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Investment Grade Debt Issuance In Advance of Thanksgiving
November 2017      Debt Market Commentary   

Quigley’s Corner 11.17.17  Investment Grade Debt Issuance Weekend Before Thanksgiving Edition

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

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

Syndicate IG Corporate-only Volume Estimates For This Week

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

Rates Trading Lab

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending Nov 15th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

The “QC” Geopolitical Risk Monitor

 

Investment Grade New Issue Re-Cap

 

Today the IG dollar DCM hosted 3 issuers across 3 tranches totaling $1.485b.  The SSA space was quiet.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate desk estimates:

  • The IG Corporate WTD total is 101.89% of this week’s syndicate midpoint average forecast or $28.775b vs. $28.24b.
  • MTD we’ve priced 87.21% of the syndicate forecast for October IG Corporate new issuance or $84.054b vs. $96.38b.
  • 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 1 IG Corporate-only (Non $25 par) new issue was <20.00> bps.
  • Including today’s Southern Company $25 par Jr. Sub Notes the average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 2 IG Corporate-only new issues that displayed price evolution was <13.125> bps.
  • BAML’s IG Master Index tightened 1 bp to +107 vs. to +108.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.02 from 1.03.
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bps to +148 from +150. The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.4b on Thursday versus $17.2b on Wednesday and $17b the previous Thursday.
  • The 10-DMA stands at $16.4b.

 

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

 

IG Corporate New Issuance This Week
11/13-11/17
vs. Current
WTD – $28.775b
November 2017 vs. Current
MTD – $84.054b
Low-End Avg. $27.04b 106.42% $95.28b 88.22%
Midpoint Avg. $28.24b 101.89% $96.38b 87.21%
High-End Avg. $29.44b 97.74% $97.48b 86.23%
The Low $20b 143.87% $75b 1112.07%
The High $40b 71.94% $130b 664.66

 

Global Market Recap

 

  • U.S. Treasuries – Same old story with the 30yr better bid & the 2yr in the red.
  • Overseas Bonds – JGB’s were better bid. Europe was unchanged to better bid.
  • 3mth Libor – Set at 1.44067% the highest since December 2008.
  • U.S. Stocks – Could not build on yesterday’s big rally.
  • Overseas Stocks – Shenzhen was hit hard. Nikkei higher. Europe more red than green.
  • U.S. Economic – The housing data was very good. KC Manufacturing down.
  • Overseas Economic – Not a factor today.
  • Currencies – USD traded poorly vs. the Yen and also lost ground vs. the Euro & Pound.
  • Commodities – CRB, crude oil, gold, etc., took advantage of the weaker USD & rallied.
  • CDX IG: +0.06 to 55.05
  • CDX HY: +0.36 to 325.24
  • CDX EM: -2.41 to 184.16

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

-Tony Farren 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 21 of today’s respondents are in the top 23 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 81.33% 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. 

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 !!

Below is the opening segue to our weekly canvass of top fixed income syndicate desks.. 

“Good morning and TGIF Ahead of Thanksgiving week!  I thought I’d start a bit early today as next week should, for all intents and purposes, be a two-day week..   

Entering this morning’s Friday session –  

  • The IG Corporate WTD total stands at $28.775b. We priced $535mm more than this week’s average midpoint estimate of $28.24b or 101.89%.
  • MTD we priced 87.21% of the syndicate projection for November IG Corporates or $84.054b vs. $96.38b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,271.993b vs. $1,226.792b on November 10th, 2016 or $45.201b (3.68%) more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,579.184b vs. $1,557.776b on November 10th, 2016 or $21.408b (1.37%) more than the year ago total. 

Entering this morning’s session, here are the five key primary market driver averages for the 49 IG Corporate-only deals that priced this week. 

o   NICS:  6.56 bps  

o   Oversubscription Rates: 3.00x

o   Tenors: 10.44 years

o   Tranche Sizes: $553mm

o   Spread Compression from IPTs to the Launch: <17.42> bps 

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

  • Week on week, average NICs tightened by 1.32 bps to an average 6.76 bps vs.7.88 bps across this week’s 50 IG Corporate-only new issues that had relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, increased by 0.66x to an average 3.00x vs. 2.34x. 
  • Average tenors decreased by 0.02 years to an average 10.44 years vs. 10.46 years.
  • Tranche sizes decreased by $207mm to $553mm vs. $760mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues tightened by 3.48 bps to <17.42> bps vs. <13.94> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 1 bps to +148 vs. +147.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bps to 1.02 vs. 1.01 week-on-week. 
  • Week-on-week, BAML’s IG Master Index widened 2 bps to +107 vs. +105. 
  • Spreads across the four IG asset classes widened 1.50 bps to 8.25 bps vs. 6.75 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors also widened 1.37 bps to 10.58 bps vs. 9.21 bps also as measured against their post-Crisis lows.
  • For the week ended November 15th, Lipper U.S. Fund Flows reported an inflow of $2.407b into Corporate Investment Grade Funds (2017 YTD net inflow of $111.988b) and a net outflow of $4.442b from High Yield Funds (2017 YTD net outflow of $12.951b).
  • Taking a look at the secondary trading performance of this week’s 52 IG Corporate and 2 SSA new issues, of the 54 deals that printed, 36 tightened versus NIP for a 66.75% improvement rate, 15 widened  (27.75%) and 3 were flat 5.50%).

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

  • IG Corps: $28.775b
  • All-in IG (Corps + SSA): $84.054b 

And now it’s time for 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!

In this season of Thanksgiving I have many things to be grateful for and one of them are wonderful clients like yourself. Thank you for your friendship and participation here each week and on deal day.  Wishing you and your family a great weekend and a very Happy Thanksgiving! -Ron”

The “Best and the Brightest” in Their Own Words

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FOMC Rate Decision Talking Points “Unchanged!”
November 2017      Debt Market Commentary   

Quigley’s Corner 11.01.17  FOMC Rate Decision Talking Points “Unchanged!”

 Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

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

FOMC Rate Decision Talking Points: Unchanged (as Expected)

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

Rates Trading Lab

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 25th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

The “QC” Geopolitical Risk Monitor

 

As you all know, Mischler Financial Group, Inc. is our great nation’s oldest Service Disabled Veteran broker dealer and as such our veteran give-back initiatives are prolific and lay at the core of our shared ethos here at Team Mischler.  I would appreciate it if you could all take a moment to read about our 2017 Veteran’s Day Month Pledge from my CEO Dean Chamberlain just before my evening sign-off below.  It is with great appreciation that Mischler Financial is able to “give-back” the fruits of our labor throughout the year and it is all thanks to you the issuers and accounts who elect to do business with us to address the need for best-in-class capital market services and your own internal diversity/veteran procurement initiatives. It means everything to each of us here at Mischler and the non-profit organizations we support.  Thank you all very much! –RQ 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 3 issuers across 5 tranches totaling $2.50b.  The SSA space was inactive today.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate estimates:

  • The IG Corporate WTD total is 83.16% of this week’s syndicate midpoint average forecast or $21.323b vs. $25.64b.
  • MTD we’ve priced 2.59% of the syndicate forecast for October IG Corporate new issuance or $2.50b vs. $96.38b.
  • There are now 7 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points 

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 3 IG Corporate-only new issues that displayed price evolution was <27.33> bps.
  • BAML’s IG Master Index widened 1 bp to +101 vs. +100.
  • BAML’s IG Master Index saw  the “AA” tied its post Crisis low of +58 for the third session in a row while the “A” class held its post Crisis low of +78 for the sixth consecutive session.
  • The Transportation industry sector set a new post Crisis low of +104.
  • 2 of the 19 major IG sectors tied their post Crisis lows as follows: Banking (+84)  and Energy (+132).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 0.95 vs. 0.94.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +142 vs. +143.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $21.1b on Tuesday versus $16.3b on Monday and $23.4b the previous Tuesday.
  • The 10-DMA stands at $18.7b.

Global Market Recap 

  • Treasury November Refunding: More supply in the front end coming in 2018 (February).
  • FOMC Statement – Upgraded growth (solid from moderate) & no change on inflation.
  • U.S. Treasuries – Closed mixed with the curve flattening the story.
  • Overseas Bonds – JGB’s unchanged to better. Bunds little changed & Gilts weaker.
  • 3mth Libor – Set at 1.38483% the highest since January 2009.
  • Stocks – Mixed heading into the close. Gave up big morning gains (reached ATH’s).
  • Overseas Stocks – Nikkei 21 year high. EM 6 year high. Europe 2 year high.
  • Economic – More positive economic data.
  • Overseas Economic – China unchanged, Japan mixed & U.K. data solid.
  • Currencies – USD better bid vs. Euro, PND & Yen but weaker vs. CAD & AUD.
  • Commodities – Crude oil traded at high since January before rolling over. Metals bid.
  • CDX IG: +0.45 to 52.60
  • CDX HY: +0.24 to 310.32
  • CDX EM: +0.55 to 174.91

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
10/30-11/03
vs. Current
WTD – $21.323b
November 2017 vs. Current
MTD – $2.50b
Low-End Avg. $24.74b 86.19% $95.28b 2.62%
Midpoint Avg. $25.64b 83.16% $96.38b 2.59%
High-End Avg. $27.65b 77.12% $97.48b 2.56%
The Low $15b 142.15% $75b 3.33%
The High $35b 60.92% $130b 1.92%

 

fomc-rate-decisionFOMC Rate Decision Talking Points: Unchanged (as Expected) 

Once again rates were left unchanged by the Fed, however there is more color on the $4.5 trillion balance sheet (b/s) unwind. Here’s all you need to know:

Policy:

  • The Fed left rates unchanged in the 1%-1.25% range, voting unanimously to so.
  • The Board left the discount rate unchanged at 1.75%.
  • Expects the economy to evolve in a way warranting gradual rate hikes.

Economy:

  • Economic activity is rising at solid rate despite recent storms.
  • Fed says storms are unlikely to alter the economy’s medium-term course.
  • Repeats risks are roughly balanced, while watching inflation closely.

Employment:

  • The labor market continued to strengthen while unemployment declined.
  • Repeats that market-based inflation compensation gauges are still low.

Inflation:

  • Inflation for items other than food and energy remained soft.
  • Repeats that it sees inflation stabilizing at around 2% in the medium-term

 

The U.S. Federal Open Market Committee November 1st Statement in its Entirety 

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The balance sheet normalization program initiated in October 2017 is proceeding.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles.

The “QC” Geopolitical Risk Monitor

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Investment Grade Corporate Debt Issuance-A Common Thread
October 2017      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.24.17 – A Common Thread re Ford Motor Credit and Goldman Sachs Corporate Debt Issuance  

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points: Spotlight on Ford Motor Credit & GS

Global Market Recap

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

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

Rates Trading Lab

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 18th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

The “QC” Geopolitical Risk Monitor

 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 3 issuers across 7 tranches totaling $9.45b.  The SSA space featured 4 issuers and 6 tranches for $7.50b bringing the all-in IG day totals to 7 issuers, 13 tranches and $16.95b. Clearly the mega deal of the day belongs to The Goldman Sachs Group, Inc. that issued a $7b three-part Senior Unsecured Global Notes transaction for which Mischler served as an active Co-Manager on the 21nc20 fixed-to-floating tranche due 10/31/2038.  That deal and more specifically that tranche is today’s Deal-of-the-Day.

Here are the day’s recaps first:

The DOW skyrocketed 168 points to close at a new all-time high of 23,441 propelled by stellar earnings from the likes of Caterpillar, 3M, GM and Fiat Chrysler.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate estimates:

 

  • The IG Corporate WTD total is 108.88% of this week’s syndicate midpoint average forecast or $23.724b vs. $21.79b.
  • MTD we’ve priced 98.36% of the syndicate forecast for October IG Corporate new issuance or $90.178b vs. $91.68b.
  • There are now 8 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • Mischler Financial is proud to have been named a Selling Group member on today’s $1bn Ford Credit Auto Lease Trust Series 2017-B. Thank you Team Ford for choosing Mischler from among your diversity candidates.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 7 IG Corporate-only new issues was <18.71> bps.
  • BAML’s IG Master Index was unchanged at +101 tying its post Crisis low set with last Friday’s close.
  • BAML’s IG Master Index saw 3 of the 4 IG asset classes set or tied new post Crisis lows as follows: “AA” +59 (tied), “A” +79 (tied) and “BBB” +130 (set).
  • 3 of the 19 major IG sectors set new post Crisis lows as follows: Banking (+84), Basic Industry (+127) and Industrials (+105).
  • 6 of the 19 major IG sectors tied their post Crisis lows as follows: Cap Goods (+79), Consumer Products (+85), Insurance (+110), Services (+102), Technology (+76) and Transportation (+106).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.95 vs. 0.96 while setting yet another new low.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +144 vs. +143.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.5b on Monday versus $13.8b on Friday and $14.3b the previous Monday.
  • The 10-DMA stands at $16.4b.

 

Global Market Recap

 

  • U.S. Treasuries – USTs market continues to struggle. 10yr closed over 2.40%.
  • Overseas Bonds – JGB’s mixed & flatter. Down day in Europe.
  • 3mth Libor – Set at its highest yield (1.37064%) since January 2009.
  • Stocks – Earnings sends U.S. stocks higher. Dow at all-time high.
  • Overseas Stocks – Asia weaker expected. Japan (record winning streak). Europe better.
  • Economic – All 3 Markit PMI’s were better but Richmond manufacturing was weaker.
  • Overseas Economic – Japan data weaker. Europe data mixed but solid overall.
  • Currencies – USD better bid vs. 4 of the Big 5 bit the DXY Index was little changed.
  • Commodities – CRB traded at high since May. Crude & gasoline up. Gold down.
  • CDX IG: -0.20 to 52.73
  • CDX HY: -0.44 to 308.86
  • CDX EM: +0.34 to 174.84

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
10/23-10/27
vs. Current
WTD – $23.724b
October 2017 vs. Current
MTD – $90.178b
Low-End Avg. $20.75b 114.33% $90.96b 99.14%
Midpoint Avg. $21.79b 108.88% $91.68b 98.36%
High-End Avg. $22.83b 103.92% $92.42b 97.57%
The Low $15b 158.16% $110b 81.98%
The High $30b 79.08% $75b 120.24%

 

The Goldman Sachs Group, Inc. $2.5b 21nc20 Fixed-to-Floating Senior Unsecured Global Notes

 

Today’s Goldman Sachs transaction was a $7bn three-part comprised of a 5nc4 fixed-to-floater as well as a 5yr FRN both due 10/31/2022.  Mischler proudly served as an active Co-Manager on today’s longest tranche of that issuance – the 21nc20 fixed-to-floating due 10/31/2038 so I am writing about that tranche this evening.

It’s important to note that in speaking with today’s accounts they like the pro-U.S. growth sentiment and rates that are helping to boost markets especially for bank and finance issuers.  Broader corporate tax reform will certainly lead to additional M&A activity ahead which is good for banks/finance. Several international accounts expressed their view that U.S. banks as flight to relative safety underscore an overall bullish sentiment in the sector.  Other investors were attracted by some additional yield compared to the risk-reward in European banks and Asian banks.  We’ve seen some front-loaded supply in the sector post Q3 earnings but the demand for GS paper has been consistently strong.

  • BAML’s IG Master Index was unchanged at +101 tying its post Crisis low set with last Friday’s close.
  • BAML’s IG Master Index saw 3 of the 4 IG asset classes set or tied new post Crisis lows as follows: “AA” +59 (tied), “A” +79 (tied) and “BBB” +130 (set).
  • 3 of the 19 major IG sectors set new post Crisis lows as follows: Banking (+84), Basic Industry (+127) and Industrials (+105).
  • 6 of the 19 major IG sectors tied their post Crisis lows as follows: Cap Goods (+79), Consumer Products (+85), Insurance (+110), Services (+102), Technology (+76) and Transportation (+106).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.95 vs. 0.96 while setting yet another new low.

 

Use of proceeds on today’s transaction will be used for general corporate purposes.

For relative value we looked to the outstanding GS 3.691% due 6/05/2028 6nc5 fixed-to-floating that priced on May 31st that was quoted today T+119 (G+120) pre-announcement.

Curves on comparable FIGs show an average 11- to 21-year spread differential of <13> bps. Applying that to the GS 11nc10 pegs fair value at T+106 nailing NIC on today’s new 21nc20 F-t-F as 2 bps.

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
21nc20 F-t-F
10/31/2038
+120-125 +110a (+/-2) +108 +108 <14.5> bps 2 bps 106/104 <2>

 

………and here’s a snap shot of today’s final book size and oversubscription rate:

 

GS Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
21nc20 F-t-F
10/31/2038
$2.5b $5bn 2.00x

 

Final Pricing – The Goldman Sachs Group, Inc. f-t-f Perp NC5 Preferred

GS $2.5b 4.017% 10/31/2038 21nc20 fixed-to-floating @ $100.00 T+108 (Back-end: 3mL+137.3)

 

Have a great evening!

Ron Quigley

 

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

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/23
AVERAGES
WEEK 10/16
AVERAGES
WEEK 10/09
AVERAGES
WEEK 10/02
AVERAGES
WEEK 8/25
AVERAGES
WEEK 8/18
AVERAGES
WEEK 9/11
New Issue Concessions 1.33 bps 0.41 bps <0.38> bps 1.18 bps 1.38 bps 0.62 bps 1.40 bps
Oversubscription Rates 2.23x 2.89x 3.03x 3.50x 3.31x 3.18x 3.27x
Tenors 6.20 yrs 8.85 yrs 9.77 yrs 12.00 yrs 8.50 yrs 8.21 yrs 9.84 yrs
Tranche Sizes $793mm $804mm $906mm $608mm $645mm $483mm $674mm
Avg. Spd. Compression
IPTs to Launch
<12.75> bps <16.81> bps <19.81> bps <18.40> bps <20.19> yrs <18.40> bps <18.91> bps

  

Rates Trading Lab

 

Most of today’s trading was confined to a tight range with yields slowly migrating higher as the curve steepened. Then came the news that John Taylor had reportedly won a straw poll on a show of hands when President Trump asked GOP Senators about their Fed pick. Market got hit with the belly leading the sell-off and 5yrs traded at 2.044%, 10yr at 2.4225% and 30yr 2.934%. Stops were hit in futures as TY touched 124-18 before bouncing. Taylor had a big day in the betting pools, for what it’s worth, solidifying his second place standing. https://www.predictit.org/Market/3306/Who-will-be-Senate-confirmed-Fed-Chair-on-February-4%2C-2018 Lost in the fray were reports that the trio of Corker, McCain and Paul might not support a tax cut program if not revenue neutral and that Jeff Flake bowed out of the Arizona Republican race, but not before saying that “[w]ithout fear of the consequences and without consideration of the rules of what is politically safe, we must stop pretending that the conduct of some in our executive branch are normal. They are not normal. Reckless, outrageous and undignified behavior has become excused as telling it like it is when it is actually reckless, outrageous and undignified.” Meanwhile, stocks carried on, with records falling once again and the financial networks straining to contain their giddiness.

 

Thoughts:

Today’s price action was a textbook case of why this market is becoming so difficult to trade. I understand that a Taylor chairmanship and its potentially consequential rules-based policy metrics is a decidedly hawkish event. Countering that, however, is more stagnation on the legislative front. Senators Corker and Flake are now question marks in the Republican camps along with the fiscal conservatives. I know we have broken through established support levels and that it may trigger a further sell-off on that basis alone, but I think this is a counter-trade. Whatever happens, it will happen fast. Machines can hit bids and lift offers faster than you can blink.

-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-30 99-19+ 99-22 99-10 97-23
RESISTANCE LEVEL 99-27+ 99-14 99-14+ 99-00 97-12+
RESISTANCE LEVEL 99-25 99-102 99-08+ 98-23+ 96-28
         
SUPPORT LEVEL 99-22+ 99-052 99-02+ 98-15+ 96-11
SUPPORT LEVEL 99-196 99-01+ 98-28+ 98-07+ 95-30
SUPPORT LEVEL 99-17+ 98-31 98-24+ 98-01 95-24

 

New Investment Grade Corporate Debt Issues Priced

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

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Investment Grade Corporate Bond-New Issue Re-Cap
October 2017      Debt Market Commentary   

Quigley’s Corner 10.17.17 – Debt Market Commentary; Investment Grade Corporate Bond-New Issue Re-Cap

Investment Grade US Corporate Debt 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 This Week and October

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 October 11th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 3 issuers across 5 tranches totaling $3.65b.  The SSA space featured 3 issuers and 3 tranches for $4.50b bringing the all-in IG day totals to 6 issuers, 8 tranches and $8.15b.

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 22.38% of this week’s syndicate midpoint average forecast or $5.65b vs. $25.25b.
  • MTD we’ve priced 57.60% of the syndicate forecast for October IG Corporate new issuance or $52.804b vs. $91.68b.
  • There are now 8 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • Hospitality Properties Trust increased its 10-year Senior Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
  • Pacific Life Insurance Co. upsized its 50nc30 fixed-to-floating subordinated surplus notes new issue today to $750mm from $500mm at the launch.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 5 IG Corporate-only new issues was <18.00> bps.
  • BAML’s IG Master Index tightened 1bp to +103 vs. +104 tying its post-Crisis low set on 10/06.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.98.
  • Standard & Poor’s Investment Grade Composite Spread tightened 2bps to +146 vs. +148.  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 Thursday versus $13.8b on Friday.
  • The 10-DMA stands at $15.9b.

Global Market Recap 

  • U.S. Treasuries – Closed mixed & flatter. Yields & curve at levels not seen in many years.
  • Overseas Bonds – JGB’s unchanged to down. Gilts rallied 4-6 bps despite higher CPI.
  • Stocks – Unchanged (NASDAQ) to higher. S&P’s and Dow traded at all-time highs.
  • Overseas Stocks – Nikkei 21 year high. China closed mixed. Europe had a down day.
  • Economic – Import prices index higher. IP, Cap U & MP nothing special but NAHB was strong.
  • Overseas Economic – U.K. CPI YoY reached 3.0% – the highest since 2012.
  • Currencies – The USD outperformed 4 of the Big 5 & the 5th was unchanged (¥en).
  • Commodities – Energy small gains. Gold, copper & silver traded poorly.
  • CDX IG: -0.09 to 54.15
  • CDX HY: -1.70 316.16
  • CDX EM: -1.30 to 176.21

*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
10/16 – EU imposes total ban on oil & petroleum to NOKO. 10/6 – Russian news announces NOKO is preparing to test fire a missile capable of reaching the U.S. Coast. Recall Trump’s “calm before the storm” comment.  NOKO rumored to reach out to GOP to help “figure out Trump.” On 9/24 Trump warns NOKO leadership that if rhetorical threats continue its leaders “won’t be around much longer.” NOKO claims comment is an “Act of War” and that it now has the right to shoot down U.S. bombers “even outside of NOKO air space.” Beijing calls situation “grave.” 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.”
ELEVATED
“The EU”
Germany’s Angela Merkel re-elected to her 4th term but nationalist Alternative for Germany (AfD) party & other right wing parties gain to force a 6-party coalition government.  Worst performance for Merkel’s CDU and Christian Social Union party since 1949.  Immigration a source of tension. Right wing has a seat in German decision-making.

EU and Macron-Merkel coalition to squeeze U.K. re: BREXIT “divorce” bill. Companies prepping for messy BREXIT & 2 years of weak growth. EU wants UK to pay exit bill before any negotiations. UK withdrawal from EU takes place in 3/2019. Moody’s downgraded the UK on 9/22 to Aa2 from Aa1.

CAUTION
“U.S. political gridlock”
31 year old conservative Sebastian Kurz becomes the world’s youngest leader winning Austria’s Presidential election. He is expected to form a coalition with the resurgent far right anti-immigration party or Freedom Party. (See the “QC” dated 11-18-2015 and 11-30-2016).

10/16 – Catalonian Pres. Puigdemont defended right to claim to independence. Spain’s Pres. Rajoy can use Article 155 to suspend the Catalan gov’t. and take over in days. If not, Puigdemont’s diverse coalition may fall apart. Results of Catalonia’s Oct. 1st independence referendum vote posted 90% support for secession from Spain. National riot police cracked down at the voting booths injuring ~900 voters in the EU nation’s worst crisis in 40+ years since turning to democracy.

Steve Bannon’s war on the GOP’s “imperialist” political class targets Senate Majority Leader Mitch McConnell among others to unite Republicans behind Trump to get things done in Washington.

GOP tax overhaul plan would double deduction and create 3 tax brackets vs. 7. Bringing Corporate rate to 20% might return trillions of dollars to the U.S. that corps are keeping overseas.  Consensus GOP support to pass legislation still in doubt. Partisan politics.

Central banks shrinking balance sheets/higher volatility; low rates persist; slow inflation pick-up. On 9/26 Yellen admitted Fed inflation model may have been “mispecified” & “misguided.”

October MTD Terror Stats: Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. October MTD thru 10/16 – there were 43 terrorist attacks. Killing 541 people and wounding 638.

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

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). Economy sliding into abyss. Regional immigration issue w/many fleeing elsewhere.

MODERATE
“China”
China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. National Congress of the Chinese Communists Party held on Oct. 18th. Most decisions are made prior to it but it’s historically pivotal regarding leadership changes & reshuffling as elders retire.

Venezuela – Maduro dictatorship firmly in control. U.S. Tsy freezes Maduro family assets. Risk of VZ default. Isolated by int’l community. 4th largest exporter of oil to U.S. behind Canada (#1), Saudi Arabia (#2) & Mexico (#3). Economy sliding into abyss. Regional immigration issue w/many continuing to flee abroad. Increased domestic crime.

MARGINAL
“More about monetary policy than recession”
Fed signals 1 more rate hike in 2017; 3 in 2018. Dot plots unchanged for 2017 & ’18; lower for ’19 & longer-term. Hurricane’s Harvey, Irma and Maria appearing in economic data; “could” push hike to 2018. $4.5 trln b/s unwind begins at Oct. 31st mtg & absence of inflation are concerns. Bullish corp. cdt. forecast for 20yr maturities and out; widening front end spreads ahead; optimism re: tax reform could mean return to US of $1trln currently offshore.  Issuers not so worried about rates. . Shifts/adjustments in monetary policy are more of a concern than chance of a 2018 recession.

 

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

 

IG Corporate New Issuance This Week
10/16-10/20
vs. Current
WTD – $5.65b
October 2017 vs. Current
MTD – $52.804b
Low-End Avg. $24.21b 23.34% $90.96b 58.05%
Midpoint Avg. $25.25b 22.38% $91.68b 57.60%
High-End Avg. $26.29b 21.49% $92.42b 57.13%
The Low $15b 37.67% $110b 48.00%
The High $36b 15.69% $75b 70.41%

 

Have a great evening!

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

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

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/16
AVERAGES
WEEK 10/09
AVERAGES
WEEK 10/02
AVERAGES
WEEK 8/25
AVERAGES
WEEK 8/18
AVERAGES
WEEK 9/11
AVERAGES
WEEK 9/05
New Issue Concessions 0.00 bps <0.38> bps 1.18 bps 1.38 bps 0.62 bps 1.40 bps 2.12 bps
Oversubscription Rates 2.05x 3.03x 3.50x 3.31x 3.18x 3.27x 2.70x
Tenors 20.00 yrs 9.77 yrs 12.00 yrs 8.50 yrs 8.21 yrs 9.84 yrs 11.10 yrs
Tranche Sizes $1,000mm $906mm $608mm $645mm $483mm $674mm $731mm
Avg. Spd. Compression
IPTs to Launch
<15.00> bps <19.81> bps <18.40> bps <20.19> yrs <18.40> bps <18.91> bps <16.80> yrs

 

New Issues Priced

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DCM Market Anticipates $25b New IG Issuance Week of Oct 16
October 2017      Debt Market Commentary   

Quigley’s Corner 10.13.17 – Weekend Edition Debt Market Commentary; New IG Issuance Outlook: $25b Week of Oct 16

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

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

Best & Brightest-Fixed Income Syndicate Desks Opine on Next Week 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 October 4th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 2 issuers across 3 tranches totaling $4.007b.  The SSA space was quiet.

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 155.97% of this week’s syndicate midpoint average forecast or $32.559b vs. $20.875b.
  • MTD we’ve priced 51.43% of the syndicate forecast for October IG Corporate new issuance or $47.154b vs. $91.68b.
  • There are now 9 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points 

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 3 IG Corporate-only new issues was <12.00> bps.
  • BAML’s IG Master Index was unchanged at +103 vs. +104 and setting a new post-Crisis low.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.98.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at 1 bp to +147 vs. +148.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.1b on Thursday versus $17b on Wednesday and $16.9b the previous Thursday.
  • The 10-DMA stands at $16.7b.

 

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

 

IG Corporate New Issuance This Week
10/09-10/13
vs. Current
WTD – $32.559b
October 2017 vs. Current
MTD – $47.154b
Low-End Avg. $20.15b 161.58% $90.96b 51.84%
Midpoint Avg. $20.875b 155.97% $91.68b 51.43%
High-End Avg. $21.60b 150.74% $92.42b 51.02%
The Low $15b 217.06% $110b 42.87%
The High $26b 125.23% $75b 62.87%

 

The Best and the Brightest” Syndicate Forecasts and Sound Bites for 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. 19 of today’s respondents are in the top 20 and 21 are among 2017’s YTD top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. 23 are in the top 26. 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 81.44% 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. 

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 !!

Let’s dive right into this week’s primary market recap and data downloads –

North Korea still remains atop the geopolitical risk factors. The only news therein was yesterday’s announcement by the U.S. Geological Survey that it recorded an event at the sight of previous North Korean nuclear tests that measured 2.9 on the Richter scale implying it could have been triggered by further underground nuclear tests. Spain’s Catalon independence risks lowered from “Elevated” to “Cautious” as Puigdemont stopped short of declaring independence pushing instead for negotiations with Madrid. President Rajoy can invoke Article 155 to suspend the Catalan government and subsequently take over. If not, then Puigdemont’s coalition may fall apart. Trump’s shortlist for the new FOMC head has dwindled to 4 candidates – Yellen, Gary Cohn, Kevin Warsh and Jerome Powell. The market is looking at a 76% chance of a December rate hike off a bit from last week. Q3 earnings are underway with the big FIGs two-thirds done and with Goldman Sachs and Morgan Stanley announcing next Tuesday, October 17th.  Of the 4 six packs banks that already announced, should BAML, CITI, JPM or WFC not print today, next week’s volume could be quite robust.

Entering this morning’s Friday session –

  • The IG Corporate WTD total stands at $28.552b. We priced $7.677b more than this week’s average estimate of $20.875b or 36.78%.
  • MTD we have now priced 47.06% of the syndicate projection for October IG Corporates or $43.147b vs. $91.68b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,118.298b vs. $1,111.191b on October 13th, 2016 or $7.107b (0.64%) more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,380.756b vs. $1,406.275b on October 13th, 2016 or $25.519b (1.85%) less than the year ago total.

Entering this morning’s session, here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week.

o   NICS:  <0.70> bps

o   Oversubscription Rates: 3.12x

o   Tenors: 10.03 years

o   Tranche Sizes: $865mm

o   Spread Compression from IPTs to the Launch: <20.62> bps

 

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

 

  • Average NICs tightened 1.88 bps to an average <0.70> bps vs. 1.18 bps across this week’s 33 IG Corporate-only new issues.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.38-times to 3.12x vs. 3.50x.
  • Average tenors reduced by 1.97 years to an average 10.03 years vs. 12.00 years.
  • Tranche sizes grew by $257mm to $865mm vs. $608mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 33 IG Corporate-only new issues tightened by 2.22 bps to <20.62> bps vs. <18.40> bps.
  • Standard and Poor’s Investment Grade Composite Spreads was unchanged at +147.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning was unchanged at 0.98 week-on-week.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +103 vs. +104 setting a new post-Crisis low.
  • Spreads across the four IG asset classes was unchanged week-on-week at 1.75 bps measured against their post-Crisis lows.
  • The “BBB” asset class tied its post-Crisis low of +103.
  • The 19 major industry sectors also widened 0.68 bps to 6.00 vs. 5.32 bps also as measured against their post-Crisis lows.
  • Of note, the Banking, Insurance and Services sectors set new post-Crisis lows this week while Basic Industry, Capital Goods, Consumer Products and Transportation sectors tied their post-Crisis lows this week. In total 7 out of the 19 major industry sectors or 38%, set or tied post-Crisis lows.
  • For the week ended October 11th, Lipper U.S. Fund Flows reported an inflow of $2.415b into Corporate Investment Grade Funds (2017 YTD net inflow of $98.803b) and a net inflow of $966.777m into High Yield Funds (2017 YTD net outflow of $6.364b).
  • Taking a look at the secondary trading performance of this week’s 33 IG Corporate and 1 SSA new issues, of the 34 deals that printed, 19 tightened versus NIP for a 56.00% improvement rate, 10 widened (29.50%) and 5 were flat (14.50%).

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

  • IG Corps: $28.552b
  • All-in IG (Corps + SSA): $43.147b

And now ladies and gentlemen, as honored members of the “B&B” Hall of Fame 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

……..……and here are their responses:

  (more…)

VIX-ated by Market Data, Sep Payroll Numbers – IG Corporate Debt Issuer Outlook
October 2017      Debt Market Commentary   

Quigley’s Corner 10.06.17 – Weekend Edition; VIX is Vexing vs. Sep Payroll Numbers; IG Corporate Debt Issuance Outlook

Investment Grade US Corporate Debt New Issue Re-Cap – VIX

Today’s IG Primary & Secondary Market Talking Points

The “QC” Geopolitical Risk Monitor

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

Rates Trading Lab-Mischler’s Tony Farren Reports In re Sep Payroll Numbers Surprise

Best & Brightest-Fixed Income Syndicate Desks Opine on Next Week 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 October 4th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

 

Investment Grade New Issue Re-Cap

 

Today was a no print Friday in our IG dollar DCM.

Although next week is a holiday shortened one, credit spreads are tightening, the VIX set a new low yesterday and equity markets continue setting new all-time highs.  The CT10 is yielding 2.35% at mid-day today so post-Q3 earnings I expect to see a nice rush to print through the end of the year amidst future rate hike sentiment.  I have maintained that rates will increase at the top of 2018, which means at the January 31st FOMC meeting, however, that’s my take. “If” the meeting was held today, the chances of a Fed hike are currently 86%. Remember folks there is a LOT playing out in our new world order.  So, why is the VIX so low?  First, the VIX is a street standard index so I will continue to post it here in the “QC” until perhaps one day it loses its prestige with market participants.  Having said that, it IS the index most akin to gambling with one’s emotions.  Unlike a basket of stocks or an index in which we can strip out good apples from bad apples, reverse engineer etc., the VIX volatility index gages market sentiment more than other indices. It’s an indication that the market believes everything is good in the world of finance when in fact, the world is far from that. With myriad highly volatile global event risk factors playing out each and every day think about this – the Fed has NEVER had to unwind a $4.5 trillion balance sheet.  Europe has NEVER dealt with a BREXIT.  We have NEVER experienced the current high level threat of nuclear rhetoric and rapid development as exists with North Korea and that includes the throes of the Cold War during the early ‘60s. Scroll down to my “QC” Geopolitical Risk Monitor just below for some other developing items.  When one of the major events turns south the VIX will spike!

As for our IG dollar DCM, we do have some big news for next week namely – Citigroup and J.P. Morgan announce Q3 earnings on Thursday, October 12th and Bank of America and Wells Fargo release earnings on Friday the 13th.  Goldman Sachs and Morgan Stanley follow on Tuesday the 17th.  They are the smart money and they lead the way for issuance each quarter.  They have more to do before 2017 is a wrap and I strongly suspect we’ll see hefty cumulative issuance from the six-pack.  The average estimate for next week’s IG Corporate only new issue volume is $20.875b. The high estimate was $26b from one desk and five others said $15b either flat out or as part of a range.

All 24 syndicate desks in my weekly “QC” survey responded once again and they are waiting below to make an early exit ahead of traffic on this start of a welcome three-day weekend.  Please scan through the below recaps and I promise you they’ll wait for you with their comments and numbers for next week before the well-deserved Columbus Day weekend!  So, sit back, relax and enjoy this Best & Brightest edition of the “QC.”

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 77.22% of this week’s syndicate midpoint average forecast or $14.595b vs. $18.90b.
  • MTD we’ve priced 15.92% of the syndicate forecast for October IG Corporate new issuance or $14.595b vs. $91.68b.
  • There are now 10 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index was unchanged at +104 tying its post-Crisis set on Wednesday and that previously dated back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.98 vs. 0.99.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bps to +147 vs. +148.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.9b on Thursday versus $20.3b on Wednesday and $18.9b the previous Thursday.
  • The 10-DMA stands at $17.6b.

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
North Korea
10/6 – Russian news announces NOKO is preparing to test fire a missile capable of reaching the U.S. Coast. Recall Trump’s “calm before the storm” comment.  NOKO rumored to reach out to GOP to help “figure out Trump.” On 9/24 Trump warns NOKO leadership that if rhetorical threats continue its leaders “won’t be around much longer.” NOKO claims comment is an “Act of War” and that it now has the right to shoot down U.S. bombers “even outside of NOKO air space.” Beijing calls situation “grave.” On 9/19 Trump spoke before UN referring to Kim as “Rocket Man on a suicide mission.” Trump says “if Kim continues to threaten the U.S., allies and the world, we will have no choice but to totally destroy North Korea.”
ELEVATED
“The EU”
-Regional parliament meets 10/9 defying a Spanish Constitutional Court suspension.  Results of Catalonia’s Oct. 1st independence referendum vote posted 90% support for secession from Spain. National riot police cracked down at the voting booths injuring nearly 900 voters in what is the EU nation’s worst territorial crisis since turning to democracy 40+ years ago. Catalan leadership is divided on rush to independence given potential civil unrest and economic consequences. Germany’s Angela Merkel re-elected to her 4th term but nationalist Alternative for Germany (AfD) party & other right wing parties gain to force a 6-party coalition government.  Worst performance for Merkel’s CDU and Christian Social Union party since 1949.  Immigration a source of tension. Right wing has a seat in German decision-making.

-EU and Macron-Merkel coalition to squeeze U.K. 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. Moody’s downgraded the U.K. to Aa2 from Aa1.

CAUTION
“U.S. political gridlock”
GOP tax overhaul plan would, in their view, double deduction and create 3 tax brackets vs. 7. Bringing Corporate rate to 20% might return trillions of dollars to the U.S. that corps are keeping overseas.  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.

-Central banks shrinking balance sheets/higher volatility; low rates persist; slow inflation pick-up. On 9/26 Yellen admitted Fed inflation model may have been “mispecified” & “misguided.”

-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.

-Las Vegas mass shooting on Sunday 10/01 is the worst in U.S. history killing 58 and 515 injured.

-October MTD Terror Stats: Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. October MTD there were 13 terrorist attacks. Killing 64 people and wounding 72.

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

-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). Economy sliding into abyss. Regional immigration issue w/many fleeing elsewhere.

-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.

-Mueller’s continuing FBI probe into Trump.

MODERATE
“China”
-China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. National Congress of the Chinese Communists Party held on Oct. 18th. Most decisions are made prior to it but it’s historically pivotal regarding leadership changes & reshuffling as elders retire.
MARGINAL
“2018 U.S. Recession”
-Fed signals 1 more rate hike in 2017; 3 in 2018. Dot plots unchanged 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 trln b/s unwind begins at Oct. 31st mtg & absence of inflation are concerns.

 

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

 

IG Corporate New Issuance This Week
10/02-10/06
vs. Current
WTD – $14.595b
October 2017 vs. Current
WTD – $14.595b
Low-End Avg. $17.54b 83.21% $90.96b 16.05%
Midpoint Avg. $18.90b 77.22% $91.68b 15.92%
High-End Avg. $20.25b 72.07% $92.42b 15.79%
The Low $10b 145.95% $110b 13.27%
The High $26b 56.13% $75b 19.46%

 

Rates Trading Lab- Mischler’s Tony Farren Reports In

Economic data this week, outside of payrolls, has been very good (details below). Treasuries have traded poorly over the last four weeks. The 10yr is currently trading at 2.40% (98-22) the level where buyers are expected to step in. The 2yr (1.524%) traded at a yield not seen since 2008. Considering the sell off over the last four weeks in USTs it makes sense for the shorts to start to cover some of their positions at current levels. Remember the longs basically did not exist in this week’s JPM Survey. I expect the 2.40% in 10’s to hold today before the long weekend (Columbus Day on Monday).

Looking ahead at factors that could impact the Treasury market –

  • What did President Trump’s comment last night “calm before the storm” mean? (North Korea?)
  • What happens between Madrid and Catalonia?
  • Does the GOP deliver on Tax Reform?
  • Do the U.S. and Global stock market rallies continue or take a breather?
  • Who does President Trump select as Chair of the FOMC?
  • Fed-speak will be active again next week
  • The FOMC Minutes from the Sept 19-20 Meeting will be released on Wednesday.
  • Next week’s Treasury supply will be a challenge for the UST market.

        ($56 billion in 3’s, 10’s & 30’s next Wednesday & Thursday)

  • PPI will be released on Thursday.
  • CPI will be released on Friday.
  • Retail sales will be released on Friday.
  • Tropical Storm Nate could impact the U.S. on Sunday as a hurricane.

As for recent economic data, it seems too good to be true with Payrolls the exception. Is the theory that hurricanes are a short term negative for the economy wrong? This week’s data makes that a fair question to ask –

  • ISM manufacturing the strongest since 2004 (Mon).
  • ISM non-manufacturing the strongest since 2005 (Weds).
  • Vehicle sales this month were very strong (Tues).
  • Unemployment Rate has not been lower since Dec 2000.
  • The U6 rate has not been lower since May 2007.
  • Average hourly earnings MoM has not been higher since June 2007.
  • Average hourly earnings YoY has not been higher since 2009.
  • The Participation Rate has not been higher since September 2013.
  • Household employment and labor force both had sizeable gains.

Here are the negatives from this morning’s Employment Report –

  • Payrolls were negative for the first time since August 2010.
  • The two-month revision for payrolls was <38k>.
  • Average weekly hours was unchanged.

-Tony Farren

 

The Best and the Brightest” Syndicate Forecasts and Sound Bites for 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. 20 of those participants are among 2017’s YTD top 21 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 81.59% 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. 

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 !!  More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! -RQ

Let’s dive right into this week’s primary market recap and data downloads as a segue to our syndicate desk canvass as to what is in expected next week i.e. DCM market and new investment grade corporate debt issuance.

North Korea remains global event risk factor number 1 with Kim Jong-Un’s regime making no progress this week toward negotiating with the U.S.  When NOKO is dormant it  means something is brewing and/or amiss.  Stay thirsty my friends!! Spanish Catalonia adds more EU suspense to the mix with 90% support for secession from Spain. The independence referendum, in defiance of the Spanish Constitutional Court, erupted in violence with Spanish National police injuring over 900 voters in attempts to prevent citizens from voting. Catalonia’s regional parliament meets on Monday, October 9th in defiance of the Spanish Court’s suspension.  GOP hopes of tax reform legislation may not appear until early in 2018 and it remains to be seen what support it has with opposition coming from within the party. Earlier this week we saw the impact of hurricanes Harvey, Irma and Maria on Vehicle Sales while this morning’s numbers confirm how skewed they will be going forward.  Clearly the hurricanes reduced the NFP number this morning as unemployment fell while the labor force participation rate rose. Any weak number is chalked up to storms while strength is attributed to a resilient economy. Go figure!

Entering this morning’s Friday session –   

  • The IG Corporate WTD total stands at $14.595b. We priced $4.305b less than this week’s average estimate of $18.90b or 77.22%.
  • MTD we have now priced 15.92% of the syndicate projection for October IG Corporates or $14.595b vs. $91.68b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,089.746b vs. $1,088.336b on October 6th, 2016 or 0.13% more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,349.204b vs. $1,374.92b on October 29th, 2016 or 1.91% less than the year ago total.

Entering this morning’s session, here are the five key primary market driver averages from the 28 IG Corporate-only deals that priced this week.  

  • NICS:  1.18 bps
  • Oversubscription Rates: 3.50x
  • Tenors: 12.00 years
  • Tranche Sizes: $608mm
  • 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 0.20 bps to an average 1.18 bps vs. 1.38 bps across this week’s 28 IG Corporate-only new issues.
  • Over subscription or bid-to-cover rates, the measure of demand, increased by 0.19-times to 3.50x vs. 3.31x. 
  • Average tenors extended by 3.50 years to an average 12.00 years vs. 8.50 years.
  • Tranche sizes reduced by $37mm to $608mm vs. $645mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 28 IG Corporate-only new issues widened by 1.79 bps to <18.40> bps vs. <20.19> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +147 vs. +151 bps.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 5 bps to 0.98 vs. 1.03 bps. 
  • Week-on-week, BAML’s IG Master Index tightened 4 bps to +104 vs. +108 setting a new post-Crisis low dating back to July 2007. 
  • Spreads across the four IG asset classes tightened 2.50 bps to 1.75 bps vs. 4.25 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors also tightened 4.21 bps to 5.32 vs. 9.53 bps also as measured against their post-Crisis lows.
  • For the week ended October 4th, Lipper U.S. Fund Flows reported an inflow of $3.770b into Corporate Investment Grade Funds (2017 YTD net inflow of $96.388b) and a net inflow of $645.473m into High Yield Funds (2017 YTD net outflow of $7.331b).
  • Taking a look at the secondary trading performance of this week’s 24 IG Corporate and 4 SSA new issues, of the 28 deals that printed, 20 tightened versus NIP for a 50% improvement rate, 3 widened (10.50%) and 5 were flat (18.00%).
  • The VIX closed yesterday at a new low of 9.17 (Amazing!) while issuance is running neck and neck with last year’s record pace given low rates and tightening spreads.  7 of the 19 IG sector spreads set or equaled post Crisis lows this week and 2 of the 4 IG asset classes did the same!

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

  • IG Corps: $14.595b
  • All-in IG (Corps + SSA): $26.475b

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?” 

As always, I hope the daily “QC” and my data downloads are helpful and informative to you.  Without your participation this widely read “QC” survey edition can’t get done.  I greatly appreciate your meaningful sound bites that bring your numbers and ranges to life. A LOT of Fortune Tsy teams read this every day and they love it!  I consistently receive positive feedback about the “QC” from them directly.  Wall Street fixed income syndicates desks that contribute to this column are directly contributing to a much bigger picture, while also helping the nation’s oldest Service Disabled Veteran broker-dealer build in a more meaningful and sustainable way.

Please know that on each and every new issue, the guy-in-the-corner is ALWAYS be in YOUR corner on deal day! If an issuer asks you who some of the best diversity firms are, my hope is that you’ll mention Mischler Financial and the guy-in-the-corner.  Our distribution is high quality, prolific and consistent. On deal day, we perform enough to influence your bid-to-cover rates with REAL unpadded orders. Besides where else can you get an award winning daily fixed income DCM piece for FREE? But most of all, we have a great certification as the nation’s oldest Service Disabled Veteran broker-dealer. We demonstrate remarkable authenticity here at Team Mischler. Our commitment to our demographic is our foundation. We donate 10% of our earnings to heavily-vetted veteran foundations and non-profits to help our active and veteran service men and women and their families. It’s all well worth it and I hope you think so too!

Thank you and wishing you and yours a great long Columbus Day weekend! -Ron”

The “Best and the Brightest” in Their Own Words

 

……..……and here are their responses:

(more…)

Investment Grade Corporate Debt Issuers of the Day-Mischler Comment
September 2017      Debt Market Commentary   

Quigley’s Corner 09.25.17  – IG Issuers of the Day: AEP, BX, HPP, NSANY

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

The “QC” Geopolitical Risk Monitor

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

SNEAK PREVIEW : “Thank You For Your Service”

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 20th

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 dollar DCM hosted 7 issuers across 13 tranches totaling $6.75b.  The SSA space was quiet with two deals slated for tomorrow’s business.

Equity markets were in the red today due to mounting tensions between the U.S. and North Korea, concern over historic gains by nationalist parties in German elections forcing Angela Merkel to form a coalition government, and increasing jitters over whether the FED hikes rates one more time in 2017 or not.

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 35.14% of this week’s syndicate midpoint average forecast or $6.75b vs. $19.21b.
  • MTD we’ve priced 105.02% of the syndicate forecast for September or $118.096b vs. $112.45b.
  • There are now 7 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • Hudson Pacific Properties LP upsized today’s 10-year Senior Notes new issue to $400mm from $300mm 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 12 IG Corporate-only new issues was <18.29> bps. Including today’s IG-rated Federal Realty $25 par preferred, the average compression of today’s 13 new issues was <17.85> bps.
  • 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 $13.5b on Friday versus $17.5b on Thursday and $12.7b the previous Friday.
  • The 10-DMA stands at $17.3b.

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
North Korea
On 9/24 Trump warns NOKO leadership that if rhetoric threats continue its leaders “won’t be around much longer.” NOKO responds saying it has the right to shoot down U.S. bombers “even outside of NOKO air space.” Beijing termed calls situation “grave.” 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 9/03 NOKO detonated a 100 kiloton hydrogen bomb 5-times more powerful than that dropped on Nagasaki causing a 6.3 magnitude earthquake. Head of IAEA  said hydrogen bomb test is “new dimension of global threat” to the world. On Tuesday, 8/29 NOKO 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. 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.
ELEVATED Germany’s Angela Merkel re-elected to her 4th term but nationalist Alternative for Germany (AfD) party & other right wing parties gain to force a 6-party coalition government.  Worst performance for Merkel’s CDU and Christian Social Union party since 1949.  Immigration a source of tension. Right wing has a seat in German decision-making.

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. 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. September MTD there were 87 terrorist attacks. killing 347 people and wounding 581.

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
9/25-9/29
vs. Current
WTD – $6.75b
September 2017 vs. Current
WTD – $118.096b
Low-End Avg. $18.17b 37.15% N/A N/A
Midpoint Avg. $19.21b 35.14% $112.45b 105.02%
High-End Avg. $20.25b 33.33% N/A N/A
The Low $10b 67.50% $100b 118.096%
The High $30b 22.50% $125b 94.48%

Sneak Preview of “Thank You For Your Service”

 

Friday, October 9th is Veteran’s Day here in the U.S., and in recognition of this important day, I thought it fitting to share a sneak preview of an upcoming film that is getting a lot of buzz in the industry.
THANK YOU FOR YOUR SERVICE profiles a group of U.S. soldiers returning from Iraq who aer struggling to integrate back into family and civilian life, while living with the memory of a war that threatens to destroy them long after they’ve left the battlefield. The film stars Miles Teller and Haley Bennett.  The film is the directorial debut of Jason Hall, a graduate of my alma mater, the University of Southern California’s School of Cinematic Arts or “SCA” and is based on the non-fiction book by David Finkel and adapted for the screen by Finkel and Hall.  The Universal Pictures production opens in theatres on Wednesday, October 27th.  As an SCA Alum, I am doing my part to get the word out from my corner desk here at our nation’s oldest Service Disabled Veteran broker dealer. Considering this past weekend’s controversies surrounding the NFL, rights, freedoms and respect of our flag, country, service men and women and first responders, I thought that perhaps we should all make it a point to see “Thank You For Your Service” at our local theatres when it’s released.  The ensemble cast tackles myriad veteran-focused situations, disorders and struggles pertinent to today’s public discourses.  The film overlays nicely with the Service Disabled Veteran mandate that we are all dedicated to here each and every day at Mischler Financial.

Here’s the preview:

 

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

 

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

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/18
TUES.
9/19
WED.
9/20
TH.
9/21
FRI.
10/22
AVERAGES
WEEK 8/18
AVERAGES
WEEK 9/11
AVERAGES
WEEK 9/05
AVERAGES
WEEK 8/28
AVERAGES
WEEK 8/21
AVERAGES
WEEK 8/14
New Issue Concessions 1.50 bps <0.39> bps 0.50 bps 0.75 bps N/A 0.62 bps 1.40 bps 2.12 bps 1.00 bp 0.72 bps 4.37 bps
Oversubscription Rates 3.10x 3.25x 2.39x 3.58x N/A 3.18x 3.27x 2.70x 2.95x 3.03x 3.25x
Tenors 8.14 yrs 11.79 yrs 3.30 yrs 15.08 yrs N/A 8.21 yrs 9.84 yrs 11.10 yrs 5.17 yrs 9.86 yrs 10.26 yrs
Tranche Sizes $414mm $531mm $281mm $625mm N/A $483mm $674mm $731mm $575mm $352mm $1,023mm
Avg. Spd. Compression
IPTs to Launch
<17.25> yrs <21.39> bps <14.75> bps <17.83> bps N/A <18.40> bps <18.91> bps <16.80> yrs <15.00> bps <19.67> bps <17.79> bps

 

New Issues Priced

(more…)

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

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