Browsing articles in "Debt Market Commentary"
Corporate Bond Issuers Close Books on Record Quarter; What’s Next for IG DCM?
March 2017      Debt Market Commentary   

Quigley’s Corner 03.31.17   QC’s Q1 Investment Grade Corporate Debt DCM Look-Back and Look Ahead

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

Syndicate IG Corporate-only Volume Estimates for Next Week and April

“Knowing the Past for the Future” – A Look at a Decade’s Worth of April 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 – Great Market Tone!

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 29th

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Month end? Quarter end?  Lots of Global economic data? You know what that means. It was a signed, sealed and delivered no-print Friday today.  That’s always welcome as it gave me a head start on today’s more involved syndicate survey.  Forecasts today are for next week’s primary market supply as well as for the month of April.  I also have a snapshot of a decade’s worth of April IG supply across three categories: all-in (Corps + SSA), Corporate as well as just SSA volumes.  I call the section “Knowing the Past for the Future.” It will help put the Best and Brightest’s thoughts and numbers into a historical perspective for you.  You should take a look at that table.

To quickly re-cap their thoughts, all 24 syndicate desks responded to my “QC” survey  The midpoint average for next week’s IG Corporate only supply is $21.40b characterized by tight voting groups with 18 of the 24 participants projecting within $20 to $25b with a low of $12b and a high of $31b.  As for April, the average was $91.50b.  Voting brackets were all over the place ranging from a low of $65b to a high of $111b. But don’t just take my word for it.  All 24 syndicate operatives contributed responses with their numbers so, scroll down below and read their meaningful thoughts.

I hope you enjoy your read and that it helps you prepare for the week and month ahead.  Thanks again to the stellar 24 participating syndicate desks who are always there for me and for YOU each and every Friday edition of the “QC”.

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index was unchanged at +122.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.17.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +163 vs. +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.3b on Thursday versus $20.7b on Wednesday and $17.8b the previous Thursday.
  • The 10-DMA stands at $17.3b.

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $22.15b
March 2017
Forecasts
vs. Current
MTD – $129.998b
Low-End Avg. $25.25b 87.72% $113.79b 114.24%
Midpoint Avg. $26.50b 83.58% $114.31b 113.72%
High-End Avg. $27.75b 79.82% $114.83b 113.21%
The Low $15b 147.67% $80b 162.50%
The High $31b 71.45% $140b 92.86

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  23 of those participants are among 2017’s YTD top 26 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 83.65% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.

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

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was prefaced as follows:

 

First up, here’s are this week’s IG new issue volume talking points:

  • We fell 17% shy of this week’s syndicate midpoint average forecast or $22.15b vs. $26.50b.
  • MTD we’ve priced 13% more than the IG Corporate mid-range projection for all of March or $129.998b vs. $114.31b.
  • The all-in MTD total (IG Corporates plus SSA) now stands at $166.158b. March, 2017 has officially broken into 8th place as the highest volume month for all-in issuance (IG Corporates plus SSA).
  • The YTD IG Corporate only volume is now $393.085b. It is the highest IG Corporate-only quarterly volume total in history.
  • YTD we have officially priced $506.151b in all-in IG Corporate and SSA issuance also ranking it #1 as the highest quarterly volume total ever.

Here are this week’s five key primary market driver averages from the 38 IG Corporate-only deals that priced:

  • NICS:  0.46 bps
  • Oversubscription Rates: 3.48x
  • Tenors:  10.14 years
  • Tranche Sizes: $791mm
  • Spread Compression from IPTs to the Launch: <19.31> bps


Here’s how this week’s performance data compares against last week’s:

  • Average NICs tightened 1.29 bps this week to 0.46 bps vs. 1.75 bps.
  • Over subscription or bid-to-cover rates, the measure of demand, increased 0.58x to 3.48x vs. 2.90x.. 
  • Average tenors shortened by a meaningful 1.41 years to 10.14 years vs. 11.55 years.
  • Tranche sizes upsized by $99mm to $791mm vs. $692mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 38 IG Corporate-only new issues tightened 3.87 bps to <19.31> bps vs. <15.44>.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +163 vs. +165 week on week,
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.17 vs. 1.18 last Friday. 
  • Week-on-week, BAML’s IG Master Index tightened by 1 bp to +122 vs. +123. 
  • Spreads across the four IG asset classes tightened by 0.75 bps to 16.00 bps vs. 16.75 as measured against their post-Crisis lows. 
  • The 19 major industry sectors also tightened by 0.74 bps to 19.63 vs. 20.37 also against their post-Crisis lows.
  • For the week ended March 29th, Lipper U.S. Fund Flows reported an inflow of $3.966b into Corporate Investment Grade Funds (2017 YTD net inflow of $39.089b) and a net outflow of $248.465m from High Yield Funds (2017 YTD net outflow of $5.937b).
  • Taking a look at the secondary trading performance of this week’s 38 IG and 3 SSA new issues, of the 41 deals that printed, 32 tightened versus NIP for a 78.00% improvement rate while 4 widened (9.75%) and 5 were flat (12.25%).

The numbers are in.  Entering today’s Friday’s session here’s how much we issued this week:

  • IG Corps: $22.15b
  • All-in IG (Corps + SSA): $25.90b

Is this week’s overwhelmingly hawkish Fed-speak justified? Or, is Fed leadership talking up yields?  The GOP seemed to have recovered from the health care fiasco.  Monday saw 10 issuers stand down, but the market quickly recouped lost ground with issuers printing the rest of the week.  Today marks month-end but more importantly quarter end. The Easter break is approaching all before we re-enter black-outs.

And now the all-important “two-part” question (and answer(s) posed to the fixed income market’s top Syndicate desks, along with my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

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

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Best Quarter EVER- Investment Grade Corporate Debt Issuance; Mischler DCM Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.30.17 – Top Ranked Quarter Ever for US IG Corp Issuance

 

Investment Grade New Issue Re-Cap – Q1 2017 Finishes as the #1 Ranked Quarter for IG Corporate-only and All-In IG Issuance.

On This Week’s Hawkish Fed-Speak

Point Counter-Point

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 22nd

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

6 IG Corporate issuers tapped the IG dollar DCM today pricing 12 tranches between them totaling $6.00b.  There was no activity from the SSA space.

 

  • “CHTR” (Ba1/BBB-/BBB-) rated 144a/REGS 30-year Senior Secured Notes new issue due 5/01/2047.  The deal was upsized to $1.25b from $750mm at the launch and at the tightest side of guidance. (Mischler served as passive co-manager)
  • CCO Holdings LLC/Capital Corp. (Charter Communications) High Yield-rated (B1/BB+/BB+) 144a/REGS tap of its 5.125% 10-year Senior Notes due 5/01/2027.  We thank the issuer for our inclusion. (Mischler served as passive co-manager)
  • The IG Corporate only WTD total is now over 83% of the syndicate midpoint average forecast or $22.15b vs. $26.50b.
  • MTD, we are now more than 13% above the IG Corporate mid-range syndicate projection for all of March or $129.998b vs. $114.31b. (scroll to the table below).
  • The all-in MTD total (IG Corporates plus SSA) now stands at $166.158b. March, 2017 has officially broken into 8th place as the highest volume month for all-in issuance (IG Corporates plus SSA).
  • The YTD IG Corporate only volume is now $393.085b. It is the highest quarterly volume total in history.
  • YTD we have officially priced $506.151b in all-in IG Corporate and SSA issuance also ranking it #1 as the highest quarterly volume total ever.

 

On This Week’s Hawkish Fed-Speak

 

Today, crude oil hit a 3-week high, gold slipped, equity markets were all in the black and U.S. Treasury yields compressed while the dollar strengthened.  Most all of that reflects the fluctuations of our fluid daily market gyrations.  Net, net, though it was a good day.  However, what garnered all the attention today – as it did all week – was the sudden overwhelmingly hawkish Fed-speak from just about every Fed member.  Yesterday, Boston FRB President Eric Rosengren said a rate increase at every other FOMC meeting this year “could and should be the committee’s default unless data change.” There are eight meetings left this year implying four additional rate hikes. He also said, four hikes in 2017 would be gradual but “more regular.” The market, however, is expecting 2.5 at the most!  The Fed is a laggard; the market is always accelerated.  Europe, meanwhile is worrying that its recent tiny monetary adjustments have investors concerned of a rate rise for still suffering laggard peripheral EU member economy’s.  They are clearly not home free by any stretch of the imagination. ……..and we do live in an inextricably global-linked world economy.

So, now let’s link all that to today’s major talking points from statements made by the Fed’s William Dudley –

 

  • Dudley says, “growth and inflation risks may be shifting to the upside.”
  • He is more confident that inflation is settling near its goal, medium-term.
  • “Forward-looking data points to further job-market gains.”
  • Calls job gains “sturdy” and labor market slack “diminishing.”
  • Says the Federal Reserve is not “removing the punch bowl, yet.”
  • Comments that the “economic outlook abroad also appears brighter.”
  • The Fed shouldn’t overreact to every “wiggle” in markets.
  • Fed cares about financial condition effects on the economy.
  • Fiscal policy is likely to shift in time to more stimulus.
  • Favors tapering reinvestments instead of an abrupt end to them

 

Point Counter-Point

The takeaway is that Fed-speak is clearly very hawkish.  That pervasive sentiment among FOMC members gives reason to pause.  Here is the point counterpoint of all this –

Several times I re-printed the following comment from a six-pack bulge bracket U.S. bank Chairman.  I also pointed out the banker is either from BAML, CITI, GS, JPM, MS or WFS.  I will always preserve anonymity folks. To clarify, no one person has tomorrow’s news today, BUT this person has a firm grip on what IS going on in the world and a track record that’s perhaps second to none. Here’s a re-print of what the Chairman said in the “QC” dated Friday, March 3rd, 12 days in advance of the most recent FOMC Rate Decision,

“Everyone is thinking a rate hike is coming in March but, the FED needs to be somewhat worried about the yield curve.  When they raised rates in December 2015 the 10yr Treasury rallied 70 bps in yield, thus crushing banks’ net interest margin or “NIM” and, having the effect of dampening growth.  When they raised rates this past December 2016, that did not happen…..instead all rates moved up a bit.  But when Yellen talked about March being a “live meeting’’, the UST 10 year went from 2.56% to 2.31%……The Fed needs to talk a good game to dampen the “animal spirits” that have elevated equity markets but, I really don’t think the Fed wants to raise rates and see the 10 year Treasury move to 2.25%. As a result, it’s a very close call…..I err on the side of thinking that the rate hike comes in June.  But, it’s  close.  If the Fed is committed to 2 to 3 hikes this year and they feel the markets are fully prepared for a March hike…they may just take advantage of that window.”

It seems that this week the historically lagging Fed is clearly attempting to talk up U.S. Treasury yields because they KNOW the CT10-year yield is going to go down…..down…..down much like it did in 2015, though perhaps not as dramatically.  Therefore, take what you are hearing with a massive grain of salt.  The market is priming itself for issuance.  As yields fall, and deals are well-priced, investor appetite remains voracious for better rated IG corporate credits.  There should be a robust amount of issuance ahead of black-outs as we head toward the Easter break.  The opportunities are creating themselves in here and the Fed doesn’t like what it sees from their prior December 2015 experience.  That’s why they ARE talking up yields.  It’s also why yields WILL contract.  The inference is clear – the Fed talks the talk but they will not walk the walk. And that’s how it is folks.

 

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 12 IG Corporate-only new issues was <17.67> bps.
  • BAML’s IG Master Index was unchanged at +122.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.17.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.7b on Wednesday versus $18.4b on Tuesday and $19.2b the previous Wednesday.
  • The 10-DMA stands at $17.3b.

 

Global Market Recap

 

  • U.S. Treasuries – Down day for USTs led by the 30yr for a host of reasons.
  • Overseas Bonds – JGB’s closed down. Mixed session in Europe.
  • Stocks – Solid gains heading into the close.
  • Overseas Stocks – Weak session in Asia. Europe closed with gains.
  • Economic – Personal consumption moved higher. Inflation data inched higher.
  • Overseas Economic – German CPI lower than expected/last. Big global calendar tomorrow.
  • Currencies – USD mixed vs. the Big 5 but a solid rally for the DXY Index.
  • Commodities – Good day for crude oil (back over 50) & bad day for gold.
  • CDX IG: -0.92 to 66.86
  • CDX HY: -4.28 to 337.98
  • CDX EM: -2.73 to 209.24

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $22.15b
March 2017
Forecasts
vs. Current
MTD – $129.998b
Low-End Avg. $25.25b 87.72% $113.79b 114.24%
Midpoint Avg. $26.50b 83.58% $114.31b 113.72%
High-End Avg. $27.75b 79.82% $114.83b 113.21%
The Low $15b 147.67% $80b 162.50%
The High $31b 71.45% $140b 92.86

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

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

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
3/27
TUES.
3/28
WED.
3/29
AVERAGES
WEEK 3/20
AVERAGES
WEEK 3/13
AVERAGES
WEEK 3/06
AVERAGES
WEEK 2/27
AVERAGES
WEEK 2/20
AVERAGES
WEEK 2/13
New Issue Concessions 0.00 bps/flat 2.60 bps 1.39 bps 1.75 bps 0.00 bps 1.17 bps <3.15> bps <0.16> bps <0.86> bps
Oversubscription Rates 2.00x 3.76x 3.53x 2.90x 3.08x 2.73x 3.39x 3.26x 3.76x
Tenors 3.00 yrs 11.65 yrs 8.10 yrs 11.55 yrs 10.05 yrs 9.65 yrs 8.04 yrs 8.37 yrs 8.03 yrs
Tranche Sizes $500mm $727mm $475mm $692mm $859mm $671mm $738mm $695mm $744mm
Avg. Spd. Compression
IPTs to Launch
<17.50> bps <20.87> bps <19.12> bps <15.44> bps <17.99> bps <20.00> bps <16.79> bps <18.47> bps <18.45> 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.
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US Corporate Debt Issuers Return From Sidelines; USD 10b Floated
March 2017      Debt Market Commentary   

Quigley’s Corner 03.28.17   They’re Back! US Corporate Debt Issuers Return After Multi-Day No-Go Signal

 

Investment Grade Corporate Debt New Issue Re-Cap – What a Difference a Day Makes

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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 March 22nd       

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

7 IG Corporate issuers tapped the IG dollar DCM today pricing 15 tranches between them totaling $10.90b.  1 SSA issuer, the Export Development of Canada, added a $500mm 2-year to the mix for an all-in IG day total of 8 issuers, 16 tranches and $11.40b.

  • The IG Corporate only WTD total is now 43% of the syndicate midpoint average forecast or $11.40b vs. $26.50b.
  • MTD, today we officially surpassed the high-, mid-point and low-end averages for March.  We are more than 4% above the IG Corporate mid-range syndicate projection for all of March or $119.248b vs. $114.31b. (scroll to the table below).
  • The all-in MTD total (IG Corporates plus SSA) now stands at $152.158b.
  • Both CDX IG and HV tightened, the VIX also pulled 1 point and the S&P and DOW gained ending an 8 day losing streak – the most since 20011.

IG Primary & Secondary Market Talking Points

 

  • Ford Motor Credit Corp. today dropped the 2yr FRN tranche from its 2- and 5-year FXD/FRN having found sufficient 2yr interest in the fixed rate tranche. The other 3 tranches all launched at the tightest side of guidance.
  • The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 15 IG Corporate-only new issues was <20.87> bps.
  • BAML’s IG Master Index was unchanged at +123.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.18.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +165 vs. +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $13.9b on Monday versus $13.8b on Friday and $13.8b the previous Monday.
  • The 10-DMA stands at $17.1b.

 

Global Market Recap

 

  • U.S. Treasuries – Poor day for USTs because of stocks, supply, economic data, USD & Trump.
  • Overseas Bonds – JGB’s down except 30yr. Bunds little changed, Gilts red & peripherals bid.
  • Stocks –  Rally in U.S. stocks. The Dow snapped its 8-session losing streak.
  • Overseas Stocks – Japan rallied, China closed down & Europe had a good day.
  • Economic – Positive U.S. data with consumer confidence off the charts strong.
  • Overseas Economic – Light calendar overseas today.
  • Currencies – U.S. came roaring back today. The DXY Index improved 1/2 handle.
  • Commodities – Crude oil, copper & silver improved while gold sold off.
  • CDX IG: -0.63 to 67.17
  • CDX HY: -7.0 to 347.24
  • CDX EM: -0.23 to 213.16

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $11.40b
March 2017
Forecasts
vs. Current
MTD – $119.248b
Low-End Avg. $25.25b 45.15% $113.79b 104.80%
Midpoint Avg. $26.50b 43.02% $114.31b 104.32%
High-End Avg. $27.75b 41.08% $114.83b 103.85%
The Low $15b 76.00% $80b 149.06%
The High $31b 36.77% $140b 85.18%

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

 

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

 

NICs, Bid-to-Covers, Tenors, 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:

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Corporate Debt Issuance Slows Due to DC Swamp Sewage Stalemate
March 2017      Debt Market Commentary   

Quigley’s Corner 03.27.17 -Corporate Debt Issuance Slows Due to DC Swamp Sewage Stalemates

 

Investment Grade Corporate Debt New Issue Re-Cap – IG Primary Markets Bogged Down by the Swamp

CT10 Year Yield Going Lower

IG Primary & Secondary Market Talking Points

Global Market Recap

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 22nd       

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Well it was a rare, highly inactive Monday for IG primary markets today. Only one well-telegraphed new issue priced that had been in the pipeline for KEB Hana Bank in the form of a $500mm 3-year FRN. I heard that as many as 10 issuers stood down today following Go/No Go calls.  So, what gives?

On Friday, I placed at the top of my edition, a comment from a widely respected Head of Syndicate.  It was an interesting comment in that it expressed an against-the-grain opinion that Friday’s healthcare bill issue might actually be good for the market in that it pulls forward focus and attention on the all-important and market impactful tax reform bill.  As we were getting ready to close shop on Friday my CEO asked me, “so do you think it’ll be busy next week?  I said, “I hate to go against 24 of the top syndicate desks, but I fear we could see a zero day on Monday and a slower week in store. A health care bill failure will send a horrible message to the market.” I added, “I hope I’m wrong and that we see lots of issuance, but I think I’m right.”  That’s how Friday ended as I left for the weekend.

First, let’s revisit my Friday syndicate voting brackets for this week’s IG new issue volume forecasts:

Next Week
3/27-3/31
1: 20b
1: 15-30b
2: 20-25b
8: 25b
6: 25-30b
5: 30b
1: 31b

 

Out of 24 desks surveyed, 19 of them, or 79%, were in a tight band of $25-$30b.  That is always a great sign.  It means a lot of joint leads verified that similar or consensus volume is expected. The comments were characterized by lots of smaller deals with the absence of any mega transaction. But, I cannot see how issuance gets done if the health care bill is pulled or doesn’t pass. Well it got pulled later on Friday as we now all know. The issue is that republicans made a mistake in prioritizing health care as the first item on their agenda. They did so because it was perceived internally as a “no brainer.” Their plan was to save a trillion dollars to justify a massive tax reform plan.  Guess what?  When it got pulled the message sent to Wall Street was that consensus will continue to be an issue within the GOP.  That’s a MAJOR problem. The historic election is now over. People no longer want to hear the same campaign rhetoric, rather they want action, as the power to legislate has been voted on and given to Trump and the GOP.  The first test was a failure. In fact, it is a massive failure.  So, the market will not be kind to an Administration that has now experienced it’s “Dysfunction Junction” wake-up call. (I refuse to call it Capitol Hill or The Beltway anymore). It’s all about action now. Failure to get a consensus on tax reform WILL lose House and Senate seats in the next elections. That would be a political disgrace after the 7 long years they had amongst themselves to one day ratify a revamped bill. That day came and went last Friday.

The result? ………..The CT10-year is going back to 2.00% to 2.10% or lower.  Here’s the challenge –  with as many as 10 Go/No Go calls this morning that wound up with issuers standing down, we risk building a congested pipeline.  That leads to creating additional congestion, sloppy deals, more concession and bankers could look bad advising clients to go now rather than wait for another 25-35 bps rally in yields. Let the market come to the issuer. The latter are in the driver’s seat.  The market is waiting for a sign of optimism. That optimism will come when positive sounders on SUBSTANTIALas in “historic” – tax reform emanates from the White House and Dysfunction Junction. When that happens, equities will rally, yields will climb quickly and we’ll be back to where the GOP wants to be. For now, the Republican Party IS part of the Swamp that desperately needs draining.  It’s a harsh but well-deserved wake-up call to get their act together.  Seven years to fix Obama Care and they come up holding nothing but a yanked deal.  Unbelievable folks!  When that happens in business people get fired fast! Trump needs to run things like a corporation and Dysfunction Junction needs a hard case of tough love. This is not what was voted for on election day. It’s all about well……….waste management………now.

 

CT10 Year Yield Going Lower

rates-going-down-mischler-debt-market

Sorry if I sound like a broken record, but I published this next piece 12 days in advance of the recent FOMC Rate Decision on Friday, March 3rd and re-printed it the day of Janet Yellen’s Press Conference on Wednesday, March 15th.  Here it is yet again:

………..I had an interesting and revealing conversation with a Chairman of a six-pack bank (That’s either BAML, CITI, GS, JPM, MS or WFS folks!) who shared thoughts on a potential March interest rate hike that the market has already built in.  I thought it would be helpful and informative to you all.  Here’s what that person said,

“Everyone is thinking a rate hike is coming in March but, the FED needs to be somewhat worried about the yield curve.  When they raised rates in December 2015 the 10yr Treasury rallied 70 bps in yield, thus crushing banks’ net interest margin or “NIM” and, having the effect of dampening growth.  When they raised rates this past December 2016, that did not happen…..instead all rates moved up a bit.  But when Yellen talked about March being a “live meeting’’, the UST 10 year went from 2.56% to 2.31%……The Fed needs to talk a good game to dampen the “animal spirits” that have elevated equity markets but, I really don’t think the Fed wants to raise rates and see the 10 year Treasury move to 2.25%. As a result, it’s a very close call…..I err on the side of thinking that the rate hike comes in June.  But, it’s  close.  If the Fed is committed to 2 to 3 hikes this year and they feel the markets are fully prepared for a March hike…they may just take advantage of that window.”

Today the CT10-year closed at 2.379% and has tightened 24.8 bps versus 2.627% on March 13th the Monday before the Fed raised rates. It’s going tighter. Issuers be patient!

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 1 IG Corporate-only new issues was <17.50> bps.
  • BAML’s IG Master Index was unchanged at +123.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.18.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +164 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $13.8b on Friday versus $17.8b on Thursday and $15.2b the previous Friday.
  • The 10-DMA stands at $17.4b.

 

Global Market Recap

 

  • U.S. Treasuries – Closed with gains except the 2yr but closed near the low prices of day.
  • Overseas Bonds – JGB’s better except the 30yr. Bunds red & Gilts green.
  • Stocks – U.S. stocks mixed heading into the close. Nice comeback in the afternoon.
  • Overseas Stocks – The Nikkei led Asia lower. Europe had more red than green.
  • Economic – Dallas Fed manufacturing was weaker than expected/last.
  • Overseas Economic – Positive IFO releases in Germany.
  • Currencies – The USD had a poor day vs. the Euro, Pound & Yen.
  • Commodities – Crude down, gold up & a 2% gain for silver.
  • CDX IG: +0.83 to 67.84
  • CDX HY: +29.80 to 354.58
  • CDX EM: +1.72 to 213.92

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $0.50b
March 2017
Forecasts
vs. Current
MTD – $108.348b
Low-End Avg. $25.25b 1.98% $113.79b 95.22%
Midpoint Avg. $26.50b 1.89% $114.31b 94.78%
High-End Avg. $27.75b 1.80% $114.83b 94.36%
The Low $15b 3.33% $80b 135.43%
The High $31b 1.61% $140b 77.39%

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

 

 

Have a great evening!
Ron Quigley

 

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

(more…)

IG Debt Market Issuers Confounded By Dysfunction Junction; Mischler Debt Market Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.23.17 –Dysfunction Junction

 

A Very Important Message

Investment Grade Corporate Debt New Issue Re-Cap – “Dysfunction Junction”

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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 March 22th      

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab –Courtesy of Jim Levenson

Tomorrow’s Calendar

 

 Important Message to all “QC” readers:  Before we dive into the session  details re: today’s corporate debt issuance, I’d like to call your attention to a very important message from one the Fixed Income Syndicate world’s truly good people, Greg Baker of Bank of America/Merrill Lynch.  Greg is going to be competing in his third 140.6 IRONMAN challenge to raise money for a critically important cause. Without further ado I will hand it over to Greg to tell you more about it. 

 

Dear Friends,

I will be participating in IRONMAN Lake Placid on July 23rd, 2017 as part of the Multiple Myeloma Research Foundation (MMRF) Team For Cures.

The Goal:
Raise $10,000 for the MMRF
Swim: 2.4 miles
Bike: 112 miles
Run: 26.2miles

Multiple myeloma is the second most common form of blood cancer and, sadly, has one of the lowest five-year relative survival rates of all cancers. But while there is no cure, great progress is being made.

In fact, thanks to the important work of the MMRF, the world’s leading private funder of myeloma research, the FDA has approved TEN new treatments, including FOUR in just the past 18 months – a track record that’s unparalleled in the world of oncology. These drugs have almost tripled the lifespan of myeloma patients. And now the MMRF is funding over 20 additional treatments in various stages of development, giving hope to tens of thousands of patients and their families.

All donations are GREATLY appreciated! Thank you very much.
Greg

To donate, please click on the link:  https://endurance.themmrf.org/2017IMLP/Member/MyPage/986791/Gregory-Baker

As Winston Churchill so eloquently put it, “We make a living by what we get, but we make a life by what we give.” Greg is giving of himself, and I ask that you please find it in yourselves to donate what you can to help this incredible cause.  In the name of social responsibility, a heartfelt thank you from the guy-in-the-corner who is always in your corner.
Good luck Greg! -RQ

 

Investment Grade New Issue Re-Cap – Zip, Zero, Zilch Thanks to Capitol Hill and “Dysfunction Junction”

quigleys-corner-Dysfunction-Junction
Why did nothing price in today’s rare non-Friday goose egg in our IG DCM?  Simple!  Market participants and issuers are wondering if the Trump rally will stop dead in its tracks if it cannot get an Obama Care replacement bill approved by Congress.  Fractional divides within the majority controlled Republican Party reminds us all of the “circus” that is our nation’s capital known as “The Beltway.”  If support is not achieved, this writer will forever refer to Washington, D.C. as “Dysfunction Junction.”

We are already living in a nation divided with the worst media wars being fought between left and right.  Congress made some “headway” this morning by throwing out the minimum benefits that insurers are required to provide.  The final iteration, however, may not reflect the many months that Trump and his campaign staff and advisors have had to work on a replacement plan promised to be better, stronger, more efficient and one that will save the average American lots of money, while upgrading their care and keeping their choice of doctors.  Anything less than that and it will be perceived as a failure.  The session expected an announcement from House Speaker Paul Ryan – it did not happen.  A vote was expected this evening – it will not happen. The vote on legislation has officially been delayed.  Discussions will be ongoing, beginning this evening in the House at 7:00 pm ET. Markets awaited today’s healthcare/legislative conundrum with the eagerness with which it typically saves for FOMC Press Conferences.  That’s the kind of impact this decision and how it is handled will have.

Unfortunately, and further underlying all the suspense, is the real story of political dysfunction within the GOP.  A new, improved Obama Care seems to be taking a back seat to the question “will the Freedom Caucus continue to agitate any progress within the party?” If so, it will mean a long and painful 4-year term for the Trump Administration, likley result in a loss of seats in the next election and potential control of his ability to effectively govern.  Without support from within his own party effectively means no control at all.  This is all about breaking the party’s House Freedom Caucus, comprised of 20+ Republicans who have been a thorn in the side of any Republican headway.  For now, however, just getting support for whatever bill is being rushed through is challenged to find the necessary 215 votes for its passage.  The legacy of Trump’s legendary negotiating ability – recall his book “The Art of the Deal” – is also being called into question as he faces off with the nation’s lawmakers.

For the more objective Trump supporters, this could be a major disappointment and usher in more toxic additives to the “swamp” that Trump has promised to drain.  The main issue here, however, is that as important as Trump’s first real litmus test is to keep his promises on a full repeal and replacement of Obama Care is that he and his Administration will not be able to focus on any other plans unless and until he overcomes this first major hurdle.  If it fails, President Trump’s ability to achieve his eagerly anticipated and market moving tax reduction plan will be questioned and a financial crisis of confidence could likely ensue.  Perhaps the ultimate deal maker is working on health care concessions in return with a sledge hammer of a tax reduction plan. We’ll have to wait and see. I do think we could see a CT10-year below 2.00% again in short order, after which issuers will gladly hop off the fence in unison and act on a more clear view of rate direction. Robust issuance will be the flavor of the day, but first, we could see a quiet period in our primary markets.  We’ll know more tomorrow when I send out the Friday “QC” featuring the syndicate world’s “Best and the Brightest” and their views and comments on next week’s IG Corporate issuance. So, stay tuned it will be a critically important read for all of you.  For today and in conclusion, “Dysfunction Junction” is why our IG DCM was stalemated today.

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index widened 1 bp to +123 vs. +122.  +106 represent the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.18 vs. +117.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +165 vs. at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Wednesday versus $20.5b on Tuesday and $21.6b the previous Wednesday.
  • The 10-DMA stands at $17.9b.

 

Global Market Recap

 

  • U.S. Treasuries – 4-day winning streak was snapped.
  • Overseas Bonds – JGB’s closed better bid. European bonds traded poorly.
  • Stocks – U.S. stocks little changed with 45 minutes left in the session.
  • Overseas Stocks – Asia closed with small gains. Europe had a good day.
  • Economic – New home sales & KC Fed manufacturing were strong.
  • Overseas Economic – U.K. retail sales were strong.
  • Currencies – The USD was mixed vs. the Big 5. The DXY Index had a small gain.
  • Commodities – Crude oil & gold closed in the red.
  • CDX IG: -0.97 to 67.37
  • CDX HY: -3.17 to 330.27
  • CDX EM: -1.52 to 216.16

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/20-3/24
vs. Current
WTD – $19.375b
March 2017
Forecasts
vs. Current
MTD – $107.848b
Low-End Avg. $24.92b 77.75% $113.79b 94.78%
Midpoint Avg. $25.65b 75.54% $114.31b 94.35%
High-End Avg. $26.38b 73.45% $114.83b 93.92%
The Low $20b 96.87% $80b 134.81%
The High $35b 55.36% $140b 77.03%

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

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

 

NICs, Bid-to-Covers, Tenors, 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 Thursday’s session followed by the averages over the prior six weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
3/20
TUES.
3/21
WED.
3/22
TH.
3/24
AVERAGES
WEEK 3/13
AVERAGES
WEEK 3/06
AVERAGES
WEEK 2/27
AVERAGES
WEEK 2/20
AVERAGES
WEEK 2/13
AVERAGES
WEEK 2/06
New Issue Concessions 0.57 bps 0.11 bps 4.62 bps N/A 0.00 bps 1.17 bps <3.15> bps <0.16> bps <0.86> bps <3.44> bps
Oversubscription Rates 3.08x 3.68x 1.77x N/A 3.08x 2.73x 3.39x 3.26x 3.76x 3.92x
Tenors 15.35 yrs 10.83 yrs 8.82 yrs N/A 10.05 yrs 9.65 yrs 8.04 yrs 8.37 yrs 8.03 yrs 12.04 yrs
Tranche Sizes $578mm $788mm $650mm N/A $859mm $671mm $738mm $695mm $744mm $735mm
Avg. Spd. Compression
IPTs to Launch
<17.69> bps <19.23> yrs <7.5> bps N/A <17.99> bps <20.00> bps <16.79> bps <18.47> bps <18.45> bps <19.60> bps

 

New Issue Pipeline (more…)

Nor’easter Stella In Front of Front-Loaded Week-Mischler Debt Market Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.13.17  Stella Won’t Stop The Show!; Saluting Women on Wall Street

 

Investment Grade Corporate Debt New Issue Re-Cap

Shout Out to Team Citigroup for Honoring IWD (International Women’s Day!)

IG Primary & Secondary Market Talking Points –Penske Widens; Everett Spinco Saves the Day

Global Market Recap

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

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 March 8th      

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

So what happens on a Monday ahead of the FOMC Rate Decision, the Bank of England, the Bank of Japan, Trump’s 2018 budget, the expiration of the U.S. debt ceiling suspension, BREXIT’s triggering via Article 50 and the eagerly watched Dutch elections and the chance of up to as much as two feet of snow in the Tri-State area tomorrow? Well I suppose one could call that a lot of things but I choose to call it a “front-loaded” week as a result………

…….and today’s IG dollar DCM agreed as 8 Corporate issuers priced 17 tranches between them totaling $18.30b with a major boost from The State of Kuwait’s $8b two-part 5s/10s that brought today’s impressive all-in IG day totals to 9 issuers, 19 tranches and $26.30b.

Here are some interesting volume talking points from today’s session:

  • The WTD total is now 73% of this week’s syndicate midpoint average forecast or $18.30b $24.83b.
  • MTD, we’ve now priced 67% of the IG Corporate mid-range projection for all of March or $77.425b $114.31b.
  • Today’s all-in IG day total (IG Corporates plus SSA) of $26.30b represents the 11th highest day of all-time.
  • The session’s $26.30b is the second highest volume day of 2017 – and we have had a lot of biggies YTD!
  • After only one day, this week’s $26.30b already ranks as the 9th busiest week of 2017.
  • Today’s $11b 5-part Verizon Communications transaction is the 4th largest issue of the year.

Shout Out to Team Citigroup for Honoring IWD

 

Today, our good friends at Citibank N.A. issued a 2yr FXD/FRN in honor of International Women’s Day (“IWD”), which was last Wednesday, March 8th. IWD is a global day celebrating the social, economic, cultural and political achievements of women among others. So, today it was a privilege and an honor to step aside and watch as Team Citi once again showed why they have been and continue to be a leading force for diversity in our IG dollar DCM.  Congratulations to the continued collective team efforts of everyone at Team Citi! The nation’s oldest Service Disabled Veteran broker dealer sends its five-star salute to each of you and as well as to all the women in our world and lives. The seven featured Women-Owned diversity broker dealer/investment banks on today’s Citibank N.A. “IWD” deal were:

  • L. King & Associates
  • CAPIS Institutional Services, Inc.
  • Lebenthal & Company LLC.
  • MFR Securities, Inc.
  • Siebert, Cisneros Shank & Cop., L.L.C.
  • Telsey Advisory Group
  • Tigress Financial Partners

Why would the financial industry’s oldest minority broker-dealer owned/operated by Service-Disabled Veterans  tout competing minority broker-dealers?  Well, I’d ask “why wouldn’t we?!”  Firstly, its the right thing to do! Second, it provides us the opportunity to showcase one of the global capital market’s leading and cutting edge D&I initiatives, while tipping our hat to the leading women in our diversity space.  So, congratulations for the glass ceilings raised and doors that Citigroup has helped open at their own financial institution through their own incredible procurement initiatives, as well as externally for all these leading women-owned firms. We extend a hardy congratulations to the respective women of D&I in our financial services industry. All for one, and one for all!

So, where do all these ideas originate?  A good place to start looking is from the top down at Citigroup.  Today I would suggest looking first in the office of one Suni Harford….

Who is Suni Harford?

suni-harford-citigroup

Suni Harford, Citigroup

Suni Harford is a Managing Director and Citigroup’s Regional Head of Markets for North America. In this capacity, Suni oversees the North American sales, trading and origination businesses of Citi’s securities and banking franchise. Citi maintains a premier position across all of its fixed income, currency, equity and commodities offerings. In addition to her current responsibilities, Suni is a member of Citi’s Pension Plan Investment Committee, and a Director on the Board of Citibank Canada. Suni is also the co-head of Citigroup’s global women’s initiative, Citi Women.

Prior to her current assignment, Suni was Citi’s Global Head of Fixed Income research, where she was responsible for Citigroup’s credit analytics, research strategy and fixed income quantitative analytics efforts globally. Suni also had oversight of Citi’s premier fixed-income analytics platform, The Yield Book. From 1995-2004, Suni served as the co-head of Citi’s Fixed Income Capital Markets origination business, where she managed relationships with financial institutions.

Not that she doesn’t have enough on her plate, Suni also serves on the Board of Directors of The Depository Trust & Clearing Corporation, the Board of Directors of The Forte Foundation, a national, non-profit organization dedicated to increasing the number of women leaders in business, the Board of the Friends of Hudson River Park, and the Board of Taproot Foundation, a national organization engaged in skills-based volunteerism and pro-bono philanthropy. Suni is also passionate about awareness and support for our veteran community, and she is involved in many organizations in this regard. In addition to serving on the U.S. Chamber of Commerce Veteran’s Employment Advisory Council, Suni has worked with First Lady Michele Obama’s Joining Forces initiative. Suni also represents Citi as a founding member of Veterans on Wall Street, a coalition of major financial services firms established in 2010 to engage the broader industry in efforts to support our transitioning veterans. Having helped formalize Citi’s very successful Veterans Initiative, CitiSalutes, in 2009, Suni remains the senior business sponsor for the initiative.

For those not already aware of her pedigree, Suni joined Salomon Brothers in January 1993, after five years with Merrill Lynch & Co. where she was a Vice President in Investment Banking. Suni joined Merrill upon graduation from the Amos Tuck School of Business at Dartmouth College, where she received her M.B.A. Suni received her Bachelor of Science degree from Denison University, where she majored in physics and math.

Pretty impressive stuff right there folks. Now you know why Suni was named one of  2016’s Top 20 Most Powerful Women on Wall Street!

So, in light of International Women’s Day and today’s honorable $2b Citibank N.A. “IWD” two-part new issue a “thank you”– not only to Suni, but to all the women in our investment grade debt capital markets and in our lives in addition to those who help perpetuate a more inclusive financial services industry.

Before I conclude, a bit of Women-on-Wall Street trivia for you from the guy-in-the-corner’s personal treasure trove – 

Did you know the first ever Euro-denominated transaction ever priced in history was for the European Investment Bank?  Did you know who priced it?  It was a woman. Her name was Natalie Armentero of Banque Paribas Syndicate. You may not have heard her name in a while because, back in 1998 – over 19 years ago – she became the wife of the guy-in-the-corner and she now goes by the name of Natalie Quigley!  Yet another smart and talented lady right there who graced our investment grade GCM opening doors and setting the bar high for many other women to follow.  She also makes me one very proud and lucky guy!  Her sister Marie-Therese Armentero represented Switzerland in the 1984 and 1988 Summer Olympics while currently holding numerous world swimming records for women over 40 years of age. Good stuff right there folks. Here’s to supporting strong women the world over.

Thank you also to Morgan Forester at team Citigroup for making herself accessible for me today on this.

 

IG Primary & Secondary Market Talking Points – Uh oh! What Gives? Penske Widens!……But Then Everett Spinco Saves the Day?!

 

  • Today’s Penske Truck Leasing Co., L.P. and PTL Finance Corporation’s 10-year 144a/REGS Senior Notes new issue opened some eyes today when it launched at +160 or 5 bps wider than +155 “area” guidance despite the fact that “area” was defined as +/-5 bps.
  • However, where there is bad there is good.  Today’s Everett Spinco Inc. 3-year 144a/REGS Senior Notes tranche was guided in the  +140 “area” with the latter defined as
    +/-5 bps but launched at +130 or a nickel tighter than the tightest side of guidance!
  • The average spread from IPTs thru the launch/final pricing of today’s 17 IG Corporate-only new issues was <17.36> bps.
  • BAML’s IG Master Index was unchanged at +121.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.16 vs. 1.15.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +163.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.6b on Friday versus $20.8b on Thursday and $21.3b the previous Friday.
  • The 10-DMA stands at $20.2b.

Global Market Recap

 

  • Massive blizzard headed towards the Northeast tonight/tomorrow.
  • S. Treasuries – lost ground due to heavy corporate supply.
  • Overseas Bonds – JGB’s had small losses. Europe was all over the place.
  • 3mth Libor – Set at the highest yield (1.13122%) since April 2009.
  • Stocks – U.S. stocks were mixed and little changed.
  • Overseas stocks – Europe more green than red. Asia closed higher.
  • Economic – Not a real factor today in the U.S. or across the globe but will be this week.
  • Currencies – USD better vs. the Euro, weaker vs. the Pound, CAD and AUD and little changed vs. Yen.
  • Commodities – Crude oil small loss, gold up, copper good day and wheat had a bad day.
  • CDX IG: +0.53 to 65.08
  • CDX HY: +3.85 to 336.70
  • CDX EM: -0.28 to 216.74

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/13-3/17
vs. Current
WTD – $18.30b
March 2017
Forecasts
vs. Current
MTD – $77.425b
Low-End Avg. $24.00b 76.25% $113.79b 68.04%
Midpoint Avg. $24.83b 73.70% $114.31b 67.73%
High-End Avg. $25.67b 71.29% $114.83b 67.43%
The Low $15b 122.00% $80b 96.78%
The High $35b 52.29% $140b 55.30%

 

In Honor of Tropical Storm “Stella”

My bet is that Tropical Storm Stella renders Tuesday an inactive day which, in turn, means Thursday now becomes a massive day for issuance.   
noreaster-stella

 

 

 

 

 

 

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

 

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

 

NICs, Bid-to-Covers, Tenors, 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.
3/06
TUES.
3/07
WED.
3/08
TH.
3/09
FRI.
3/10
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 2/27
AVERAGES
WEEK 2/20
AVERAGES
WEEK 2/13
AVERAGES
WEEK 2/06
AVERAGES
WEEK 1/30
New Issue Concessions <0.56> bps <0.47> bps 5.5 bps 3.94 bps 3.33 bps 1.17 bps <3.15> bps <0.16> bps <0.86> bps <3.44> bps <0.87> bps
Oversubscription Rates 3.19x 2.54x 2.22x 2.37x 1.92x 2.73x 3.39x 3.26x 3.76x 3.92x 3.12x
Tenors 9.93 yrs 8.68 yrs 17.99 yrs 6.58 yrs 5.21 yrs 9.65 yrs 8.04 yrs 8.37 yrs 8.03 yrs 12.04 yrs 11.60 yrs
Tranche Sizes $843mm $638mm $443mm $583mm $275mm $671mm $738mm $695mm $744mm $735mm $1,311 yrs
Avg. Spd. Compression
IPTs to Launch
<21.31> bps <18.56> yrs <17> bps <25.06> bps <13.50> bps <20.00> bps <16.79> bps <18.47> bps <18.45> bps <19.60> bps <19.77> 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
Citibank N.A. A1/A+ FRN 3/20/2019 1,000 3mL+equiv 3mL+34 the # 3mL+34 3mL+34 CITI-sole
Citibank N.A. A1/A+ 2.00% 3/20/2019 1,500 +low 70s/+72.5a +67 the # +67 +67 CITI-sole
DCT Industrial Oper. Part.
(tap) New Total: $325mm
Baa2/BBB 4.50% 10/15/2023 50 +185a +175a (+/-5) +170 +170 CITI/JPM/WFS
Everett Spinco Inc. Baa2/BBB+ 2.875% 3/27/2020 500 +175a +140a (+/-5) +130 +130 BAML/MUFG/RBC
Everett Spinco Inc. Baa2/BBB+ 4.25% 4/15/2024 500 +225a +195a (+/-5) +190 +190 BAML/MUFG/RBC
Everett Spinco Inc. Baa2/BBB+ 4.75% 4/15/2027 500 +237.5-250
+243.75a
+220a (+/-5) +215 +215 BAML/MUFG/RBC
Humana Inc. Baa3/BBB+ 3.95% 3/15/2027 600 +150-155 +140a (+/-5) +135 +135 BAML/JPM/MS/USB
Humana Inc. Baa3/BBB+ 4.80% 3/15/2047 400 +180a +165a (+/-5) +160 +160 BAML/JPM/MS/USB
Ontario Teachers A1/AA 3.125% 3/20/2022 500 +112.5a +100-105 +100 +100 GS/TD
Ontario Teachers A1/AA 3.875% 3/20/2027 500 +137.5a +130-135 +130 +130 GS/TD
Penske Truck Leasing Baa2/BBB+ 4.20% 4/01/2027 500 +160a +155a (+/-5) +160 +160 BAML/JPM/PNC/WFS (a)  +1 (p)
Verizon Communications Inc. Baa1/A- FRN 3/16/2022 1,400 3mL+equiv 3mL+equiv 3mL+100 3mL+100 BAML/BARC/MS/RBC (a) +5 (p)
Verizon Communications Inc. Baa1/A- 3.125% 3/16/2022 1,850 +125-130 +115a (+/-5) +110 +110 BAML/BARC/MS/RBC (a) +5 (p)
Verizon Communications Inc. Baa1/A- 4.124% 3/16/2027 3,250 +175-180 +165a (+/-5) +160 +160 BAML/BARC/MS/RBC (a) +5 (p)
Verizon Communications Inc. Baa1/A- 5.25% 3/16/2036 3,000 +230-235 +215a (+/-5) +210 +210 BAML/BARC/MS/RBC (a) +5 (p)
Verizon Communications Inc. Baa1/A- 5.50% 3/16/2046 1,500 +245-250 +235a (+/-5) +230 +230 BAML/BARC/MS/RBC (a) +5 (p)
Virginia Electric & Power Co. A2/A 3.50% 3/15/2027 750 +105a +90-95 +90 +90 DB/JPM/WFS

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
State of Kuwait AA/AA 2.75% 3/20/2022 3,500 +100a +85a +75 +75 CITI/DB/HSBC/JPM/NBK/SCB
State of Kuwait AA/AA 3.50% 3/20/2027 4,500 +120a +110a +100 +100 CITI/DB/HSBC/JPM/NBK/SCB

 

Indexes and New Issue Volume

 

Index Open Current Change
IG27 64.547 64.853 0.306
HV27 131.025 131.490 0.465
VIX 11.66 11.35 <0.31>
S&P 2,372 2,373 1
DOW 20,902 20,881 <21>
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $18.30 bn DAY: $26.30 bn
WTD: $18.30 bn WTD: $26.30 bn
MTD: $77.425 bn MTD: $100.475 bn
YTD: $340.508 bn YTD: $440.458 bn

 

Lipper Report/Fund Flows – Week ending March 8th      

     

  • For the week ended March 8th, Lipper U.S. Fund Flows reported an inflow of $3.482b into Corporate Investment Grade Funds (2017 YTD net inflow of $29.433b) and a net outflow of $2.119b from High Yield Funds (2017 YTD net outflow of $743m).
  • Over the same period, Lipper reported a net inflow of $1.208b into Loan Participation Funds (2017 YTD net inflow of $9.308b).
  • Emerging Market debt funds reported a net inflow of $154.368m (2017 YTD inflow of $1.387b).

 

IG Credit Spreads by Rating

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

Draghi Says Euro is Irrevocable-Mischler Debt Market Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.09.17 –Draghi Says Euro is Irrevocable

 

Investment Grade New Issue Re-Cap

Buy-Side Feedback—“Its Amazing!”

IG Primary & Secondary Market Talking Points

Global Market Recap

ECB President Mario Draghi’s Declares “The Euro is here to stay!” and “The Euro is irrevocable!” 

Draghi’s ECB Key Talking Points

ECB Forecasts

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 March 8th      

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

6 IG Corporate issuers tapped the dollar DCM today pricing 9 tranches between them totaling $5.25b.  The SSA space featured 2 issuers and 2 tranches totaling $1.30b for an all-in IG day total of 8 issuers, 11 tranches and $6.55b.
The WTD total is now 34% more than this week’s syndicate midpoint average forecast or $44.50b vs. $33.15b. MTD, we’ve now priced 50% of the IG Corporate mid-range projection for all of March or $58.025b vs. $114.31b.

Note: In last Friday’s “QC” Best and Brightest edition I wrote at the top, “Personally one should err to the upside in markets like this wherein new issue volume forecasts are concerned.  I’ll start by saying I have a strong feeling we see another $50b week of all-in IG Corporate and SSA new issuance next week.  IG Corporates alone could easily eclipse the $40b mark.  However, that’s my take on things. Across the 24 syndicate desks that I surveyed today, next week’s IG Corporate-only midpoint average estimate calls for $33.15b to price characterized by MANY new issuers.”

The WTD tally for IG Corporate new issuance thru today is $44.50b and all-in IG Corporate and SSA issuance is $52.80b ……not too shabby eh?

Buy-Side Feedback

Late this afternoon a buy-side account pointed out the following, “It’s amazing Ron! I was looking at your “QC” from last Friday and recall how staggered I was that almost 90% of last weeks’ new issues tightened versus pricing spread levels especially considering the negative concession environment.  I don’t think I’ve ever seen that before.  But this week is an entirely different story. In fact, it’s completely the opposite.  I’ll bet that a new record number of this week’s new issues widened out vs. their pricing levels given yields.  I haven’t seen more apathy in the market than this week in a VERY long time.”

We’ll see tomorrow folks when I check  the secondary trading levels of this week’s


IG Primary & Secondary Market Talking Points

 

  • Host Hotels & Resorts LP bumped up its 7yr Senior Notes new issue to $400mm from $350m at the launch and at the tightest side of guidance.
  • Neuberger and Berman upped today’s 144a/REGS 10yr Senior Notes new issue to $300mm from $250mm at the launch. The deal skipped guidance.
  • The Asian Development Bank increased today’s 4yr FRN new issue to $1b from $750mm at the launch.
  • Swedish Export Credit Corp. upsized today’s tap of its FRNs due 10/04/2018 to $300mm from $250mm at the launch.
  • The average spread from IPTs thru the launch/final pricing of today’s 8 IG Corporate-only new issues, that displayed price evolution, was <25.06> bps.
  • BAML’s IG Master Index was unchanged at +119.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 2 bps to 1.14 vs. 1.12.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +161.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.2b on Wednesday versus $20.9b on Tuesday and $21.6b the previous Wednesday.
  • The 10-DMA stands at $20.4b.

 

Global Market Recap

 

  • U.S. Treasuries – Terrible price action. Supply, Draghi and healthcare the main culprits.
  • Overseas Bonds – Europe sold off on Draghi’s political correctness.. JGB’s red except 30yr.
  • 3mth Libor – Set at 1.11956% the highest since April 2009.
  • Stocks – Basically unchanged with 40 minutes left in the session.
  • Overseas Stocks – Japan up, China & Hang Seng down & Europe more green than red.
  • Economic – Claims higher from low since 1973. Import prices YoY high since 2012.
  • Overseas Economic – China inflation data mixed & credit down. Ireland GDP was strong.
  • Currencies – U.S. weaker vs. Euro & Pound but stronger vs. the Yen, CAD & AUD.
  • Commodities – CRB, crude oil, gold, copper, silver, etc., all got hit.
  • CDX IG: +0.85 to 64.75
  • CDX HY: +4.14 to 333.37 (wider by 26.15 bps this week)
  • CDX EM: +4.48 to 221.56

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

-Tony Farren

 

ECB President Mario Draghi’s Declares “The Euro is here to stay!” and “The Euro is irrevocable!” 

mischler-draghi-euro-irrevocable 

 

Today the ECB left the Euro Zone’s  main refinancing rate unchanged at 0%, the marginal lending facility unchanged at 0.25% and the deposit facility rate also unchanged at <0.4%>.  Asset purchases remained €80b a month until the end of March after which they will be reduced by 25% to €60b per month from April thru December. Currency traders, however, reacted to the hawkish news that the ECB dropped its pledge to use “all available instruments” to achieve its mandate, and is now less worried about deflation. On the one hand, ECB President Mario Draghi talked up the prospects for the Euro Zone economy while saying there is no longer a deflation risk however, he also warned that there are “downside risks” that could derail the recovery. Clearly the ECB monetary chief has a firm eye on upcoming elections, particularly in France. Draghi sighted domestic risks are now more contained but subsequently took several minutes explaining how elections actually make everything uncertain. Among notable moments in his speech, he ducked the question: Could the ECB raise interest rates before it has ended its QE program?“  That was interesting, as he previously insisted that the rate would not rise until the asset-purchase program concludes.  The takeaway is that risks surrounding the euro area growth outlook have become less pronounced, but remain tilted to the downside and relate predominantly to global factors.

Draghi’s ECB Key Talking Points

 

  • ECB leaves the main refinancing rate unchanged at 0.00%.
  • Leaves the marginal lending facility unchanged at 0.25%.
  • Leaves the deposit facility rate unchanged at -0.4%.
  • Keeps asset purchases at €80b a month until the end of March.
  • Says asset purchases will be €60b a month from April to December – a 25% reduction.
  • Reiterates that rates will stay at present or lower levels for an extended period of time.
  • Net purchases will be made alongside reinvestments.
  • QE can be increased in size and/or duration if the outlook worsens.
  • Draghi sees rates at present or a lower level well past the end of QE.
  • QE will run until the ECB sees a sustained inflation pick-up.
  • Sees no convincing upward trend in underlying inflation.
  • Inflation is likely to remain close to 2% in the coming months.
  • Core inflation set to rise gradually over the medium-term.
  • ECB measures preserve favorable conditions needed.
  • Sentiment indicators point to a pick-up in momentum.
  • Inflation increased due to energy effects.
  • Underlying inflation pressures remain subdued.
  • The ECB will look through transient inflation changes.
  • A very substantial degree of accommodation is needed.
  • Draghi omits pledge to use “all instruments” within the mandate.
  • Says economic risks are less pronounced, yet still to the downside.
  • Risks relate predominantly to global factors.
  • Survey results increase confidence in the recovery
  • Survey results suggest the recovery may broaden.
  • Rising employment bolsters private consumption.
  • Signs of a somewhat stronger global recovery.
  • Euro-area growth was damped by a sluggish reform pace.

 

ECB Forecasts

  • 2017 GDP growth at 1.8% vs 1.7%
  • 2018 GDP growth at 1.7% vs 1.6%
  • 2019 GDP growth at 1.6% vs 1.6%
  • 2017 inflation at 1.7% vs 1.3%
  • 2018 inflation at 1.6% vs 1.5%
  • 2019 inflation at 1.7% vs 1.7%

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

 

IG Corporate New Issuance This Week
3/06-3/10
vs. Current
WTD – $44.50b
March 2017
Forecasts
vs. Current
MTD – $58.025b
Low-End Avg. $31.79b 139.98% $113.79b 50.99%
Midpoint Avg. $33.15b 134.24% $114.31b 50.76%
High-End Avg. $34.50b 128.99% $114.83b 50.53%
The Low $25b 178.00% $80b 72.53%
The High $45b 98.89% $140b 41.45%

 

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

 

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

 

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

Rate Hike Coming..Beige Book Talking Points-Mischler Debt Market Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.01.17-Rate Hike IS Coming; Fed Beige Book Talking Points

 

Investment Grade New Issue Re-Cap – Dow Breaks 21,000 – Odds of March Rate Hike Rise From 40% to 80% in 3 Sessions!

IG Primary & Secondary Market Talking Points

Global Market Recap

The Federal Reserve Beige Book Talking Points – All You Need to Know

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

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 February 22nd    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

7 IG Corporate issuers tapped the dollar DCM today pricing 12 tranches between them totaling $9.275b.  The SSA space hosted 2 issuers across 4 tranches including a $5b 3-part from the Sultanate of Oman that pumped up the all-in IG day totals to 9 issuers, 16 tranches and $14.625b. March has certainly started off on the right foot.
The WTD total is now 52% more than this week’s syndicate midpoint average forecast or $38.825b vs. $25.44b.
The all-in (IG Corporate plus SSA WTD volume total is now $51.425b.

Deregulation, cutting corporate taxes, focusing on American manufacturing and jobs while negotiating with America’s interests first and building a strong national defense equates to GROWTH.  Growth will cause rates to rise, rising rates will swell the stock market and bank stocks should get back to a semblance of their true values among many other things.
IG Primary & Secondary Market Talking Points

 

  • Mercury General Corp. upped its 10-year Senior Notes new issue to $375mm from $350mm at the launch and at the tightest side of guidance.
  • Telus Corp. increased its 10-year Senior Notes new issue to $500mm from $350mm at the launch.
  • Brixmor Operating Partnership LP upsized today’s 10-year Senior Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
  • The average spread from IPTs thru the launch/final pricing of today’s 12 IG Corporate-only new issues was <19.00> bps.
  • BAML’s IG Master Index tightened 1 bp to +121 vs. +122.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.15 vs. 1.16 setting yet another new tight since November 3rd, 2014.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $22.7b on Tuesday versus $15.8b on Monday and $17.8b the previous Tuesday.
  • The 10-DMA stands at $20b.

 

Global Market Recap

 

  • U.S. Treasuries – had a very difficult day thanks to the Fed Speak & President Trump.
  • Overseas Bonds – Europe hit hard with USTs and JGB’s also closed in the red.
  • 3mth Libor – Set at the highest yield (1.09278%) since April 2009.
  • Stocks – Big rally for U.S. stocks as S&P, Dow & NASDAQ traded at all-time highs.
  • Overseas Stocks – Very strong day for Europe & the Nikkei. China & HS with small gains.
  • Economic – Full U.S. calendar with some very good & not so good data.
  • Fed’s Beige Book at odds with the very hawkish Fed Speak this week.
  • Overseas Economic – The data in China, Japan & Europe overall was positive.
  • Currencies – Big rally for USD overnight & gave a little back during NY hours.
  • Commodities – CRB, copper & wheat were higher while crude oil & gold were lower.
  • CDX IG: -2.57 to 60.01 (trade at 59.856 the tightest since 2014)
  • CDX HY: -11.47 to 305.44
  • CDX EM: -7.51 to 213.30

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

-Tony Farren

 The Federal Reserve Beige Book Talking Points – All You Need to Know

 

  • Near-term business optimism eased since the last report.
  • Economy grew at a modest to moderate pace through mid-February.
  • Job market is tight amid little price pressure change.
  • There were a few districts that saw a pickup in wage growth.
  • Businesses expect prices to rise modestly in the months ahead.
  • Most Fed regions say prices were up modestly to moderately.
  • Some districts saw widening labor shortages.
  • Employment expanded moderately in most of the country.
  • Staffing firms saw a “brisk business for this time of year”.
  • Energy, home-building and house sales are all growing moderately.
  • Auto sales were up in most districts; tourism mostly stronger.
  • New York Fed prepared the Beige Book from early January to February 17th.

 

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

 

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

US Corporate Debt New Issuance Market-What’s Next?
February 2017      Debt Market Commentary   

Quigley’s Corner 02.24.17 – Weekend Edition: Corporate Debt New Issuance- What’s Next?

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

“Knowing the Past for the Future” – A Look at a Decade’s Worth of March 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

Lipper Report/Fund Flows – Week ending February 22nd    

Investment Grade Credit Spreads by Rating

Investment Grade Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

We missed the midpoint syndicate forecast for IG Corporate volume this week by a lot. In fact, the very low estimate calling for only $19.4b was off by 42% with only $11.125b in new supply.  Next week, however, desks seemed focused on around $25b.

Yellen speaks next Friday, March 3rd and the Employment Report is the following Friday, March 10th. Those are really the only two bits of data that could move the market. Of course that’s notwithstanding any one of myriad global event risk factors playing out i.e. the Dutch election on Wed. 3/15 followed by round one of the French election on Sunday, April 23rd and round 2 on Sunday, May 7th. As we get closer and closer to each, polling will gyrate thru the markets.

Next week has been a huge one in each of the past three years for IG Corporate volume and overall IG issuance including SSA product.

Take a look:

2016 – IG Corps: $50.72b Corps + SSA: $61.22b

2015 – IG Corps: $59.03b Corps + SSA: $65.03b

2014 – IG Corps: $50.29b Corps + SSA: $55.18b

 

Unfortunately no estimate for next week comes close to the $50m mark. The highest estimate is an out layer at $43b. The most dense groupings are focused on around $25b with the midpoint estimate being $25.46b. I am more optimistic for 30b+ in new IG Corporate issuance only because we’ve disappointed on recent weekly issuance projections in 3 of the past 4 weeks, the time is right, tone is formidable, concessions are skimpy, issuers cannot sit around forever, demand is very strong and so, I err to the upside. Overall issuance including SSA could top $40b.

IG Primary & Secondary Market Talking Points

  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 20 deals that printed, 17 tightened versus NIP for a 00% improvement rate while 2 widened (10.00%) and 1 were flat (5.00%).
  • For the week ended February 22nd, Lipper U.S. Fund Flows reported an inflow of $2.566b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.906b) and a net inflow of $726.282m into High Yield Funds (2016 YTD net inflow of $1.616b).
  • BAML’s IG Master Index was unchanged at +123.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.17 vs. 118 setting a new tight since November 3rd, 2014.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +164 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $21.2b on Thursday versus $20.8b on Wednesday and $24b the previous Wednesday.
  • The 10-DMA stands at $19.9b.

 

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

 

IG Corporate New Issuance This Week
2/20-2/14
vs. Current
WTD – $11.125b
February 2017
Forecasts
vs. Current
MTD – $61.15b
Low-End Avg. $18.25b 60.96% $90.65b 67.46%
Midpoint Avg. $19.40b 57.35% $91.96b 66.50%
High-End Avg. $20.54b 54.16% $93.26b 65.57%
The Low $15b 74.17% $85b 71.94%
The High $26b 42.79% $120b 50.96%

 

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

 

I am happy to announce that I had 96% response to today’s “Best & Brightest” survey! That means 23 out of 24 desks.  21 of those participants are among 2017’s YTD top 25 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 22 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg 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 84.38% 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.

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was framed as follows:

Getting right to it today, here are this week’s numbers entering today’s morning session:

  • We priced an anemic 57% of this week’s already low syndicate midpoint average forecast or $11.125b vs. $19.40b.
  • Thus far in February we priced 66.50% of the monthly syndicate projection or $61.15b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $303.183b! 
  • Wednesday was the fastest pace ever to reach the $300mm mark for all-in IG Corporate and SSA issuance.

 Here are this week’s five key IG Corporate-only primary market driver averages:

  • NICS:  <0.16> bps
  • Oversubscription Rates: 3.26x
  • Tenors:  8.37 years
  • Tranche Sizes: $695mm
  • Spread Compression from IPTs to the Launch: <18.47> bps


Here’s how this week’s performance data compares against last week’s:

  • NICs widened 0.70 bps to<0.16> bps vs.  <0.86> bps.
  • Over subscription or bid-to-cover rates, the measure of demand, reduced by 0.50x to 3.26x vs. 3.76x. 
  • Average tenors extended by 0.34 years to 8.37 years vs. 8.03 years.
  • Tranche sizes decreased by $49mm to $695mm vs. $744mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 16 IG Corporate-only new issues tightened fractionally by <0.02> bps to <18.47> bps vs. <18.45> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 1 bp to+164 vs. +165.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +123 vs. +124. 
  • Spreads across the four IG asset classes tightened 0.25 bps to16.50 bps vs. 16.75 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.79 bps to 20.37 vs. 21.16 bps also against their post-Crisis lows.
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 20 deals that printed, 17 tightened versus NIP for a 00% improvement rate while 2 widened (10.00%) and 1 were flat (5.00%).
  • For the week ended February 22nd, Lipper U.S. Fund Flows reported an inflow of $2.566b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.906b) and a net inflow of $726.282m into High Yield Funds (2016 YTD net inflow of $1.616b).

It seems as if syndicate desks have said issuance would increase “the week after next” in each of the last two Friday’s.  Now, however, with Corporate America having posted earnings and with most issuers having exited blackouts, expectations are for a much more robust calendar next week. The two bits of potentially market moving data are: Fed Chair Janet Yellen speaks at the Executive’s Club of Chicago on Friday, March 3rd and the Employment Situation for February is scheduled to be released on Friday, March 10, 2017, at 8:30 a.m. (EST). After that there’s the FOMC meeting on Tuesday and Wednesday March 14th and 15th, which is associated with a Summary of Economic Projections and a press conference by Chair Yellen.  Blackouts then begin shortly thereafter. The point being – this time, next week really should see very strong issuance across all sectors. But why listen to me let’s go back to the same week in time over the past three years. The results are eye-opening:

  • 2016 – IG Corps: $50.72b Corps + SSA: $61.22b
  • 2015 – IG Corps: $59.03b Corps + SSA: $65.03b
  • 2014 – IG Corps: $50.29b Corps + SSA: $55.18b

 We all understand that “past performance is no guarantee of future results” but those are pretty telling statistics right there folks!

The Big Question:  Next Wednesday begins the month of March, so today I ask a two-part question “what are your thoughts and numbers for BOTH next week AND March?

The “Best and the Brightest” in Their Own Words

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

Munching on Mnuchin Musings; Mischler Debt Market Comment
February 2017      Debt Market Commentary   

Quigley’s Corner 02.23.17- Munching on Mnuchin Musings

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

Global Market Recap

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

Treasury Secretary Steve Mnuchin Speaks on Squawk

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 February 15th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Danske Bank A/S was the lone corporate issuer to tap the IG dollar DCM today pricing 3 tranches totaling $1.75b.  The SSA space woke up featuring one well-telegraphed NWB 5-year that was $1b, bringing the all-in IG day totals to 2 issuers, 4 tranches and $2.75b.
We priced an anemic 57% of this week’s already low syndicate midpoint average forecast or $11.125b vs. $19.40b.
CDX IG and HV closed today’s session at new tights and the S&P and Dow closed at new all-time highs.

Upcoming potential market moving events:

  • Fed Chair Janet Yellen speaks at the Executive’s Club of Chicago on Friday, March 3rd.
  • The Employment Situation for February is scheduled to be released on Friday, March 10, 2017, at 8:30 a.m. (EST).

 

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs thru the launch/final pricing of today’s 3 IG Corporate-only new issues was <11> bps.
  • BAML’s IG Master Index tightened 1 bp to +123 vs. +124.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.18 vs. 119 matching its tight since November 3rd, 2014.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.8b on Wednesday versus $17.8b on Tuesday and $24.6b the previous Wednesday.
  • The 10-DMA stands at $20.0b.

 

Global Market Recap

 

  • U.S. Treasuries – rallied into the $28 bn 7yr auction & then the market stood still.
  • Overseas Bonds – 30yr JGB rallied 5 bps. Strong session for France & Belgium.
  • Stocks – Dow heading for its 10th winning session in a row.
  • Overseas Stocks – Asia with small losses. Europe closed mostly red.
  • Economic – Jobless claims 4-week moving average at lowest level since 1973.
  • Overseas Economic – China data better & Japan weaker. Good data in Germany & U.K.
  • Currencies – USD was weaker vs. all of the Big 5.
  • Commodities – Good day for crude oil, gold & silver and very bad day for copper.
  • CDX IG: -0.75 to 61.83
  • CDX HY: -1.53 to 314.93
  • CDX EM: -8.77 to 213.16

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
2/20-2/14
vs. Current
WTD – $11.125b
February 2017
Forecasts
vs. Current
MTD – $61.15b
Low-End Avg. $18.25b 60.96% $90.65b 67.46%
Midpoint Avg. $19.40b 57.35% $91.96b 66.50%
High-End Avg. $20.54b 54.16% $93.26b 65.57%
The Low $15b 74.17% $85b 71.94%
The High $26b 42.79% $120b 50.96%

 

Treasury Secretary Steve Mnuchin Speaks on Squawk Box

US Treasury Secretary Steve Mnuchin offered his views this morning while appearing with Becky Quick of CNBC in his first interview since becoming the 77th U.S. Secretary of State. He spoke on various topics ranging from policy and regulation to immigration tax and growth.  Here are the key takeaways.  Thank you to one of our own Treasury gurus, Mr. Tony Farren, for the summary..

  • Most important thing for growth is tax plan.
  • We’re mostly focused on middle-class tax cut.
  • We believe in dynamic scoring for tax plan.
  • High-income tax cuts should be offset.
  • Could be late 2018 to get to 3% growth.
  • We’re looking closely at border adjustment tax.
  • Some issues with border adjustment tax.
  • Tax reform to be significant.
  • Tax reform goal is by August Congress recess.
  • Not ready to announced a longer-term U.S. Bond.
  • Should seriously look at longer-term bond issues (50- and 100-year).
  • Have had terrific talks with China so far.
  • Not making judgments on China FX.
  • Treasury has a process for reviewing FX policies.
  • We will probably have low rates for a long period.
  • Administration’s growth projections are likely higher versus Congress.
  • 3% GDP growth is very achievable.
  • Regulatory relief is also important boost to growth.
  • We’re looking at significant economic changes.
  • We’re reaching out to businesses.
  • Need to ensure banks put liquidity to work.
  • USD, stocks reflecting confidence in U.S. economy.
  • Not focused on day-to-day market moves.
  • Looking forward to regular meetings with Yellen
  • Looking forward to G-20 talks in March.
  • Has his team looking at EXIM Bank loan expansion.
  • He’s committed to housing finance reform.
  • We need bipartisan solution so that GSEs are not left as is.

 

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

 

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