The Low $100b 7.35%
The High $150b 4.90%

 

Global Market Recap

 

  • U.S. Treasuries – European bonds sell off and rate lock selling sent Treasuries south.
  • Overseas Bonds – JGB’s were closed for holiday. Europe was hit very hard.
  • 3mth Libor – Set at the highest yield (1.69693%) since December 2008.
  • Stocks – The NASDAQ leading U.S. stocks higher at 3:30pm.
  • Overseas Stocks – China & Hang Seng with big rallies. Europe closed mixed.
  • Economic – Markit Manufacturing PMI was the strongest since March 2015.
  • Overseas Economic – Mixed Manufacturing PMI data in Europe but overall very good.
  • Currencies – USD lost ground vs. all of the Big 5.
  • Commodities – CRB, gold and wheat higher. Crude oil had a very small loss.
  • CDX IG: -0.53 to 48.49
  • CDX HY: +0.31 to 306.69
  • CDX EM: -2.42 to 116.95

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

Updates are highlighted in BOLD print!

 

Risk Level/Main Factor Geopolitical Risks
HIGH +
“North Korea”
1/02 – Announcing that he’ll send a NOKO team to the Seoul Olympics and desires constructive dialogue with SOKO, dictator Kim Jong Un also announced that “the entire U.S. territory is within the range of a (NOKO) nuclear strike and a nuke button is on *(his) desk” claiming “it is a reality, not a threat.” 12/20 – U.K. successfully tests Sea Ceptor air defense aboard HMS Argyll recently sent to Sea of Japan to join U.S. Naval ships. System shields against multiple airborne targets protecting 500 square mile area.  NOKO pushed further into a corner. 12/05 – U.S. reveals powerful microwave pulses from missiles that can disable NOKO’s electronic missile/launch systems. 12/02 – WH Nat’l. Security Advisor H.R. McMaster says “possibility of war with NOKO increases every day.” 11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. SOKO Olympics begin Friday 2/2018 thru Sunday 2/25. 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
ELEVATED
“Iranian Protests,”
Trumponomics and Beltway Beginning to Function
1/02 – Highly diverse Iranian protests/civil unrest over economic conditions and political corruption continue for 5th day as President Rouhani warns of an immediate response by the Revolutionary Guards. Worst since 2009. Spread from Mashad to Tehran and 10 other major cities. Authorities warn the death penalty can be enforced for “waging war against God!” Over 20 dead; nearly 500 arrested. U.S. & Britain quick with calls for Iran to address issues raised by protestors. Supreme Leader Ayatollah Ali Khamenei blames “enemies of Iran” and Trump of instigating riots. No impact on oil production……..yet! Important to note that Iran, Syria & Russia stand together on one side with the U.S. KAS and Israel on the other. Syria lays blame on U.S. & Israel.  Watch these developments carefully. Executions in Iran will bring civil unrest and ultimately war.

12/22 – Pres. Trump signed the $1.5 trillion Tax Reform Bill into law as promised before Christmas in one of the GOP’s single greatest legislative victories.

12/21 – The UN General Assembly voted 128-9 (93.4%) with 35 abstains, condemning Pres. Trump’s 12/06 recognition of Jerusalem as Israel’s capital.  

12/19 – Yemeni rockets launched at the royal palace in Riyadh intercepted by Saudi forces. Iranian-backed rebels now targeting population and power centers in Saudi Arabia enough to call an act of war between KAS and Iran.

CAUTION
“Russia, Europe, U.K.
& Terror”
12/27 – Enjoying an 82%+ Russian approval rating, Vladimir Putin announced he will seek a 4th term as President. Serving out a 4th 6-year term would mean 24 years at the top  including P.M. posts. Only Stalin ruled longer (29 years). Putin moved the 2018 election date to 3/18 – the 4th anniversary of Russia’s annexation of Crimea. Putin’s lone opponent Alexey Navalny called for a day of protest on January 28th. People will be watching Navalny in more ways than one.

1/01 – Germany’s Angela Merkel in the midst of worst crisis of her 12yr chancellorship following  11/20 collapse of the “Jamaica Coalition.” Must convince socialist SPD party to join her center-right CDU party. Preliminary talks scheduled for Jan. 3rd with exploratory talks from the 7th-12th. Minority gov’t is an option lest Merkel face new elections. Sources of tension are immigration, taxation & the environment. Right wing has seat in decision-making and wants new elections.

1/01 – UK Parliament votes 309-305 requiring separate Act before BREXIT can be implemented dealing PM Theresa May a major setback in negotiations on the EU divorce bill. The U.K. is targeting an “implementation period” of March and completion by October 2018. U.K. withdrawal from the EU takes place in 3/2019. May began 2017 with a parliamentary majority, led in polls and owned the Conservative party; now, however, Democratic unionists are governing, tension persists in her own party as PM May readies to let go of as many as 5 of her cabinet ministers.

January 2018 Terror Events and Casualties: 3 terrorist attacks; 2 dead; 9 wounded.

Final December 2017 Terror Events and Casualties: 93 terrorist attacks; 430 dead; 733 wounded.

U.S. trade protectionism contrarian to the world coming together on trade. Long term impact?

MODERATE
“China” &
Fractured EU?
12/22 – Three Catalonian pro-independence (secessionist) parties won snap elections called for by Spanish PM Rajoy who invoked never before used laws to oust the regional gov’t. & parliament hoping to reunify Spain.  However, the Republican Left (32), Together for Catalonia (34) and Popular Unity Candidacy (4) parties now control a majority 70 seats in the 135-seat Parliament  Over 3,000 companies and banks moved their HQ from Catalonia. Uncertainty and lack of confidence may well stymie Spain’s recovery from the financial crisis. The new parliament is set to convene on January 17th. Disruptions have cost the region over €1b.

1/02 – Ceremonial President Sergio Mattarella dissolved parliament to pave the way for the upcoming March 4th elections. 5-Star Populist Party leader Luigi Di Maio said he would vote for an ITALEXIT if EU discussions fail. Italians are resistant to the EU’s stringent austerity measures. 5-Star holds a lead in polls. Unemployment is 11%; youth joblessness is 35%. Italy is the EU’s 3rd largest economy and has the world’s 3rd highest debt-to-GDP ratio at 132.5%. It is the EU’s biggest economic risk.

China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. 6% GDP in 2018 will be difficult.

Cybercrime, ransomware, viruses & hacking.

MARGINAL
“2018 US Recession?”
12/13 – FOMC raises rates 0.25% recognizes prolonged inflation miss that is globally low. Sees faster 2018 growth and strong labor market. Economic activity and investment picked up. Low odds of a recession. Concerned about debt. Asset prices characterized as being “elevated.”

Key FOMC Dates for 2018

I thought this might be a helpful and handy table of this year’s key U.S. Monetary Policy meetings and dates.

FOMC Minutes Beige Book FOMC Meetings Chairman’s
Press Conference
January 3, 2018 January 17, 2018 Jan. 30-31, 2018  
February 21 March 7 March 20-21 March 21
April 11 April 18 May 1-2  
May 23 May 30 June 12-13 June 13
July 5 July 18 July 31 – Aug. 1  
August 22 September 12 September 25-26 September 26
October 17 October 24 November 7-8  
November 28 December 5 December 18-19 December 19
January 9, 2019 January 16, 2019 January 29-30, 2019  

Hawks vs. Doves: A Look at the FOMC Voting Line-up for 2018 from 2017

The 2018 voting FOMC Regional President’s will consist of 1 dove (Dudley/retiring in 2018), 3 hawks (Barkin, Mester and Williams) and 1 neutral voter (Bostic). Last year (2017) consisted of 4 doves (Dudley, Evans, Harker and Kashkari) and only 1 hawk (Kaplan).

The Board of Governors will also be more hawkish in 2018 than 2017. Fed Gov. Powell (neutral) is expected to replace Fed Chair Yellen (dove) as Fed Chairman in January. Fed Gov. Quarles (hawkish lean) joined the Board in October.  Marvin Goodfriend (hawkish lean) was nominated to be a Fed Governor by Pres. Trump in November but to date has not been confirmed by the Senate. During 2017 Vice Chair Fischer (hawkish lean) and Fed Gov. Tarullo (dove) left the Board of Governors. Fed Gov. Brainard (dove) remains on the Board. 2018 will start with 3 open Governor seats (Goodfriend’s seat is 1 of the 3) and 2017 started with 2.

Summary: In 2018 out of the 9 voting members (currently 3 open Fed Governor seats) there will be 3 doves, 4 hawks and 2 neutral voters. Last year (2017) there were 7 doves, 2 hawks and 1 neutral voters. The details are below:

New Voters in 2018 Dove/Hawk
Randal Quarles (Governor) Hawkish Lean
Thomas Barkin (Richmond) Hawk
Raphael Bostic (Atlanta) Neutral
Loretta Mester (Cleveland) Hawk
John Williams (San Fran) Hawkish Lean

 

2017 Voters
Not Voting in 2018
Dove/Hawk
Stanley Fischer (Vice-Chair) Hawkish Lean (retired)
Daniel Tarullo (Governor)                     Dove (retired)
Charles Evans (Chicago) Dove
Patrick Harker (Philadelphia) Dovish Lean
Robert Kaplan (Dallas) Hawkish Lean
Neel Kashkari (Minneapolis) Very Dovish

 

2018 Voting Line-Up:

  • Doves (3): Yellen, Brainard & Dudley
  • Hawks (4): Quarles, Barkin, Mester & Williams
  • Neutral (2): Powell & Bostic

Other:

  • Fed Gov. Powell expected to replace Fed Chair Yellen in January.
  • Fed Chair Yellen will retire once Fed Gov. Powell is confirmed as the Fed Chair.
  • NY Fed Pres. Dudley announced he will retire in mid-2018.
  • Marvin Goodfriend has been nominated to the Fed Board but has not yet been confirmed.

-Tony Farren

 

Have a great evening!
Ron Quigley, Managing Director / Head of Fixed Income Syndicate

 

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

 

…..and here’s another look at last week’s day-by-day re-cap of key primary market driver averages for IG Corporates only followed by the prior six week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/25
TUES.
12/26
WED.
12/27
Th.
12/28
FRI.
12/29
AVERAGES
WEEK 12/25
AVERAGES
WEEK 12/18
AVERAGES
WEEK 12/11
AVERAGES
WEEK 12/04
AVERAGES
WEEK 11/27
AVERAGES
WEEK 11/20
New Issue Concessions N/A N/A N/A N/A N/A N/A N/A <1.46> bps 1.62 bps 0.51 bps 0.50 bps
Oversubscription Rates N/A N/A N/A N/A N/A N/A N/A 4.64x 3.18x 3.31x 3.29x
Tenors N/A N/A N/A N/A N/A N/A N/A 11.63 yrs 10.69 yrs 11.43 yrs 7.41 yrs
Tranche Sizes N/A N/A N/A N/A N/A N/A N/A $398mm $576mm $648mm $550mm
Avg. Spd. Compression
IPTs to Launch
N/A N/A N/A N/A N/A N/A N/A <18.18> bps <16.34> bps <17.60> bps <18.94> bps

 

New Issues Priced

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Muni Bond New Issuance First Week 2018: Demand Up, Supply Down
January 2018      Muni Market   

Muni Bond New Issuance Scheduled Week of Jan 02 2018  via Mischler Muni Market Update looks back to last week’s metrics and provides view towards municipal bond offerings scheduled for this holiday-shortened week.  Between two back-to-back holiday shortened weeks, the take-away for some is “demand for muni credits is up, but the number of offerings is down..” Good news: NJ Economic Development Authority is open for issuance (see below) As always, the Mischler Muni Market Outlook offers public finance investment managers, institutional investors focused on municipal debt and muni bond market participants a summary of the prior week’s municipal debt activity, including credit spreads and money flows, and a curated view of pending municipal finance offerings tentatively scheduled for this week’s issuance.

Last week muni volume ended up at $1.2 billion. This week volume is expected to be about $757.4 million. The negotiated
market is led by $381.2 million of New Jersey Economic Development Authority State Lease Revenue Bonds. The competitive market does not have any deals over $50 million.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

 

 

mischler-municipal-bond-new-issuance-schedule

Since 2014 alone, minority broker-dealer Mischler Financial Group Inc.’s  presence across the primary Primary Debt Capital Markets (DCM) space has included underwriting roles in which Mischler has led, co-managed and/or served as selling group member for more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. Mischler is also a federally-certified Service-Disabled Veteran Owned Business Enterprise (SDVOBE).  Mischler Muni Market updates are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

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Tax Reform Bill Passes Both Houses-Let The Good Times Roll
December 2017      Debt Market Commentary   

Quigley’s Corner 12.20.17 – Tax Reform Bill Heralded By US Corporations

 

Investment Grade New Issue Re-Cap -Tax Reform Bill Ready For President’s Signature

Investment Grade Credit Spreads at Post Financial Crisis Lows

Syndicate IG Corporate-only Volume Estimates For This Week, December & January 2018

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending December 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

Below is the opening extract from Quigley’s Corner aka “QC”  Wednesday December 20 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.

Investment Grade New Issue Re-Cap – It’s Official: Tax Reform Bill Has Passed in Both Houses

That is one heck of a Christmas present to the American middle class which – make no mistake about it – IS the engine that drives the greatest country on the planet. To illustrate just how great this event could prove to be, let’s turn to the world’s 15th largest global company AT&T Inc. (NYSE:ATT) which announced it will give over 200,000 U.S. employees a special $1,000 bonus – to celebrate the signing of today’s historic tax bill! AT&T also committed to invest $1b in the U.S. in 2018.
IG Spreads Set or Tie Post-Crisis Lows

The good news doesn’t stop there though! Getting more granular to our IG dollar DCM, today saw credit spreads set or tie new post-Crisis lows across the four IG asset classes and the 19 major industry sectors.  It was bound to happen as IG secondary spreads continue to tighten given the absence of any new issuance here at year end among others. I suspect that despite the 10% reduction in IG Corporate new issuance being called for in 2018 as a consequence of the 21% corporate tax rate, there should also be a positive impact of the massive repatriation of trillions of dollars of offshore funds back to domestic corporate coffers. Overall, the new tax reform bill should reflect positively on IG credit quality.

Year-to-date we priced $1.333 trillion in IG Corporate new issues. Many are calling for a 10% reduction in 2018 IG Corporate issuance versus 2017 thanks to repatriation of funds. That would bring the amount down to $1.2tln.  Backing out this year’s $200b in M&A related financings gets you to $1tln even. I think we’ll actually see another 5% increase to that number thanks to redemptions, etc so, and more utility and FIG activity that will bring us to $1.05tln. However, many issuers are looking at their new piles of cash as a “strategic asset” in which they will be asking, “what can we buy with all these new found greenbacks?”  I think we’ll actually see ~$250bn in M&A-related financings.  So, that would bring my total to $1.3tln.

So, $1.3tln is my call for 2018 IG Corporate new issuance. Remember I count split-rated issuance as long as one of the 3 IG ratings is by Moodys, S&P or Fitch and I also include IG rated $25 par Preferreds.

Additionally, today’s November Existing Home Sales beat by 5.06% or 5.81m vs. 5.53m the highest number in 11 years!  The MoM number was 5.6% vs. 0.9% forecasts.

Here’s a look at WTD and MTD IG Corporate new issuance volume as measured against the syndicate desk estimates:

  • The IG Corporate WTD total is 0.00% of this week’s syndicate midpoint average forecast or $0.00m vs. $994mm.
  • MTD we’ve priced 79.96% of the syndicate forecast for December IG Corporate new issuance or $26.387b vs. $33b.
  • There are now 5 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points  

  • The IG Average set a new post-Crisis low of +99; the “AA” asset class also set a new post-Crisis low of +56.
  • The “A” (+77) IG asset class tied its post-Crisis low for the second consecutive session. “BBBs” also tied it post-Crisis low of +129.
  • Of the 19 major industry sectors, a total of 9 of them (47.4%) set or tied their post-Crisis lows as follows: Basic Industry (+124) and Transportation (+102) set new lows while Banking (+82), Consumer Products (+84), Energy (+132), Industrials (+104), Insurance (+108), Real Estate (+111) and Services (+100) tied their post-Crisis lows.
  • BAML’s IG Master Index tightened 1 bp to +99 vs. +100.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.94 vs. 0.95.
  • Standard & Poor’s Investment Grade Composite Spread tightened 3 bps to +137 vs. +140 setting a new post-Crisis low dating back to July 30th 2014 (+140).
  • Investment grade corporate bond trading posted a final Trace count of $14.5b on Tuesday versus $12.9b on Monday and $18.6b the previous Tuesday.
  • The 10-DMA stands at $15.4b.

Syndicate IG Corporate-only Volume Estimates For This Week, December & January 2018

 

IG Corporate New Issuance Thru year End
12/18-12/29
vs. Current
WTD – $0.00b
December 2017 vs. Current
MTD – $26.387b
January 2018
Low-End Avg. $344mm 0.00% $31.33b 84.22% $128.54b
Midpoint Avg. $994mm 0.00% $33b 79.96% $129.29b
High-End Avg. $1.64b 0.00% $34.67b 76.11% $130.04b
The Low $0b 0.00% $25b 105.55% $100b
The High $5b 0.00% $28b 94.24% $150b

 Global Market Recap

  •  U.S. Treasuries – 30yr experienced its third terrible session in a row.
  • Overseas Bonds – JGB’s weaker. EU core and semi core lost. EU Peripherals mixed.
  • 3mth Libor – Set at 1.65793% the highest since December 2008.
  • Stocks – Small losses at 3pm.
  • Overseas Stocks – Asia lower except Nikkei. Europe closed red except Greece.
  • Economic – U.S. housing data continues to impress. Existing home sales best since 2006.
  • Overseas Economic – Japan data was mixed. German PPI was lower than the last.
  • Currencies – USD better vs. Yen, weaker vs. Euro/CAD and little changed vs. Pound/AUD.
  • Commodities – CRB, crude oil, gasoline, gold, copper, silver, wheat, etc higher.
  • CDX IG: -0.61 to 49.14
  • CDX HY: -1.46 to 308.13
  • CDX EM: -1.24 to 120.54

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH +
“North Korea”
·        12/20 – U.K. successfully tests Sea Ceptor air defense aboard HMS Argyll recently sent to Sea of Japan to join U.S. Naval ships. System shields against multiple airborne targets protecting 500 square mile area.  NOKO pushed further into a corner. 12/05 – U.S. reveals powerful microwave pulses from missiles that can disable NOKO’s electronic missile/launch systems. 12/02 – WH Nat’l. Security Advisor H.R. McMaster says “possibility of war with NOKO increases every day.” 11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. SOKO Olympics begin Friday 2/2018 thru Sunday 2/25. 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
ELEVATED
“MENA and
Trumponomics and Beltway Beginning to Function”
·        12/20 – The House, in its re-vote cleared the tax rewrite for Trump’s signature 224-201. Tax Reform is official.  One of the single greatest GOP legislative wins in history. 12/19 – The Senate passed the bill in a 51-48 vote after the House voted in support 227 to 203 (4 no votes) requiring a revote the 12/20 due to a 529 home schooling technicality.  A typical U.S. family will get an add’l. $2k in 2018, the U.S. Corporate tax rate would be reduced to 21%, Americans can choose their own healthcare and Tax  Form is simplified. These are the largest tax cuts in U.S. history. President Trump said he wanted to sign the bill into law before Christmas.

·        12/19 – Yemeni rockets launched at the royal palace in Riyadh intercepted by Saudi forces.  Iranian-backed rebels now targeting population and power centers in Saudi Arabia is more than enough to promote an act of war between KAS and Iran. 12/06 – Pres. Trump formally recognizes Jerusalem as Israel’s capital. Plans to move U.S. embassy there from Tel Aviv. Could take three years. Palestinian leader Mahmoud Abbas and Jordan’s King Abdullah warn Trump of dangerous consequences for stability and security in the Middle East. Turkey’s Erdogan threatens to cut ties with Israel calling the move a “red line for all Muslims” and decision puts “world and region in a ring of fire.” 12/04 – Former Yemeni President Ali Abdullah Saleh assassinated in Sanaa by former allied and Iranian-backed Houthis.  Yemen, like Lebanon are sights of proxy wars fought between Saudi Arabia and Iran. 11/28 – Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group.  Beirut, is proving ground for Saudi-Iranian proxy wars. Crown Prince Mohammed bin Salman’s plans sweeping with “Vision 2030” to wean KSA off oil. Saudi inner players arrested in anti-corruption probe involving multi-billion dollar “settlements.” Both Trump and KAS share strong views of an anti-nuclear Iran. KSA needs oil above $81 to break even. Mideast tension expected to boost the price of oil.

CAUTION
“Russia, Europe,
Uranium 1 & Terror”
·        December MTD Terror Stats a/o 12/20: 56 terrorist attacks; 225 dead; 414 wounded.

·        U.S. trade protectionism contrarian to the world coming together on trade. Long term impact?

MODERATE
“China”
·        12/19 – Spain’s Rajoy announces snap elections on Thursday, Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Separatists remain ahead in latest polls 46.9% to 43.7% for the Unionists. 7.8% are “non-aligned.”

·        Italian elections to be held no later than March 20th, 2018. 5-Star Populist Party leader Luigi Di Maio is hopeful for EU negotiations but said he would vote for an ITALEXIT if discussions fail. Italians are resistant to the EU’s stringent austerity measures. 5-Star holds a lead in polls.

·        China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. 6% GDP in 2018 will be difficult.

·        Cybercrime, ransomware, viruses & hacking.

MARGINAL
“2018 US Recession?”
·        12/13 – FOMC raises rates 0.25% recognizes prolonged inflation miss that is globally low. Sees faster 2018 growth and strong labor market. Economic activity and investment picked up. Low odds of a recession. Concerned about debt. Asset prices characterized as being “elevated.”

 

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Investment Grade Debt New Issuance: FIG Heaven
December 2017      Debt Market Commentary   

Quigley’s Corner 12.18.17  FIG Heaven – Make Reservations Now for January Seating

 

Investment Grade New Issue Re-Cap – 2017 Sets Two All-Time Volume Records

Looking Ahead to Potential FIG Issuance in January 2018

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates For This Week, December & January 2018

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending December 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

Below is the opening extract from Quigley’s Corner aka “QC”  Monday December 18 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.

Investment Grade New Issue Re-Cap
IG Corporate and SSA new issuance posted another shut-out today.  However, even if we get no new supply for the remainder of this year, 2017 already won out as the highest volume year on record for both IG Corporate and all-in IG Corporate + SSA new issuance.  This year’s IG Corporate total beat last year by $48.138b or 3.75% more while all-in volume beat by $23.595b or 1.45%.  Congratulations to all the issuers, bankers, syndicate desks and accounts that made it possible.

Taking a look at the prior six years, each year’s total volume surpassed the prior in both categories:

Year IG Corporates (bn) IG Corps + SSA (bn)
2017 $1,333.355 $1,648.746
2016 $1,285.217 $1,625.151
2015 $1,268.448 $1,512.838
2014 $1,129.33 $1,367.97
2013 $1,051.19 $1,334.76
2012 $1,025.31 $1,254.33

 

It’ll be tough to do this again next year though as the call is for a 10% reduction in 2018 IG Corporate issuance should the new tax reform bill be signed law and the subsequent repatriation of billions of dollars of offshore funds combining with a new and improved 21% corporate tax.

NAHB Housing was the lone piece of economic data today and it surprised to upside in a big way posting a 74 from 70 expectations and a 69 prior reading. That’s an 18-year high! It’s a strong market for homebuyers with national home prices up about 6% YoY.  With strong labor and an improving economy, the outlook is good for home real estate sales.

Looking Ahead to Potential FIG Issuance in January 2018

Next up, I guess we were all a bit stymied by today’s zero issuance activity. But some good souls out there turned it into an opportunity to get creative and work on things they might otherwise not have the time to. So, without further ado, I decided to re-print (with permission of course) a very interesting and informative piece written by none other than Bob Elson. Many of you with Bloomberg terminals may know Bob.  Most everyone in syndicate does.  For the following piece, Bob did the heavy-lifting on what to expect from the big banks or the U.S. six-pack as we roll into the new year.  Not bad for an old dog who remembers when the T30 14% due 2011 traded at a discount.  Given the aforementioned Oscar lead in who else to better give a shout out than Bob Elson who has been “Bond Salesman to the Stars since 1971?”  They don’t make’em like they used to folks and he/they are a class act.

Take it away Bobby E. –

The Large Banks Have January Maturities, They Have a History of January Issuance and for Some, Strikingly Large 2018 Maturities:

Bank of America has $3b maturing Jan. 11

  • Jan. 17, 2017: priced $6.75b in 4 parts
  • Issued in Dec. 2015, rather than Jan. 2016
  • Jan. 16, 2015: priced $2.5b
  • Jan. 15, 2014: priced $4.5b in 2 parts
  • Jan. 8, 2013: 3 tranche deal totaling $8.25b
  • Jan. 19, 2012: $2.25b 10Y
  • Hasn’t been seen since Sept.
  • Has near $28b of 2018 maturities, by far the largest year in its debt distribution
  • Scheduled to announce earning Jan. 17

Citigroup has near $25b maturing in the new year, the largest in its debt distribution

  • Jan. 4, 2017: priced 3-part deal for $5.25b; this was prior to announcing earnings Jan. 18
  • Jan. 5, 2016: priced $2b 10Y; prior to earnings Jan. 15
  • Jan. 29, 2015: priced $2.5b 3Y after announcing earnings Jan. 15
  • Jan. 3, 2013: priced $1.75b 3Y prior to its Jan. 17 earnings
  • Jan. 19, 2012: priced $1b 30Y following its Jan. 17 earnings release
  • Citi will announce earnings Jan. 16

Goldman Sachs has near $6b due Jan. 18-22

  • Jan. 23, 2017: priced $8b in 3 parts
  • Jan. 20, 2015: priced $5.5b in 3 parts
  • Jan. 28, 2014: priced $2.5b 5Y
  • Jan. 16, 2013: priced $5b in 2 parts
  • Jan. 19, 2012: priced $4.5b 10Y
  • 2018 maturities near $26b, the largest in its debt distribution
  • Earnings scheduled for Jan. 17

JPMorgan has ~$8.7b due Jan. 15-25

  • Jan. 25, 2017: $2.75b priced
  • Jan. 15, 2015: priced $6.25b in 2 parts
  • Jan. 14, 2014: priced $2b Jr Sub
    • Jan. 21, 2014: priced $5.25b in 5 parts
  • Jan. 17, 2013: priced 3 part deal for $6.4b
  • Jan. 13, 2012: priced $3.25b 10Y
  • Has near $27b coming due next year, the largest in its debt distribution
  • Will exit earnings blackout Jan. 12

Morgan Stanley has ~$2b due Dec. 28 and ~$2.1b due Jan. 5

  • Jan. 17, 2017: priced $8.25b in 3 parts
  • Jan. 22, 2016: priced 3-part deal totaling $5.5b
  • Jan. 22, 2015: $5.5b in 3 parts
  • Jan. 21, 2014: $2.75b in 2 parts
  • Jan. 23, 2013: $500m 3Y
  • Its 2018 maturities total ~$17.4b
  • Has not been seen since July
  • Earnings scheduled for Jan. 16

Wells Fargo, ~$4.1b Jan. 16-22

  • Jan. 17, 2017: priced $5b in 2 parts
  • Jan. 22, 2016: priced $4b in 2 parts
  • Jan. 15, 2015: priced $2b Jr Sub
    • Jan. 26, 2015: priced $2.65b in 2 parts
  • Jan. 16, 2014: priced $1.7b 7Y
  • Priced $2.1b in Dec. 2012 rather than Jan. 2013
  • 2018 maturities total ~$12.3b
  • Has issued in Nov.-Dec. in four of the past five years
    • Last issued in July
  • Earnings are Jan. 12

If you have a Bloomberg terminal, my strong advice is to reach out to Bob Elson and ask him to add you to his distribution list.  It’s free and you’ll likely get good intel along with some very funny jokes now and then. Please tell him “the guy-in-the-corner” sent you.  Thanks Bob! -RQ

Here’s a look at WTD and MTD IG Corporate new issuance volume as measured against the syndicate desk estimates:

  • The IG Corporate WTD total is 0.00% of this week’s syndicate midpoint average forecast or $0.00m vs. $994mm.
  • MTD we’ve priced 79.96% of the syndicate forecast for December IG Corporate new issuance or $26.387b vs. $33b.
  • There are now 5 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • The “AA” (+57) and “A” (+78) IG asset classes tied their post Crisis lows for the fourth consecutive session.
  • The Real Estate (+111) and Services (+100) sectors set new post-Crisis lows.
  • The Banking (+82) and Transportation (+104) investment grade sector spreads tied their post Crisis lows for the fourth consecutive day.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s X IG Corporate-only new issues was <XX.XX> bps.
  • BAML’s IG Master Index tightened 1 bp to +100 vs. +101.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.95.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +140 vs. +141.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.7b on Friday versus $15.9b on Thursday and $14.7b the previous Friday.
  • The 10-DMA stands at $16b.

Syndicate IG Corporate-only Volume Estimates For This Week, December & January 2018

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