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

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

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

 

Investment Grade New Issue Re-Cap

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

Syndicate IG Corporate-only Volume Estimates For January

Global Market Recap

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

The “QC” Geopolitical Risk Monitor

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending January 11th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

  

Investment Grade New Issue Re-Cap

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

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

Today’s IG Primary & Secondary Market Talking Points 

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

 

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

 

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

 

Global Market Recap

 

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

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

-Tony Farren

 

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

 

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

 

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

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

 

New Issues Priced

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

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

 

IG

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

 

SSA

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

 

Indexes and New Issue Volume              

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

*Denotes new all-time high or tight.

                                                                                                                                               

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

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

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

 

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

     

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

 

IG Credit Spreads by Rating

(more…)

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

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

 

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

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

Syndicate IG Corporate-only Volume Estimates For January

Global Market Recap

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

Key FOMC Dates for 2018

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

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

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending December 27th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

 

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

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

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates For January

 

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

 

Global Market Recap

 

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

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

Updates are highlighted in BOLD print!

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Cybercrime, ransomware, viruses & hacking.

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

Key FOMC Dates for 2018

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

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

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

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

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

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

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

 

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

 

2018 Voting Line-Up:

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

Other:

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

-Tony Farren

 

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

 

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

 

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

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

 

New Issues Priced

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

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

 

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

Investment Grade Credit Spreads at Post Financial Crisis Lows

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending December 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

Below is the opening extract from Quigley’s Corner aka “QC”  Wednesday December 20 2017 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC is one of three distinctive market comment pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline.

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

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

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

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

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

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

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

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

Today’s IG Primary & Secondary Market Talking Points  

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

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

 

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

 Global Market Recap

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

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

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

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

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

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

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

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

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

·        Cybercrime, ransomware, viruses & hacking.

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

 

(more…)

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

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

 

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

Looking Ahead to Potential FIG Issuance in January 2018

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending December 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

Below is the opening extract from Quigley’s Corner aka “QC”  Monday December 18 2017 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC is one of three distinctive market comment pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline.

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

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

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

 

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

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

Looking Ahead to Potential FIG Issuance in January 2018

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

Take it away Bobby E. –

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

Bank of America has $3b maturing Jan. 11

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Today’s IG Primary & Secondary Market Talking Points

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

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

(more…)

Investment Grade Corporate Debt Issuance Cools
December 2017      Debt Market Commentary   

Quigley’s Corner 12.08.17 : IG Corporate Debt Issuers Standing Pat

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

The Best and the Brightest” Investment Grade Corporate Syndicate Forecasts and Sound Bites for Next Week & November

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

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

New Issues Priced

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

Indexes and New Issue Volume

Rates Trading Lab

Lipper Report/Fund Flows – Week ending Dec 6th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases 

 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM produced zero…….zilch……….nada. It was a December Friday goose egg as they say! The geopolitical risk monitor featured quite a bit of fluid news this week so be sure to review the QC monitor by scrolling below.  Also, the “Best and the Brightest” are back this week albeit there is not much activity lining up to get done. Next week looks like a light front-loaded week of between $5-10b. The average estimate of the 25 top syndicate desks for next week’s IG Corporate only issuance is $7.58b. The FOMC holds its final meeting of 2017 next Tuesday and Wednesday the 12th and 13th with overwhelming expectations for a rate hike that has long been baked into the market………..and despite the absence of inflation.  It looks like December issuance will come to an end a few days earlier than is the historical average with a chance of posting the lowest December IG Corporate issuance volume since $21.10b printed the same week back in 2008.  Team B&B are all waiting below for you to take in their forecasts and comments.  Enjoy the read.

 

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 98.31% of this week’s syndicate midpoint average forecast or $18.434b vs. $18.75b.
  • MTD we’ve priced 55.86% of the syndicate forecast for December IG Corporate new issuance or $18.434b vs. $33b.
  • There are now 7 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index was unchanged at +102.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.97.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +143.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16b on Thursday versus $17.9b on Wednesday and $23.6b the previous Thursday.
  • The 10-DMA stands at $16b.

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

IG Corporate New Issuance This Week
12/04-12/08
vs. Current
WTD – $18.434b
December 2017 vs. Current
MTD – $18.434b
Low-End Avg. $17.50b 105.34% $31.33b 58.84%
Midpoint Avg. $18.75b 98.31% $33b 55.86%
High-End Avg. $20.00b 92.17% $34.67b 53.17%
The Low $15b 122.89% $25b 73.74%
The High $25b 73.736% $28b 65.84%

 

Global Market Recap 

  • U.S. Treasuries – Closed mixed with no move greater than 0.7 bps.
  • Overseas Bonds – JGB’s unchanged to better. Bunds & Gilts small red. Peripherals more green.
  • 3mth Libor – Set at highest yield (daily occurrence) since December 2008 (1.54878%).
  • U.S. Stocks – Higher heading into the last hour.
  • Overseas Stocks – Global stock rally.
  • U.S. Economic – Very good U.S. Employment Report with tame average hourly earnings.
  • Overseas Economic – China (trade) & Japan (GDP) were strong. Europe data was mixed.
  • Currencies – USD was better bid vs. all of the Big 5.
  • Commodities – Crude oil ended the week with 2 good days. Gold struggled all week.
  • CDX IG: -0.67 to 50.93
  • CDX HY: -4.47 to 316.39
  • CDX EM: -1.37 to 177.35

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

Updates are in BOLD print!

 

Risk Level/Main Factor Geopolitical Risks
HIGH +
“North Korea”
·        12/05 – U.S. reveals CHAMPs or powerful microwave pulses emitted from missiles launched from B-52s that can disable NOKO’s electronic missile and launching systems. 12/02 – WH Nat’l. Security Advisor H.R. McMaster says “possibility of war with NOKO increases every day.” 11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. SOKO Olympics begin Friday 2/2018 thru Sunday 2/25. 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
ELEVATED
“MENA and
Trumponomics and Beltway Dysfunction”
·        12/06 – Pres. Trump formally recognizes Jerusalem as Israel’s capital. Plans to move U.S. embassy there from Tel Aviv. Could take three years. Palestinian leader Mahmoud Abbas and Jordan’s King Abdullah warn Trump of dangerous consequences for stability and security in the Middle East. Turkey’s Erdogan threatens to cut ties with Israel calling the move a “red line for all Muslims” and decision puts “world and region in a ring of fire.” 12/04 – Former Yemeni President Ali Abdullah Saleh assassinated in Sanaa by former allied and Iranian-backed Houthis.  Yemen, like Lebanon are sights of proxy wars fought between Saudi Arabia and Iran. 11/28 – Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group.  Beirut, is proving ground for Saudi-Iranian proxy wars. Crown Prince Mohammed bin Salman’s plans sweeping with “Vision 2030” to wean KSA off oil. Saudi inner players arrested in anti-corruption probe involving multi-billion dollar “settlements.” Both Trump and KAS share strong views of an anti-nuclear Iran. KSA needs oil above $81 to break even. Mideast tension expected to boost the price of oil.

·        12/01 – U.S. Senate GOP passes the most sweeping tax overhaul in over 30 years in a 51-49 vote. This is the biggest tax bill and tax cuts in U.S. history. As promised, President Trump wants to sign the bill into law before Christmas.

·        12/01 – Former Trump national security advisor Michael Flynn pleaded guilty to lying to the FBI about contacts with Russia’s ambassador in 12/2016. This places a senior Trump insider in a cooperative position for the investigators.  Then again, how much credibility does a liar have?

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

CAUTION
“Russia, Europe,
Uranium 1 & Terror”
·        12/06 – Enjoying an 82%+ Russian approval rating, Vladimir Putin announced he will seek a 4th term as President. Serving out a 4th 6-year term would mean 24 years at the top  including P.M. posts. Only Stalin ruled longer at 29 years. Putin moves 2018 election date to 3/18 – the 4th anniversary of annexation of Crimea….in response to Olympic Committee ruling?

·        12/05 – Russian team barred from 2018 Seoul Winter Olympics. Olympic Committee will allow Russian athletes to compete who meet stringent drug testing but they will be referred to as “athletes from Russia” in which no Russian flag can fly, no Russian anthem played and no Russian gov’t. officials can attend.

·        12/03 – Germany’s Social Democrats (Socialist Party) urged by French President Macron to from ruling coalition with Merkel’s conservative bloc.  Following the 11/20 collapse of the “Jamaica coalition” negotiations in the worst crisis of Merkel’s 12yr chancellorship.  New elections as early as next spring may still be the only solution. Sources of tension are immigration, taxation & the environment. Right wing has seat in German decision-making and wants new elections.

·        12/08 – Britain and Ireland agree on Irish border regulations mainly acknowledging there will be no border controls on the Irish Sea. It clears the way for a second a phase of talks with the EU. Negotiators reached agreement in principle on the BREXIT “divorce bill” earlier in the week in the €45b to €55b range down from €60bn that the EU initially demanded. Agreement promotes further December & January negotiations. U.K. withdrawal from EU takes place in 3/2019.

·        Atty. Gen. Sessions raised the possibility of a special counsel appointment to investigate the Uranium One Deal involving the Clinton Foundation in which a Russian company took control of 20% of entire supply of U.S. uranium supply used to make nuclear weapons in exchange for Clinton Foundation donations. In a decree on March 20, 2008 Russia’s Vladimir Putin, abolished the Federal Agency for Nuclear Power. The public corporation Rosatom (he owns) was vested with the authority to implement on behalf of the Russian Federation the rights of shareholders in the joint-stock companies in the nuclear energy industry. In 2013 Rosatom retained full ownership. Matter of U.S. national security.

·        December MTD Terror Stats a/o 12/08: 21 terrorist attacks; 114 dead; 187 wounded.

MODERATE
“China”
·        China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. National Congress of the Chinese Communists Party confirms Xi Jinping as its most powerful leader since Mao. Xi loyalists make up inner sanctum of Chinese politics into the next decade. 6% GDP in 2018 will be difficult.

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

·        Spain’s Rajoy announces snap elections on Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Former Catalan Pres. Puigdemont to appear in court 11/17. On 11/02: 8 Catalan gov’t. members jailed in Spain for role in independence rebellion & sedition.

·        Italian elections in March 2018.

MARGINAL
“2018 US Recession?”
·        12/05 – Senate committee approved Jay Powell nomination to replace Janet Yellen in a 22-1 vote.

·        12/08 – FOMC Meeting Tues/Wed Dec. 12th/13th. Rate hike baked in despite absence of inflation. Bearish flattening signals danger for the U.S. economy. Recent bullish flattening has completely disregarded the absence of inflation. The balance sheet or “b/s” normalization program is proceeding and will remain highly incremental. Fed signals 1 more rate hike in 2017 (December12/13 FOMC); 3 in 2018. Dot plots are unchanged for 2017 & ’18; lower for ’19 & longer-term. Shifts/adjustments in monetary policy outweigh chance of a 2018 recession.

 

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

 

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. 20 of today’s respondents are in the top 21 while 23 are among 2017’s YTD top 27 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 81.38% 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.  Below is opening to this week’s survey. 

 “Welcome to Friday. In preparation for takeoff, please ensure all negative attitudes are properly stowed. On behalf of QC Air welcome aboard. I expect sunshine and good intel today for our trip. Enjoy the ride and thanks for flying QC Air.

This week’s geopolitical recap: 

The FOMC meets next Tuesday and Wednesday the 13th and 14th.  Over 94% believe the Fed will hike rates which is already baked in. The nation’s largest Tax Reform bill in over 30 years may in fact get signed by President Trump by Christmas. The situation in North Korea remains the lone high risk event on the global risk monitor despite the U.S. claim to possess powerful CHAMPS microwave pulse technology that can disable NOKO’s missile launch systems. The situation in MENA has been upgraded to elevated with Trump’s announcement that the U.S. formally recognizes Jerusalem as Israel’s capital following warnings from Jordanian, Palestinian and Turkish leadership among others that it will destabilize the region. Yemeni President Ali Saleh was assassinated and Prince Mohammed bin Salman’s “Vision 2030” resulted in multi-billion dollar anti-corruption settlements with members of the house of Saud and major KAS players. MBS, as the Saudi Prince is commonly known, also purged rivals in order to anchor his leadership and future plans. Germany’s Social Democrats agreed to pursue preliminary talks to form a coalition government with Merkel’s conservative CDU party and will include a third CSU party. German political stability is needed to cement the EU’s keystone economy. Ireland and Britain are near an accord on future Irish border regulations that would help promote an agreement in principle on the BREXIT “divorce bill.”  Leveraging his 85% approval rating at home, Vlad Putin announced he will seek a 4th 6-year term as President of Russia that would make it the second longest tenure to Stalin’s 29 year reign. Putin also moved the Russian election to coincide with the 4th year anniversary of its annexation of Crimea, possibly in reaction to the prior day’s Olympic Committee ruling that bars Russian officials, flags and anthem at the 2018 Seoul Olympics in which Russian athletes must also agree to stringent drug testing.       

Entering this morning’s Friday session –  

  • The IG Corporate WTD total stands at $18.434b. We priced $316mm less than this week’s average midpoint estimate of $18.75b or 98.31%.
  • MTD we priced 55.86% of the syndicate projection for November IG Corporates or $18.434b vs. $33b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,325.402b vs. $1,281.017b on December 8th, 2016 or $44.385b (3.46%) more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,640.543b vs. $1,620.951b on December 8th, 2016 or $19.592b (1.21%) more 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:  1.62 bps  

o   Oversubscription Rates: 3.18x

o   Tenors: 10.69 years

o   Tranche Sizes: $576mm

o   Spread Compression from IPTs to the Launch: <16.34> 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 widened by 1.11 bps to an average 1.62 bps vs.0.51 bps across this week’s 33 IG Corporate-only new issues displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.13x to an average 3.18x vs. 3.31x. 
  • Average tenors narrowed by 0.74 years to an average 10.69 years vs. 11.43 years.
  • Tranche sizes decreased by $72mm to $576mm vs. $648mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 1.26 bps to <16.34> bps vs. <17.60> bps.
  • Standard and Poor’s Investment Grade Composite Spreads was unchanged at +143.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightned 1 bp to 0.97 vs. 0.98 week-on-week. 
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +102 vs. +103. 
  • Spreads across the four IG asset classes tightened 0.25 bps to 3.00 bps vs. 3.25 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.68 bps to 6.32 bps from 7.00 bps as measured against their post-Crisis lows.
  • For the week ended December 6th, Lipper U.S. Fund Flows reported an inflow of $622.386b into Corporate Investment Grade Funds (2017 YTD net inflow of $116.331b) and a net inflow of $217.412m into High Yield Funds (2017 YTD net outflow of $12.633b).
  • Taking a look at the secondary trading performance of this week’s 33 IG Corporate and 6 SSA new issues, of the 39 deals that printed, 23 tightened versus NIP for a 59.00% improvement rate, 11 widened  (28.25%) and 5 were flat 12.75%).

 

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

  • IG Corps: $18.434b
  • All-in IG (Corps + SSA): $24.684b 

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! 

 

The “Best and the Brightest” in Their Own Words

 

……..……and here are their responses:

(more…)

Bearish Flattening, Tax Reform: DCM Unscathed; Rinse Repeat
November 2017      Debt Market Commentary, Recent Deals   

Quigley’s Corner 11.28.17 Bearish Flattening; Tax Reform; US Corporate Debt Capital Markets Unscathed; Rinse Repeat

 

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

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

Rates Trading Lab

New Issues Priced: Synchrony Financial and Deutsche Bank AG New York 

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending Nov 22

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 8 issuers across 8 tranches totaling $4.25b.  The big story for our nation’s oldest Service Disabled Veteran broker dealer – Mischler Financial Group, Inc., is that we were named a Co-Manager on the day’s two largest issues – Deutsche Bank AG New York Branch’s $1bn 15NC10 fxd-to-fxd Reset Sub Tier 2 Notes and Synchrony Financial’s 10-year Senior Notes new issue.  Those two transactions also just happened to account for 47% of today’s IG Corporate issuance!  You know what that means? Both DB and SYF are today’s Deals-of-the-Day which I will get to in alphabetical order following a review of an incredible day for markets and geopolitical events risk factors that I strongly advise you stay tuned to.

The S&P 500, the DOW and Nasdaq all closed at new all-time highs.

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 47.81% of this week’s syndicate midpoint average forecast or $13.875b vs. $29.02b.
  • MTD we’ve priced 109.03% of the syndicate forecast for October IG Corporate new issuance or $105.079b vs. $96.38b.
  • There are now 11 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • IHS Markit Ltd. (Ba1/BBB) bumped up its 8.25-year 144a/REGS Senior Notes new issue this afternoon to $500mm from $400mm at the launch and at the tightest side of guidance.
  • Physicians Realty LP increased today’s 10-year Senior Notes new issue to $350mm from $300mm at the launch and at the tightest side of guidance.
  • Life Storage LP upsized its 10-year Senior Notes new issue today to $450mm from $400mm at the launch and at the tightest side of guidance.
  • BAML’s IG Master Index was unchanged at +104.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.99.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +145.  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 Monday versus $1.7b on Friday and $15.7b the previous Monday.
  • The 10-DMA stands at $14b.

 

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

 

IG Corporate New Issuance This Week
11/27-12/01
vs. Current
WTD – $13.875b
November 2017 vs. Current
MTD – $105.079b
Low-End Avg. $27.72b 50.05% $95.28b 110.28%
Midpoint Avg. $29.02b 47.81% $96.38b 109.03%
High-End Avg. $30.32b 45.76% $97.48b 107.80%
The Low $25b 55.50% $75b 140.11%
The High $38b 36.51% $130b 80.83%

 

Global Market Recap

 

  • U.S. Treasuries – Unchanged (30yr) to small losses (balance of curve) in a choppy session.
  • Overseas Bonds – JGB’s mixed. EU core & semi core little changed. Peripherals more green.
  • 3mth Libor – Set at the highest level since December 2008 (1.47882%).
  • U.S. Stocks – Big rally to all-time highs.
  • Overseas Stocks – China rallied. Nikkei & HS tiny losses. Winning day in Europe.
  • U.S. Economic – Mixed data today but the strong data was very, very strong.
  • Overseas Economic – Not a factor today but will be tomorrow.
  • Currencies – USD outperformed 4 of the Big 5. Solid rally for the DXY Index.
  • Commodities – Down day from crude oil, gold, cooper, silver, etc. Strong session for natural gas.
  • CDX IG: -0.89 to 52.65
  • CDX HY: -4.71 to 317.68
  • CDX EM: -1.15 to 179.38

*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”
11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. This comes 26 days after SOKO’s 11/02 NIS warning of activity at a NOKO nuke facility and expectations of a launch. Situation is “dire” Action needed = “Exclusive “QC” source. SOKO Olympics begin Friday 2/2018 and end Sunday 2/25 = Dates to keep in mind! 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
ELEVATED
“Beltway Dysfunction”
11/28 – U.S. Senate Budget Committee advanced the GOP tax reform bill to Senate for debate that could see a vote take place as early as Thursday 11/30. Congress passed the Tax Reform Bill on 11/16 in a 227-205. Strong push to unite all Republicans behind Trump to get tax reform done by year end.

Gaining traction in the Beltway: Atty. Gen. Sessions raised the possibility of special counsel appointment to investigate the Uranium One Deal involving the Clinton Foundation in which a Russian company took control of 20% of entire supply of U.S. uranium supply used to make nuclear weapons in exchange for Clinton Foundation donations. In a decree on March 20, 2020 Russia’s Vladimir Putin, abolished the Federal Agency for Nuclear Power. The public corporation Rosatom (he owns) was vested with the authority to implement on behalf of the Russian Federation the rights of shareholders in the joint-stock companies in the nuclear energy industry. In 2013 Rosatom retained full ownership. Matter of U.S. national security.

 

CAUTION

MENA & EU

11/28Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group.  Beirut, is proving ground for Saudi-Iranian proxy wars. Consolidation of KSA power with Crown Prince Mohammed bin Salman breeds sweeping change in the Kingdom called “Vision 2030” to wean KSA off oil. bin Salman leadership saw more than 50 Saudi inner players arrested in anti-corruption probe including Prince Alwaleed bin Talal, Saleh Kamel & Khalid al-Tuwaijri to show he is clearly in charge.  Trump and House of Saud are close.  Both share strong views on an anti-nuclear Iran. KSA needs oil above $81 to break even. “Tensions” will surely boost the price of a barrel of “black gold.”

Negotiators reached agreement in principle on EU settlement demand or BREXIT “divorce bill.” Amount is heard to be in a €45b to €55b range down from the €60bn that the EU initially demanded. This breaks the deadlock and should promote further Dec. & Jan. negotiations. U.K. withdrawal from EU takes place in 3/2019. Moody’s downgraded the UK on 9/22 to Aa2 from Aa1. Critical that PM Theresa May has shown an ability to effectively.

Spain’s Rajoy announces snap elections on Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Former Catalan Pres. Puigdemont to appear in court 11/17. On 11/02: 8 Catalan gov’t. members jailed in Spain for role in independence rebellion & sedition.

The Caliphate is destroyed but ISIS is now scattered across a wider region including Europe. November MTD Terror Stats a/o 11/27: 39 terrorist attacks; 766+ dead; 705+ wounded. 

MODERATE
“China”
China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. National Congress of the Chinese Communists Party confirms Xi Jinping as its most powerful leader since Mao. Xi loyalists make up inner sanctum of Chinese politics into the next decade. 6% GDP in 2018 will be difficult.

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

Italian elections in March 2018.

MARGINAL
“2018 US Recession?
Bearish flattening signals danger for the U.S. economy. Recent bullish flattening has completely disregarded the absence of inflation. Jay Powell nominated as new fed Chief. Should provide stability/continuity; positive for GOP if latter gets their act together. The balance sheet or “b/s” normalization program is proceeding and will remain highly incremental. Fed signals 1 more rate hike in 2017 (December12/13 FOMC); 3 in 2018. Dot plots are unchanged for 2017 & ’18; lower for ’19 & longer-term. Shifts/adjustments in monetary policy outweigh chance of a 2018 recession.

 

Deutsche Bank AG New York Branch 15NC10 fxd-to-fxd Reset Sub Tier 2 Notes Deal Dashboard 

Mischler Financial Group, Inc., the nation’s oldest Service Disabled Veteran broker dealer was honored today to serve on today’s $1b Deutsche Bank AG/New York Branch 15NC10 fixed-to-fixed Reset Subordinated Tier 2 Notes new issue. We thank Team DB for selecting Mischler as a Junior Co-Manager from among the host of diversity firms in our industry.

For the DB fair value study I looked at the outstanding 4.296% 15NC10 Global Sub Notes (5/24/2028) that was 4.63% to call or 4.70 YTM which is equal to T+237 vs. T10.  Adding 9 bps to account for the swap curve from 2028s to 2032s gets you to T+246 pegging NIC on today’s T+255 print at 9 bps. A personal “thank you” to Margaret Szczerbicki!

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

 

DB Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
15nc10
fxd-to-fxd
12/01/2032
+280a +260a (+/-5) +255 +255
Reset 5yr
MS +255.3
<25> bps 9 250/247 <5>

 

………and here’s a snap shot of today’s final book size and oversubscription rate – the measure of investor demand:

 

DB Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
15nc10 ftf
12/01/2032
$1bn $2.3b 2.30x

 

Final Pricing – Deutsche Bank AG New York Branch 15NC10 fixed-to-fixed Reset Subordinated Tier 2 Notes

DB $1bn 4.875% (15nc10) fxd-to-fxd due 12/01/2032 @ $99.968 to yield 4.878% or T+255  Reset 5yr MS +255.3

 

Synchrony Financial $1bn 10-year Senior Notes Deal Dashboard 

Mischler Financial Group, Inc., is proud to announce that it also served as an active 1.00% Co-Manager on Synchrony Financial’s $1bn 10-year Senior Notes new issue today.  We have enjoyed a longtime partnership with Synchrony.

For the Synchrony Financial relative value study I looked to the outstanding SYF 3.70% Senior Unsecured Global Notes due 8/04/2026 that were T+148 (G+153) pre-announcement. Adding 5 bps for the extension from the SYF 8/2026 to today’s SYF 12/2027 gets us to G+158 landing on today’s +165 print as 7 bps.

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

 

SYF Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
SYF 10yr +180a +165 the # +165 +165 <15> bps 7 165 (issue bid) 0/flat

 

………and here’s a snap shot of today’s final book size and oversubscription rate – the measure of investor demand:

 

SYF Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
SYF 10yr $1bn $2.4b 2.40x

 

Final Pricing – Synchrony Financial 10-year Senior Notes

SYF $1bn 3.95% due 12/01/2027 @ $99.714 to yield 3.985% or T+165

(more…)

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

(more…)

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:

(more…)

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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