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Investment Grade US Corporate Debt Market Comment: Distilling DCM Data
September 2017      Debt Market Commentary   

Quigley’s Corner 09.22.17-Distilling the Week’s DCM Activity; Look Back to Learn, Look Forward to Window of Opportunity

 

Investment Grade US Corporate Debt New Issue Re-Cap –A Day for Donuts, Dissecting the New Issue Pipeline

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

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 September 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Investment Grade US Corporate Debt New Issue Recap

No IG issues printed today, however, it does not mean that nothing happened. In fact, something big happened!  The Best & Brightest all came back to me once again today in the “QC’s” most eagerly anticipated Friday edition.  That’s right they’re busy lining things up for next week and they’re taking just a little bit of time out to respond in their own words and with their own volume thoughts for next week’s IG Corporate new issue volume.  And you know what? ….They’re all here just waiting for you to scroll down below.  So, let’s get thru the recaps et al and then it’s onto the best and the brightest in the world of investment grade dollar syndicate. Thank you as always to those 24 desks and the very fine operatives on all of them for participating.

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

  • The IG Corporate WTD total is 65.41% of this week’s syndicate midpoint average forecast or $17.876b vs. $27.33b.
  • MTD we’ve priced 99.02% of the syndicate forecast for September or $111.346b vs. $112.45b.
  • There are now 4 issuers in the IG credit pipeline

Today’s IG Primary & Secondary Market Talking Points

 

BAML’s IG Master Index was unchanged at +111. +106 represents the post-Crisis low dating back to July 2007.

Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.06.

Standard & Poor’s Investment Grade Composite Spread was unchanged at +154.  The +140 reached on July 30th 2014 represents the post-Crisis low.

Investment grade corporate bond trading posted a final Trace count of $17.5b on Thursday versus $18.8b on Wednesday and $20.2b the previous Thursday.

The 10-DMA stands at $17.1b.

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
North Korea
On 9/19 Trump spoke before UN referring to Kim as “Rocket Man on a suicide mission.” Says if Kim continues to threaten the U.S., allies and the world “we will have no choice but to totally destroy North Korea.” On 9/14 North Korea launched another ballistic missile over Northern Japan in the face of UN Security Council sanctions. Trump warned U.S. military options are “effective and overwhelming”. Missile traveled 2,300 miles landing in the Pacific. Guam is 2,131 from NOKO! On Sunday, 9/03 NOKO detonated a 100 kiloton hydrogen bomb 5-times more powerful than that dropped on Nagasaki causing a 6.3 magnitude earthquake according to the U.S. GS. Head of IAEA  said the hydrogen bomb test is a “new dimension of global threat” to the world. On Tuesday, 8/29 NOKO ICBM launched an ICBM over Japan that landed in the Pacific Ocean. On Monday, 9/04 U.S. Amb. to the UN, Nikki Haley said “the time has come to exhaust all diplomatic means to end this crisis.” Called for strongest sanctions vs. NOKO. Monday 8/31 began joint U.S. & SOKO military exercise the world’s largest computerized command controlled with over 80,000 troops. CIA Director Mike Pompeo says of NOKO “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Friday 8/11 Trump said “U.S. military solutions are in place, locked and loaded” matching his earlier “fire and fury” statement. On Th. 8/10 NOKO announced its plan to “pre-emptively strike Guam in mid-August.” Trump’s reaction, “Maybe my “fire and fury” threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location in U.S. U.S. sanctions against select Chinese banks to pressure PRC to influence NOKO failed. China insiders say PRC does not have influence with NOKO that the U.S. thinks it does. China in precarious position given South China Sea Islands. Asian allies now justified to build out their respective militaries.
ELEVATED
BREXIT Fallout
On July 28th Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. The Brookings Institute calls Pakistan “the world’s most dangerous country.” Democracy in nuclear-armed country with 205m population at risk.

EU and Macron-Merkel coalition to squeeze U.K. for all it can re: BREXIT “divorce” bill. Companies prepping for hard BREXIT & 2 years of weak growth. PM May wants rolling series of meetings with EU.  UK withdrawal from EU takes place in March, 2019.

CAUTION
“U.S. political gridlock”
GOP to release tax overhaul plan week of Sept. 25th & Senate will vote on new Graham-Cassidy healthcare bill to repeal Obama Care. Infrastructure reform challenges & consensus GOP support to pass legislation still in doubt. Partisan politics. Trump recently bypassed GOP to close a deal w/Dems to extend debt limit to December.

Mueller’s continuing FBI probe into Trump.

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

September MTD Terror Stats: Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. There were 4 terrorist attacks thus far in September – that had 100 or more deaths – killing 615 people and wounding 733.

Cybercrime, ransomware, viruses & hacking are winning cyber wars. Recent attacks have hit four continents, law firms, food companies, power grids, pharma and governments.

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

Venezuela – civil unrest continues against Maduro dictatorship. U.S. Tsy freezes Maduro family assets. Risk of VZ default.  4th largest exporter of oil to U.S. behind Canada (#1), Saudi Arabia (#2) & Mexico (#3).

MODERATE China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns.
MARGINAL
2018 U.S. Recession
Fed signals 1 more rate hike in 2017; 3 in 2018. Dot plots unch for 2017 & ’18; lower for ’19 & longer-term. Hurricane’s Harvey, Irma and Maria not yet reflected in economic data; “could” push hike to 2018. $4.5 trillion b/s unwind begins in October & absence of inflation are concerns.

 

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

 

IG Corporate New Issuance This Week
9/18-9/22
vs. Current
WTD – $17.876b
September 2017 vs. Current
WTD – $111.346b
Low-End Avg. $26.29b 68.00% N/A N/A
Midpoint Avg. $27.33b 65.41% $112.45b 99.02%
High-End Avg. $28.375b 63.00% N/A N/A
The Low $20b 89.38% $100b 111.346%
The High $36b 49.66% $125b 89.08%

 

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week’s Investment Grade Corporate Debt

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 19 of those participants are among 2017’s YTD top 20 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.46% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

Here are this week’s primary market recap and data downloads:

Fed Chair Yellen continues to express concern about the absence of inflation that she’d like to see at 2%.  The FOMC tempts markets with accolades about the how low the unemployment rate is. Meanwhile, Wednesday’s eagerly anticipated $4.5 trillion QExit guidance amounted to nothing more than “we’ll start that in October!” Although the FOMC voiced there’d be one more rate hike in 2017 and 3 in 2018, the market doesn’t really believe that. The devastating hurricanes Harvey, Irma and Maria have not begun to show up in our economic data. I don’t believe we’ll see a rate hike in 2017.  Additionally, the next meeting in late October is not followed by a press conference so it’s highly unlikely that they’ll raise rates at that time. That leaves one meeting left in December. Do you think the Fed is giving out holiday gifts this year? I think not.  The S&P, Dow and Nasdaq once again reached new all-time highs this week.

Entering this morning’s Friday session –

 

  • The IG Corporate WTD total stands at $17.876b. We priced $9.454b less than this week’s average estimate of $27.33b or 65.41%.
  • MTD we have now priced 99.02% of the syndicate projection for September IG Corporates or $111.346b vs. $112.45b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,053.881b vs. $1,055.736b on September 22nd, 2016 or 0.18% less than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,280.209b vs. $1,331.873b on September 22nd, 2016 or 4.04% less than the year ago total.
  • Entering this morning’s session, here are the five key primary market driver averages from the 37 IG Corporate-only deals that priced this week
  • NICS:  0.62 bps
  • Oversubscription Rates: 3.18x
  • Tenors: 8.21 years
  • Tranche Sizes: $483mm
  • Spread Compression from IPTs to the Launch: <18.40> bps

 

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

 

  • Average NICs widened 0.78 bps to an average 0.62 bps vs. 1.40 bps across this week’s 37 IG Corporate-only new issues.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.12-times to 3.18x vs. 3.30x.
  • Average tenors contracted by 1.63 years to an average 8.21 years vs. 9.84.
  • Tranche sizes decreased by $192mm to $483mm vs. $675mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 37 IG Corporate-only new issues widened by 0.51 bps to <18.40> bps vs. <18.91>.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +154 vs. +158 bps.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 4 bps to 1.06 vs. 1.10 bps.
  • Week-on-week, BAML’s IG Master Index tightened 5 bps to +111 vs. +115.
  • Spreads across the four IG asset classes tightened 3.5 bps to 7.50 bps vs. 11.00 bps as measured against their post-Crisis lows.
  • The 19 major industry sectors also tightened 3.58 bps to 11.95 vs. 15.53 bps also as measured against their post-Crisis lows.
  • For the week ended September 20th, Lipper U.S. Fund Flows reported an inflow of $2.858b into Corporate Investment Grade Funds (2017 YTD net inflow of $91.384b) and a net inflow of $865.832m into High Yield Funds (2017 YTD net outflow of $8.410b).
  • Taking a look at the secondary trading performance of this week’s 37 IG Corporate and 4 SSA new issues, of the 41 deals that printed, XX tightened versus NIP for a 75.50% improvement rate, 5 widened (12.25%) and 5 were flat (12.25%).

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

  • IG Corps: $17.876b
  • All-in IG (Corps + SSA): $23.389b

 

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

Thank you in advance for your time and contribution!

Have a great evening!

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

……..……and here are their formidable responses:

(more…)

No Power Lost re: IG New Issue Debt Market; Mischler DCM Comment
September 2017      Debt Market Commentary   

Quigley’s Corner 09.12.17-No Power Lost re: IG New Issue Debt Market  

 

Investment Grade New Issue Re-Cap – Equity Exchanges Achieve a Trifecta of New Highs; CDX IG & HV New Tights

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

A Special Message from the EEI About Hurricane Irma

Prudential Financial Inc. Veteran Initiatives

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 September 6th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights – $112.4 Billion in Cumulative Enterprise Value

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calender

I have a special edition for you tonight, it is chock full of all the usual talking points of our dollar IG primary markets as well as a feature for you that I recommend you all read about Prudential Financial’s long and wonderful history giving back to our nation’s veteran community. Mischler was selected as an active Co-Manager today’s Prudential Financial 30nc10 f-t-f new issue.  Then, it’s on to a permission-ed piece by the Edison Electric Institute re: what they and our utility sector are doing to remedy and resolve the damage done by the recent hurricanes Irma and Harvey.  Edison is quite the authority for all things power-related in the United States.

So, sit back relax, the day is done and this is all you really need to know. Thank you as always for stopping in.

Today’s IG dollar DCM hosted 10 issuers across 14 tranches totaling $8.05b.  The SSA added another 4 issues, 6 tranches and $5.75b for an IG Corporate and SSA day tally of 14 issuers, 20 tranches and $13.80b.

What’s more is the S&P, the Dow and Nasdaq all closed today’s session at new all-time highs.  CDXIG and HV also both reached new tights!

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

  • The IG Corporate WTD total is 58.55% of this week’s syndicate midpoint average forecast or $19.175b vs. $32.75b.
  • MTD we’ve priced 59.95% of the syndicate forecast for July or $67.415b vs. $112.45b.
  • There are now 12 issuers in the IG credit pipeline

 

Today’s IG Primary & Secondary Market Talking Points

 

  • Mischler Financial was named a “passive” Co-Manager on today’s Metropolitan Life Global Funding 10-year Secured FA-backed Notes tranche. We thank Team MetLife for selecting Mischler, the nation’s oldest Service Disabled Veteran broker dealer, from among your many diversity partners.
  • PS Business Parks Inc. upped its $25 par PerpNC5 cumulative preferred Series “X” new issue to $200mm (8mm shs) from an initially announced $100mm (4mm) size at the launch and at the tightest side of guidance.
  • Penske Truck leasing Co. increased its long 5-year 144a/REGS Senior Notes new issue to $600mm from $500mm today at the launch and at the tightest side of guidance.
  • Banistmo S.A. upsized today’s 5-year 144a/REGS Senior Notes new issue to $500mm from $400mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 13 IG Corporate-only new issue, was <26.56> bps.  Including today’s PS Business Parks IG-rated Preferred, the spread compression across 14 tranches was <25.11> bps.
  • BAML’s IG Master Index was unchanged at +117.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.12 vs. 1.13.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +162.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14.8b on Monday versus $12.2b on Friday. Last Monday was a holiday.
  • The 10-DMA stands at $13.0b.

 

Global Market Recap

 

  • U.S. Treasuries – Back to back losing days for USTs. Supply and higher U.K. CPI were the catalysts.
  • Overseas Bonds – Poor day for JGB’s and an even worse day for bonds in Europe.
  • 3mth Libor – Set at the highest yield since March 2009 (1.31917%).
  • Stocks – Closed with gains and with the S&P reaching an all-time high.
  • Overseas Stocks – Nikkei strong rally. Europe closed higher except the FTSE.
  • Economic – Another strong JOLTS release. PPI tomorrow.
  • Overseas Economic – U.K. CPI ties the highest level in 4 years.
  • Currencies – USD mixed vs. the Big 5. Big rally for the Pound.
  • Commodities – Non-event today
  • CDX IG: -1.15 to 56.24
  • CDX HY: -3.71 to 323.0
  • CDX EM: +0.86 to 175.43

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
North Korea
·         On Sunday, 9/03 NOKO detonated a 100 kiloton hydrogen bomb 5-times more powerful than that dropped on Nagasaki causing a 6.3 magnitude earthquake according to the U.S. Geological Survey. Head of IAEA (Int’l. Atomic Energy Authority) said the hydrogen bomb test a “new dimension of global threat” to the world. On Tuesday, 8/29 NOKO ICBM launched an ICBM over Japan that landed in the Pacific Ocean. On Monday, 9/04 U.S. Ambassador to the UN, Nikki Haley said “the time has come to exhaust all diplomatic means to end this crisis. Only the strongest sanctions will enable us to solve this problem through diplomacy.” Monday 8/31 began joint U.S. & S. Korean military exercise the world’s largest computerized command control implementation that involved  over 80,000 U.S. and South Korean troops. CIA Director Mike Pompeo cites U.S./NOKO tensions have subsided saying “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Rhetoric reached height on Friday 8/11 w/ Trump saying “U.S. military solutions are in place, locked and loaded” matching his earlier statement that “North Korea best not make any more threats to the United States or they will be met with fire and fury like the world has never seen.” On Th. 8/10 NOKO announced its plan to “pre-emptively strike on Guam in mid-August.” Trump’s reaction, “Maybe my ‘fire and fury threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location on the U.S. continent. NOKO may use nuclear technology as barter for food with ”suspect” nations. U.S. sanctions of select Chinese banks to pressure PRC to influence NOKO has failed. China insiders say PRC does not have influence with NOKO that the U.S. thinks it does. China in precarious position given South China Sea Islands. Asian allies justified to build out their respective militaries.
ELEVATED
BREXIT Fallout
·         Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. Many geopolitical strategists point to the India/Pakistani

border conflict as one of if not the most volatile. Both are nuclear capable. The 100-year old non-partisan Brookings Institute calls Pakistan “the world’s most dangerous country.”

·        EU and Macron-Merkel coalition to squeeze U.K. for all it can re: BREXIT “divorce” bill. Companies prepping for hard BREXIT & 2 years of weak growth. PM May wants rolling series of meetings with EU.  UK withdrawal from EU takes place in March, 2019.

CAUTION
“U.S. political gridlock”
·         Trump tax reform targeted for this year. Infrastructure reform challenges & consensus GOP support to pass legislation still in doubt after repeal and replace defeat in late July. Trump’s Strategic and Policy Forum disbanded as did his Manufacturing Council. Tense U.S. political environment.

·         Market expecting unwind announcement by Fed in September.

·         Mueller’s FBI probe into Trump.

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

·         Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. There were 57 global terrorist attacks in the month August killing 766 people and wounding 1,112.

·         Cybercrime, ransomware, viruses & hacking are winning cyber wars. Recent attacks have hit four continents, law firms, food companies, power grids, pharma and governments.

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

·         Venezuela – civil unrest continues against Maduro dictatorship. U.S. Tsy freezes Maduro family assets. Risk of VZ default.  4th largest exporter of oil to U.S. behind Canada (#1), Saudi Arabia (#2) & Mexico (#3).

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

 

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

 

IG Corporate New Issuance This Week
9/11-9/15
vs. Current
WTD – $19.175b
September 2017 vs. Current
WTD – $67.415b
Low-End Avg. $31.71b 60.47% N/A N/A
Midpoint Avg. $32.75b 58.55% $112.45b 59.95%
High-End Avg. $33.79b 56.75% N/A N/A
The Low $25b 76.70% $100b 67.415%
The High $40b 47.94% $125b 53.93%

A Special Message from the EEI about Hurricane Irma

In light of the recent catastrophic hurricanes Harvey and Irma that slammed Texas and Florida among other states and with damage costs estimated as high as between $150b-$200b I wanted to share an article with you all that came to me from the Edison Electric Institute (EEI).  It’s informative and in many ways perhaps the best source from which to receive a power/electric damage assessment from and certainly to comprehend the immensity of what EEI and the power companies are facing.  It should also serve as reassurance that they are in fact truly doing everything they can to power you all back up.  We here at Mischler are acutely aware of what our friends (issuers, accounts, family and friends) have gone through and will be facing in the coming weeks and in some cases months.  We appreciate what you’re experiencing and would like to thank the EEI and particularly Brian Reil at EEI Media Relations for the quick permission approval process to re-print the below article for all of you. There are some embedded links in the piece that may also be very helpful and informative to you.

The Edison Electric Institute is the association that represents every U.S. investor-owned electric company.  EEI’s members provide electricity for about 220 million Americans, and operate in all 50 states and the District of Columbia. As a whole, the electric power industry supports more than 7 million jobs in communities across the United States. In addition to its U.S. members, EEI has more than 60 international electric companies with operations in more than 90 countries, as International Members, and hundreds of industry suppliers and related organizations as Associate Members.

Organized in 1933, EEI provides public policy leadership, strategic business intelligence, and essential conferences and forums.

Hurricane Irma: More Than 50,000 Workers From Across the U.S. and Canada Dedicated to Power Restoration Efforts  
WASHINGTON (September 11, 2017) – As of 7 p.m. EDT, more than 7.1 million customers are without power across Florida and in parts of Alabama, Georgia, and South Carolina as a result of Hurricane Irma. As the storm moved through the region, companies were able to address more than 1.25 million outages, thanks largely to recent investments in energy grid technology and automation. Irma was downgraded to a tropical storm earlier today.

 

“This is likely to be one of the largest and most complex power restoration efforts in U.S. history,” said EEI President Tom Kuhn. “An army of more than 50,000 workers from across the United States and Canada is now dedicated to supporting the industry’s Irma restoration efforts. This includes workers from affected companies, as well as mutual assistance crews, contractors, and other support personnel. Mutual assistance is a hallmark of our industry and serves as an effective—and critical—restoration resource for electric companies.”

 

Given the size and strength of Irma, infrastructure systems will need to be rebuilt completely in some places of Florida before power can be restored. This will delay restoration times, and customers should be prepared for the possibility of extended power outages.

 

“We know that being without electricity creates hardships, and we greatly appreciate customers’ patience as electric companies work day and night to assess damage and to restore power where and when conditions are safe to do so,” said Kuhn. “Companies will continue their storm restoration efforts around the clock until the last customer who can receive power is restored.”

 

Responding to major events like Irma requires significant coordination among the public and private sectors, and strong industry-government coordination is critical. As we did throughout Hurricane Harvey, EEI and the electric power industry are working through the Electricity Subsector Coordinating Council (ESCC) to coordinate with the federal government, other segments of the industry, and critical infrastructure operators.

 

For the fourth consecutive day, Energy Secretary Rick Perry joined an ESCC call with the CEOs of companies impacted by Irma to identify issues that will expedite power restoration. “We commend Secretary Perry’s ongoing leadership and the commitment of the entire Administration to ensure unity of effort in the Irma response,” said Kuhn.

 

Ensuring the safety of customers, communities, and workers is the electric power industry’s highest priority. As always, customers should stay away from downed power lines and always treat fallen wires and anything touching them as though they are energized. Customers using generators should plug appliances directly into the generator and follow all safety warnings.

 

EEI’s Storm Center is a resource for real-time information and explanations of the restoration process. It also includes a map to company outage centers. Customers can follow EEI on Twitter and Facebook​ for the latest updates.

I hope the EEI article was helpful and informative to you.

 

Have a great evening!

Ron Quigley, Managing Director, Head of Fixed Income Syndicate (more…)

Weather, Washington Wackiness, Drums of War..What’s Next?!
September 2017      Debt Market Commentary   

Quigley’s Corner 09.06.17 – Weather, Washington Wackiness, Drums of War..What’s Next?!

 

Investment Grade Corporate Bond New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates For September

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending August 30th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights  

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Investment Grade Corporate Bond New Issue Recap

What’s Next?! Despite North Korea bomb-rattling, Hurricane’s Harvey and Irma natural play to stimulate infrastructure spending, and a host of global event risk factors, there was some good news today from of all places “Dysfunction Junction” a.k.a. The Beltway….Washington, D.C.  Despite GOP push back from House Speaker Paul Ryan, Washington Wackiness got even more wacky when President Trump crossed the aisle to join arms with the Democratic caucus and pledged to extend our nation’s debt limit to three months to December 15th.  The GOP hasn’t shown much support for the president anyway, so what the heck, right? WAKE UP GOP! Equally important was the $7.4b disaster relief bill passed by an overwhelming 419-3 vote to assist all those Gulf Coast families and businesses impacted by Hurricane Harvey.  Only when our fellow Americans and businesses are beaten, battered and bruised, do our nation’s politicians do the right and obvious thing.  Wouldn’t it be great if they came together for us and our great nation every time?  We’re their bosses, folks. They are supposed to work for us. We tell them what to do. If they don’t deliver then they’re not doing their jobs.

Today’s IG Corporate dollar DCM finished with 12 issuers that priced 23 tranches between them totaling $13.65b.  The SSA space added ADB’s well-telegraphed $4b Global 5-bringing the all-in IG Corporate plus SSA day totals to 13 issuers, 24 tranches and $17.65b.

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

 

  • MTD we’ve priced 31.97% of the syndicate forecast for September or $35.95b vs. $112.45b.
  • There are now 17 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • Mischler served as a “passive” Co-Manager on today’s Visa Inc. $2.5b 3-part 5s/10/s/30s Senior Global Notes new issue.
  • PPL Capital Funding Inc. boosted its 30-year Senior Notes new issue to $500mm from $450mm
  • The Carlyle Group LP increased today’s $25 par Series “A” PerpNC5 Preferred to $400mm from $150mm.
  • Visa Inc. upsized today’s three-part 5s/10/s/30s Senior Global Notes new issue to $2.5b from $2b at the launch and at the tightest side of guidance.
  • Sinopec Group Overseas Development added a 30-year tranche to today’s 3-, 5- and 10-year transaction at guidance.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 22 IG Corporate-only new issues, that illustrated price evolution, was <16.76> bpsThis includes today’s Carlyle Group Preferred and does not include the Sinopec 30-year tranche that was an add-on at guidance.
  • BAML’s IG Master Index widened 1 bp to +116 vs. +115.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.11 vs. 1.10.
  • Standard & Poor’s Investment Grade Composite Spread widened 2 bps to +161 vs. +159.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.9b on Tuesday versus $5.3b on Friday and $14b the previous Friday. Monday was a holiday.
  • The 10-DMA stands at $12.2b.

 

Global Market Recap

 

  • S. Treasuries – Debt ceiling 3-month extension deal does in the UST market.
  • Overseas Bonds – JGB’s mixed. Bunds and Gilts small losses. Peripherals weaker.
  • Stocks – U.S. stocks recovering some of yesterday’s sizeable losses.
  • Overseas Stocks – Nikkei and HS down. China higher. Europe more red than green.
  • Economic – U.S. data mixed. Fed’s Beige Book: moderate, modest with no inflation.
  • Overseas Economic – Japan data disappointing. Europe data weaker.
  • Currencies – USD closed mixed vs. the Big 5 but rallied on the debt ceiling news.
  • Commodities – Crude oil and copper higher. Gasoline, gold and wheat lower.
  • CDX IG: -0.70 to 58.46
  • CDX HY: -0.27 to 330.42
  • CDX EM: -1.17 to 177.09

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
North Korea
NOKO’s Kim Jong-Un explodes 100 kiloton hydrogen bomb 5-times more powerful than that dropped on Nagasaki; causes 6.3 magnitude earthquake according to the U.S. Geological Survey after last week’s ICBM launch over Japan lands in Pacific Ocean. Head of IAEA (Int’l. Atomic Energy Authority) calls NOKO’s recent hydrogen bomb test a “new dimension of global threat” to the world. U.S. Ambassador to the UN, Nikki Haley spoke today saying “the time has come to exhaust all diplomatic means to end this crisis. Only the strongest sanctions will enable us to solve this problem through diplomacy.” Monday 8/31 began joint U.S. & S. Korean military exercise the world’s largest computerized command control implementation that involved  over 80,000 U.S. and South Korean troops. CIA Director Mike Pompeo cites U.S./NOKO tensions have subsided saying “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Rhetoric reached height on Friday 8/11 w/ Trump saying “U.S. military solutions are in place, locked and loaded” matching his earlier statement that “North Korea best not make any more threats to the United States or they will be met with fire and fury like the world has never seen.” Russia’s Foreign Minister Lavrov says his country “does not want to see North Korea with nuclear weapons.” On Th. 8/10 NOKO announced its plan to “pre-emptively strike on Guam in mid-August.” Trump’s reaction, “Maybe my ‘fire and fury threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location on the U.S. continent. UN projects worst famine in NOKO in 17 yrs; last one killed 2mm (8% of population).  NOKO may use nuclear intel/systems as barter for food w/”suspect” nations. U.S. has already sanctioned certain Chinese banks to pressure the PRC to use more influence over NOKO which has failed. China insiders say PRC does not have the influence with NOKO that the U.S. thinks it does. U.S.’s NOKO strategy quickly changing from containment on the Korean peninsula to defending the Hawaii, Alaska and the continental United States and more offensive in nature. NOKO adding miniature nuclear warheads to its ICBMs. Asian allies now justified to build up militaries including Japan. China in precarious position given South China Sea Islands.
ELEVATED
BREXIT Fallout
Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. Many geopolitical strategists point to the India/Pakistani border conflict as one of if not the most volatile. Both are nuclear capable. The 100-year old non-partisan Brookings Institute calls Pakistan “the world’s most dangerous country.”

EU and Macron-Merkel coalition to squeeze U.K. for all it can re: BREXIT “divorce” bill. Companies prepping for hard BREXIT & 2 years of weak growth. PM May wants rolling series of meetings with EU.  UK withdrawal from EU takes place in March, 2019.

CAUTION
“U.S. political gridlock”
Trump tax reform targeted for this year according to Gary Cohn, Director of the NEC. Infrastructure reform challenges & consensus GOP support to pass legislation still in doubt after repeal and replace defeat in late July. Trump’s Strategic and Policy Forum disbanded as did his Manufacturing Council.

Mueller expanding FBI probe into Trump. Many think it’s a “witch” hunt.

Increasingly tense political environment.

GCC Crisis continues as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base, severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.  German Foreign Minister blames Trump for inciting conflict in the region.

Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. There were 57 global terrorist attacks in the month August killing 766 people and wounding 1,112.

Cybercrime, ransomware, viruses & hacking are winning cyber wars. Recent attacks have hit four continents, law firms, food companies, power grids, pharma and governments.

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

Venezuela – civil unrest continues against Maduro dictatorship. U.S. Tsy freezes Maduro family assets. Risk of VZ default.  4th largest exporter of oil to U.S. behind Canada (#1), Saudi Arabia (#2) & Mexico (#3). PDVSA announces relief aid to victims of Harvey as ploy to get U.S. citizens to fill up at domestic CITGO stations. Don’t use CITGO! Donate to organizations instead.

MODERATE China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns.
MARGINAL
2018 U.S. Recession
Increased chance of 2018 U.S. recession; “maybe” one more rate hike in 2017; recent absence of inflation and $4.5 trillion balance sheet unwind are concerns. Market expecting unwind announcement by Fed in September.  The 9/01 U.S. Unemployment Rate rose 0.1% to 4.4%. Impact of Hurricane Harvey and Irma on upcoming domestic data releases.

 

Syndicate IG Corporate-only Volume Estimates For September

 

IG Corporate New Issuance September 2017 vs. Current
WTD – $35.95b
Midpoint Avg. $112.45b 31.97%
The Low $100b 35.95%
The High $125b 28.76%

 

Have a great evening!

Ron Quigley

 

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, Sizes and Average Spread Compression from IPTs thru Launches

(more…)

Fortune CEOs Vote With Their Feet and “Take the High Road”
August 2017      Debt Market Commentary   

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

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

Below is the opening extract from Quigley’s Corner aka “QC”  Wednesday, Aug 16 2017  weekend edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”the QC  provides objective debt capital market and investment corporate debt commentary and geo-political analysis, it is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our investment grade fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. 
To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646


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

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

Fortune CEOs Hold the Trump Card – “QC” Commentary

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending August 9th               

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates  Trading Lab

Tomorrow’s Calendar

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

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

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

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

Today’s IG Primary & Secondary Market Talking Points

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

 

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

 

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

2.) North Korea

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

Monday 8/31 begins joint U.S. & S. Korean military exercises. It is the world’s largest computerized command control implementation and will involve over 80,000 U.S. and South Korean troops.
CIA Director Mike Pompeo cites U.S./NOKO tensions have subsided saying “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Rhetoric reached height on Friday 8/11 w/ Trump saying “U.S. military solutions are in place, locked and loaded” matching his earlier statement this week that “North Korea best not make any more threats to the United States or they will be met with fire and fury like the world has never seen.” Russia’s Foreign Minister Lavrov says his country “does not want to see North Korea with nuclear weapons.” On Th. 8/10 NOKO announced its plan to “pre-emptively strike on Guam in mid-August.” Trump’s reaction, “Maybe my ‘fire and fury threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location on the U.S. continent. UN projects worst famine in NOKO in 17 yrs; last one killed 2mm (8% of population).  NOKO may use nuclear intel/systems as barter for food w/”suspect” nations. U.S. has already sanctioned certain Chinese banks to pressure the PRC to use more influence over NOKO which has failed. China insiders say PRC does not have the influence with NOKO that the U.S. thinks it does. U.S.’s NOKO strategy quickly changing from containment on the Korean peninsula to defending the Hawaii, Alaska and the continental United States and more offensive in nature. NOKO adding miniature nuclear warheads to its ICBMs. Asian allies now justified to build up militaries. China in precarious position given South China Sea Islands.

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

U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. France pressing for $115b equivalent. Companies prepping for hard BREXIT & 2 years of weak growth.

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

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

June 9th: GCC Crisis as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base,

severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

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

 

CEOs Hold the Trump Card – “QC” Commentary

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

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

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

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

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

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

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

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

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

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

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

Syndicate IG Corporate-only Volume Estimates for the Remainder of August & September (more…)

Risk On, Risk Off, US-NOKO Tensions Subside; CEOs Stance Vs. Ugly Heads of Racism
August 2017      Debt Market Commentary   

Quigley’s Corner Debt Market Comment- 08.14.17 – Risk On, Risk Off, US-NOKO Tensions Subside; Ugly Heads of Racism Take Top Headline as Fortune CEOs “Pivot”

Below is the opening extract from Quigley’s Corner aka “QC”  Monday, Aug 14 2017  weekend edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”the QC  provides objective debt capital market and investment corporate debt commentary and geo-political analysis, it is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our investment grade fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. 
To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646


Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending August 9th               

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates  Trading Lab

Tomorrow’s Calendar

 

Investment Grade Corporate Debt New Issue Re-Cap – A View About Charlottesville and the Aftermath

Risk was clearly back on in the financial markets today, as U.S./NOKO tensions fell to the wayside.  Unfortunately prejudice and racism reared their ugly heads in the Charlottesville, Virginia riot over the weekend.  On Monday, Fortune 500 thought leaders Ken Frazier, CEO of Merck & C0., Brian Krzanich, CEO of Intel, and Kevin Plank, CEO of Under Armour each took a stand by protesting the ‘equivocal’ comments made by President Trump in his first response to the domestic terrorism acts in Charlottesville, which were advanced by self-proclaimed alt-right and white supremacist neo-Nazis.  Mischler Financial Group  stands with every corporate executive (and every duly-elected or duly-appointed government official) who stays true to genuinely right-minded beliefs and applauds their respective organization’s dedication to doing right by doing good. In case you missed the memo, many of America’s Fortune corporations adhere to this same notion and advance their commitment via proactive Diversity & Inclusion initiatives. For those corporate executives who may have spent all of their undergrad time in finance and accounting classes, and for those who are perhaps not as familiar as they could be i.e. American History (let’s not forget to mention world history, too!), racism and bigotry are diseases that spew hatefulness and cannot be allowed in a free and democratic society. The incendiary and incite-full actions for which the various white supremacist and KKK groups are notorious for are NOT protected  “First Amendment rights.* They are cancers that cannot be discounted or condoned via equivocal platitudes; simple right-mindedness demands they be eradicated.

(*Think Justice Oliver Wendell Holmes Jr i.e. Schenck v United States and also re-visit Brandenburg v. Ohio)

To the above point, one only need to re-read the Constitution and the Bill of Rights to appreciate that D&I is part and parcel to our country’s DNA. It is also part of the cultural foundation of many Fortune 500 corporations, including Intel, including Merck, including Under Armour and including many others! D&I means respect for and appreciation of differences in ethnicity, gender, age, national origin, disability, sexual orientation, education, and religion. But it’s more than this. We all bring with us diverse perspectives, work experiences, life styles and cultures and we presumably all share a disdain for anyone and any group that attempts to dismantle, disrupt and or destroy. Kudos to Mssrs. Frazier, Krzanich and Plank for putting themselves in harm’s way and risk of “injury by Twitter” for being true leaders and staying true to their convictions and their constituents.

Kudos also to the many Fortune executives who have raised their own voices to advocate on behalf of right mindedness, and to those corporate executives such as Jamie Dimon, CEO of Citigroup, who have opted not to resign their volunteer roles serving on “Presidential Councils” in protest to seemingly wrong-headed rhetoric.  One can hope they have chosen to remain in their roles so that they can be that much more proactive in their WH-appointed “l” roles and/or similar presidential councils in which they serve as volunteers. These are jobs these business leaders have [presumably] accepted to better the country, not to help advance any political platform or political agenda. How the US Secretary of the Treasury or the Director of the National Economic Council decide how to square the so-called ‘equivocal’ views expressed by the CEO-In-Chief vs. their own cultural beliefs will likely be subject to ongoing self-reflection, external speculation and spirited debate. These are smart folks and optimism demands these administration officials be given the benefit of the doubt, just as it is incumbent on any/every corporate leader to serve as role models for employees, customers and clients; just as right-minded parents do for their own children.

Today’s VIX closed 3 bps tighter versus Friday’s close. Also a reminder that tomorrow is August 15th – “mid-August” – that’s when North Korea’s illustrious “bad boy” proclaimed that he’d have his master plan ready to bomb Guam developed by.  One week from today on Monday, August 21st begin joint U.S-South Korean military exercises referred to as Ulchi-Freedom Guardian. The exercise began in our Bicentennial year of 1976. North Korea has annually perceived the joint exercise as “preparation for war.” It is the world’s largest computerized command control implementation. Up to 80,000 American and South Korean troops have participated in this exercise in the recent past.  The game will go on for two weeks before concluding on Thursday August 31st.  Enjoy the show Mr. Jong-Un. You’ll have front row seats though I recommend binoculars. Here’s lookin’ at you kid!

If you ask me, this is the perfect time for corporations to issue bonds. Not a bad thing will really happen, risk is back on and summer vacations are quickly approaching. My prediction – expect Amazon to the hit the tapes first thing tomorrow morning.  Free market enterprise at work. Ya gotta love it!

Today’s IG Corporate dollar DCM finished with 5 issuers that priced 7 tranches between them totaling $4.10b.

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

  • The IG Corporate WTD total is 15.24% of this week’s syndicate midpoint average forecast or $4.10b vs. $26.90b.
  • MTD we’ve priced 86.82% of the syndicate forecast for July or $68.675b vs. $79.10b.
  • There are now 6 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

 

  • Arch Capital Group Ltd. upsized today’s 8mm share $25 par non-cumulative PerpNC5 Preferred, Series “F” to $200mm from $150mm.
  • Manufacturers & Traders Trust Co. dropped the 3-year FRN tranche from today’s announced 3-part electing 3- and 10-year fixed rate tranches at the launch and with both coming at the tightest side of guidance.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 6 IG Corporate-only new issues, was <14.58> bps.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 7 IG Corporate new issues, including the Arch Capital Group Ltd. $25 par Preferred was <13.21> bps.
  • BAML’s IG Master Index widened 2 bps to +116 vs. +114.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 2 bps to 1.12 vs. 1.10.
  • Standard & Poor’s Investment Grade Composite Spread widened 3 bps to +161 vs. +158.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $11.4b on Friday versus $13.2b on Thursday and $14.2b the previous Friday.
  • The 10-DMA stands at $16.1b.

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
North Korea
·        CIA Director Mike Pompeo cites U.S./NOKO tensions have subsided saying “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Rhetoric reached height on Friday 8/11 w/ Trump saying “U.S. military solutions are in place, locked and loaded” matching his earlier bluster this week that “North Korea best not make any more threats to the United States or they will be met with fire and fury like the world has never seen.” Russia’s Foreign Minister Lavrov says his country “does not want to see North Korea with nuclear weapons.” On Th. 8/10 NOKO announced its plan to “pre-emptively strike on Guam in mid-August.” Trump’s reaction, “Maybe my ‘fire and fury threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location on the U.S. continent. UN projects worst famine in NOKO in 17 yrs; last one killed 2mm (8% of population).  NOKO may use nuclear intel/systems as barter for food w/”suspect” nations. U.S. has already sanctioned certain Chinese banks to pressure the PRC to use more influence over NOKO which has failed. China insiders say PRC does not have the influence with NOKO that the U.S. thinks it does. U.S.’s NOKO strategy quickly changing from containment on the Korean peninsula to defending the Hawaii, Alaska and the continental United States and more offensive in nature. NOKO adding miniature nuclear warheads to its ICBMs. Asian allies now justified to build up militaries. China in precarious position given South China Sea Islands.
ELEVATED
BREXIT Fallout
Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. Many geopolitical strategists point to the India/Pakistani border conflict as one of if not the most volatile. Both are nuclear capable.

·U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. France pressing for $115b equivalent. Companies prepping for hard BREXIT & 2 years of weak growth.      

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

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

·        June 9th: GCC Crisis as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base,severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

IG Corporate New Issuance This Week
8/14-8/18
vs. Current
WTD – $4.10b
August 2017 vs. Current
MTD – $68.675b
Low-End Avg. $26.17b 15.67% $78.37b 87.63%
Midpoint Avg. $26.90b 15.24% $79.10b 86.82%
High-End Avg. $27.62b 14.84% $79.83b 86.03%
The Low $15b 27.33% $60b 114.46%
The High $40b 10.25% $100b 68.67%

 

 

Have a great evening!

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

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

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Day’s IG DCM: 14 Issuers Float $14.67b in New Corporate Debt
August 2017      Debt Market Commentary, Recent Deals   

Quigley’s Corner 08.07.17 :  Another New Corporate Debt Issue Milestone


Investment Grade New Issue Re-Cap – Most Amount of Issuers YTD; 14 Issuers, $14b+

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

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

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending August 2nd               

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Today’s IG Corporate dollar DCM finished with a YTD record of 14 issuers that priced 22 tranches between them totaling $14.675b.  Leading the pack: Aetna (NYSE: AET), American Water Capital, Ares Capital (NASDAQ: ARCC), Duke Energy (NYSE: DUK), Kraft Heinz (NYSE:HNZ), Regions Financial (NYSE: RF), and UBS Group (NYSE: UBS).  The SSA space was quiet.  This past March 6th the IG Corporate space featured 12 issuers and April 27th also hosted 12 IG Corporate issuers.  But today takes the cake for the most number of issuers YTD. The DJIA closed at its 9th consecutive new high. The S&P also ended the session at a new all-time high.

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

  • The IG Corporate WTD total is 42.80% of this week’s syndicate midpoint average forecast or $14.675b vs. $34.29b.
  • MTD we’ve priced 45.13% of the syndicate forecast for July or $35.70b vs. $79.10b.
  • There are now 4 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • Kimco Realty Corp. upsized its $25 par PerpNC5 Class “L” cumulative redeemable preferred stock new issue to $225mm from $150mm at the launch and at the tightest side of price talk.
  • Regions Financial Corp. dropped the 5-year FRN tranche from today’s earlier announced two-part 5-year FXD/FRN new issue having secured sufficient funding in the 5-year fixed rate tranche.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 20 IG Corporate-only but ex-Kimco Realty $25 par Preferred new issues, was <15.69> bps.
  • The spread compression across all 21 IG Corporate new issues including the Kimco Realty $25 par Preferred was <15.24> bps.
  • The average spreads of 1 of the 19 major industry sectors set a new post-Crisis low while 2 of the 19 tied their post-Crisis lows. That’s 15.79% of the sectors.
  • BAML’s IG Master Index was unchanged at +109.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.05 vs. 1.04.
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bps to +150 vs. +152.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14.2b on Friday versus $19.6b on Thursday and $14.3b the previous Friday.
  • The 10-DMA stands at $17.6b.

 

Global Market Recap

 

  • U.S. Treasuries – Not fazed by strong Employment Report & this week’s Treasury Refunding.
  • Overseas Bonds – JGB’s down. Good day Gilts. Bund unchanged. Peripherals better.
  • Stocks – Dow looking for 9th record high close & 11th winning day in a row.
  • Overseas Stocks – Asia rallied to a 10yr high. Europe had more red than green.
  • Economic – Not a factor in the U.S. today. PPI on Thursday & CPI on Friday.
  • Overseas Economic – China foreign reserves up. Japan better. Germany IP weaker.
  • Currencies – Quiet day on the FX front. U.S. outperformed 4 of the Big 5 (small).
  • Commodities – Crude oil small loss, gold basically unchanged & copper 2+ year high.
  • CDX IG: +0.24 to 57.95
  • CDX HY: +0.38 to 322.22
  • CDX EM: -3.47 to 183.20

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
Asian Political Tensions
·        N. Korea launches ICBM on 7/28. Jong-Un claims Hwasong-14 missile can reach any location on the U.S. continent. UN projects worst famine in NOKO in 17 yrs; last one killed 2mm (8% of population).  Fear that NOKO may use nuclear intel/systems as barter for food w/”suspect” nations. U.S. has already sanctioned certain Chinese banks to pressure the PRC to use more influence over NOKO which has failed. U.S. lofts Trident missile in Pacific Ocean in response. China insiders say PRC does not have the influence on NOKO that the U.S. thinks it does.
ELEVATED
BREXIT Fallout
·        U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. France pressing for $115b equivalent.
Venezuela – civil unrest as Maduro dictatorship claims bogus election outcome favors unlimited powers and a new constitutional assembly in elections that U.S. and key LATAM nations will not acknowledge. Caracas named most dangerous city in the world with highest murder rate. VZ gov’t stopped publishing crime stats a decade ago. Dictatorship in our Western Hemisphere. U.S. Tsy. freezes Maduro family assets.
CAUTION
“U.S. political gridlock”
·        Trump financial, healthcare, tax and infrastructure reform challenges & consensus GOP support to pass legislation questioned; U.S. Senate sanctions Iran for missile testing and supporting terrorism; also expands sanctions against Russia in 98-2 vote. Russia in expansion mode.

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

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

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

IG Corporate New Issuance This Week
8/07-8/11
vs. Current
WTD – $14.675b
August 2017 vs. Current
MTD – $35.70b
Low-End Avg. $33.46b 43.86% $78.37b 45.55%
Midpoint Avg. $34.29b 42.80% $79.10b 45.13%
High-End Avg. $35.12b 41.79% $79.83b 44.72%
The Low $30b 48.92% $60b 59.50%
The High $45b 32.61% $100b 35.70%

 

UBS Funding Group (Switzerland) AG $3.25bn 2-part 6NC5 Fixed-to-Floating and 6NC5 FRNs Deal Dashboard

Let’s go straight to the “QC” Deal Dashboard for pricing intel and book sizes/bid-to-cover rates.  Here’s a look at spread compression throughout price evolution during today’s two-part book build from IPTs to the launch and final pricing:

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
6NC5 FRNs 3mL+equiv 3mL+equiv 3mL+95 3mL+95 <20> bps 2.5
6NC5F-t-F +125a +110a (+/-5) +105 +105 <20> bps 2.5

 

………and here’s a snap shot of today’s final book sizes and oversubscription rates:

 

Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
6NC5 FRNs $1.25bn $2.20bn 1.76x
6NC5 F-t-F $2bn $3.5bn 1.75x

 

Final Pricing – UBS Funding Group (Switzerland) AG $3.25bn 2-part 6NC5 Fixed-to-Floating and 6NC5 FRNs

UBS $1.25bn 6nc5 FRNs due 8/15/2023(22) @ $100.00 3mL+95.

UBS $2bn 2.859% 6nc5 due 8/15/2023(22) @ $100.00 to yield 2.859% or T+105.

 

 

Have a great evening!

Ron Quigley

 

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, Sizes and Average Spread Compression from IPTs thru Launches

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
7/31
TUES.
8/01
WED.
8/02
TH.
8/03
FRI.
8/04
AVERAGES
WEEK 7/31
AVERAGES
WEEK 7/24
AVERAGES
WEEK 7/17
AVERAGES
WEEK 7/10
AVERAGES
WEEK 7/03
AVERAGES
WEEK 6/26
New Issue Concessions <4.05> bps 0.375 bps 1.19 bps 6.80 bps N/A 0.06 bps 1.68 bps <0.05> bps 2.46 bps 2.25 bps <0.24> bps
Oversubscription Rates 4.35x 2.82x 3.09x 1.95x N/A 3.34x 3.30x 3.37x 2.97x 2.38x 3.29x
Tenors 12.83 yrs 12.80 yrs 12.55 yrs 8.12 yrs 6.5 yrs 11.96 yrs 13.03 yrs 10.28 yrs 8.96 yrs 12.50 yrs 9.43 yrs
Tranche Sizes $466mm $933mm $627mm $721mm 325 $651mm $1,512mm $1,187mm $765mm $1,437mm $527mm
Avg. Spd. Compression
IPTs to Launch
<19.73> bps <15.33> bps <17.98> yrs <19.92> bps N/A <18.56> bps <21.15> bps <18.10> bps <19.80> bps <20.50> bps <17.35> bps

 

New Issues Priced

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Summer Avalanche New IG Debt Issuance Forecast-Mischler Comment
August 2017      Debt Market Commentary   

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

Below is the opening extract from Quigley’s Corner aka “QC”  Friday, Aug 4 2017  weekend edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”the QC is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646


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

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

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

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending August 2nd               

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

 

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

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

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

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

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

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

Today’s IG Primary & Secondary Market Talking Points

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

The “QC” Geopolitical Risk Monitor

 

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

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

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

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

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

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

 

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

 

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

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

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

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

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

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

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

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

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

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

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

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

Thank you in advance for your time and contribution!

The “Best and the Brightest” in Their Own Words

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Corporate Bond Day Belongs to Comcast & Verizon – Mischler DCM Comment
August 2017      Debt Market Commentary   

Quigley’s Corner 08.01.17- Investment Grade Corporate Bond Day Belongs to Comcast & Verizon 

Below is the opening extract from Quigley’s Corner aka “QC”  Tuesday, Aug 1 2017  edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”the QC is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646

 

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

Comcast Corporation’s $2.5bn 2-part 10.5- and 30-year Deal Dashboard

Comcast Corporation’s Commitment to Honoring the Military, Veterans and Their Families

  • The Comcast Corp. Promise
  • Comcast’s Military and Veteran Affairs Office
  • Q&A with Carol Eggert, SVP, Military and Veteran Affairs for Comcast Cable Brigadier General (Retired), U.S. Army

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

New Issues Priced (Comcast, Verizon Communications, Celgene Corp, Kimco Realty, Ryder System, Axis Bank)

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending July 26th              

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Investment Grade New Issue Re-Cap

 

Today’s IG Corporate dollar DCM finished with 7 issuers pricing 9 tranches between them totaling $8.40b.  The SSA space boosted the total adding 3 issuers across 4 tranches for $2.75b and thereby bringing the all-in IG day total to 10 issuers, 13 tranches and $11.15b.   But, today was all about Comcast Corporation (NASDAQ:CMCSA) and their $2.50b two-part 10.5- and 30-year.  Comcast is consistently acknowledged by Military Friendly as a Top Military Friendly Employer. Since 2012, the cable giant has been recognized for its commitment to increasing opportunities for the Military Community. This year Comcast is happy to highlight its recognition as the #1 Military Spouse Friendly Employer and the #4-ranked Military Friendly Employer in the nation.

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

  • The IG Corporate WTD total is 60.93% of this week’s syndicate midpoint average forecast or $15.386b vs. $25.25b.
  • MTD we’ve priced 10.62% of the syndicate forecast for July or $8.40b vs. $79.10b.
  • There are now 5 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • The Asian Development Bank upsized today’s 5-year Global Green Bond tranche of its 2-part 5s/10s new issue to $750mm from $500mm at the launch.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 6 IG Corporate-only new issues, was <15.33> bps.
  • The average spreads across 1 of the 19 major industry sectors set a new post-Crisis low while 3 of the 19 tied their post-Crisis lows. That’s 21.05% of the sectors.
  • BAML’s IG Master Index widened 1 bp to +109 vs. +108.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.02 vs. 1.03.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +151.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.7b on Monday versus $14.3b on Friday and $13.3b the previous Monday.
  • The 10-DMA stands at $17.4b.

 

Global Market Recap

 

  • U.S. Treasuries – Started under pressure but turned it around with the 30yr leading the rally.
  • Overseas Bonds – JGB’s mixed & little changed. Strong rally in Europe.
  • Stocks – Dow (all-time high) leading U.S. stocks higher into the close.
  • Overseas Stocks – Global stock rally.
  • Economic – U.S. data was weak or weaker than last with tame inflation.
  • Overseas Economic – China better. Japan weaker. Europe solid-to-strong.
  • Currencies – USD was better bid vs. 3 of the Big 5 & unchanged vs. the other 2.
  • Commodities – Crude oil reached its high since May & then sold off hard.
  • CDX IG: -0.84 to 56.38
  • CDX HY: -1.89 to 318.54
  • CDX EM: +0.24 to 190.25

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

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

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

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

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

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

IG Corporate New Issuance This Week
7/31-8/04
vs. Current
WTD – $15.386b
August 2017 vs. Current
MTD – $8.40b
Low-End Avg. $24.21b 63.55% $78.37b 10.72%
Midpoint Avg. $25.25b 60.93% $79.10b 10.62%
High-End Avg. $26.29b 20.49% $79.83b 10.52%
The Low $15b 102.57% $60b 14.00%
The High $35b 43.96% $100b 8.40%

 

Comcast Corporation’s $2.5bn 2-part 10.5- and 30-year Deal Dashboard

(more…)

Investment Grade DCM Talking Points-Mischler Comment
August 2017      Debt Market Commentary   

Quigley’s Corner 07.31.17- Investment Grade DCM – American Airlines Floats and Flies Ahead of Day’s Debt Issuers 

Below is the opening extract from Quigley’s Corner aka “QC”  Monday July 31 2017  edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”the QC is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646


Investment Grade DCM New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and July

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 July 26th              

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar


Investment Grade New Issue Re-Cap

Today’s IG Corporate dollar DCM finished with 11 issuers pricing 15 tranches between them totaling $6.986b.  The SSA space was quiet today. It seemed much busier than today’s final tally given the 15 tranches but if you’ll recall several syndicate desks did comment in last Friday’s “QC” survey for this week’s IG Corporate new issue volume that it would seem busier given the expectation for lots of smaller sized deals.

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

  • The IG Corporate WTD total is 27.67% of this week’s syndicate midpoint average forecast or $6.986b vs. $25.25b.
  • MTD we’ve priced 143.28% of the syndicate forecast for July or $120.926b vs. $84.40b.
  • There are now 6 issuers in the IG credit pipeline.

July 2017 finished as the second highest volume July on record for IG Corporates at $120.876b as well as for all-in IG supply (Corporates plus SSA) – $141.476b. 

Today’s IG Primary & Secondary Market Talking Points 

  • Banco General, S.A. upsized today’s 10yr 144a/REGS Senior Unsecured Notes new issue to $550mm from its $500mm launch size.
  • International Paper Co. dropped the FRN tranche from today’s earlier announced two-part 3NC1 FGRN and 30yr Senior Notes offering.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 15 IG Corporate-only new issues, was <19.73> bps.
  • Excluding today’s IG-rated preferred for Public Storage, the average spread compression of today’s 14 IG Corporate-only new issues, was <20.61> bps.
  • The average spreads across 1 of the 19 major industry sectors set a new post-Crisis low while 6 of the 19 tied their post-Crisis lows. That’s 36.84% of the sectors.
  • BAML’s IG Master Index was unchanged at +108.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.03 vs. +102.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +151 vs. +150.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14.3b on Friday versus $19.6b on Thursday and $12.8b the previous Friday.
  • The 10-DMA stands at $17.1b.

 

Global Market Recap 

  • U.S. Treasuries – Unchanged (2yr & 3yr) to +0.8 bps (30yr) in a very quiet day.
  • Overseas Bonds – JGB’s small loss. Bund small gain & Gilt weaker.
  • Stocks – U.S. stocks mixed heading into last hour. Dow traded closed at a new all-time high……again!
  • Overseas Stocks – HS & China rallied. Nikkei small loss. Europe mostly red.
  • Economic – U.S. data was mixed. Core PCE tomorrow.
  • Overseas Economic – China weaker. Japan stronger. Europe stronger with tame inflation.
  • Currencies – USD was better overnight but was hit hard during NY trading hours.
  • Commodities – Crude oil little changed but did trade over 50. Copper 2+ year high.
  • CDX IG: -0.28 to 57.37
  • CDX HY: -0.20 to 320.94
  • CDX EM: -0.53 to 190.66

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

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

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

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

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

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates This Week and July

 

IG Corporate New Issuance This Week
7/31-8/04
vs. Current
WTD – $6.986b
July 2017
Forecasts
vs. Current
MTD – $120.926b
August 2017
Low-End Avg. $24.21b 28.86% $83.87b 144.18% $78.37b
Midpoint Avg. $25.25b 27.67% $84.40b 143.28% $79.10b
High-End Avg. $26.29b 26.57% $84.92b 142.40% $79.83b
The Low $15b 46.57% $70b 172.75% $60b
The High $35b 19.96% $111b 108.94% $100b

 

 

Have a great evening!

Ron Quigley

 

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, Sizes and Average Spread Compression from IPTs thru Launches

(more…)

ATT Mobilizes Investment Grade Corporate Debt Market w Mega Deal
July 2017      Debt Market Commentary   

Quigley’s Corner 07.27.17- AT&T Mobilizes Corporate Debt Market Issuance w $22.5bil 7-part deal

Below is the opening extract from Quigley’s Corner aka “QC”  Thursday July 27, 2017  edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”the QC is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646


Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and July

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 July 19th              

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Investment Grade New Issue Re-Cap – AT&T Prints $22.5b 7-Part –  3rd Largest Deal in IG Dollar DCM History!

ATT-Investment Grade Corporate Debt

Today’s IG Corporate dollar DCM finished with 4 issuers pricing 11 tranches between them totaling $26.00b.  The SSA space wisely stood down. Clearly, the day was all about AT&T’s mega $22.5bn 7-part SEC registered Senior Global Notes new issue.  The transaction ranks as the third largest in history behind only Verizon Communication’s $49b deal on 9/11/2013 and Anheuser Busch InBev’s $46bn 1/13/2016.  The deal is also the largest of this very prolific year-to-date thus far.  What’s more, AT&T also pushed us over the $1 trillion mark for all-in IG Corporate and SSA issuance YTD.  AT&T (A-/BBB+) agreed to buy Time Warner (Baa2/BBB+) for $85.4b.  This follows Comcast’s purchase of NBCUniversal and Verizon’s acquisition of Yahoo. Both AT&T and Time Warner boards approved the deal that now has to overcome a few regulatory hurdles.  AT&T hopes to complete the transaction by the end of 2017.  To finance the half cash, half stock deal involved AT&T taking on $40b in bridge loans prior to today’s announced deal.

 

The DJIA closed at another all-time high at 21,796 up 85 points.

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

 

  • The IG Corporate WTD total is 151.38% of this week’s syndicate midpoint average forecast or $36.30b vs. $23.98b.
  • MTD we’ve priced 135.00% of the syndicate forecast for July or $113.94b vs. $84.40b.
  • There are now 4 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 11 IG Corporate-only new issues, excluding HIS, was <19.14> bps.
  • The average spreads across 3 of the 19 industry sectors tied their post-Crisis lows.
  • BAML’s IG Master Index was unchanged at +108.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +103.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +151 vs. +150.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.4b on Wednesday versus $19.2b on Tuesday and $19.6b the previous Wednesday.
  • The 10-DMA stands at $16.5b.

 

Global Market Recap

 

  • S. Treasuries – 3rd losing session out of 4 this week. 30yr lagged on the curve again
  • Overseas Bonds – JGB’s, Bunds & Gilts closed with gains.
  • Stocks – In the morning reached all-time highs but then sold off in the afternoon.
  • Overseas Stocks – Asia closed with gains. Europe had more red than green.
  • Economic – U.S. data had more good than bad. First look at Q2 GDP tomorrow.
  • Overseas Economic – Light calendar today but that will not be the case tomorrow.
  • Currencies – USD started weak overnight but traded with a bid during NY hours.
  • Commodities – Another good day for the commodities market despite the better USD.
  • CDX IG: +0.94 to 57.45
  • CDX HY: +2.95 to 321.11
  • CDX EM: +0.79 to 192.70

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
Asian Political Tensions
·    N. Korea launches ICBM on July 4th. Continues development, improving accuracy & distance in defiance of G-20 protests; Lack of Chinese mediation; U.S. sanctions select Chinese banks and  individuals to influence PRC pressure on North Korea; UN projects worst famine in NOKO in 17 yrs; last one killed 2mm (8% of population).  Fear that NOKO may use nuclear intel/systems as barter for food w/”suspect” nations.
ELEVATED
BREXIT Fallout
·    U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. France pressing for $115b equivalent.
CAUTION
“U.S. political gridlock”
·    Trump financial, healthcare, tax and infrastructure reform challenges & consensus GOP support to pass legislation questioned; Mueller expanding FBI probe into Trump.

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

·    GCC Crisis as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air

and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base, severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.

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

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

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

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

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

MODERATE ·    China hard landing – rising corporate debt have the OECD and IMF concerned.

·    Venezuela – low oil prices/Maduro resistance impacting ability to repay debt; civil unrest.

MARGINAL
2018 U.S. Recession
·    Increased chance of 2018 U.S. recession in light of recent very hawkish Fed-speak?; “Maybe” one more rate hike in 2017; lack of inflation and $4.5 trillion balance sheet unwind are concerns.

 

Syndicate IG Corporate-only Volume Estimates This Week and July

 

IG Corporate New Issuance This Week
7/24-7/28
vs. Current
WTD – $36.30b
July 2017
Forecasts
vs. Current
MTD – $113.94b
Low-End Avg. $23.52b 154.34% $83.87b 135.85%
Midpoint Avg. $23.98b 151.38% $84.40b 135.00%
High-End Avg. $24.71b 146.90% $84.92b 134.17%
The Low $15b 242.00% $70b 162.77%
The High $40b 90.75% $111b 102.65%

 

AT&T Corp. $22.5b 7-Part Deal Dashboard

Mischler was once again proud and honored to serve as an active Co-Manager on today’s behemoth AT&T 7-part.

 

Today’s 7 tranches posted a cumulative average spread contraction of <18.43> bps through price evolution or from IPTs to the launch and final pricing.

Here’s a look at how it all evolved:

 

ATT Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
5.5yr FRN 3mL+113a 3mL+94a (+/-5) 3mL+89 3mL+89 <24> bps 15
5.5 yr FXD +125a +105a (+/-5) +100 +100 <25> bps 15
7yr FXD +150a +135a (+/-5) +130 +130 <20> bps 12
10yr FXD +175a +165a (+/-5) +160 +160 <15> bps 9
20yr FXD +215a +205a (+/-5) +200 +200 <15> bps 1
32.5yr FXD +240a +230a (+/-5) +225 +225 <15> bps <7>
41yr FXD +255a +245a (+/-5) +240 +240 <15> bps <7>

 

..here’s a look at final book sizes and over-subscription rates that amounted to $58.5b for an overall bid-to-cover rate of 2.60x:

 

AT&T Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
5.5yr FRN $750mm $3.2bn 4.27x
5.5yr FXD $1.75bn $5.8bn 3.31x
7yr FXD $3bn $8.3bn 2.77x
10yr FXD $5bn $12.4bn 2.48x
20yr FXD $4.5b $10.4bn 2.31x
32.5yr FXD $5b $11.1bn 2.22x
41yr FXD $2.5b $7.3bn 2.92x

 

A Look at How AT&T Supports Our Veterans

 

First, let’s make it clear to everyone that AT&T understands that members of the military and their families make great sacrifices for our great nation and often confront unique challenges during periods of deployment and throughout their return to civilian life. AT&T understands that corporations have an important role to play in supporting our veterans.  So, for nearly 100 years – that’s right – a century – AT&T has remained dedicated to supporting military personnel, veterans and their families.  Our nation’s service men and women make sacrifices to protect our country and our freedoms. AT&T understands that is their honor to support them at home and abroad.  Moreover, military veterans possess the skills and experience it needs to succeed as a company and knows they are an invaluable part of its work force.  For that all of us here at Mischler Financial send out a five-star salute to AT&T from the top down and especially today to the entirety of its Treasury/Funding team that carved out another memorable place in our IG dollar Debt Capital Markets history with today’s $22.5 billion seven-part transaction.

Some of the Ways that AT&T Supports Our Nation’s Veterans –

 

Recruiting and Hiring Military Veterans

AT&T integrated veteran recruitment into its business practices for years. The Company focuses on recruiting veterans not only because it’s the right thing to do, but also because it’s good for its business. In the past few years, AT&T enhanced its military recruitment programs by increasing their promotion of AT&T as an employer of choice within the veteran community. That includes maintaining a Military Talent Attraction Program Manager to inform the military about AT&T and educate AT&T managers about the military.

Online Tools and Resources

AT&T understands that the job search and application process at large companies can be challenging for anyone — and even more so for veterans. Therefore, it created online tools, resources and checkpoints to optimize success through its recruitment process, such as:

  • A military-focused career site: att.jobs/military
  • A Military Skills Translator Tool that allows veterans to use their current Military Occupation Code or Military Occupation Specialty to identify civilian jobs at AT&T that may be a good fit for them: http://att-veterans.jobs/
  • The Careers for Veterans program, which is designed to support veterans moving into civilian life by providing career advice and insight on AT&T jobs: http://veterans.att.jobs
  • An AT&T Military Timeline to help guide veterans step-by-step through their transition to the civilian/corporate workforce
  • A career page for military spouses highlighting work locations that provides portable, flexible jobs: att.jobs/milspouse

 

Stepping up AT&T’s Hiring Commitment

AT&T actively focuses on recruiting veterans into career paths because the experience and skills gained through military service are an invaluable contribution to its workforce.

In 2013, AT&T announced a commitment to hire 10,000 veterans over the course of the next 5 years. That’s a commitment that was reached in 2015 – well ahead of schedule. In May of 2016, AT&T announced that it would double its original commitment by hiring an additional 10,000 veterans – for a total of 20,000 – by 2020.

AT&T is also a founding member of the Veteran Jobs Mission, launched in 2011 by JPMorgan Chase & Co. and 10 other companies to commit to hiring 100,000 veterans by 2020. Since then, the coalition has grown to more than 230 private-sector companies that represent almost every industry in the U.S. economy. Collectively, members have hired more than 395,261 veterans since 2011.

Once veterans are hired, AT&T helps ensure they have the skills needed to grow their careers and succeed as employees in the ever-evolving technology landscape.

Veteran Employee Resource Group

The AT&T Veterans employee resource group (ERG) was founded in 1983 and now serves more than 10,200 members in 40 chapters across the U.S. It’s an independent organization of AT&T employees and retirees dedicated to serving the veteran and active military community.

The ERG creates an instant community for veterans joining the company and involves them in outreach, philanthropy and volunteer opportunities – including ways to refer fellow veterans for jobs at AT&T. Members of this ERG serve as career ambassadors and represent AT&T at veteran career events.

At AT&T’s 8th annual National ERG Conference in September 2016, the AT&T Veterans-Washington State chapter was recognized for its Operation Santa program, which supports homeless vets and those in VA hospitals and retirement homes during the holidays.

 

2016 AT&T Awards and Recognition’s Include:

 

  • Ranked No. 5 on Diversity Inc’s Top 10 Companies for Veterans list
  • Ranked No. 24 on G.I. Jobs/Victory Media’s Top 100 Military Friendly Employers list
  • Ranked No. 44 on G.I. Jobs/Victory Media’s Top 100 Military Spouse Friendly Employers list
  • Ranked No. 44 on Military Times’ Best for Veterans Employer list
  • Named to US Veterans magazine’s Best of the Best – Top 10 Veteran-Friendly Companies list
  • Named to US Veterans magazine’s Top 10 Supplier Diversity Programs list

 

AT&T’s Support for Organizations Include:

 

Blue Star Families

AT&T supports veterans and military families through many financial contributions, programs and collaborations with organizations dedicated to service men and women. AT&T supports Blue Star Families at their networking events for military spouses and in their mission to honor and empower military families through no-cost programs available to members nationwide.

Cell Phone for Soldiers
AT&T has a long-standing mission to connect members of our nation’s military with their loved ones back home. Initiated in 2004, and expanded through financial support from AT&T, Cell Phones for Soldiers is a non-profit that uses funds from recycled cell phones to buy prepaid phone cards for our service men and women, helping them connect with their families.

Supporting Veteran-Owned Business

Since 1968, the AT&T Global Supplier Diversity organization has connected certified diverse service-disabled veteran-, minority-, women-owned business enterprises with opportunities to provide products and services to AT&T around the world. AT&T is committed to working with veteran-owned suppliers through its mentoring programs.

 

AT&T Scholarship Programs
In 2016, AT&T continued to offer executive-level scholarships to diverse suppliers, including veterans, as part of its commitment to provide educational support to diverse-owned businesses. Five scholarships were awarded nationally to diverse-owned business representatives to attend an executive training class.  Classes were offered through the following programs:

  • The Advance Management Education Program (provided by National Minority Supplier Development Council)
  • Building a High Performing Minority Business Program (provided by Tuck School of Business at Dartmouth
  • Tuck-WBENC Executive Program (provided by Women’s Business Enterprise National Council)

 

The AT&T Business Growth Acceleration Program
The AT&T Business Growth Acceleration Program provides mentorship to a select group of qualified business leaders, including veterans. The program focuses on improving participants’ business operations and enhancing their abilities to win corporate contracts. The practical, hands-on learning approach enables each participant to immediately apply concepts learned to their individual business challenges. During 2016, the program was led by the John F. Kennedy Institute of Entrepreneurial Leadership and there were 12 graduates from this AT&T-sponsored JFK University Business Growth Acceleration Program.

Additionally,

  • Through the full year ending 2016, AT&T’s spend with service disabled veteran-, veteran-, minority and women-owned business enterprises firms, among others, was $14.2bn.
  • AT&T’s percent of total spend with service disabled veteran-, veteran-, minority and women-owned business enterprises is 83%.

That is a great story about some of the wonderful things Corporate America’s AT&T is doing for our veterans. It’s a story that needs to be told to Main Street U.S.A. I’ll always do my part to get Corporate America’s story out there.  The next deal could by YOUR deal and YOUR story. Today, however, belonged to AT&T. Thank you AT&T from the top down. Thank you also to JPM, BAML, GS, Mizuho and MUFG Syndicate for working with us today.

 

Have a great evening!

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

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

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