Browsing articles in "Recent Deals"
Mischler Muni Market Outlook; Pending Municipal Debt Deals Week of March 20
March 2017      Muni Market, Recent Deals   

Mischler Muni-bond Market Outlook for the week commencing 03.20.17 looks back to last week’s metrics and provides a lens focused on pending municipal debt deals scheduled. As always, the Mischler Muni Market snapshot provides public finance investment managers, institutional investors focused on municipal debt and municipal bond market participants a summary of prior week’s municipal debt activity, including credit spreads, money flows and a curated view of pending municipal finance offerings scheduled for this week’s issuance.

Last week muni volume was about $4.4 billion. This week volume is expected to be $4.5 billion. The negotiated market is led by $594.0 million for the New York State Environmental Facilities Corp on behalf of New York City Municipal Water Finance Authority. The competitive market is led by $239.9 million general obligation bonds for San Francisco Unified School District, California in 2 bids 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

mischler-muni-market-outlook

 

 

 

 

 

 

 

 

 

Mischler Financial Group debt capital market expertise includes Debt Origination, Distribution, Primary Market Access and Secondary Market trading across the full spectrum of fixed income markets. Our value-add is courtesy of our 18-member team of debt market veterans. a team that makes MFG’s Fixed Income Group a compelling partner to Fortune issuers, corporate treasurers, municipal debt market issuers and the world’s leading institutional investors.

To illustrate our presence within the Debt Capital Markets space: since 2014 alone,  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 a federally-certified Service-Disabled Veteran Owned Business Enterprise (SDVOBE) and a recognized minority broker-dealer. Mischler Muni Market updates are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

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MetLife-Navigating Life Together; Global Funding Dashboard
December 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 12.12.16 – MetLife Global Funding Deal Dashboard

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

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

MetLife Global Funding Deal Dashboard

MetLife’s Veteran Inclusive Partnership

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 7th     

IG Credit Spreads by Rating & Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Tomorrow’s Calendar

 

 

Our IG DCM is certainly winding down the year. Today there were only 2 issuers that priced 4 tranches between them totaling $2.75b or over 45% of this week’s syndicate midpoint average forecast calling for $6.00b.  However that’s not to say there is nothing to write about because there is.  MetLife’s portion of today’s calendar was 73% in the form of their $2b 3-part 2yr FXD/FRN and 10yr FXD tranche.  Mischler Financial was honored and privileged to be invited to serve as an active 2.00% underwriter on MetLife’s 10yr tranche.  You know what that means?  Today’s MetLife 10-year Note transaction IS today’s “QC” Deal-of-the-Day.  Let’s get to the recaps, talking points and volume tables first followed by the MetLife Deal Dashboard, Drill Down and a surprising story about advertising and MetLife’s new rebranding.

 

Global Market Recap

 

  • S. Treasuries – Closed mixed & little changed but had a big comeback during NY hours.
  • Overseas Bonds – 30yr JGB lost 9 bps. Core & semi core EU red. Peripherals mixed.
  • 3mth Libor – Set at highest yield since May 2009 (0.95872%).
  • Stocks – S&P & NASDAQ red at 3:45pm while the Dow is green.
  • Overseas stocks – Europe more red than green. Nikkei rallied. China hit hard.
  • Economic – U.S. calendar not a factor today but will be later in the week.
  • Currencies – Poor day for the USD losing ground vs. all of the Big 5.
  • Commodities – Crude oil rallied (non-OPEC cuts) but closed $2 off of its high print.
  • CDX IG: +1.21 to 68.10
  • CDX HY: +2.65 to 358.23
  • CDX EM: -3.80 to 245.56

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Enbridge Inc. upsized today’s 60NC10 fixed-to-floating rate Junior Subordinated Notes Hybrid new issue to $750mm from $500mm at the launch.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 4 IG Corporate-only new issues was <15.75> bps.
  • BAML’s IG Master Index was unchanged at +133.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.27.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +173 vs. +174.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.7b on Friday versus $16.1b on Thursday and $25.0b the previous Friday.

 

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

 

IG Corporate New Issuance This Week
12/12-12/16
vs. Current
WTD – $2.75b
December 2016
Forecasts
vs. Current
MTD – $38.955b
Low-End Avg. $4.74b 2.75% $40.87b 95.31%
Midpoint Avg. $6.00b 45.83% $41.52b 93.82%
High-End Avg. $7.26b 37.88% $42.17b 92.38%
The Low $0.1b/”0” 2,750.00% $30b 129.85%
The High $10b 27.5% $60b 64.92%

 

 

 

MetLife Global Funding I $1b 10yr FXD 144a/REGS FA-backed Notes Deal Dashboard

For the MetLife relative value study I looked at the outstanding MET 1.95% Secured Notes due 9/15/2021 that were T+80 pre-announcement. Applying a 20-25 bps (call it 22.5 bps) for the 5s/10s credit curve gets you to T+102.50 inferring a negative or <5.5> bps NIC vs. today’s final T+97 spread level.

Another approach to fair value would be to look at the outstanding MET Global Senior Unsecured 3.60% due 11/13/2025 that were T+90 (G+99) before today’s MET new issue hit the tapes.  The new MET 10-year Holdco was T+105-110 (call it T+107.5). FA-backed paper is also better rated and typically trades inside Holdco paper.  So call fair value from this angle T+100-105 or T+102.5 also pegging NIC on today’s new T+97 10year as negative <5.5> bps.

 

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
MET +115a +100a (+/-3) +97 +97 <18> bps <5.5> 95/94 <2>

 

………and here’s a look at final book sizes and oversubscription rates:

 

MET  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
MET $1b $2.5b 2.50x

 

Final Pricing – MET $1b 3.45% 10yr due 12/18/2026 @ $99.933 to yield 3.458% or T+97

 

The Guy-in-the-Corner Bids Adieu to Y&Rs Long Ago “Snoopy” Campaign and Welcomes in MetLife’s New Green and Blue.

metlife-debt-market-mischler

Given my 4+ years as a film producer at Young & Rubicam Advertising – my first job after graduating from USC’s School of Cinematic Arts – how happy I am to tell you the story about MetLife’s huge re-branding campaign that will roll out throughout 2017.  It all begins with a new logo and tagline which is “MetLife. Navigating life together.” The logo is a simple letter “M” (see above) that brings together the MetLife brand’s classic blue and new green that is reflective of the company’s partnership with its customers.  It also means farewell to the 31 long and sweet years that MetLife had enjoyed employing Charles Schulz’s Peanuts characters in their branding campaigns.

The reason for the change is simple – MetLife was looking to transform its brand to convey that it is a Company actively engaged in ongoing, frequent partnerships around navigating and solving life’s challenges.  MetLife is transforming its brand as it is becoming more focused on the types of customers it serves and the brand to reflect that.  Given the underlying motivation and strategy of its re-branding campaign I am very proud to say that Mischler is happy to share “blue and green” today with MetLife.  We appreciate our partnership with MetLife and those who we liaised with on today’s 10-year FA-backed 10-year new issue.

Life IS change.  We are constantly reminded of that fact.  I fondly recall producing test commercials for MetLife way back during my earlier career at Y&R from 1983 thru 1987. It was a long and wonderful campaign that served its purpose well through the years but all good things give way to improvements and such is MetLife’s new roll-out.  Good bye Snoopy and hello Blue and Green!

P.S. Don’t worry about Snoopy. He’ll enjoying a wonderful retirement with his pal Charlie Brown.

 

MetLife’s Veteran Inclusive Partnership

MetLife is a diverse employer.  How do we know? Simple. Everything at a Company starts from the top down folks.  So, what does MetLife Chairman, CEO and Chief Executive Officer, Steven A. Kandarian think about Diversity and Inclusion?
“………A diverse workforce and a culture of inclusion are essential to the way MetLife does business and how we treat our employees.  We are committed to diversity and inclusion at MetLife, and strive to be known as an inclusive global company that attracts, develops and retains the best talent.  A workforce that reflects our customer base is essential to our continued success.”

Global Chief Diversity and Inclusion Officer, Elizabeth Nieto continued, “as a global company, our goal is to honor the cultures, backgrounds, unique experiences and perspectives that our employees, customers and suppliers bring to enhance the “fabric of a world class company”…..that is MetLife.”

The company ensures fairness in vetting and evaluating its diversity vendors and partners.  It leverages the best practices of The National Veteran Business Development Council, Women President’s Educational organization and the National Minority Supplier Development Council among others to institute a meaningful evaluation process to identify, qualify and partner with its well-vetted partnerships with diverse companies such as Mischler Financial Group, Inc.

Additionally, MetLife recognizes that hiring veterans is not just the right thing to do, but it is also the right thing for its global business.  Veterans after all, leave the military with discipline, an ability to lead and passion for service commensurate with MetLife’s own core values.  That’s the reason MetLife fosters a company culture honoring the wealth of experiences, traits and skills of those who have served or continue to serve their country.  As a result, MetLife is regularly recognized on GI Job’s Military Friendly Employers list.

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

Have a great 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 Monday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/12
AVERAGES
WEEK 12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
New Issue Concessions <1.83> bps 4.26 bps 3.53 bps 4.5 bps 3.62 bps
Oversubscription Rates 2.15x 3.68x 3.38x 2.99x 2.78x
Tenors 6 yrs 9.21 yrs 10.84 yrs 12.14 yrs 11.28 yrs
Tranche Sizes $688mm $760mm $711mm $929mm $1,039mm
Avg. Spd. Compression
IPTs to Launch
<15.75> bps <22.24> bps <17.60> bps <16.07> bps <17.69> bps

 

New Issues Priced

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

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
Enbridge Inc. Ba1/BBB- 6.00% 60NC10 750 6.25%a 6.00% the # 6.00% $100.00 BAML/HSBC/JPM
MetLife Global Funding Aa3/AA- FRN 12/19/2018 500 3mL+equiv 3mL+equiv 3mL+43 3mL+43 DB/CITI/USB/WFS
MetLife Global Funding Aa3/AA- 1.75% 12/19/2018 500 +75a +65 the # +65 +65 DB/CITI/USB/WFS
MetLife Global Funding Aa3/AA- 3.45% 12/18/2026 1,000 +115a +100a (+/-3) +97 +97 DB/BARC/JPM/MS

           

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.27 1.27 0
IG27 66.89 68.095 1.205
HV27 137.825 136.006 <1.819>
VIX 11.75 12.64 0.89  
S&P 2,259 2,256 <3>
DOW 19,756 19,796 40  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $2.75 bn DAY: $2.75 bn
WTD: $2.75 bn WTD: $2.75 bn
MTD: $38.955 bn MTD: $44.905bn
YTD: $1,283.717 bn YTD: $1,623.651 bn

 

Lipper Report/Fund Flows – Week ending December 7th     

     

  • For the week ended December 7th, Lipper U.S. Fund Flows reported an inflow of $2.583b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.047b) and a net inflow of $2.034bm into High Yield Funds (2016 YTD net inflow of $6.973b).
  • Over the same period, Lipper reported a net inflow of $1.761b into Loan Participation Funds (2016 YTD net inflow of $2.322b).
  • Emerging Market debt funds reported a net outflow of $1.005b (2016 YTD inflow of $4.738b).

 

IG Credit Spreads by Rating

The 10-day IG spread performance vs. the T10 across the ratings spectrum and how IG compared versus high yield:

Spreads across the four IG asset classes are an average 24.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 11/29 11/28 1-Day Change 10-Day Trend PC
low
IG Avg. 133 133 134 134 135 135 135 136 136 136 0 <3> 106
“AAA” 75 75 75 75 75 75 75 75 75 75 0 0 50
“AA” 81 82 82 82 82 83 83 84 84 83 <1> <2> 63
“A” 106 106 106 107 107 107 107 108 108 108 0 <2> 81
“BBB” 170 171 172 172 173 174 174 175 177 177 <1> <7> 142
IG vs. HY 295 305 308 316 323 329 327 331 333 330 <10> <35> 228

IG Credit Spreads by Industry

…….and a snapshot of the major investment grade sector credit spreads for the past ten sessions:

Spreads across the major industry sectors are an average 30.00 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 11/29 11/28 1-Day Change 10-Day Trend PC
low
Automotive 121 121 121 121 121 122 122 123 123 123 0 <2> 67
Banking 123 124 124 125 125 126 125 125 126 126 <1> <3> 98
Basic Industry 170 172 173 174 175 176 175 177 175 175 <2> <5> 143
Cap Goods 99 99 100 100 100 101 101 102 101 101 0 <2> 84
Cons. Prod. 109 109 109 109 109 110 109 110 110 110 0 <1> 85
Energy 170 172 173 174 175 177 177 180 181 180 <2> <10> 133
Financials 152 153 154 154 155 155 154 155 157 157 <1> <5> 97
Healthcare 117 117 117 117 118 118 118 119 118 118 0 <1> 83
Industrials 135 135 136 136 137 137 137 139 139 139 0 <4> 109
Insurance 145 146 146 146 146 147 146 147 147 147 <1> <2> 120
Leisure 135 135 134 134 135 135 135 135 135 134 0 +1 115
Media 157 158 158 159 159 160 159 161 161 160 <1> <3> 113
Real Estate 143 143 143 143 144 144 144 144 142 142 0 +1 112
Retail 114 115 115 116 116 116 116 117 117 117 <1> <3> 92
Services 127 127 127 128 128 128 128 128 127 127 0 0 120
Technology 108 109 109 110 110 110 110 112 112 113 <1> <5> 76
Telecom 163 163 164 165 165 166 165 166 167 167 0 <4> 122
Transportation 131 132 133 135 135 135 135 136 135 135 <1> <4> 109
Utility 133 134 135 135 135 136 135 135 135 135 <1> <2> 104

 

New Issue Pipeline (more…)

Goldman Sachs Raises the D&I Barbell w 1bil Debt Issuance
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.25.16- Goldman Sachs Raises the D&I Barbell

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard

Goldman Sachs Diversity Dealer Game Changer

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller
New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

6 IG Corporate issuers priced 7 tranches between them totaling $4.90b bringing the WTD total to $14.75b or 60% of this week’s syndicate midpoint average estimate calling for $25.48b.  But today was all about one deal –  a TLAC deal for The Goldman Sachs Group, Inc.  The deal had much more to do about breaking and shattering new ground for diversity and inclusion.  And you know what?  THAT is the story I’m telling tonight.  Let’s check our various recaps first and then continue scrolling down to another great read from the House of Gold!

Global Market Recap

 

  • S. Treasuries – USTs closed mixed & little changed with a flatter curve.
  • Overseas Bonds – Core Europe were little changed & JGB’s had small gains.
  • 3mth Libor – Set at the highest yield since May 2009 (0.88567%).
  • Stocks – U.S. red at 3:30pm. Europe closed red except the FTSE. Asia closed higher.
  • Economic – The U.S. data was solid except for consumer confidence (-4.9 points).
  • Overseas Economic – Strong IFO data in Germany but the data in France was weaker.
  • Currencies – USD mixed vs. the Big 5. DXY Index reached highs since early February.
  • Commodities – Good day for gold, copper & silver but not for crude oil.
  • CDX IG: +0.75 to 74.52
  • CDX HY: +2.97 to 400.24
  • CDX EM: -1.13 to 231.09

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 15.79 bps.
  • BAML’s IG Master Index was unchanged at +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +_130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +181.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14b on Monday versus $12b Friday and $13.9b the previous Monday.
  • The 10-DMA stands at $15.3b.

 

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

 

IG Corporate New Issuance This Week
10/24-10/28
vs. Current
WTD – $14.75b
October 2016 vs. Current
MTD – $83.345b
Low-End Avg. $24.61b 59.93% $87.83b 94.89%
Midpoint Avg. $25.48b 57.89% $88.59b 94.08%
High-End Avg. $26.35b 55.98% $89.35b 93.28%
The Low $15b 98.33% $75b 111.13%
The High $35b 42.14% $125b 66.68%

 

The Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
11NC10 FRNs 3mL+180a 3mL+175 # 3mL+175 3mL+175 <5> +5 3mL+176/174 +1

Here’s a look at the relative value analysis to derive NIC on today’s GS 11NC10 FRNs.

  • The outstanding GS 10yr was G+144 pre-announcement this morning.
  • Add 5 bps for the 10s/11s curve = G+149
  • Add in 16 bps for 10yr mid swaps = G+165
  • Interpolating 10yr m/s to 11yr m/s = 5 bps or G+170 to get an 11yr bullet equivalent.
  • NIC = 5 bps.

………and here’s a look at final book sizes and oversubscription rates:

 

GS  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
11NC10 FRNs $1b $2.7b 2.7x

 

Goldman Sachs Final Pricing
GS $1b 11NC10 FRNs due 10/28/2026 @ $100.00 or 3mL+175

goldman sachs-diversity-D&I

Goldman Sachs Diversity Dealer Game Changer: It’s All About Capability & Distribution
What Goldman Sachs did today was something they tried about 18 months ago.  They were experimenting then and carried thru today with the single most formidable ratcheting up of meaningful diversity and inclusion initiatives that I have ever seen before in this space.  What they did, and as I wrote in this morning’s very early deal announcement at 7:47 am ET, was to encourage strong participation among today’s 12 diversity co-managers on their $1bil 11NC10 FRNs.  It was Goldman’s most inclusive transaction.  Everyone started from the same playing field upon today’s announcement. The built-in ‘incentive’ was where the pedal meets the metal so to speak by “rewarding unique orders in addition to each firm’s underwriting liability.” In Mischler’s case, that was 0.5%.  It was all completely about distribution. What that did was send a signal to diversity firms to ratchet up their game and prove their capabilities by delivering on each of their respective promises to provide meaningful incremental/tertiary tier II and III HIGH QUALITY distribution.  These are the true value add elements that separate the wheat from the chaff.

Let me explain the above: Irrespective of industry, and notwithstanding cultural and/or corporate guidelines designed to embrace and advance diversity and inclusion (D&I) initiatives with regard to internal hiring, strategic engagements and/or outsourcing, the fact is Goldman “gets the joke.” Based on my own lengthy tenure on Wall Street, it is clear to me, if not most that GS’s goal is not to simply “check the box” and  arbitrarily select from the myriad of “minority-owned brokerdealers” when they are the Issuer or the lead bookrunner of a particular underwriting. For those who didn’t get the memo, Goldman is a globally-recognized thought-leader i.e. best practices, and when it comes to D&I, they don’t simply ‘check the box’; their internal mandate is to enlist only truly capable firms, not merely those whose owners fall into one of the various minority classifications (e.g. Woman-owned aka WMBEs, African American-owned, Hispanic American owned, Service-Disabled Veteran owned, etc).

At Mischler, we agree with the GS philosophy wholeheartedly. It is imperative to embrace diversity, but the embrace should be driven by capability and excellence, not merely whether the firm is owned by a ‘certified minority’ . It is an approach that Mischler embraces when selecting the Veteran-centric philanthropic organizations that we support year round and during the months of May and November, when we pledge a portion of the entire month profits to honor Memorial Day and Veterans Day. NO enterprise, whether it be a Fortune Corporation/Issuer, a Public Plan Sponsor, a global investment bank, or an Investment Manager that has D&I goals and/or mandates should be ‘checking the box’ without first checking the actual capabilities of the respective service provider!

In the case of today’s $1bil placement, GS remained focused on reviewing their myriad diversity order books and to only select co-manager firms according to an internal and granular set of criteria.  Among other things, Goldman would have the right to scrutinize accounts and reflect their thoughts through their final allocations to each firm.

With our underwriting liability of 0.5% applied to today’s deal size of $1b that equates to $5mm allocation. Assuming we secured our full 5mm underwriting liability (given our typical high quality order books), it would be a tall order to allocate each of several dozen institutional accounts with a meaningful amount of paper.  The prospective allocations would simply not prove meaningful enough to those fund managers. But Goldman wanted to capture new, quality middle markets accounts that include a range of investor profiles, as well as geographically diverse placement opportunities across the globe. Goldman included a good firm today when they called Mischler Financial, the nation’s oldest Service Disabled Veteran broker dealer. We are grateful for the bulge bracket firms who look for the distribution value-add.  That said, one particular firm (shall I say notorious shop?) recently asked us to build a book, encouraged our orders and claimed they’d work together on securing us the best possible allocation, only to give us an otherwise deminimis allocation of bonds once the books were closed.

Before readers infer a sense of sour grapes on the part of this writer, that is not the case.  We’re big boys and girls here and we’ve been to more rodeos than many of our peers insofar as the new issue allocation process. But, as I shared that story with several bulge bracket firms during the past several days, the senior syndicate team members I spoke with genuinely found it “deplorable” that any desk would put a prospective co-manager or selling group member through the exercise of building a book of firm IOIs, only to leave that firm and their accounts with less than crumbs for the effort. In fact, one syndicate head said, “If we know allocations will be very difficult we will always tell you there’s no distribution this go ‘round, but we would NEVER be so egregious to encourage it and then disrespect you like that. It’s plain bad business that hurts what you guys are trying to do and you work so hard at doing it right!”  Indeed! And that story got around folks, but then there is Goldman Sachs–a firm that has historically proven to have honor and integrity whenever interacting with their underwriting group partners.

Conclusion, Goldman did something bold and daring today for diversity and inclusion and for their transaction.  It IS a game changer that incentivizes on a much grander scale.  The message sent is clear – Goldman will partner with you, but you need to work hard at it; you need to deliver and execute consistently and you need to show us quality accounts, solid order books and be able to place the paper when we give it to you.

Who and where are the Mischler investor accounts that participated in today’s GS transaction?  They represented a total of 13 different investor profile types. They exist throughout the United States. They are in the United Kingdom and throughout Europe. They are in Asia, they are in the Caribbean and LATAM.  There were over 3 dozen MFG clients on today’s GS order book.  They are true quality accounts; good, solid, reliable investors who are often crowded out in our new world order by global money managers who pin down most of today’s new issues.  These middle market investors yield too. They want to buy the best, highest-rated IG credits.  They often add to positions in the secondary market.

And, they all showed up today.  I personally thank each and every one of them.  They get the “QC” and they read it.  They understand all the hard labor we expend in this space, and they understand we are led by an executive team that is honorable and financially committed to stick with it for the long haul.  We are called Mischler Financial Group. We’re about a proudly earned certification; we’re about the strongest distribution in the business; we’re about very strong capital, a fantastic operations team that is second to none, and we’re about stellar relationships across the DCM and Syndicate ecosystem. That’s what it takes in today’s competitive landscape and we greatly appreciate the wonderful partnership we share with Goldman Sachs. We’re also grateful for Goldman’s revolutionary transaction today; one that was focused on best-in-class financial industry partners who can help extend the GS brand with integrity and reliability!

Words Count, Most of All These Two Words: Thank You.

Before this “guy-in-the-corner” walks out of his bedroom each morning, I say “thank you”.  It’s important folks.  Sometimes the only prayer we ever have in life is “thank you” and it will be enough.  You know that I mean that.  It’s time for roll call again and it gives me great pleasure to shout out Team Goldman Sachs not only for being there for our firm today, but for Diversity & Inclusion in general.  Thank you to Team GS not for merely moving the needle forward today for inclusive initiatives, but for bulldozing it ahead with a new powerful distribution incentive.  Your trajectory in finding new ways to lend meaning to the mandate never surprises, rather it overwhelms because you are doing great things the right way.  Our firm, and others with proven capabilities grow as a result and all the accounts that participated today in yet another major bank’s TLAC issuance will come to us to execute across myriad other product lines.  So, from the desk of Chairman and CEO Lloyd Blankfein to Jonny Fine; from Tony Shan to Matt Jackson; from Salina Lee and Elizabeth Plunkett to Jason Ghilarducci, you are all part of one team that came together again on deal day to raise the bar for D&I while fortifying your own self-funding with new global investors that cover a diversity of profiles and regions.

Simply said, “Thank you all!”

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller

Mr. Scott Stringer seems like a nice enough fellow. His resume includes being the 44th and current New York City Comptroller and a New York Democratic politician who previously served as the 26th Borough President of Manhattan.  Regarding Mr. Stringer’s recent and LOUD October 16th press request for The Goldman Sachs Group Inc. (among 14 other major companies) to disclose data on the diversity of their suppliers and to increase spending with firms owned by minorities and women and veterans.  The fact is, there is currently no mandate on the part of NYC Comptroller to include SDV-owned broker-dealers, although select managers do informally include such firms. I invite Mr. Stringer and/or his designates to read the “QC.” They’ll find what they’re looking for, which is nothing but a best-in-class procurement initiative in the IG dollar DCM; no, make that Global Debt Capital Markets.

Contrary to the less-than-subliminal context of the above noted press release, Goldman does understand and fully embraces the notion that supplier diversity is the next frontier for companies seeking to manage risk and create sustainable shareowner value. In fact, Goldman has ‘gotten it’ for many years. Starting from inside the office of Chairman and CEO Lloyd Blankfein right on down to the DNA of his top lieutenants like Jonathan “Jonny” Fine, who heads syndicate at the House of Gold, Goldman knows that a broader pool of diverse financial suppliers provides tangible benefits to corporations in terms of price and quality.  In today’s case, their very own company!  As Mr. Stringer said, and I quote, “The Company talks the talk but absent disclosure, it’s impossible to measure the impact of their efforts.”

Mr. Stinger, I’m the guy-in the corner and I’m here to RESPECTFULLY suggest to you that Goldman has not only moved the needle forward for all of D&I in the financial services industry, they are at the cutting edge. Contrary to what you implied in the press statement, and despite the ubiquitous trend of bashing big banks in general, I’d humbly argue that for GS, it’s not all about the money, rather it’s about incentivizing us (minority firms) to grow so that we’re around in the future.  Goldman has created such a meaningful diversity mandate that it has literally helped my firm, Mischler Financial Group, Inc. to become one of the best in the country in the fixed income markets. We are a sustainable proposition. GS has raised the bar in a healthy spirit of competition in the entire diversity space across our industry in order to bring out the best in all of us and our respective platforms.

As opposed to ‘calling out’ GS and challenging their D&I process, we respectfully encourage the NYC Comptroller’s office to take a page from the GS playbook vis a vis the process by which NYC’s pension funds determine how and who they include within their own “minority broker” approvals and respective allocation of order schemes. The NYC Comptroller’s Office does not [yet] recognize Service-Disabled veteran brokerdealers; but does recognize other minority classifications within this industry. At such time as you expand the minority classifications to include SDV-owned/operated BDs,  you’ll discover that Mischler was one of the very first firms to be certified by State of New York in connection with the 2014 NYS legislation that established mandates for NYS agencies to procure from Service-Disabled Veteran owned enterprises. While the NYC Comptroller office has not yet embraced State of New York’s SDV legislation, we are hopeful that you will, and when you do, it will likely prove additive in many ways.

Mr. Stringer, if you’d like more perspective and/or insight about this topic, I’m happy to have a dinner with you. We’ll go “Dutch treat.”   I promise you it’ll be a fun and informative meeting, and I’ll happily share with you the history of outreaches made to your office specific to this subject that have seemingly fallen through the cracks. You’ll have one less thing to check off your “to do” list! Hopefully, our firm will not be penalized for creating ‘greater transparency’ via this “op-ed.”  My contact info is at the bottom of the page.

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s a review of this week’s key primary market driver averages for IG Corporates only through Monday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
New Issue Concessions 2.67 bps 3.31 bps 1.87 bps 4.36 bps 2.71 bps
Oversubscription Rates 2.52x 3.05x 3.28x 4.20x 3.52x
Tenors 6.75 yrs 9.16 yrs 11.51 yrs 12.16 yrs 10.51 yrs
Tranche Sizes $985mm $1,137mm $640mm $523mm $646mm

 

New Issues Priced

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

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
Comm. Bank of Australia Aa2/AA- FRN 11/07/2019 500 3mL+equiv 3mL+equiv 3mL+64 3mL+64 CBA/HSBC/JPM
Comm. Bank of Australia Aa2/AA- 1.75% 11/07/2019 1,000 +90-95 +80 the # +80 +80 CBA/HSBC/JPM
Goldman Sachs Group, Inc. A3/A FRN 11NC10 1,000 3mL+180a 3mL+175 the # 3mL+175 3mL+175 GS-sole
Lennox International Inc. Baa3/BBB 3.00% 11/15/2023 350 +180a +155a (+/-5) +145 +145 JPM/WFS
M&T Bank Corp. Baa2/BBB- 5.125% 11/01/2026 500 5.25%a 5.125% the # 5.125% 3mL+352 CS/JPM/RBC/UBS
National Rural Utilities Coop Fin. Corp. A2/A 1.50% 11/01/2019 300 +65-70 +55a (+/-5) +50 +50 JPM/MIZ/PNC/STRH
Orange SA Baa1/BBB+ 1.625% 11/03/2019 1,250 +80-85 +70a (+/-3) +67 +67 BAML/JPM/MS/MUFG

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.30 1.30 0
IG27 73.767 74.537 0.77
HV27 161.385 161.635 0.25
VIX 13.02 13.46 0.44
S&P 2,151 2,143 <8>
DOW 18,223 18,169 <54>
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $4.90 bn DAY: $4.90 bn
WTD: $14.75 bn WTD: $14.75 bn
MTD: $83.345 bn MTD: $126.695 bn
YTD: $1,158.081 bn YTD: $1,481.915 bn

 

Lipper Report/Fund Flows – Week ending October 19th  

     

  • For the week ended October 19th, Lipper U.S. Fund Flows reported an inflow of $2.431b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.086b) and a net outflow of $160m from High Yield Funds (2016 YTD net inflow of $11.119b).
  • Over the same period, Lipper reported a net inflow of $514.8m into Loan Participation Funds (2016 YTD net outflow of $1.956b).
  • Emerging Market debt funds reported a net inflow of $621.7m (2016 YTD inflow of $7.333b).

 

IG Credit Spreads by Rating

The 10-day IG spread performance vs. the T10 across the ratings spectrum and how IG compared versus high yield:

Spreads across the four IG asset classes are an average 26.75 bps wider versus their post-Crisis lows!

 

ASSET CLASS 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
low
IG Avg. 135 135 135 135 136 137 136 137 137 137 0 <2> 106
“AAA” 78 77 76 76 76 78 78 79 79 79 +1 <1> 50
“AA” 83 83 83 82 83 84 84 84 84 84 0 <1> 63
“A” 108 108 108 108 109 109 109 110 110 110 0 <2> 81
“BBB” 174 175 174 175 176 176 176 177 177 177 <1> <3> 142
IG vs. HY 325 327 327 331 336 339 336 345 338 338 <2> <13> 228

IG Credit Spreads by Industry

…….and a snapshot of the major investment grade sector credit spreads for the past ten sessions:

Spreads across the major industry sectors are an average 32.21 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
low
Automotive 117 117 117 117 117 118 118 119 119 119 0 <2> 67
Banking 127 127 128 128 129 130 129 130 129 130 0 <3> 98
Basic Industry 177 179 179 180 180 180 179 180 179 180 <2> <3> 143
Cap Goods 101 101 101 101 101 102 102 102 102 102 0 <1> 84
Cons. Prod. 105 105 105 104 105 106 106 106 106 107 0 <2> 85
Energy 174 175 175 177 179 179 178 180 180 181 <1> <7> 133
Financials 160 160 161 161 162 163 163 163 163 163 0 <3> 97
Healthcare 114 114 114 114 114 114 114 114 115 116 0 <2> 83
Industrials 136 136 135 136 136 137 137 137 137 138 0 <2> 109
Insurance 154 155 155 155 156 155 155 156 156 156 <1> <2> 120
Leisure 136 135 136 136 137 137 137 137 138 138 +1 <2> 115
Media 157 157 155 155 155 157 157 158 158 159 0 <2> 113
Real Estate 147 147 147 148 148 149 149 148 149 149 0 <2> 112
Retail 115 114 114 114 114 115 115 115 115 115 +1 0 92
Services 128 128 128 128 129 129 129 130 130 130 0 <2> 120
Technology 112 112 112 111 112 113 113 114 114 115 0 <3> 76
Telecom 162 161 156 155 156 157 158 158 158 158 +1 +4 122
Transportation 136 136 137 137 137 137 137 138 138 137 0 <1> 109
Utility 136 137 137 138 138 138 139 139 139 139 <1> <3> 104

 

New Issue Pipeline

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

(more…)

Investment Grade Debt: Who Will Issue at Record Low Yield?
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.13.16  Who Will Issue at Record Low Yield?

 

Investment Grade Debt New Issue Re-Cap – Strong Day for IG Issuance

Toyota Motor Credit Corp. $2b 3-part Deal Dashboard

Toyota Finance Eyes Bond Issue with Record-Low 0.0003% yield

Global Market Recap

IG Primary & Secondary Market Talking Points

Oversubscription Rates for IG New Issuance

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 5th  

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab
 

It was a nice day for IG primary markets as 5 IG Corporate issuers priced 13 tranches between them totaling $8.25b.  SSA chimed in as well with 2 issuers, 2 prints and a total of $3.5b bringing the all-in IG day total to 7 issuers, 15 tranches and $11.75b.  We broke right thru the low-, midpoint and high-end syndicate estimates for IG Corporate issuance this week.  Versus the midpoint forecast, we priced $19.855b against $15.02b so, weekly supply is 32% above that number.  We are now 41% of the syndicate IG Corporate outlook for the month of October or $36.455b vs. $88.59b.

It was also a great day for Mischler Financial, the nation’s oldest SDVBE as we were privileged and honored to serve as a 1.00% active Co-Manager on Toyota Motor Credit Corp’s. $2b three-part 3yr FXD/FRN and 7yr FXD Senior Unsecured Notes new issue.

As you all recall from last week’s “QC” dated Wednesday, October 5, 2016 edition (time-stamped at 10:22PM ET I might add…..check your incomings!), “Toyota made Diversity & Inclusion history with a Mischler sponsored investor luncheon that gathered together 12 accounts in person in Manhattan and 46 dial-in investor participants.”  Needless to say we’re glad TMCC issued so close to that historic day last week.  Here’s an example of the type of investor feedback I received as orders were placed in to me today during the internal book build:

“We are very grateful and feeling up to speed and more well informed on TMCC than we have in some time thanks to your call last week.” 
toyota-motor-credit-corp-mischler
Toyota Motor Credit Corp. $2b 3-part Deal Dashboard

 

TMCC Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
Comparable Bid
Pre-Announcement
NICs
(bps)
Trading at
the Break
+/-
(bps)
3yr FRN 3mnL+equiv 3mL+equiv 3mL+44 3mL+44 <14.5> bps TMCC 1.40% due 5/2019 G+53
*2bps 3s/5s cdt. curve adj.
3 bps

 

3mL+43/45 <1>
3yr FXD +low 70s/+72.5 +60a (+/-2) +58 +58 <14.5> bps TMCC 1.40% due 5/2019
G+53
*2bps 3s/5s cdt. curve adj.
3 bps 57/56 <1>
7yr FXD +hi 80s/+87.5 +77a (+/-2) +75 +75 <12.5> bps TMCC 2.625% due 1/2023
G+70
5 bps 72/70 <3>

 

………and here’s a look at final book sizes and oversubscription rates:

 

TMCC Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr FRN 500mm $920mm 1.84x
3yr FXD 1,000mm $2.2b 2.20x
7yr FXD 500mm $1.15b 2.30x

 

 

And before I sign off, Mischler would like to congratulate Toyota Finance, a different issuer under the same Toyota umbrella, for setting a new yen record low yield.  That’s right!  I cannot say if it’s in “modern history” or “of all time” because I do not know of a John Murphy in Japan!  There’s only one JM.  However, suffice it to say, Nikkei Asian Review published the following as of this writing that was then also published as a Bloomberg news article as well:

 

October 14, 2016 3:15 am JST

 

Toyota Finance Eyes Bond Issue with Record-low 0.0003% yield

 

TOKYO — Toyota Finance is expected to issue new three-year bonds with an annual yield of about 0.0003%, the first Japanese corporate debt with an issue yield of less than 0.001%.

The Toyota Motor unit will iron out details as early as Friday, with plans to issue the debt by the end of the month. The company plans to raise about 25 billion yen ($241 million). At 0.0003%, the total annual borrowing cost for the debt comes to just 75,000 yen, or little more than $720.

 

The Bank of Japan decided to lead long-term interest rates to about 0% when it conducted a comprehensive review of its monetary easing policy in September. But yields on 10-year, five-year and two-year Japanese government bonds remain in negative territory, exerting downward pressure against yields on corporate debt. Amid a lack of options, mutual funds and institutional investors are turning even to corporate bonds with extremely low returns.

(Nikkei)

 

Toyota’s financial arm certainly lives up to the parent company’s slogan of “Let’s Go Places.”  Thanks for breaking new ground and for taking us onboard to one of those new “places.”

Global Market Recap

  • S. Treasuries – Strong session for USTs & long end in Europe. U.S. bill market was well bid.
  • Stocks – U.S. stocks under heavy pressure early but are staging an afternoon rally.
  • Overseas Stocks – Poor day for Europe & HS. Nikkei small loss & China small gain.
  • Economic – The U.S. jobless claims data were off the charts good. Best in 43 years.
  • Currencies – USD lost ground vs. all of the Big 5.
  • Commodities – Copper down big & wheat up big. Crude small gain despite bearish inventories.
  • CDX IG: +0.18 to 75.70
  • CDX HY: +3.11 to 407.80
  • CDX EM: +0.50 to 237.34

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 13 IG Corporate-only new issues was 22.19 bps.
  • BAML’s IG Master Index was unchanged at +137.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +132 vs. +133.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +183 vs. +184.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.7b on Wednesday versus $15.4b Tuesday and $18.7b the previous Wednesday.
  • The 10-DMA stands at $15.9b.

 

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

 

IG Corporate New Issuance This Week
10/10-10/14
vs. Current
WTD – $19.855b
October 2016 vs. Current
MTD – $36.455b
Low-End Avg. $14.15b 140.32% $87.83b 41.51%
Midpoint Avg. $15.02b 132.19% $88.59b 41.15%
High-End Avg. $15.89b 124.95% $89.35b 40.80%
The Low $10b 198.55% $75b 48.61%
The High $20b 99.275% $125b 29.16%

 

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s a review of this week’s key primary market driver averages for IG Corporates only through Wednesday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/10
TUES.
10/11
WED.
10/12
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
AVERAGES
WEEK 9/12
New Issue Concessions Holiday 3.19 bps 2.00 bps 4.36 bps 2.71 bps 0.69 bps 4.66 bps
Oversubscription Rates Holiday 3.48x 2.80x 4.20x 3.52x 3.23x 3.47x
Tenors Holiday 11.33 yrs 3 yrs 12.16 yrs 10.51 yrs 9.36 yrs 11.28 yrs
Tranche Sizes Holiday $663mm $500mm $523mm $646mm $964mm $710mm

 

New Issues Priced

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

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+ 2.60% 11/01/2026 700 +110a +95a (+/-5) +90 +90 CITI/CS/JPM/UBS
CSX Corp. Baa1/BBB+ 3.80% 11/01/2046 800 +155a +140a (+/-5) +135 +135 CITI/CS/JPM/UBS
CSX Corp. Baa1/BBB+ 4.25% 11/01/2056 700 +200a +180a (+/-2) +178 +178 CITI/CS/JPM/UBS
Ecolab Inc. Baa1/A- 2.70% 11/01/2026 750 +130a +105a (+/-5) +100 +100 CITI/CS
Ecolab Inc. Baa1/A- 3.70% 11/01/2046 250 +165a +135a (+/-5) +125 +125 CITI/CS
Global Bank Corp. BBB-/BBB- 4.50% 10/20/2021 550 +mid 300s/+350a +337.5a (+/-12.5) +325 +325 CITI/DB/JPM
KEXIM Aa2/AA FRN 10/21/2019 750 3mL+equiv 3mL+equiv 3mL+46 3mL+46 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
KEXIM Aa2/AA 1.50% 10/21/2019 750 +80a +65a (+/-5) +60 +60 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
KEXIM Aa2/AA 1.875% 10/21/2021 300 +90a +75a (+/-5) +70 +70 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
KEXIM Aa2/AA 2.375% 4/21/2027 700 +100a +75a (+/-5) +70 +70 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
Toyota Motor Credit Corp. Aa3/AA- FRN 10/18/2019 500 3mL+equiv 3mL+equiv 3mL+44 3mL+44 BAML/RBC/SMBC/SG
Toyota Motor Credit Corp. Aa3/AA- 1.55% 10/18/2019 1,000 +low 70s/+72.5 +60a (+/-2) +58 +58 BAML/RBC/SMBC/SG
Toyota Motor Credit Corp. Aa3/AA- 2.25% 10/18/2023 500 +hi 80s/+87.5 +77a (+/-2) +75 +75 BAML/RBC/SMBC/SG

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Japan Int’l. Cooperation Agency A+/AA+ 2.125% 10/20/2026 500 N/A RG: MS+60a
MS+62a
MS+59 +42.9 BAML/BARC/DAIW
Kingdom of Sweden Aaa/AAA 1.125% 10/21/2019 3,000 MS+8a MS+7a MS+6 +20.45 BARC/GS/HSBC/SEC

 

Indexes and New Issue Volume (more…)

IG Corporate Debt: PepsiCo-Good AND Better For You; Mischler Comment
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.03.16- PepsiCo: Good and Better For You

 

Investment Grade New Issue Re-Cap – New Records, Negative Rates and a Blockbuster from Pepsi

Global Market Recap

IG Primary & Secondary Market Talking Points

The PepsiCo Inc. $4.5b 6-part Deal Dashboard

A Look at Socially-Responsible PepsiCo Inc.: Good and Better For You.

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 28th

IG Credit Spreads (by Rating & Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

In the limited time I had today to thumb through a very interesting Q3 report from friends and financial news reporters John Balassi and Michael Gambale of Thomson Reuters fame, the multi-billion dollar multinational mass media and information firm, I was taken by a couple talking points about Global New Issuance that you should find noteworthy:

o   Global Debt Capital Markets activity is up 27% to $5.5 trillion through Q3.

o   Q3 U.S. Investment Grade Corporate Debt is 9%

o   Global High Yield is down 21%

o   Government and Agency offerings rose 76%

o   Emerging Markets Debt is down 23%

o   Overall Debt Underwriting fees declined 9%

However, what’s more incredible is that we are witnessing an unprecedented surge in bonds the world over that are guaranteed to lose investors’ money if held to maturity given their negative yields.  In an article written by Bloomberg Editorial’s Phil Kuntz, the total face value of negative yielding corporate and sovereign debt in the “Bloomberg Barclays Global Aggregate Index of investment grade bonds jumped to $11.6 trillion as of September 30th, up 6.1% from the prior month……….less than one seventh of the world’s negative yielding debt is owed by businesses. Finance companies issued……almost 80% ….totaling $1.3 trillion!” The number includes debt one year and out.  Corporations account for 15% of the world’s negative debt while 85% is derived from governments.  That’s not good news folks.

This pie chart displays the drama in those numbers:

mischler corporate debt comment

 

So, what’s this got to with new issuance?  Everything because the place investors go to fill their portfolios is the safe haven of better rated IG corporate debt right here is our U.S. dollar-denominated primary markets.  In what continues to be a historically low rate environment, corporations have a wonderful window of opportunity before them to secure favorable funding for M&A, expansions, lower refi levels, you name.  What’s more, investors are attracted to the relative safe haven of these credits that do, in fact offer the best balance in our world in better managing risk exposure while securing a decent return, comparatively speaking.

 

That’s our segue into this evening’s IG DCM that owned the new issues leaderboards as 3 corporate issuers priced 11 tranches between them totaling $7.15b.  But the biggest deal of the day belonged to PepsiCo’s (NYSE:PEP) $4.5b 6-part Senior Notes transaction comprised of 3- and 5-year FXD/FRNs, 10s and 30s.  It also happens to be the Deal-of-the-Day as Mischler Financial, our nation’s oldest Service Disabled veteran broker dealer was more than honored to be named an active 1.00% Co-Manager and was showcased as one of two diversity co’s on today’s deal.  So, I invite you to join me in the relative value story of this deal and PepsiCo’s Diversity & Inclusion initiatives.

But first, here’s the global re-cap and a look at all today’s primary market talking points and issuance!

 

Global Market Recap

 

o   U.S. Treasuries – Better than expected ISM manufacturing hits the front end.

o   Stocks – U.S. stocks red (3:30pm). FTSE, Nikkei & HS rallied. Europe mostly red.

o   Economic – ISM manufacturing moved back over 50. Good news for hawks on the FOMC.

o   Currencies – USD outperformed the Euro, Pound & Yen. Pound had a very bad day.

o   Commodities – Crude oil closed higher while gold, copper, silver & wheat lost.

o   CDX IG: +0.50 to 75.63

o   CDX HY: +2.30 to 403.45

o   CDX EM: -0.65 to 233.06

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 11 IG Corporate-only new issues was 18.18 bps.
  • BAML’s IG Master Index was unchanged at +143.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.3b on Friday versus $15.8b Thursday and $13.3b the previous Thursday.
  • The 10-DMA stands at $16.2b.

 

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

 

IG Corporate New Issuance This Week
10/03-10/07
vs. Current
WTD – $7.15b
October 2016 vs. Current
MTD – $7.15b
Low-End Avg. $17.35b 41.21% $87.83b 8.14%
Midpoint Avg. $18.54b 38.57% $88.59b 8.07%
High-End Avg. $19.74b 36.22% $89.35b 8.00%
The Low $15b 47.67% $75b 9.53%
The High $26b 27.50% $125b 5.72%

 

The PepsiCo Inc. $4.5b 6-part Deal Dashboard

 

PEPSI Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
Comparable Bid
Pre-Announcement
NICs
(bps)
Trading at
the Break
+/-
(bps)
3yr FXD +55-60 +50a (+/-5) +45 +45 <12.5> PEP 1.50% ’19 T+35 (G+42)
Curve adjusted = flat
0 44/43 <1>
3yr FRN 3mL+equiv 3mL+equiv 3mL+27 3mL+27 <12.5> PEP 1.50% ’19 T+35 (G+42)
Curve adjusted = flat
0 3mL+26/24 <1>
5yr FXD +65-70 +60a (+/-5) +55 +55 <12.5> PEP 3.00% ’21 T+54 (G+55) 0 54/53 <1>
5yr FRN 3mL+equiv 3mL+equiv 3mL+53 3mL+53 <12.5> PEP 3.00% ’21 T+54 (G+55) 0 3mL+52/51 <1>
10yr +90-95 +80a (+/-5) +75 +75 <17.5> PEP 2.85% ’26 (T+67/G+71) +4 74/73 <1>
30yr +130-135 +120a (+/-5) +115 +115 <17.5> PEP 4.45% ’46 (T+112) +3 114/ <1>

 

………and here’s a look at final book sizes and over-subscription rates:

 

ETR Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr FXD 250mm 450m 1.8x
3yr FRN 750mm 1,950m 2.6x
5yr FXD 250mm 600mm 2.4x
5yr FRN 750mm 2,200m 2.93x
10yr 1,000m 3,250m 3.25x
30yr 1,500m 4mm 2.67x

 

Thank You’s Galore

 

Let’s see if you’ve been reading the “QC” with a simple test question – “Where does D&I start in corporate America?”  Correct good job!  The answer is it starts from the top down.  At PepsiCo, the world’s second largest food and beverage business that means India-born and naturalized American Chairperson and Chief Executive Officer Indra Nooyi.  It is from her office that Pepsi’s D&I initiative is carried, embraced and filtered through what is among the best-in-class Diversity and Inclusion mandates that we saw in action today, as evidenced by Mischler’s opportunity to demonstrate our capital markets capabilities and to work with PepsiCo’s Treasury/Funding Department.

Mischler sends off its five-star salute this evening to all of you with thanks not only for the privilege to be involved in your transaction, but for the active roll you enabled and supported us to participate with.  As a 1.00% active Co-Manager we were able to introduce nearly one quarter of a billion dollars in volume and 80 individual orders to Pepsi’s six-part order books.  By allocating Team Mischler we then see return business from our middle markets distribution network that executes Corporate, Agency, ABS/MBS, Rates and Municipal business among others.  The sustainable growth trajectory we are on, in turn, helps fund our “giving back and pay forward set asides”  so that we can apply our shared ethos to give back to our Veteran community.  This is a circular process, and it’s how we grow our business while giving back to veteran and service disabled veteran organizations – the root of our diversity certification.  So, thank you all at Team Pepsi from all of us here at Team Mischler for being great stewards for D&I and Veteran causes.

PepsiCo Inc debtA Look at Socially Responsible PepsiCo Inc.: Good and Better For You

But let me tell you a bit more about Pepsi D&I leadership roles. Pepsi’s Supplier Diversity mandate began over 30 years ago at the company and its annual spend is approximately $1.3 billion!  Also, internally, PepsiCo recognizes individuals within the company who are active supporters of diversity and inclusion in the workplace.  Two such honors are the Harvey C. Russell Inclusion Award to honor employees for their outstanding achievements in diversity and inclusion.  Most recently, 76 associates from Pepsi’s Global business were awarded.  Additionally, Pepsi offers the Global Steve Reinemund Diversity and Inclusion Leadership Award recognizing senior Pepsi staff members who model exemplary leadership and a commitment to diversity and inclusion.

Which brings me to PepsiCo’s incredible commitment to hire U.S. military veterans, an initiative that earned it a top 25 ranking for the second consecutive year in the G.I. Jobs ranking of Top 100 Military Friendly Employers in 2013.  Pepsi is the lone food and beverage company in the top 50 companies in that category.  Also in 2013, Pepsi’s online jobs clearinghouse named, Bright.com, secured the top ranking for Pepsi among Fortune 50 companies in “most veterans hired” as a percentage of its workforce.  How awesome is that folks?  For four consecutive years Pepsi’s recycling program provided $1.5million to support Entrepreneurship Bootcamp for Veterans or “EBV” that helps veterans build their own businesses to pursue their dreams. Those are just some of the ways Pepsi is giving back.

They gave the nation’s oldest SDVBE a chance again today to prove our muster and so, it’s our job and expectation to deliver the goods and in addition to extol the virtues and tell the stories of what Pepsi does to make this world a better, more socially responsible place; Pepsi is Good and Better For You!

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

…..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 four week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/26
TUES.
9/27
WED.
9/28
TH.
9/29
FRI.
9.30
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
AVERAGES
WEEK 9/12
AVERAGES
WEEK 9/05
New Issue Concessions 2.50 bps N/A 5.69 bps 0 bps/flat N/A 2.71 bps 0.69 bps 4.66 bps 1.30 bps
Oversubscription Rates 3.71x N/.A 2.66x 4.12x N/A 3.52x 3.23x 3.47x 3.23x
Tenors 13.12 yrs 30 yrs 7.71 yrs 7.29 yrs N/A 10.51 yrs 9.36 yrs 11.28 yrs 9.42 yrs
Tranche Sizes $509mm $150mm $862mm $681mm N/A $646mm $964mm $710mm $719mm

 

New Issues Priced

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

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
General Motors Finc’l. Co. BBB-/BBB- FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+127 3mL+127 BAML/BNPP/CITI/LLOY/MIZ
General Motors Finc’l. Co. BBB-/BBB- 2.35% 10/04/2019 750 +155a +145 the # +145 +145 BAML/BNPP/CITI/LLOY/MIZ
General Motors Finc’l. Co. BBB-/BBB- 4.00% 10/06/2026 750 +260a +245a (+/-5) +240 +240 BAML/BNPP/CITI/LLOY/MIZ
PepsiCo. Inc. A1/A FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+27 3mL+27 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 1.35% 10/04/2019 750 +55-60 +50a (+/-5) +45 +45 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A FRN 10/06/2021 250 3mL+equiv 3mL+equiv 3mL+53 3mL+53 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 1.70% 10/06/2021 750 +65-70 +60a (+/-5) +55 +55 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 2.375% 10/06/2026 1,000 +90-95 +80a (+/-5) +75 +75 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 3.45% 10/06/2046 1,500 +130-135 +120a (+/-5) +115 +115 BAML/CITI/GS/MIZ
Xylem Inc. Baa2/BBB 3.25% 11/01/2026 500 +200a +170a (+/-5) +165 +165 CITI/WFS(a) JPM (p)
Xylem Inc. Baa2/BBB 4.375% 11/01/2046 400 +250a +215a (+/-5) +210 +210 CITI/WFS(a) JPM (p)

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.38 1.38 0
IG27 75.132 75.232 0.10
HV27 176.145 175.005 <1.14>
VIX 13.29 13.57 0.28
S&P 2,168 2,161 <7>
DOW 18,308 18,253 <55>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $7.15 bn DAY: $7.15 bn
WTD: $7.15 bn WTD: $7.15 bn
MTD: $7.15 bn MTD: $7.15 bn
YTD: $1,081.886 bn YTD: $1,366.37 bn

 

Lipper Report/Fund Flows – Week ending September 28th

     

  • For the week ended September 28th, Lipper U.S. Fund Flows reported an inflow of $2.334b into Corporate Investment Grade Funds (2016 YTD net inflow of $37.925b) and a net inflow of $2.011b into High Yield Funds (2016 YTD net inflow of $9.444b).
  • Over the same period, Lipper reported a net inflow of $480.7m into Loan Participation Funds (2016 YTD net outflow of $3.319b).
  • Emerging Market debt funds reported a net inflow of $209.7m (2016 YTD inflow of $6.549b).

 

IG Credit Spreads by Rating

The 10-day IG spread performance vs. the T10 across the ratings spectrum and how IG compared versus high yield:

Spreads across the four IG asset classes are an average 33.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 9/30 9/29 9/28 9/27 9/26 9/23 9/22 9/21 9/20 9/19 1-Day Change 10-Day Trend PC
low
IG Avg. 143 143 143 143 142 141 141 142 142 142 0 +1 106
“AAA” 84 84 84 84 83 82 82 83 83 83 0 +1 50
“AA” 87 87 87 86 86 85 85 86 85 85 0 +2 63
“A” 113 114 114 114 113 112 112 113 113 113 <1> 0 81
“BBB” 185 185 185 185 184 183 183 185 184 185 0 0 142
IG vs. HY 354 366 371 375 374 369 368 380 382 383 <12> <29> 228

IG Credit Spreads by Industry

…….and a snapshot of the major investment grade sector credit spreads for the past ten sessions:

Spreads across the major industry sectors are an average 38.95 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 9/30 9/29 9/28 9/27 9/26 9/23 9/22 9/21 9/20 9/19 1-Day Change 10-Day Trend PC
low
Automotive 122 121 121 121 119 119 119 121 120 120 +1 +2 67
Banking 133 136 134 134 131 131 131 133 132 133 <3> 0 98
Basic Industry 186 187 187 187 187 186 186 188 189 189 <1> <3> 143
Cap Goods 106 107 105 106 105 104 104 104 104 104 <1> +2 84
Cons. Prod. 111 111 111 112 110 110 110 111 111 111 0 0 85
Energy 191 191 192 193 193 191 191 192 192 192 0 <1> 133
Financials 169 167 167 167 166 165 165 167 167 167 +2 +2 97
Healthcare 120 119 119 119 118 118 118 119 118 118 +1 +2 83
Industrials 144 144 144 145 143 143 143 144 144 144 0 0 109
Insurance 162 163 163 163 163 162 162 163 162 163 <1> <1> 120
Leisure 140 141 140 141 141 141 142 142 142 142 <1> <2> 115
Media 165 164 165 165 164 164 164 166 165 165 +1 0 113
Real Estate 153 151 151 151 151 151 151 151 151 150 +2 +3 112
Retail 119 119 119 119 118 118 119 120 119 120 0 <1> 92
Services 133 136 135 135 134 134 135 135 135 135 <3> <2> 120
Technology 121 124 124 124 123 123 123 124 124 124 <3> <3> 76
Telecom 163 165 165 165 162 162 162 164 164 164 <2> <1> 122
Transportation 141 138 138 139 139 138 139 139 139 139 +3 +2 109
Utility 141 142 141 141 140 140 140 141 140 141 <1> 0 104

  (more…)

IG Corporate Debt Issuance-7th Busiest Month; Entergy Louisiana Snapshot
September 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 09.28.16 –Entergy Lousiana; Investment Grade Debt Issuance: Sep is 7th Busiest Month Ever

 

QC Quote of The Day: “Demand for IG corporate credit and particularly the defensive nature of the utility sector is resounding..”

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Deal-of-the-Day: Entergy Louisiana, LLC

Entergy Louisiana, LLC Final Pricing Details

A Brief Look at Entergy’s Call to Diversity and Social Responsibility

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 21st

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 European equities were all up across the boards this morning and Deutsche Bank stock (NYSE:DB) rallied back a bit despite “counter party risk” being a topic of discussion in some circles.   September has witnessed market volatility swing 10yr Treasury yields within a very wide 20 bp band from 1.72% to 1.49%.  Driving that volatility are the recent policy decisions and comments from the Central Banks, namely the FOMC, ECB, BOE and BOJ.  Oil markets, highly correlated to the month’s wild equity swings we’ve witnessed hasn’t helped stability at all.  Still, we’ve wound up pricing $136b in new IG Corporate issuance and $161b including SSA.  Heap indigestion on top of that and the fact that corporates are averaging anywhere from 0-10 bps NICs with utilities averaging 0-5 bp NICs and it illustrates just how resilient and amazing this primary market month has been.  All of the recent market volatility elevated the importance of this morning’s Durable Goods Number forecast to be <1.5%> against the 4.4% prior number.  It delivered a 0.00% and primary markets were off to the races given the stable back drop.

Having said all that, it was not a crowded day for issuance today creating a nice opportunity for several companies to print new deals. 5 IG Corporate issuers owned today’s IG primary markets pricing 8 tranches between them totaling $6.90b.  We have now priced 54% of this week’s syndicate midpoint average forecast for IG Corporates or $12.65b vs. $23.30b.  MTD we’re now over 23% above the syndicate estimate or $143.418b vs. $116.02b.  September all-in (IG Corporate plus SSA) issuance is now $168b which ranks as the 7th busiest month on record with two more days remaining! It’s pretty safe to say that September will finish as the second busiest month of 2016.

As Team Mischler was an active 2.50% Co-Manager on today’s Entergy Louisiana, LLC $400mm 10-year Collateral Trust Mortgage Bond new issue, it was the clear winner to be crowned as the session’s Deal-of-the-Day!  For the deal drill-down please scroll just below. Entergy Louisiana is a sub of Entergy Corp., NYSE: ETR

 

Global Market Recap

 

  • S. Treasuries: Small losses across curve. First all-out losing session in the last 11.
  • Stocks – U.S. & Europe stocks rallied. Nikkei traded poorly & China small losses.
  • Economic – Durables were better than expected but nothing to get excited about.
  • Currencies – The CAD rallied with higher crude oil. The USD outperformed the Yen.
  • Commodities – Big rally for crude oil as OPEC agreed on a production cut (no details given).
  • CDX IG: -2.0 to 75.42
  • CDX HY: -9.68 to 404.28
  • CDX EM: -0.53 to 234.0

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 8 IG Corporate-only new issues was 18.875 bps.
  • BAML’s IG Master Index widened 1 bp to +143 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Tuesday versus $12.8b Monday and $19.1b the previous Tuesday.
  • The 10-DMA stands at $15.8b.

 

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

 

IG Corporate New Issuance This Week
9/26-9/30
vs. Current
WTD – $12.65b
September 2016 vs. Current
MTD – $143.418b
Low-End Avg. $22.13b 57.16% $115.45b 124.23%
Midpoint Avg. $23.30b 54.29% $116.02b 123.61%
High-End Avg. $24.48b 51.67% $116.59b 123.01%
The Low $15b 84.33% $80b 179.27%
The High $36b 35.14% $150b 95.61%

 

Deal-of-the-Day: Entergy Louisiana, LLC

entergy louisianaThe fairly quiet and stable day made it a good one for the few issuers who had the foresight to take advantage of an uncrowded new issue calendar, to print new deals.  One of those astute Treasury/Funding teams was Entergy that announced and priced a $400mm “will not grow” 10-year Collateral Trust Mortgage Bond for Entergy Louisiana, LLC through joint leads BNP Paribas, Goldman Sachs, KeyBanc, SMBC Nikko and U.S. Bancorp.  Co-Managers were Mischler Financial Group, Inc., Regions, Toronto Dominion and Williams Capital.

The deal announced in the early morning session post the 8:30 economic data releases as a $400mm “will not grow” CTMB new issue carrying initial price thoughts in the T+110 “area” before ratcheting in nicely to T+95 “area” guidance with “area” defined as +/-5 bps. It launched at the tightest side of guidance to launch and price at T+90.  That’s a full 20 bps of spread compression wherein the average IG Corporate contraction from IPTs to the launch this month has been more like 15 bps. A great level for the issuer, leads and Co-Managers to have achieved together.

Relative value was straight line on today’s new 10-year.  We looked at the outstanding Entergy Arkansas (A2/A) 3.50% due 4/01/2026 that was T+86 (G+90) pre-announcement, and the Entergy Louisiana 3.25% due 4/01/2028 that was T+103 bid or G+98.  Since the latter is a 12-year I adjusted 5 bps for the 12s/10s curve getting me to G+93. Taking an average of those two comps equates to a G+91.5 inferring that today’s new issue priced with a negative 1.5 bp NIC or <1.5> bp concession at today’s final T+90 pricing spread level.

I know I sound like a broken record, but really folks, demand for IG corporate credit and particularly the defensive nature of the utility sector is resounding.  Today’s order book topped out at $1.6b before the tighter launch level saw several tier I accounts drop their orders. The final order book held in extremely well without them finishing at $1.1b for a still very strong 2.75x bid-to-cover rate.  I am particularly pleased and even more proud to say that our tier II and III incremental/tertiary middle markets accounts did not drop from the book at all except for one limit order.  It was the single most satisfying outcome on a new issue since reinventing myself in the diversity space nearly 12 years ago.  A lot of that satisfaction comes from working with an issuer like Entergy and a lead left like Goldman Sachs who believe in, embrace and WILL reward the value-added proposition.

What Does True “Inclusion” Mean on Deal Day?
It’s all about involvement from start to finish.  Of critical importance is Entergy’s consistent mandate to introduce true best practices throughout the deal day issuance process,  and to include their co-managers on all calls pertaining to the deal as follows:

 

  • Auditor Due Diligence Call
  • Organizational and Market Update Call
  • Business Due Diligence Call
  • Go-No Go Call
  • Guidance Call
  • Launch Call
  • Pre-Pricing Due Diligence Call
  • Pricing Call

 

That right there is called getting us involved.  We feel a part of the deal in that we’re immediately informed as the call takes place.  We sound more informed in discussions with accounts and it just makes for a much more professional and complete approach for Co-Managers.

The Entergy Louisiana, LLC Deal Dashboard

 

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
ETR 10yr +110a +95a (+/-5) +90 +90 <20> bps <1.5> 89/87 <1>

 

………and here’s a look at final book sizes and the oversubscription rate:

 

ETR Issue Tranche Size Book at the Top Final Book
Size
Bid-to-Cover
Rate
10yr $400mm $1.6b $1.1b 2.75x

 

A Brief Look at Entergy’s Call to Diversity and Social Responsibility

 

As the nation’s oldest Service Disabled Veteran broker dealer you all know that wear our SDVBE certification/dedication proudly. When the opportunities knock we expect to be the best there is at providing value to our customers (issuers, syndicate teams and accounts).  I extol the virtues of our give-back component at every opportunity I get right here in the “QC” and all of Mischler’s employees embraces our veteran causes with one common, shared ethos.

It follows then that when we are granted opportunities to serve on transactions, we extol those same virtues held near and dear to the Issuers who we serve.  So please give a bit of time to the below.  There’s so much more to what Entergy and its wholly-owned subsidiaries do for diversity and social responsibility, but I thought I’d highlight some recent recognition they’ve received in 2016.  True to their corporate slogan it’s about “The Power of People.” It’s nice for bankers to know how to bank and structure deals, but the below is also helpful for them to better understand the corporate culture behind the issuers whose mandates they seek to secure. It brings the entire process full circle and makes the endeavor more than just about the money!

You should all know that Entergy has once again been named to the Dow Jones Sustainability North America Index. The index measures performance in economic, environmental and social dimensions against industry peers around the globe. Entergy was one of only four U.S. electric utilities named to the index. The company achieved perfect scores of 100 in the focus areas of Corporate Citizenship and Philanthropy, Biodiversity, Climate Strategy and Water-Related Risks. This is the 15th consecutive year Entergy has been included on either the World or North America index or both.

Corporate Responsibility Magazine’s 2016 list of the 100 Best Corporate Citizens

Entergy is also ranked 18th on Corporate Responsibility Magazine’s 2016 list of the 100 Best Corporate Citizens. Entergy was the highest-ranking electric utility on the list. In the category of philanthropy and community support, Entergy was ranked number 4. The list recognizes companies demonstrating transparency and accountability in highly competitive industries. This is the seventh time Entergy has been named to the list.

 

Cogent Reports – 2016 Most Trusted Utility Brand

 

During 2016, Cogent Reports conducted online surveys with more than 50,000 customers of the country’s 129 largest utility companies. Results placed Entergy as one of the top utilities nationwide in brand trust. Cogent Reports attributes the high score to Entergy’s focus on charitable giving, community volunteerism and support of low-income customers.

Saving the best for last, you all know Mischler is the nation’s Oldest Service Disabled Veteran broker dealer and our commitment to giving back to veteran causes is a shared ethos among all Team Mischler employees.  We honor Entergy for winning the 2016 Patria Award and send our heartfelt thanks and Mischler five-star salute to all of you in Treasury/Funding for being part of the Entergy’s culture and commitment to giving back to our nation’s veterans. 

 

Pro Patria Award

In 2016, Entergy won the 2016 Pro Patria Award from the U.S. Department of Defense’s Employer Support of the Guard and Reserve for promoting supportive work environments for members of the National Guard and Reserve. And among 2,400 nominees, Entergy was also named one of the 30 finalists for the 2016 Secretary of Defense Employer Support Freedom Award, the highest recognition given by the Department of Defense’s Employer Support of the Guard and Reserve.

So, I think it’s clear to see that Entergy is not only constantly moving the needle forward for diversity and inclusion in our IG dollar Debt Capital Markets but it is ingrained in ETR’s corporate culture.  This evening’s “QC” lays out a picture perfect illustration of what it means when a company Entergy consistently focuses work on growing and expanding diversity and social responsibility.  When an issuer gives Mischler an opportunity to grow sustainably, this daily owes it to that Company to extol the virtues of all the great things it is doing toward effective and landmark Corporate Governance. We take it seriously and the companies we serve do as well.  That is a story you will always find here in the “QC.”

Issuers do care and are looking for diversity co-managers who consistently deliver quality orders to their transactions in order to capture new investors to their profile.  I also know that when the world’s largest financial institutions lend to and bank the U.S. Fortune 500, issuers care a lot about who does it right, who does it wrong, and who doesn’t do it all.  So, maybe think about that and dedicate a section of your pitch books to diversity and social responsibility.  In our highly competitive financial services industry it just might be the difference between a mandate or not; an active role or a passive one; a role or none at all.  I am telling you this because the guy-in-the-corner really is in your corner.  It’s all helpful advice.
And of course, thanks to all of our tier II and III high quality middle markets accounts  – you all know who you are – yet I can’t mention you by name.  You are all great business partners, not to mention those who are longtime friends outside the office.  You’ve been there from the get go and as I always say, “it’s about the quality of the order” and in that regard, “you’re all BlackRock in our book.”  Thank you!


Entergy Louisiana, LLC Final Pricing Details

$400mm ETR 2.40% CTMBs due 9/01/2026 @ $99.577 to yield 2.448% or T+90. MW+15

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

Have a great evening!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate
(more…)

Corporate Bond Issuers Back Up the Trucks In Advance of Delivering New Deals
September 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 09.22.16- Corporate Bond Issuers Back Up The Trucks in Advance of Delivering Big Tranche(s) of Fresh Paper

 

Investment Grade New Issue Re-Cap – Backing up the Trucks

Global Market Recap

Deal-of-the Day: All That Glitters IS Gold..Man Sachs

Goldman Sachs Raising the Bar for Diversity and Inclusion Again, and Again
IG Primary & Secondary Market Talking Points

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

corporate bond issuersLast evening at 9:13PM I closed my “QC” commentary with this: “Folks, Q3 is about over.  You hear that sound?   That’s the sound of trucks?  They’re backing up to print between now and Election Day – BIG TIME. 12 IG issuers are in the pipeline with a whole lot of M&A deals getting closer.”  Well, today did not disappoint. Treasuries were better bid, yields fell, equity markets rallied the world over thanks to yesterday’s FOMC and BoJ dovishishness as issuers took note to quickly back up their trucks to print.  All told beforehand right here in the little ole “QC”.  Just in case any of you aren’t sure what I meant when I say “back up the truck” perhaps this visual might be of assistance because it’s what I mean when I say that:

All right, now we’re understand each other, let’s get to today!

Today’s IG dollar DCM saw those trucks line up and take charge once again featuring 9 IG Corporate issuers across 20 tranches totaling $17.05b.  Adding in one lone SSA visitor to the mix, the all-in IG day totals were 10 issuers, 21 tranches and $18.05b.

What’s more is that we blew right through the IG Corporate syndicate midpoint average forecast calling for $30.38b this week ….to the tune of over 25% having priced $38.013bMTD it’s more of the same people.  Syndicate estimates expected a September total of $116.02b and we’re now over 12% above that amount sitting pretty at  $130.218b. This week isn’t over and we have yet another full week left next week.  The record for September IG Corporate only issuance is $153.32b set in 2013.

Don’t forget that all-in IG issuance including SSA volume is now at $150.568.  The September all-in record, also set in 2013, is $192.14b. That’s’ $41.572b away.

12 deals remain in the pipeline while 14 M&A deals are on the M&A docket for some point before year end or early 2017…..and those are ones I know about!

………..What do you say?  Are we all up for shattering yet another record?  That’s the spirit!  I think so too!  Issuers line up, ready, aim, FIRE!

Today’s largest transaction was Air Liquide’s $4.5b 5-part Senior Unsecured Notes transaction with proceeds used to repay a portion of the bridge loan credit facility associated with its acquisition of Airgas that completed on May 23rd among others.  However, that’s not to say there weren’t other large new issues.  Team Mischler’s “Deal-of-the-Day” belongs to The Goldman Sachs Group, Inc. $3.5b two-part 5NC4 FXD/FRN for which we were honored to be a part of.

 

Global Market Recap

 

o   U.S. Treasuries – Solid session for USTs. Tremendous session for the long end in Europe.

o   Stocks – Stocks were led higher by NASDAQ. Strong in Europe & Asia closed higher.

o   Economic – U.S. data was mixed. Data in China & France was positive.

o   Currencies – USD lost ground vs. 4 of the Big 5. The Yen was the lone loser.

o   Commodities – Back to back strong days for the commodity market.

o   CDX IG: -2.49 to 76.01

o   CDX HY: -9.50 to 381.91

o   CDX EM: -4.62 to 227.04

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

-Tony Farren

 

Deal-of-the Day: All That Glitters IS Gold..man Sachs

 

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5NC4 FRN 3mL+equiv 3mL+equiv 3mL+117 3mL+117 <20> bps 3.5 112/110 <3>
5NC4 FXD +140a +125a (+/-5) +120 +120 <20> bps 3.5 117/115 <3>

Mischler Financial is always privileged and honored to be named an active Co-Manager for The Goldman Sachs Group, Inc.  Today we served as a 0.5% active Co-Manager on today’s $3.5b two-part 5NC4 FXD/FRN Senior Unsecured Global Notes new issue. Hop on into the “QC” and let me show you around the new dashboard for my relative value study.

So relative value, as we all know is part art and part science but today’s fair value study is much more creative shall we say.  Always careful to tell the right story in the best way I can, this evening’s deal review will walk you through the “logic” art and science.

J.P. Morgan issued a 5NC4 back in August that many concluded priced about 12 bps behind where a bullet would issue.  What happened at the break, however, changed the logic as it tightened 10 bps points.  Given the same structure, let’s look at today’s Goldman deal in as straight-line approach as we can.  Let’s compare it to the outstanding GS 5-year – the 2.625% due 4/25/2021  – that was G+114 at yesterday’s close. That implies today’s new issue that priced at T+120 came with a 6 bp concession. The trick is valuing the 1-year optionality.  What is that worth?  Additionally, the same structured JPM 2.625% due 8/15/2021 (A3/A-) was also G+114 this morning pre-announcement.  Goldman’s deal is A3/NA) so, factoring let’s say a nickel or 5 bps for the S&P ratings differential one could argue that fair value on today’s new print is +119 or 1 bp NIC.  I could also take an average of the two approaches and call it 3.5 bps NIC.  One thing is for sure, now that both JPM and GS have issued this structure, we’ll likely see more of its kind ahead.  I can also tell you that the session closed with Goldman’s new 5NC4 fixed rate tranche framed in a 117/115 market or, not coincidentally, 3 bps tighter and effectively absorbing the 3 bps NIC.  The FRNs traded at 3mL+112/ or 5 tighter on the bid side.  All good stuff.

When markets re-open, like they did today, post FOMC and BOJ doldrums, we all like to see big banks pave the way by leading the way and setting the tone. Goldman did just that, but it didn’t stop there.

………and here’s a look at final book sizes and the oversubscription rate:

 

GS Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
FRN 1,250 $2.5b 2x
FXD 2,250 $8b 3.56x


Goldman Sachs Raising the Bar for Diversity and Inclusion Again, and Again

I’m actually having difficulty finding new creative ways to thank the “Fine” crew over at the firm with the Midas touch.  Goldman Sachs’ D&I private eye is Jonny Fine.  He’s nurturing an entire syndicate culture under his watch which is the mandate from the inner sanctum at Goldman Sachs.  Today I had no fewer than 5 hands on deck with me for questions, answers, updates, posts, bulletins, announcements, color…..you name it, they are always there for us on deal day or not, the nation’s oldest SDVBE.  There are just a couple of firms out there that shape their D&I promotions with actionable results on deal day. Goldman is tops. They get it by reviewing and scrutinizing our distribution capabilities. I/we learned years ago to vet only the highest caliber middle market accounts.  It’s a lot of work; it’s a lot of late nights on the DCM front.  Without divulging too much, word-of-mouth as to what we do here at Mischler has resulted in top 25 issuers asking us to put together non-deal roadshows for them. Trust me they are large well-known issuers to all of you.  Other tier I issuers, if you will, have been so impressed with our distribution that they are forming partnerships with us to bring our middle markets accounts to sell “other” products to them, away from new issues.  All because they are hearing about our quality investor base.

Firms like Goldman Sachs and Citigroup, to name another are demanding and they expect results. However, when delivered they help us become the best we can be. They then take us to the next level resulting in the aforementioned opportunities. We take what we do seriously and we WILL NEVER take it for granted. When we are rewarded for that hard work, we apportion some of that toward our give back initiatives to those who served, those who sacrificed, and/or their families and children.  It’s all very circular and one feeds the other. We grow our business; we help wounded veterans, we hire and train veterans returning home after active duty. Case in point: Jonathan Herrick another resident former US Marine who personifies what we’re trying to accomplish here in the bigger picture. We train them to keep them here and make them part of our corporate culture. Quality middle market accounts, such as those MFG client investment managers who count on Mischler’s symbiotic relationships with the 6-pack lead underwriters, like those on today’s Goldman Sachs transaction, represent the best incremental distribution network on the Street.  I’d put these institutional accounts up against anyone else’s and call them the best.  They are here throughout the U.S., Europe, Asia. They are banks, insurance companies, re-insurers, they manage endowments and foundations, they are pension funds, they are RIAs, commercial banks, private wealth managers, SFOs, MFOs, captive insurance, etc.  Thanks to firms like Goldman Sachs among others, we reward their high quality patronage and that’s when they begin transacting treasuries, or equities; ABS and MBS business, agencies and municipals both primary and secondary.

All of it began with a soldier, it grew further thanks to earning a minority certification, and as it flourished it’s been supported by a great operations/back office unit that is as buttoned up as our own front line.  Capital continues to grow with each and every DCM opportunity and we do have award winning debt capital markets coverage and fabulous distribution. So, we get it.  And we really do thank Team Goldman.  Our success is a direct result of what Team Goldman Sachs has done to help us become the best we can be. That is genuine and is delivered from every single employee here to all of you at GS.

Thank you Jonny Fine, James White, Jessica “Jess” Stern and the Fine folks at Team GS Syndicate from Tony Shan to Matt Jackson – you guys are the best, and today’s two new additions Elizabeth Plunkett and Jason Ghilarducci.  The two are learning from the best in the business at 200 West Street.  Leave it on the floor every night and be proud that you’re not only at a great firm,  but you are all part of doing amazing things for social responsibility while working on Wall Street. That IS something to brag about.

IG Primary & Secondary Market Talking Points

 

  • Arch Capital Group Ltd., upsized today’s $25 par PerpNC5 non-cumulative preferred, Series “E” transaction to $450mm from $250mm at the launch and at the tightest side of guidance.
  • For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 20 IG Corporate-only new issues was 22.13 bps.
  • BAML’s IG Master Index was unchanged at +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +139.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.3b on Wednesday versus $19.1b Tuesday and $17b the previous Wednesday.
  • The 10-DMA stands at $15.4b.

 

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

 

Have a great evening!
Ron Quigley, Managing Director, Head of Fixed Income Syndicate (more…)

Investment Grade Debt Issuance-Full Steam Ahead
August 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 08.08.16-Investment Grade Issuance – Not a “Sleepy Summer Monday”; $11bil Floated

 

Investment Grade New Issue Re-Cap – “It’s Just Another Manic Massive Monday!”

Global Market Recap

IG Primary & Secondary Market Talking Points

CenterPoint Energy Deal Drill Down: A Case Study in Fortune Co. Diversity & Inclusion Goals

Ford Motor Credit Corp: Banking on the Little Engine That Can and Does

Mischler’s “Give Back” Component

New Issues Priced

Lipper Report/Fund Flows

IG Secondary Market Trade Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

Last week it was the $19.75 b 7-part Microsoft deal, today it was a slew of issuers’ – 13 to be exact – who priced 19 tranches between them totaling $11.80b. UMS added a $2.75b two-part in the SSA space to bring the all-in IG day total to 14 issuers, 21 tranches $14.55bn.  We have now priced 51% of this week’s syndicate midpoint average estimate for IG Corporates after just one session or $11.8b vs. $22.8b.  What’s more is we priced just over 99% of the forecast for all of August or $60.75b vs. $61.13b.

But of all the deals that priced today, CenterPoint Energy Houston Electric, LLC and Ford Motor Credit Co. LLC are the deals of the day because Mischler Financial Group, Inc. was involved in both.  Let’s take them in alphabetical order and start with CenterPoint Energy Houston Electric, LLC. But first here’s a look at the Global Recap –

 

Global Market Recap

 

  • U.S. Treasuries – Mixed & little changed but a strong bounce off the morning low prices.
  • Overseas Bonds – JGB’s sold off, Bunds basically unchanged & Gilts rallied (record low yields)
  • 3mth Libor – First trade over 0.80% since 5/15/09 (0.80650%).
  • Stocks – S&P’s & NASDAQ opened at all-time highs but rolled over.
  • Overseas Stocks – Europe, Japan, Hong Kong & China rallied.
  • Economic – Fed’s labor market conditions index was the strongest YTD.
  • Europe – Weak data in China but stronger data in Japan & Germany.
  • Currencies – U.S. better vs. PND/Yen, little changed vs. Euro/AUD & weaker vs. AUD.
  • Commodities – Crude rallied because OPEC said so (wish everything was that easy!).
  • CDX IG: +0.65 to 71.37
  • CDX HY: -0.02 to 392.36
  • CDX EM: -5.37 to 241.56

*CDX levels are as of the 3PM ET UST close.

-Tony Farren


IG Primary & Secondary Market Talking Points

 

  • HCA Inc. upsized today’s 1srt Lien Senior Secured notes new issue to $1.2bn from $1bn.
  • CubeSmart LP increased today’s 10-year Senior Unsecured Notes new issue to $300mm from $250mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 19 IG Corporate new issue was 12.53 bps.
  • BAML’s IG Master Index tightened 2 bps to +149 versus +151.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 12 bps to +191 versus +203.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.6b on Friday versus $16.4b Thursday and $13.9b the previous Friday.

CenterPoint Energy Deal Drill Down

 centerpoint-energy

Firm market tone carried over from last week so today’s early back-drop pointed toward an unquestionable “go” on the morning call with the issuer, CenterPoint Energy Houston Electric, LLC.  Dow futures pointed to a +25 opening with the IG index 1.25 bps tighter, a CT10-year at 1.587% and a nice pop for oil. Last week’s Dominion prints were 3 to 5 bps tighter and last Friday’s Southwestern Public Service 30-year was 1 bp tighter as well.   The recommendation was clearly to go ahead with today’s new CNP 10-year GMBs.

Price evolution started with the announcement of a CenterPoint Energy Houston’s $300mm “will not grow” 10-year General Mortgage Bond new issue due 9/01/2026 with IPTs in the T+100 “area.”  Additionally, on the “Go/No Go” call this morning, CFO Bill Rodgers announced that CNP had no interest in turning itself into a REIT which opened the doors for dozens of major institutional investors to fly into today’s deal.  The spread level reeled in much tighter to T+85a guidance level with “area” defined as +/-2.  The deal launched and priced at the tightest side of guidance or T+83. 

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing of today’s deal. 

CNP Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
10yr T+100a  +85a (+/-2) +83 +83 <17> bps <5> 80/78 <3>

 

………and here’s a look at final book sizes and the oversubscription rate:

 

CNP Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
10yr $300mm $1bn + 3.33x

 

CenterPoint Energy Houston Fair Value Study

 

  • In terms of relative value leads pointed to the outstanding CNP 30-year or the 4.50% due 4/01/2044 that was T+118 late Friday.  A nice large block traded at that level late last Friday.  With the 10s/30s curve worth 30 bps that lands fair value on today’s new 10-year at T+88 versus today’s T+83 final spread level for a negative 5 bps concession! Market tone has been really strong of late and the issuer was all over the leads and vice versa to capitalize on timing the transaction for this morning with the caveat that it be priced by 1:30 ahead of all the potential visitors to the session’s IG DCM.  Syndicate desks all agreed this week’s calendar would be front-loaded. Sure enough CNP was the first deal to price today at 1:30.  What’s more CFO Bill Rodgers announced on this morning’s “Go/No Go” call that CNP had decided not to pursue becoming a REIT.  With that resolved and off the table, all CNP spreads reacted by tightening. It all made for a perfect environment in which to price CNP’s new 10-year GMB.
  • Paper was framed in an 80/78 market after being freed to trade or 3 bps tighter on the bid side.  Truly a phenomenal transaction.

This is what makes companies happy, Public Utility Commissions happy, rate payers happy – all while creating a more meaningful and value-added proposition for social responsibility. There’s only everything right and nothing wrong with that. Congrats all around.

 

CenterPoint Energy Houston Electric LLC – Final Pricing

CNP $300mm 2.40% due 9/01/2026 @ $99.884 to yield 2.413% or T+83. MW+15

 

Diversity & Inclusion at the Heart of CNP

Let me begin by saying this is NOT, repeat NOT a utility new issue deal review and D&I study for the sake of saying thank you.  Rather this is a piece to illustrate what it is when a utility company, or any company for that matter in Corporate America does everything right in creating a formidable and lasting Diversity and Inclusion mandate. I’ll point the differences and add-ons that make today’s CenterPoint Energy Houston 10-year new issue another in a long list of issuers who are making a concerted effort to bring genuine differentiation to their D&I program versus others.  It also serves to raise the bar for D&I in our IG dollar DCM for ALL issuers.  That is the best way I can thank CNP for today’s opportunity in which Mischler was invited to demonstrate our capital markets capabilities, and on a larger scale, it is what this daily is meant for – to show time and time again the good things that corporate America is doing for social responsibility by creating unique diversity programs that start from the top down, permeating a company’s corporate DNA.

First I’d like to start way back when Bill “Buck” Rogers, a West Point grad was at American Water when my CEO, Dean Chamberlain and I visited him in Southern New Jersey.  He had his entire Treasury/Funding team in a conference room.  He shared stories of West Point and when he was a senior utility banker at Merrill Lynch.  He said, “I like your newsletter.  I think it’s very good.  We’re thinking of embarking on our first D&I transaction and I want to do something different, something lasting, something meaningful.  I want you to think if you were the CFO of this company why a D&I mandate is productive and useful? How is it additive? Why do we want new investors to our program? Why would a Public Service Commission care?  What’s it say about the Company and who would you use and why?  He then said, “I have my own ideas but I’d like you to tell us in your words!”

Well, I must say, that’s why I call a golden opportunity.  I touched upon all his points and a few months later AWK issued its first D&I transaction. Lo and behold all the minority firms I recommended were vetted by the Company, among others and the four firms, including Mischler, served as Co-Managers.  It was a tremendous success for AWK.

At this point you’re probably wondering to yourselves, “but today’s deal is CNP not AWK” what’s up with the guy-in-the-corner?”  Well, for one thing Bill Rogers is now CFO at CenterPoint Energy.  Among the first things he and his Treasury/Funding team tackled was to construct a landmark D&I initiative that resulted in an annual banker’s meeting in Houston that included not only their bulge bracket and loan lending institutional bankers but welcomed by invitation the best-in-class diversity broker dealers in the financial services industry.  That, right there spoke volumes from the onset about what CNP was developing resulting in last January 16th’s  first D&I new issue for CNP – a 5yr transaction and what continued today on today’s 10-year deal.

Much like Exelon’s breakthrough banker’s meeting back in the Fall of 2014, CNP’s presentation was perhaps the best organized I’ve been a part. I still have the CNP three-ring binder on my desk.  In it is a comprehensive CenterPoint Energy Overview, Presentations, Financial Information, Recent Press Releases, all CenterPoint Contacts and Supplemental Materials.  Fast forward to a few weeks ago when I received a call from CNP Treasury leadership – Carla Kniepp, Bob Mcrae and Brett Jerasa the Treasurer, Assistant Treasurer and Manager respectively to vet us as a potential member of their diversity rotation.  Last Wednesday I received yet another communication from the triad asking me to put together a two slide presentation including an overall market update, sector update and credit opinion along with indicative pricing with comparables.  Although the last two weeks have been phenomenally busy for Team Mischler, the offer and opportunity to be treated as a joint lead even though we served on today’s deal as an active Co-Manager, was something I relished.  The ask actually meant the ultimate compliment and conveyed the value the issuer saw in our opinion and pricing methodology, daily debt capital markets coverage and distribution capabilities.  Trust and respect are critical foundations to success. So, we got to work.

If the story segued from that point today’s relative value study, it would represent the quickest and most formidable diversity and inclusion initiative I’ve ever seen take place in our DCM. However, what makes the story even better is that it didn’t stop there.  Rather I received this e-mail from the CNP Director of Corporate Finance, Brett Jerasa over this weekend:

Ron,

 

In order to help your sales efforts on Monday, here is a brief overview of CenterPoint Energy Houston Electric’s credit thesis. This is the same messaging we use for Fixed Income investors and the Ratings Agencies. I’ve also attached the earnings press release from this morning.

Thank you,
Brett

 

Now, most lead lefts and underwriters know what Mischler does when it comes to distribution and so do many of America’s Fortune 250 companies.  We pride ourselves on our gold nugget middle-market distribution network and placement opportunities, and I always write here that each and every one of them is a BlackRock to me.  To be given talking points for our sales efforts ratchets up the proposition from our perspective.  Note that Brett wrote, “it is the same messaging we use for Fixed Income investors and the ratings Agencies.”  I wrote him back over the weekend and said, “Brett, I have to say this is a first, believe it or not.  The credit thesis you attached is brilliant and very helpful. I will definitely use that in my marketing efforts……”Just another way to move the needle forward for D&I!”

Who gets our five-star salute?  I’m proud to say Bill “Buck” Rogers, Chief Financial Officer and Executive Vice President; Carla Kniepp, Vice President and Treasurer; Bob Mcrae, Assistant Treasurer, Financing and Brett Jerasa, Manager, Treasury. Thank you all very much for today’s opportunity.  You should not only feel good about today’s financing for your company and its shareholders, but equally so for what you’ve done today for social responsibility which best reflects those ratepayers – the people who turn on and off the light switches in Houston Texas.  My hope is that today’s Lone Star State story spreads as fast as you helped inaugurate it within and outside of CNP.  I’ve never quite seen anything like it before.

Next grateful appreciation once again for “all of those little BlackRock accounts” who have trusted in our mandate and our promise to get on deals and chip away at securing allocations for you.  Thanks for the UST business you’ve expanded into with me, ABS and MBS business and Municipal bond business, and thanks for the equity trading you’ve executed and agency participations. You are touching every spoke within our special operations unit here.  It takes all of us to bring about the best outcome: from onboarding MSDA and MAAUs five years ago when I first landed here; to introducing the platform to so many wonderful issuers; nurturing those relationships to get on their deals and adding business lines as our trajectory allows.  From the core of you who followed me here and signed up based on our past experiences and then others added on as our DCM universe expanded and grew. Our efforts in DCM coverage have opened doors to ECM relationships and share buybacks allowing our equity experts to prove their muster as well.  So from all of us here at team Mischler a resounding “thank you.”

 

Ford Motor Credit Co. LLC Believes in and Banks On The Little Engine That Could –

Thanks go out to FMCC’s David Lupu, Head of Global Debt Capital Markets for awarding the nation’s oldest SDVBE today’s Selling Group role on Ford’s $1b two-part 3-year FXD/FRN.

The deal announced with IPTs suggesting the +120 “area before guidance tightened a dime to +110 a +/-5 after which it launched and priced at the tightest side of guidance or T+105.  Relative value pointed directly at the Ford 2.021% due 5/03/209 that were T+100 (G+103) nailing NIC on today’s new FXD/FRN at 2 bps vs. the +105 final pricing.

Order books were split as follows:  $2.1b on the fixed rate tranche for a bid-to-cover rate of 3x and a $750mm FRN book or 2.5-times oversubscribed.

The fixed notes went out 3 bps tighter showing a +102 bid while the FRNs were 1bp improved with bids of 3mL+82.

We thank of course Dave Lupu of Ford, “the Golden ones” as I refer to them at GS Syndicate, who I was asked to liaise with, as well as a very good guy named Mr. Michael Shapiro at Societe Generale.  SocGen served as B&D
Ford Motor Credit Co., LLC – Final Pricing

F $300mm FRNs due 8/12/2019 @ $100.00 or 3mL+83
F $700mm 1.897% due 8/12/2019 @ $100.00 to yield 1.897% or T+105

 

Mischler’s “Give Back” Component

 

Ours are not merely issuer meetings focused solely on renewables, green energy, spreads, the market and new investors rather they go beyond our latest company updates, add-ons and build-outs.  You know what?  That’s exactly how it can and should work folks!  My CEO, Dean Chamberlain, a West Point graduate and Service Disabled Veteran himself – will be carrying around his metal shoulder for the rest of his life as a reminder of his service to our country – and he’s proud of it.  So are we of him!  During our meetings he’s right there to discuss market mechanics, the drill downs, our and out platform but when the question of honoring or helping United States Veterans comes up, meetings take on a whole new meaning.  It’s something to witness.  That “give back” component of Mischler Financial Group, Inc. is more than a feel good for those asking – it’s one of the many rewards for working here.

Mischler-Veterans-Education-Challenge

Avis and Bruce Richards, Founders of VetEdChallenge, MFG Analyst Jonathon Herrick, CEO Dean Chamberlain

 

In 1994, Mischler Financial Group became the securities industry’s first, fully-certified Service Disabled Business Enterprise.   Our original business plan envisioned our filling a void in the financial industry in connection with both mounting legislative initiatives (federal and state) and the increasing focus on the part of public plan sponsors and corporate issuers to broaden diversity and inclusion goals through the mandated inclusion of minority-owned service providers.

Since that time, and through the leadership and inspiration of both our Founder & Chairman Walter Mischler (SDV) a U.S Military Academy at West Point grad (Class of ’69) and CEO Dean Chamberlain (USMA Class of ’85), our firm has grown exponentially.  We now employ approximately 50 financial industry professionals across five major-city offices and we provide aggressively-competitive capital markets services to a discerning institutional community that includes the country’s top Fortune corporations, the leading public plan sponsors and leading investment managers.

However much we’ve grown and benefited from the hard work of our team and the support and trust of those who we do business for and the contemporaries who we work with across the financial services arena, we have remained adamant about our firm’s unwavering dedication to “doing good by giving back” to the disabled military veteran community and their respective families.

Our support of the SDV community includes our taking a lead role in a broad variety of philanthropic programs, advocacy initiatives and mentoring of service-disabled military veterans who are determined to overcome all obstacles.

Since 1994, we have directly and indirectly raised hundreds of thousands of dollars for critical SDV support programs including, among others, The Fisher House Foundation, The Children of Fallen Patriots Foundation, Bob Woodruff Foundation, The Semper Fi Fund, Veterans Education Challenge, Lead the Way Fund and Wounded Warrior Project.

So, when we’re on your deals, we’ll do our best to serve you the right way and you’ll have our promise and commitment that some of those fees will go to one of these funds or others like them, to help those who were prepared to give or gave the ultimate sacrifice. That commitment is part of our shared ethos here at Team Mischler.

 

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

 

IG Corporate New Issuance This Week
8/08-8/12
vs. Current
WTD – $11.80b
August 2016 vs. Current
MTD – $60.75b
Low-End Avg. $21.76b 54.23% $60.48b 100.45%
Midpoint Avg. $22.80b 51.75% $61.13b 99.38%
High-End Avg. $24.93b 47.33% $61.78b 98.33%
The Low $15b 78.67% $45b 135.00%
The High $30b 39.33% $75b 81.00%

 

 

Have a great evening!
Ron

 

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.

NICs, Bid-to-Covers, Tenors and Sizes

 

…..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 four week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
8/01
TUES.
8/02
WED.
8/03
TH.
8/04
FRI.
8/05
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 7/25
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
New Issue Concessions 1.16 bps 2.08 bps 11.28 bps <1> bps N/A 3.17 bps 1.23 bps 3.95 bps 0.82 bps
Oversubscription Rates 2.48x 2.77x 2.61x 3.90x N/A 2.86x 3.63x 3.42x 4.73x
Tenors 15.70 yrs 13.54 yrs 9.17 yrs 5.72 yrs N/A 11.57 yrs 13.45 yrs 7.95 yrs 9.58 yrs
Tranche Sizes $1,671mm $750mm $958mm $528mm N/A $1,020mm $875mm $1,482mm $887mm

 

New Issues Priced

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

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
Air Lease Corporation BBB-/A- 3.00% 9/15/2023 750 +low 200s (202.5) +185a (+/-5) +180 +180 BAML/CITI/JPM/MIZ
Ameriprise Financial Inc. A3/A 2.875% 9/15/2026 500 +hi 130s (+137.5) +130-135 +130 +130 CITI/JPM/WFS
Archer-Daniels-Midland Co. A2/A 2.50% 8/11/2026 1,000 +110a +98a (+/-3) +95 +95 BNPP/HSBC
Berkshire Hathaway Finance Aa2/AA FRN 8/15/2019 250 3mL+equiv 3mL+equiv 3mL+26 3mL+26 BAML/GS/JPM/WFS
Berkshire Hathaway Finance Aa2/AA 1.30% 8/15/2019 1,000 +60-65 +50a (+/-2) +48 +43 BAML/GS/JPM/WFS
Berkshire Hathaway Inc. Aa2/AA FRN 8/15/2018 250 3mL+equiv 3mL+equiv 3mL+15 3mL+15 BAML/GS/JPM/WFS
Berkshire Hathaway Inc. Aa2/AA 1.15% 8/15/2018 500 50-55 +45a (+/-2) +43 +43 BAML/GS/JPM/WFS
Boston Properties LP A-/BBB+ 2.75% 10/01/2026 1,000 +140a +125a (+/-2) +125 +125 BAML/DB/JPM/MS/USB
CenterPoint Energy Houston A1/A 2.40% 9/01/2026 300 +100a +85a (+/-2) +83 +83 BAML/DB/RBC
CubeSmart LP Baa2/BBB 3.125% 9/01/2026 300 +hi 100s (+187.5) +165a (+/-5) +160 +160 BARC/JEFF/WFS
Ford Motor Credit Co. LLC Baa2/BBB FRN 8/12/2019 300 3mL+equiv 3mL+equiv 3mL+83 3mL+83 CITI/CA/GS/MS/SG/RBC
Ford Motor Credit Co. LLC Baa2/BBB 1.897% 8/12/2019 700 +120a +110a (+/-5) +105 +105 CITI/CA/GS/MS/SG/RBC
HCA Inc. Ba1/BBB- 4.50% 2/15/2027 1,200 4.625%a 4.625%a 4.50% +294 BAML/BARC/CITI/CS/DB/GS
JPM/GS/RBC/STRH/UBS/WFS
ING Bank A1/A+ FRN 8/15/2019 250 3mL+equiv 3mL+equiv 3mL+61 3mL+61 CS/ING/JPM/MS/WFS
ING Bank A1/A+ 1.65% 8/15/2019 450 +87.5a +85a (+/-2) +83 +83 CS/ING/JPM/MS/WFS
ING Bank A1/A+ FRN 8/15/2021 250 3mL+equiv 3mL+equiv 3mL+88 3mL+88 CS/ING/JPM/MS/WFS
ING Bank A1/A+ 2.05% 8/15/2021 600 +hi 90s (+97.5) +95a (+/-2) +93 +93 CS/ING/JPM/MS/WFS
NXP BX/NXP Funding LLC Ba2/BBB- 3.875% 8/31/2022 1,000 3.875%a N/A 3.875% 3.875% BAML/MS
TransCanada Trust Baa2/BBB 5.875% 8/15/2076 1,200 6.125%a 5.875-6.00%
(5.9375%)
5.875% +428.6 DB/JPM

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
United Mexican States A3/BBB+ 4.125% 1/21/2026 750 +165a +150a (+/-5) +145 +145 BAML/BBVA/CS
United Mexican States A3/BBB+ 4.35% 1/15/2047 2,000 +225a +210a (+/-5) +205 +205 BAML/BBVA/CS

 

Lipper Report/Fund Flows – Week ending August 3rd     

 

  • For the week ended August 3rd, Lipper U.S. Fund Flows reported an inflow of $2.472b into Corporate Investment Grade Funds (2016 YTD net inflow of $23.27b) and a net outflow of $2.464b into High Yield Funds (2016 YTD net inflow of $7.232b).
  • Over the same period, Lipper reported a net inflow of $60.438m from Loan Participation Funds (2016 YTD net outflow of $5.328b).
  • Emerging Market debt funds reported a net inflow of $613.318m (2016 YTD inflow of $4.330b).

(more…)

Banks Dominate Day’s Debt Issuance; JPM, UBS, NWB, Legg Mason; Mischler Comment
August 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 08.03.16-Bulge Bracket Banks Dominate Day’s Debt Market Issuance.

 

Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

 

Another big day for IG primary issuance as 8 IG Corporate issuers tapped our dollar DCM to price 12 tranches between them totaling $11.50.  SSA assisted with 2 issuers, 2 deals and $1.75b bringing the all-in IG day total to 10 issuers, 14 tranches and $13.25b. WTD we’ve now priced 67% more than this week’s IG Corporate issuance estimates. MTD we have already issued 71% of the total amount projected for August…….after just three days!

             

Global Market Recap

 

  • S. Treasuries – Mixed & little changed. JGB sell off calms. Bunds/Gilts little changed.
  • 3mth Libor – Set at highest yield since May 2009 (0.77760%).
  • Stocks – The Dow snaps its 7 session losing streak.
  • Overseas Stocks – Europe bank stocks rallied. Nikkei & HS hit & . China higher.
  • Economic: US data today was solid (ADP & ISM non-manufacturing)
  • Overseas Economic: China mixed, Japan better & Europe mixed tilted to upside
  • Currencies: USD outperformed 4 of the Big 5. The Euro struggled today
  • Commodities: Good day for the CRB & crude oil but a down day for the metals
  • CDX IG: -1.83 to 75.01
  • CDX HY: -8.35 to 409.04
  • CDX EM: -4.17 to 260.25

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points – Mischler Co-Manages for JPM and UBS

 

  • Mischler served as a Co-Manager on today’s J.P. Morgan Chase & Co. 5NC4.  The 5NC4 structure gained much attention in today’s marketplace.  Thank you Team JPM Treasury Janeene Balmir and Adam Berg as well as JPM Syndicate’s Bob LoBue, Nick Balzano and Tom Monaghan.  Mischler served as a Co-Manager on today’s UBS Group Funding (Jersey) Ltd. two-part 5yr FXD/FRN. Thank you Team UBS. Many thanks to Bill Coughlin and his Treasury/Funding Team as well as Todd Mahoney, Igor Grinberg and Chelseay Boulos for working with me on securing our underwriting liability today for distribution throughout our middle markets network. It’s always greatly appreciated and makes a big difference in helping us to build the nation’s oldest Service Disabled Veteran broker-dealer in a value-added way. Thanks for your commitment to social responsibility today.
  • Columbia Property Trust Operating Partnership LP increased its 10-year Senior Notes new issue at the launch to $350mm from $250mm and 5bps tighter than the tightest side of guidance.
  • Legg Mason Inc. bumped up its 40NC5 $25 par Junior Subordinated Notes new issue to $500mm from $150mm.
  • NWB Bank, in the SSA space, upsized today’s tap of its 2.375% due 3/24/2026 to $250mm from $100mm. The new total amount outstanding is $1.25b.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 12 IG Corporate new issues was 14.96 bps.

 

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

 

IG Corporate New Issuance This Week
8/01-8/05
vs. Current
WTD – $43.90b
August 2016 vs. Current
MTD – $43.90b
Low-End Avg. $25.13b 174.69% $60.48b 72.59%
Midpoint Avg. $26.22b 167.43% $61.13b 71.81%
High-End Avg. $27.30b 160.81% $61.78b 71.06%
The Low $15b 292.67% $45b 97.56%
The High $45b 97.56% $75b 58.53%

Have a great evening!
Ron

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. (more…)

GOOGL: The ABC’s of Successful Corporate Debt Issuance; Mischler Comment
August 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 08.02.16- Alphabet Inc: ABC’s of a Successful Corporate Debt Issuance

 

Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points: 

New Debt Issues Priced- Alphabet Inc (NASDAQ:GOOGL); Hershey Co (NYSE:HSY); Intl Paper (NYSE:IP); Mattel Inc (NASDAQ: MAT)

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases
Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

9 IG Corporate issuers priced 12 tranches between them totaling $9b.  One AFDB tap for $250mm in the SSA space brought today’s all-in IG day totals to 10 issuers, 13 tranches and $9.25b.  What’s more astonishing, however, is that the first two days of August have already priced 53% of syndicate desk’s midpoint average forecast for IG Corporate new issuance for the entire month or $32.40b vs. $61.13bWTD we priced 23% above this week’s syndicate average estimate or $32.40b versus $26.22b.

             

Global Market Recap

 

  • JGB’s: 3 very poor days in a row.
  • S. Treasuries – USTs, Bunds & Gilts were led down by JGB’s (again).
  • 3mth Libor – Set at highest yield since May 2009 (0.76760%).
  • Stocks – Dow headed for 7th losing session in a row (3:30pm).
  • Overseas Stocks – Banks lead Europe lower. Nikkei down & Shanghai higher.
  • Economic – U.S. inflation data was low. EU PPI remained negative but improved.
  • Currencies – Bad day for the USD & DXY Index. Strong day for Yen & Pound.
  • Commodities – CRB & crude oil down (lows since April), gold well bid & wheat low since 2006.
  • CDX IG: +1.75 to 76.98
  • CDX HY: +7.95 to 418.20
  • CDX EM: +1.76 to 265.02

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 12 IG Corporate new issues only was 16.17 bps.

 

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

 

IG Corporate New Issuance This Week
8/01-8/05
vs. Current
WTD – $32.40b
August 2016 vs. Current
MTD – $32.40b
Low-End Avg. $25.13b 128.93% $60.48b 53.57%
Midpoint Avg. $26.22b 123.57% $61.13b 53.00%
High-End Avg. $27.30b 118.68% $61.78b 52.44%
The Low $15b 216.00% $45b 72.00%
The High $45b 72.00% $75b 43.20%

alphabet-google-debt-issuance

Mischler Financial was happy to have been named an active Co-Manager for Alphabet Inc. today, parent company of Google among others.  The Aa2/AA issuer priced a new $2b 10-year Senior Notes offering that started price evolution with IPTs in the +80 “area” before tightening 10 bps into +70a (+/-2) guidance after which it launched and priced at the tightest side orT+68.  For fair value I looked at the outstanding GOOGL 3.375% due 2/25/2024 that was G+61.  Applying 10 bps for the 8s/10s curve gets you to T+71 fair value versus today’s T+68 final pricing inferring a new issue concession of negative 3 bps.   The final order book was $3.5b for a bid-to-cover or oversubscription rate of 1.75-times. Bonds were seen T+67 bid or 1 bp tighter closing the session.

What’s more today’s new Alphabet 10-year represents the fourth lowest ever IG-rated Corporate coupon in debt capital markets history!

Here’s a look at the top 4 low “A”-rated coupons:

 

  • Walt Disney 1.85% due 7/30/2026
  • IBM Credit $1bn 1.875% due 8/01/2022
  • Colgate $500mm 1.95% due 2/01/2023
  • Alphabet Inc. $2bn 1.998% due 8/15/2026

 

Thank yous go out to Alphabet’s Treasury/Funding team and for today’s achievement and opportunity.
Have a great evening!
Ron

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.

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s a review of this week’s key primary market driver averages for IG Corporates only through Monday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
8/01
AVERAGES
WEEK 7/25
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
AVERAGES
WEEK 7/04
New Issue Concessions 1.16 bps 1.23 bps 3.95 bps 0.82 bps 0.73 bps
Oversubscription Rates 2.48x 3.63x 3.42x 4.73x 3.82x
Tenors 15.70 yrs 13.45 yrs 7.95 yrs 9.58 yrs 9.72 yrs
Tranche Sizes $1,671mm $875mm $1,482mm $887mm $770mm

 

New Issues Priced

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

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
Alphabet Inc. Aa2/AA 1.998% 8/15/2026 2,000 +80a +70a (+/-2) +68 +68 JPM/MS(a) + 4 (p)
ENAP Baa3/BBB- 3.75% 8/05/2026 700 +high 200s
(+287.5)
+250a (+/-10) +240 +240 CITI/JPM
Hershey Company A1/A 2.30% 8/15/2026 500 +90a +85a (+/-5) +80 +80 BAML/CITI/JPM/RBC
Hershey Company A1/A 3.375% 8/15/2046 300 +120a +110a (+/-5) +110 +110 BAML/CITI/JPM/RBC
International Paper Baa2/BBB 3.00% 2/15/2027 1,100 +175a +155a (+/-5) +150 +150 DB/JPM (a) + 8 (p)
International Paper Baa2/BBB 4.40% 8/15/2047 1,200 +235a +215a (+/-5) +210 +210 DB/JPM (a) + 8 (p)
Mattel Inc. Baa1/BBB+ 2.35% 8/15/2021 350 +mid-100s
(+150a)
+135a (+/-5) +130 +130 BAML/CITI/MS/WFS
National Grid
Keyspan Gas East Corp.
A2/A- 2.742% 8/15/2026 700 +125a +120 the # +120 +120 BNY/CITI/HSBC/MUFG/TD
National Grid
Massachusetts Electric Co.
A3/A- 2.304% 8/15/2046 500 +160a +175a (+/-5) +170 +170 BNY/CITI/HSBC/MUFG/TD
Rabobank UA/NY Aa2/A+ FRN 8/09/2019 400 3mL+equiv 3mL+equiv 3mL+51 3mL51 BAML/BARC/MS/UBS
Rabobank UA/NY Aa2/A+ 1.375% 8/09/2019 1,000 +80a +72a (+/-2) +70 +70 BAML/BARC/MS/UBS
Weingarten Realty Inv. Baa1/BBB 3.25% 8/15/2026 250 +212.5 +185a (+/-2) +183 +183 BAML/JPM/REG/USB

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
African Development Bank
(tap) New total: $1,250mm
Aaa/AAA 1.00% 5/19/2019 250 MS+2a MS+2 MS+2 +19.3 BNPP/RBC

 

Lipper Report/Fund Flows – Week ending July 27th     

 

  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).
  • Over the same period, Lipper reported a net outflow of $15.422m from Loan Participation Funds (2016 YTD net outflow of $5.389b).
  • Emerging Market debt funds reported a net inflow of $1.382b (2016 YTD inflow of $3.717b).

 

IG Secondary Trading Lab

 

  • BAML’s IG Master Index was unchanged at +150.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 6 bps to +202 versus +196.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $13.9b on Friday versus $14.5b Thursday and $11.5b the previous Friday.

 

New Issue Volume

 

Index Open Current Change
IG26 75.231 76.833 1.602
HV26 202.90 206.915 4.015
VIX 12.44 13.37 0.93
S&P 2,170 2,157 <13>
DOW 18,404 18,313 <91>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $9.00 bn DAY: $9.25 bn
WTD: $32.40 bn WTD: $32.65 bn
MTD: $32.40 bn MTD: $32.65 bn
YTD: $843.591 bn YTD: $1,077.377 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Personal Income June 0.3% 0.2% 0.2% —-
Personal Spending June 0.3% 0.4% 0.4% —-
Real Personal Spending June 0.2% 0.3% 0.3% 0.2%
PCE Deflator MoM June 0.2% 0.1% 0.2% —-
PCE Deflator YoY June 0.9% 0.9% 0.9% —-
PCE Core MoM June 0.1% 0.1% 0.2% —-
PCE Core YoY June 1.6% 1.6% 1.6% —-
ISM New York July —- 60.7 45.4 —-
Wards Domestic Vehicle Sales July 13.06m 13.77m 12.76m —-
Wards Total Vehicle Sales July 17.30m 17.77m 16.61m —-

 

Rates Trading Lab

 

Neutral day for TYU6s Monday with the flat Value Area.  Larger technicals remain constructive (see the chart in MP package and the Bull Trend Channel ) — note though,  this situation is highly dependent on the major 132-17 Support remaining intact.   The 132-17 level was Friday’s GDP launch level that started a huge 9-tic Buying Tail, it also sits near the lower boundary of the just mentioned Bull Trend Channel; a break here would do technical damage, and it would signify a loss of upside momentum.

-Steven Muchnikoff

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 100-00+ 100-182 99-24 101-15 106-30
RESISTANCE LEVEL 99-31 100-16 99-21 101-10+ 106-08
RESISTANCE LEVEL 99-296 100-102 99-13+ 101-00 105-12
         
SUPPORT LEVEL 99-26 100-04 99-05 100-20+ 104-01
SUPPORT LEVEL 99-246 99-306 98-29+ 100-10+ 103-20
SUPPORT LEVEL 99-222 99-266 98-24+ 100-03 102-31

 

Tomorrow’s Calendar

 

  • S. Data: Jun PI/PS/PCE, Jul NY ISM, Aug IBD-TIPP, Jul Vehicles
  • Supply: Nothing Scheduled
  • Events: Nothing Scheduled
  • Speeches: Nothing Scheduled

(more…)

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