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Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest
February 2017      Debt Market Commentary   

Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest

 

Investment Grade Corporate Debt 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 

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

Economic Data Releases

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Tomorrow’s Calendar

It was another no-print Friday today and a welcome one at that.  I am happy to announce that one additional syndicate desk earned its way into the “Best and the Brightest” so, my survey now includes 24 desks. They are the ones you want and need to hear from. They are very patiently lined up and waiting below with their numbers and thoughts for next week’s IG dollar DCM supply. So, kick back, relax, have a cup of coffee, knock back a beer or enjoy glass of wine or perhaps just sit by the fireplace and read what you need to know.  Let’s recap things first and on with the show!

 

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 26 deals that printed, 14 tightened versus NIP for a 00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +121 vs. 1.22.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +167.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.4b on Thursday versus $22.1b on Wednesday and $22.5b the previous Thursday.
  • The 10-DMA stands at $20.3b.

 

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

 

IG Corporate New Issuance This Week
2/06-2/10
vs. Current
WTD – $14.70b
February 2017
Forecasts
vs. Current
MTD – $27.275b
Low-End Avg. $23.74b 61.92% $90.65b 30.09%
Midpoint Avg. $24.72b 59.47% $91.96b 29.66%
High-End Avg. $25.70b 57.20% $93.26b 29.25%
The Low $15b 98.00% $85b 32.09%
The High $35b 42.00% $120b 22.73%

 

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

 

I am happy to announce that I’ve added a new top syndicate desk to the “QC’s” “Best & Brightest” survey!  As they are in the top 25 they are a most welcome addition.  Once again, the “QC” received unanimous responses from the 24 syndicate desks surveyed in today’s Best & Brightest poll.  22 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, 21 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 86.61% 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 the third consecutive year! That’s 2014, 2015 and 2016 !!  More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! -RQ

 

The question posed to the “Best and the Brightest” early this morning framed with the following:
Here are this week’s numbers:

  • WTD, we missed this week’s IG Corporate syndicate midpoint average forecast by over 40% having priced only $14.70b vs. $24.72b.
  • Thus far in February we priced 30% of the monthly syndicate projection or $27.275b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $268.558b! 

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

  • NICS:  <3.44> bps
  • Oversubscription Rates: 3.92x
  • Tenors:  12.04 years
  • Tranche Sizes: $735mm
  • Spread Compression from IPTs to the Launch: <19.60> bps


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

 

  • NICs tightened 2.57 bps to <3.44> bps vs. <0.87> bps.
  • Over subscription or bid-to-cover rates increased by 0.80x to 3.92x vs. 3.12x.. 
  • Average tenors extended by 0.44 years to 12.04 years vs. 11.60 years.
  • Tranche sizes declined dramatically by $576mm to $735mm vs. $1,311mm, the result of last week’s hefty jumbo deal tranche sizes from MSFT, AT&T and AAPL.
  • Spread compression from IPTs to the launch/final pricing of this week’s 20 IG Corporate-only new issues widened ever so slightly by <0.17> bps to <19.60> vs. <19.77> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 1 bp to +167 vs. +166.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +128 vs. +127. 
  • Spreads across the four IG asset classes tightened 0.50 bps to 20.50 vs. 21.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.46 bps to 24.74 vs. 25.20 bps also against their post-Crisis lows.
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).

 

Corporate America has posted earnings.  Most issuers have exited blackouts.  Thursday’s storm may have hampered a bit of issuance this week and next week is expected to be sizeable. Chair Yellen testifies before the U.S. Senate Banking Panel on Tuesday the 14th. This represents Yellen’s first appearance since raising rates last month. All eyes and ears will be tuned into that especially since the January FOMC meeting was not followed by a Press Conference. Meanwhile Japan’s Prime Minister Abe arrives today for his first official summit with President Trump through the weekend.    

My approach to the “Quig” Pro Quo is to give something first and then ask.  So, it’s now time for the question, – “what are your thoughts and numbers for next week’s IG Corporate new issue volume?” 

Thank you very much and a have a great weekend! -Ron”

 

The “Best and the Brightest” in Their Own Words*

 

*Responses the QC Best & Brightest are available exclusively to QC email subscribers

 

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
2/13-2/17
Low-End Avg. $20.71b
Midpoint Avg. $21.33b
High-End Avg. $21.96b
The Low $15b
The High $26b

A Look at How the Voting Brackets Broke-Out for Next Week

 

Next Week
2/13-2/17
1: 15b
2: 15-20b
10: 20b
1: 21b
4: 20-25b
5: 25b
1: 26b

 

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 weekend!

Ron Quigley

 

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

 

Here is this week’s day-by-day re-cap of the five key primary market driver averages for IG Corporatesonly followed by this week’s and the prior five week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/06
TUES.
2/07
WED.
2/08
TH.
2/09
FRI.
2/10
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
New Issue Concessions <3.62> bps <7.5> bps 5.25 bps N/A N/A <3.44> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps
Oversubscription Rates 4.25x 4.56x 2.18x 7.33 N/A 3.92x 3.12x 3.29x 2.40x 2.85x 2.45x
Tenors 12.83 yrs 16.65 yrs 6.40 yrs 10 yrs N/A 12.04 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs
Tranche Sizes $744mm $850mm $690mm $300mm N/A $735mm $1,311 yrs $845mm $1,123mm $927mm $859mm
Avg. Spd. Compression
IPTs to Launch
<19.17> bps <25.40> bps <11.5> bps <35> bps N/A <19.60> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps

 

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

 

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 26 deals that printed, 14 tightened versus NIP for a 54.00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).

Issues are listed from the most recent pricings at the top working back to Monday at the bottom.  Thanks! –RQ

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
H.B. Fuller Co. Baa3/BBB 4.00% 2/15/2027 300 +200a +170a (+/-5) +165 +165 156/153
ADB Aaa/AAA 2.00% 2/16/2022 3,750 MS +19a MS +19a MS +18 +26.95 25/24
BP Capital Markets PLC A2/A- FRN 8/14/2018 500 N/A 3mL+40a (+/-5) 3mL+35 3mL+35 3mL+29.5/26.5
BP Capital Markets PLC
(tap) New Total: $1.75b
A2/A- 2.315% 2/13/2020 500 +85a +70a (+/-5) +65 +65 63/60
BP Capital Markets PLC A2/A- 3.224% 4/14/2024 1,000 +120a +115a (+/-5) +110 +110 108/105
BP Capital Markets PLC A2/A- 3.588% 4/14/2027 850 +130a +125 the # +125 +125 121/118
CMS Energy Corp. Baa2/BBB 3.45% 8/15/2027 350 +125-130 +115a (+/-5) +110 +110 111/109
BNG Aaa/AAA 1.50% 2/15/2019 2,250 MS +13a MS +13a MS +13 +44.25 44/42
Citigroup Inc.
(tap) New Total: $1.75b
Baa3/A- 4.75% 5/18/2046 750 +185a +175a (+/-2) +173 +173 176/173
Fondo Mivivienda S.A.
(tap) New Total: $650mm
BBB+/BBB+ 3.50% 1/31/2023 150 +180a +175a (+/-5) +170 +170 170/167
MPLX LP Baa3/BBB- 4.125% 3/01/2027 1,250 very high 100s +193.75a +180a (+/-5) +175 +175 175/171
MPLX LP Baa3/BBB- 5.20% 3/01/2047 1,000 +50 bps curve
243.75
+225a (+/-5) +220 +220 215/212
Symantec Corp. Baa3/BB+ 5.00% 8NC3 1,100 +mid to hi 5.00%
or 5.625%a
5.25-5.30%
or 5.375%a
5.00% +271 277/272
Dexia Capital Local Aa3/AA- FRN 2/15/2019 500 3mL+50 N/A N/A 3mL+50 3mL+50/47
EIB Aaa/AAA 1.75% 5/15/2020 3,000 MS +14a MS +14a MS +12 +42.5 41/40
KfW Aaa/AAA 1.25% 9/13/2018 1,000 MS <4>a MS <4>a MS <4> +17.45 17.6/17.4
TVA Aaa/AAA 2.875% 2/01/2027 1,000 +low 50s / +52.5a +50a (+/-2) +48 +48 48/46
Discover Financial Services BBB-/BBB+` 4.10% 2/09/2027 1,000 +190a +175a (+/-5) +170 +170 171/167
Estee Lauder Cos. Inc. A2/A+ 1.80% 2/07/2020 500 +55-60 +45a (+/-5) +40 +40 38/36
Estee Lauder Cos. Inc. A2/A+ 3.15% 3/15/2027 500 +90-95 +80 (+/-5) +75 +75 77/74
Estee Lauder Cos. Inc. A2/A+ 4.15% 3/15/2047 500 +125-130 +115a (+/-5) +110 +110 113/111
First Republic Bank Baa1/BBB+ 4.625% 2/13/2047 400 +high 100s
+187.5a
RG: +170a (+/-5)
+175a (+/-5)
+165 +165 164/160
GATX Corp. Baa2/BBB 3.85% 3/30/2027 300 +170a +150a (+/-3) +147 +147 149/146
IHS Markit Ltd. BB+/BBB 4.75% 2/15/2025 500 5.00% 4.75%a 4.75% +244 219/217
Vale Overseas Ltd.
(tap) New Total: $2bn
BBB-/BBB 6.25% 8/10/2026 1,000 5.45%a 5.20-5.25% 5.20% +278.3 269/265
Wells Fargo & Co. A2/AA- FRN 2/11/2022 2,000 3mL+95-100 3mL+93 the # 3mL+93 3mL+93 3mL+89/86

 

Indexes and New Issue Volume

Index levels are as of 12:00 noon ET.
*Denotes new record high

Index Open Current Change  
IG27 64.712 65.024 0.312
HV27 138.575 137.87 <0.705>
VIX 10.88 10.72 <0.16>  
S&P 2,307 *2,313 6
DOW 20,172 *20,242 70  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $14.40 bn WTD: $22.15 bn
MTD: $26.975 bn MTD: $37.225 bn
YTD: $199.358 bn YTD: $264.508 bn

 

Lipper Report/Fund Flows – Week ending February 8th    

     

  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).
  • Over the same period, Lipper reported a net inflow of $854.782m into Loan Participation Funds (2016 YTD net inflow of $4.614b).
  • Emerging Market debt funds reported a net inflow of $358.189m (2016 YTD inflow of $502.693m).

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 20.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
IG Avg. 128 128 128 127 127 128 128 128 126 126 0 +2 106
“AAA” 75 76 75 75 74 75 76 77 75 71 <1> +4 50
“AA” 79 80 79 79 79 80 80 79 78 78 <1> +1 63
“A” 103 104 103 103 103 104 104 104 103 103 <1> 0 81
“BBB” 161 162 161 161 160 161 161 161 159 160 <1> +1 142
IG vs. HY 265 270 265 264 259 265 267 272 270 267 <5> <2> 228

 

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 24.74 bps wider versus their post-Crisis lows!

 

INDUSTRY 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
Automotive 112 112 112 112 113 115 116 117 116 117 0 <5> 67
Banking 119 120 119 119 118 120 121 121 119 120 <1> <1> 98
Basic Industry 155 157 156 156 155 156 156 157 156 156 <2> <1> 143
Cap Goods 94 95 95 95 95 95 95 95 95 95 <1> <1> 84
Cons. Prod. 106 106 106 105 105 105 106 106 105 105 0 +1 85
Energy 157 159 157 157 156 157 157 157 154 154 <2> +3 133
Financials 139 141 141 142 141 143 144 144 142 143 <2> <4> 97
Healthcare 115 115 114 114 113 114 114 114 112 112 0 +3 83
Industrials 130 130 129 129 129 129 130 129 128 128 0 +2 109
Insurance 138 139 139 139 138 139 139 139 138 139 <1> <1> 120
Leisure 127 128 127 128 128 129 129 128 129 129 <1> <2> 115
Media 156 157 156 156 155 156 156 155 154 153 <1> +3 113
Real Estate 140 141 141 141 140 141 141 141 139 140 <1> 0 112
Retail 115 115 115 114 114 115 115 114 112 112 0 +3 92
Services 123 123 123 123 123 123 123 122 121 121 0 +2 120
Technology 104 105 104 104 103 105 105 105 103 101 <1> +3 76
Telecom 168 168 166 166 165 165 166 164 161 161 0 +7 122
Transportation 127 128 128 128 127 128 129 128 126 126 <1> +1 109
Utility 127 128 128 128 127 127 127 127 126 127 <1> 0 104

                                  

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Import Price Index MoM January 0.3% 0.4% 0.4% 0.5%
Import Price Index ex Petroleum MoM January —- 0.0% <0.2%> <0.1%>
Import Price Index YoY January 3.4% 3.7% 1.8% 2.0%
U. of Michigan Sentiment February 98.0 95.7 98.5 —-
U. of Michigan Current Conditions February —- 111.2 111.3 —-
U. of Michigan Expectations February —- 85.7 90.3 —-
U. of Michigan 1 Year Inflation February —- 2.8% 2.6% —-
U. of Michigan 5-10 Year Inflation February —- 2.5% 2.6% —-
Monthly Budget Statement (2:00pm ET) January $45.0b —- <$27.5b> —-

 

*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones

 

New Issue Pipeline (more…)

Grexit, Brexit and Frexit-Mischler Debt Capital Markets Comment
February 2017      Debt Market Commentary   

Quigley’s Corner 02.08.17- First Grexit, Then Brexit and Now..Frexit? Mischler Debt Market Comment

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points – A Citigroup tap

Global Market Recap

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

The Critically Important French Elections

The EU: It’s All Greek to Me

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 January 25th     

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

 

2 IG Corporate issuers priced 5 tranches between them totaling $3.45b.  Additionally, 1 SSA issuer, BNG, priced a $2.25b 2-year for an all-in IG day total of $5.7b.

The WTD IG Corporate total is now $14.40b or 58% of this week’s syndicate midpoint average calling for $24.72b.

 

IG Primary & Secondary Market Talking Points – Mischler Serves as “passive” Jr. Co-Manager on Citigroup tap.

 

  • BP Capital Markets PLC added a fourth tranche, a $TBD 18-month FRN, to today’s earlier announced three-part 3-year tap, new 7s and 10s. 
  • The average spread from IPTs thru the launch/final pricing of today’s 5 IG Corporate-only new issues was <11.50> bps.
  • BAML’s IG Master Index tightened 1 bp to +127 vs. +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.21.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +166 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 $16.7b on Friday versus $22.5b on Thursday and $18.9b the previous Friday.
  • The 10-DMA stands at $20.6b.

 

Global Market Recap

 

  • U.S. Treasuries – rallied into supply for the second day. Curve flatter for second day.
  • Overseas Bonds – Big rally in Europe led by the long end despite heavy supply.
  • Stocks – mixed & little changed heading into the close.
  • Overseas Stocks – Europe mixed with slightly more green. Asia closed higher.
  • Economic – Non-event in U.S. & Europe. Weaker data in Japan.
  • Currencies – USD had small losses vs. all of the Big 5.
  • Commodities – Crude oil had a small gain despite very bearish inventory data.
  • CDX IG: +1.11 to 66.65
  • CDX HY: +3.07 to 331.64
  • CDX EM: -0.18 to 226.81

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
2/06-2/10
vs. Current
WTD – $14.40b
February 2017
Forecasts
vs. Current
MTD – $26.975b
Low-End Avg. $23.74b 60.66% $90.65b 29.76%
Midpoint Avg. $24.72b 58.25% $91.96b 29.33%
High-End Avg. $25.70b 56.03% $93.26b 28.92%
The Low $15b 96.00% $85b 31.74%
The High $35b 41.14% $120b 22.48%

 

The Critically Important French Elections

mischler-frexit-french-election-

Okay so, we all understand that the first round of the French Presidential Elections are held on Sunday, April 23rd.  The most recent election polls show National Front leader Marine Le Pen ahead 26% versus 20.5% for Emmanuel Macron and 18.5% for a fast-sinking Francois Fillon whose fizzling campaign is embroiled in corruption charges. But then there is the run-off Presidential election that is held two weeks later on Sunday on May 7th.  Now, many of you may be very familiar with the concept of the run-off or second election but many are not. In the first April election it is clear that no Presidential candidate will win with the required number of votes or an absolute majority 40-45% with a winning margin of 5-15%.  As a result a run-off election is held between the two candidates with the most votes.  It’s that simple.

There is a history in France of moderate and even conservative parties capturing the liberal votes in an effort to thwart what was once a notoriously nationalistic leaning National Front founded and headed by Marine Le  Pen’s father Jean-Marie.  That is no more.  Marine re-shaped and re-branded the National Front party catapulting it into modern times making it more appealing for contemporary sensibilities while capturing its widest support in its history – thanks to an unlikely strategist named Florian Phillipot.  The first task on the docket toward reinvention of the NF was for Marine to oust her father as the party’s leader.  That was no small task for anyone let alone the daughter of the man at the top of the National Front.  He simply could not remain at the helm with his dated and nationalistic and often times offensive views on certain subjects.  Marine took over and has changed the perception of the NF in France and around the world to make it more palatable and at a critical juncture in history for France. 

 

What has emerged since 2009 when Marine took charge and Phillipot became the NF’s chief strategist, was to tap into France’s silent majority of working class people fed up with the bureaucracy of the European Union.  Having lived in France for five formative years from the ages of 11 thru 16 I know a bit more about French culture and society than the next person.  Make no mistake about it – the French invented the word B-U-R-E-A-U-C-R-A-C-Y.  I saw it at play during my tenure as head of syndicate at BNP Paribas before, during and after that painful merger.  I had seven reporting lines between New York, London and Paris.  It took 6 months to have ideas even considered.  “Bureaucracy” is my point.  French bureaucracy however, is the worst kind.

When I visited with my wife’s Uncle Jean who had been the long-time Police Commissioner of Lyon, France’s second largest city, and de factor gastronomic capital of the world, I sensed his frustration. Here was a man who was an active member of La Resistance during World War II and who saw society at the street level thru his long and respected career in law enforcement.  He was comparable to George Simenon’s Inspector Maigret.  He was very dedicated and hard-working guy.  He always carries an Opinel knife, eats fresh-baked baguette with cheese accompanied by the obligatory glass of Bordeaux.  The French culture wore him well and vice versa but he epitomizes today’s disgruntled, frustrated and concerned Frenchman.  He takes nothing for granted unlike the stigma associated with France that has been enjoying a quality of life for over a decade thanks to neighboring Germany.  He is distraught at the current direction and future of his country and relayed that his former “brothers in arms” the French gendarme are all equally disappointed and concerned. Does this sound familiar?


In 2002 when Le Pen senior made it to the second round of French elections, virtually all of France pooled together to oust him by showing support for Jacques Chirac.  It was more of a vote against Jean-Marie than a vote for Chirac. But today’s National Front, though conservative, is much more inclusive than people think. It would serve at this critical juncture to learn more about its reinvention since Le Pen and Phillipot took the reins. As Phillipot himself has said, “ I didn’t come into this party saying I’m going to go to war against Jean-Marie Le Pen……but he was increasingly out to provoke and his behavior became untenable.  Subsequent to Le Pen’s ouster he in turn said in a nationally broadcast interview “that he wished his daughter no longer bore his name.”

Le Pen and Phillipot took care of business. That business started in the home. They ousted Jean-Marie from his throne of leadership and created a veritable powerhouse National Front party that has been leading in all the polls in France. She is currently projected to win the April election. Meanwhile the conservative party’s candidate M. Fillon had become embroiled in a mess surrounding his having paid his wife hundreds of thousands of dollar (equivalent) over years in a position she never showed up to work for.  Once his public relations handlers attempted to manage that fiasco, it was then revealed that he did the same for his two sons.  The result? He is now running in third place.


The NF has appealed to a similar type of populist movement in France analogous to what we saw here in the U.S. It’s somewhat of a silent majority that feels it needs to restrain open support of Le Pen for fear of being ostracized, criticized and labeled.  But once again, come election day, people will cast their ballot in private. It will be between themselves and the man upstairs.  That’s when voices will once again be heard and reverberate throughout the world.

Should Le Pen becomes France’s next president it will be thanks to our rapidly changing world.  What happened here in the United States is playing out across Europe as well. We saw BREXIT first.  Be prepared for FREXIT next.  It can very likely happen and the EU, which according to many, was destined for failure from the beginning, will be focused on putting all its energies into as orderly an unwind as can be orchestrated.  There have and always will be too many borders, too many cultures, too many histories, too many languages and for that matter too many cuisines in Europe for it to function as a quasi-United States of Europe.  It’s coming so, be prepared as the world reconfigures its alliances, it defense strategies and its economies.  Change is something that NEVER comes easy to any one person let alone countries, continents and hemispheres.  Get ready. If you don’t have the financial stomach for it well, continue buying into the full trust and faith of the United States of America – it’s called BUY TREASURIES.  Yields will tumble despite the Fed’s hawkish tone that will continue when Chair Yellen speaks on February 14th.  If you are a corporate treasury/funding team operative get ready to take full advantage.  As I pointed out yesterday after a relatively long silence for me and being more focused on the Microsoft, AT&T and Apple deals that Mischler was involved in last week, black-outs are upon us and you and your companies will look brilliant when you issue debt in here.  The CT10 closed today 6 bps tighter versus yesterday’s closing yield.  That’s now 26 bps tighter in the last 8 weeks. It’s going lower…….Rates will continue to rally and rates will continue to go lower……..much lower.

 

As Charles de Gaulle once famously said, “Once upon a time there was an old country, wrapped up in habit and caution.  We have to transform our old France into a new country and marry it to its time.”  That time is now.  The National Front would agree that if not at this juncture in time, well, France will likely continue along the same do nothing bureaucratic path more humorously captured by the late great General Norman Schwarzkopf who said “Going to war without France is like going hunting without an accordion.”

 

The EU: It’s All Greek to Me

  eu-faces-collapse-mischler-commentary

To say “Greece is back” would be a gross misrepresentation.  Greece never went away.  The disaster was always there it’s just that so many other EU issues have stolen it’s spotlight……BREXIT, immigration, French elections, etc.  Well, Greece has returned to the proscenium.  Today the IMF effectively announced that Grexit concerns are back on the table. Okay, so what do I mean by “effectively?”  Well, a senior IMF staff member said “Greece cannot grow out of its debt problem.”  Let’s go straight to the numbers here shall we?  “Greek debt will reach 175% of GDP in 3 years…….275% of GDP by 2060.”  Shall I continue?  Sure, why not?  The IMF report just out today also says “our analysis suggests that Greece’s public debt is highly unsustainable…….Even with full implementation of policies agreed under the European Stability Mechanism or ESM program, public debt and financing needs will become EXPLOSIVE!” (caps are mine!)  The National Front, to use an example, isn’t taking a “jump ship” policy approach toward the EU because of this.  The National Front foresaw this year’s and years ago and never wanted to be part of the EU to begin with. That WILL resonate with French voters in April and May elections.  The problems are literally just beginning in Europe.  National Front knows it and wants to take the precautions necessary with their nation to take more control of the French Revolution’s motto of Liberté, égalité, fraternité ……… (translated – freedom, equality and fraternity)……while it still has the chance. Trouble + Concern = Flight-to-Quality folks. You’ll be seeing that clearly illustrated very shortly.  OOPAH!!!!

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

 

Have a great evening!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/06
TUES.
2/07
WED.
2/08
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
New Issue Concessions <3.62> bps <7.5> bps 5.25 bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps N/A
Oversubscription Rates 4.25x 4.56x 2.18x 3.12x 3.29x 2.40x 2.85x 2.45x N/A
Tenors 12.83 yrs 16.65 yrs 6.40 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs N/A
Tranche Sizes $744mm $850mm $690mm $1,311 yrs $845mm $1,123mm $927mm $859mm N/A
Avg. Spd. Compression
IPTs to Launch
<19.17> bps <25.40> bps <11.5> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps N/A

 

New Issues Priced (more…)

Sell-Side FI Syndicate Desks Sound Off: New IG Debt Issuance Forecasts
February 2017      Debt Market Commentary   

Quigley’s Corner 02.03.17– Fixed Income Syndicate Seers Forecast Next Week’s New IG Debt Issuance

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 25th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

It was a very welcome no print Friday today.  It gives me an opportunity on behalf of Team Mischler to thank Microsoft, AT&T and Apple for inviting us to serve this week on their multi-tranche transactions.  Thanks also to the leads who worked with us at HSBC – on Microsoft; Citigroup – on AT&T  and Goldman Sachs on Apple. All greatly appreciated!

But I know why you all checked in this evening – it’s to hear what the soothsayers of syndicate say about next week’s investment grade corporate new issue volume.  They all once again participated in my survey and their numbers and thoughts await you below.  Next week there is a lack of any earth shattering, market moving economic data and although Fed members will be speaking here and there it opens the door for further issuance.  Considering the very strong market tone that we’re going out with today in which 75% of this week’s IG Corporate new issues are tighter to MUCH tighter, I’d have to once again take the upside of forecasts.  But heck, we all know you want to hear from the top 23 under writers so, let’s first re-cap the day and then it’s on to the “Best and the Brightest” that syndicate has to offer. 

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 36 deals that printed, 27 tightened versus NIP for a 75.00% improvement rate while 6 widened (16.75%) and 3 were flat (8.25%).
  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $2.657b into Corporate Investment Grade Funds (2016 YTD net inflow of $12.354b) and a net inflow of $412.595m into High Yield Funds (2016 YTD net inflow of $291.062m).
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.21.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +166 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 $22.5b on Thursday versus $21.6b on Wednesday and $21.2b the previous Thursday.
  • The 10-DMA stands at $20.5b.

 

Global Market Recap

  • U.S. Treasuries – Rallied after Employment then sold off hard on Trump regulation talk & Williams.
  • Overseas Bonds – Wild day for JGB’s. Core Europe better & balance struggled.
  • Stocks – Strong rally in the U.S. Europe closed higher & Asia lower.
  • Economic – U.S. Employment Report was mixed while the other data was solid.
  • Overseas Economic – China & Japan data weaker. Europe data was a mixed bag.
  • Currencies – USD traded better overnight than it did during the NY session.
  • Commodities – Crude oil small gain & gold small loss. Copper & natural gas were weak.
  • CDX IG: -1.55 to 63.99
  • CDX HY: -22.66 to 323.55
  • CDX EM: -3.93 to 226.36

*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
1/30-2/03
vs. Current
WTD – $44.575b
February 2017
Forecasts
vs. Current
MTD – $12.575b
Low-End Avg. $20.96b 212.67% $90.65b 13.87%
Midpoint Avg. $21.63b 206.08% $91.96b 13.67%
High-End Avg. $22.30b 199.89% $93.26b 12.48%
The Low $10b 445.75% $85b 14.79%
The High $27b 165.09% $120b 10.48%

 

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

 

The investment grade fixed income new issuance forecast question posed to the “Best and the Brightest” FI syndicate desk professionals early this morning was framed as follows:

Well, here’s what we did this week:

  • January 2017 broke the all-time, all-in monthly volume record $227.283b vs. $213.40b (May 2016).
  • WTD, we surpassed the syndicate midpoint average forecast with a 2.12x bid-to-cover rate or $44.575b vs. $21.63b. (206.08%!)
  • February MTD we priced over nearly 14%% of the syndicate forecasts in just two days $12.57b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $242.358b which simply means we are on pace to price $2.644 Trillion in 2017!  HOOOAH. That won’t happen but it’s nice to put things in their proper perspective. 

Here are this week’s five IG Corporate-only key primary market driver averages after the close of yesterday’s:

  • NICS:  <0.87> bps
  • Oversubscription Rates: 3.12x
  • Tenors:  11.60 years
  • Tranche Sizes: $1,311mm
  • Spread Compression from IPTs to the Launch: <19.77> bps


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

  • NICs tightened 2.00 bps to <0.87> bps vs. 1.13 bps.
  • Over subscription or bid-to-cover rates contracted by 0.17x to 31.12x vs. 3.29x. 
  • Average tenors extended dramatically by 4.93 years to 11.60 years vs. 6.67 years.
  • Tranche sizes increased by $466mm to $1,311mm vs. $845mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 28 IG Corporate-only new issues tightened by <1.57> bps to <19.77> vs. <18.20> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 2 bps to +166 vs. +164.
  • Week-on-week, BAML’s IG Master Index widened 2 bps to +128 vs. +126. 
  • Spreads across the four IG asset classes widened 2.00 bps to 21.00 vs. 19.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors widened 1.20 bps to 25.20 vs. 24.00 bps also against their post-Crisis lows.

Corporate America has posted earnings.  Lots of issuers have exited blackouts.  Next week we have a very light calendar insofar as economic data releases are concerned.  Japan’s Abe meets with President Trump but that’s not until a week from Saturday.  There are several Fed members that will be speaking next week but we are in a steady-as-she-goes mode and I strongly suspect a big week next week.    

And now after my work and thoughts I ask you my favorite question of the week gift to you I ask, “what are your numbers and thoughts for next week’s IG Corporate new issue volume.

Thank you very much! -Ron”

 

The “Best and the Brightest” in Their Own Words

 

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

 

*Responses to the QC weekly canvass of the top 23 investment bank fixed income syndicate desks are available only via direct email to distribution list recipients of Quigley’s Corner.

 

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
2/06-2/10
Low-End Avg. $23.74b
Midpoint Avg. $24.72b
High-End Avg. $25.70b
The Low $15b
The High $35b

A Look at How the Voting Brackets Broke-Out for Next Week

 

Next Week
2/06-2/10
1: 15b
1: 15-20b
2: 20b
3: 20-25b
9: 25b
4: 25-30b
1: 30b
1: 31b
1: 30-35b

 

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 weekend and enjoy the Super Bowl!

Ron Quigley, Managing Director & Head of Fixed Income Syndicate

 

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

 

Here is this week’s day-by-day re-cap of the five key primary market driver averages for IG Corporatesonly followed by this week’s and the prior five week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/30
TUES.
1/31
WED.
2/01
TH.
2/02
FRI.
2/03
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
New Issue Concessions 7 bps 5.36 bps N/A <2.82> bps N/A <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps N/A
Oversubscription Rates 2.68x 2.89x N/A 3.71x N/A 3.12x 3.29x 2.40x 2.85x 2.45x N/A
Tenors 14.11 yrs 12.37 yrs N/A 9.15 yrs N/A 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs N/A
Tranche Sizes $1,983mm $1,179mm N/A $967mm N/A $1,311 yrs $845mm $1,123mm $927mm $859mm N/A
Avg. Spd. Compression
IPTs to Launch
<17.22> bps <19.54> bps N/A <21.88> bps N/A <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps N/A

 

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

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 36 deals that printed, 27 tightened versus NIP for a 75.00% improvement rate while 6 widened (16.75%) and 3 were flat (8.25%).

Issues are listed from the most recent pricings at the top working back to Monday at the bottom.  Thanks! –RQ

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
Apple Inc. Aa1/AA+ FRN 2/08/2019 500 3mL+equiv 3mL+equiv 3mL+8 3mL+8 3mL+7/5
Apple Inc. Aa1/AA+ 1.55% 2/08/2019 500 +60a +40a (+/-2) +38 +38 34.5/32
Apple Inc. Aa1/AA+ FRN 2/07/2020 500 3mL+equiv 3mL+equiv 3mL+20 3mL+20 3mL+17/15
Apple Inc. Aa1/AA+ 1.90% 2/07/2020 1,000 +65a +50a (+/-5) +45 +45 43/41
Apple Inc. Aa1/AA+ FRN 2/09/2022 1,000 3mL+equiv 3mL+equiv 3mL+50 3mL+50 3mL+45/43
Apple Inc. Aa1/AA+ 2.50% 2/09/2022 1,500 +80a +60a (+/-2) +58 +58 58/56
Apple Inc. Aa1/AA+ 3.00% 2/09/2024 1,750 +100a +80a (+/-5) +75 +75 71/69
Apple Inc. Aa1/AA+ 3.35% 2/09/2027 2,250 +110a +90a (+/-2) +88 +88 83/81
Apple Inc. Aa1/AA+ 4.25% 2/09/2047 1,000 +140a +120a (+/-5) +115 +115 111/109
Johnson Controls Int’l. PLC Baa1/BBB+ 4.50% 2/15/2047 500 +170a +150a (+/-5) +145 +145 139/138
PNC Financial Services A3/NR FRN 8/07/2018 575 N/A N/A N/A 3mL+25 3mL+24/23
Standard Industries Inc. Ba2/BBB- 5.00% 11/15/2026 500 low 5.00%
5.125
N/A N/A +253 254/250
US Bancorp A3/BBB+ 5.30% PerpNC10 1,000 5.625%a 5.35%a (+/-5) 5.30% $100.00 283/278
Province of Ontario Aa2/AA- 2.40% 2/08/2022 2,500 MS +44a MS +42 MS +42 +49.35 46.5/44.5
AT&T Inc. Baa1/A- 3.20% 3/01/2022 1,250 +150a +135a (+/-5) +130 +130 125/123
AT&T Inc. Baa1/A- 3.80% 3/01/2024 750 +175a +160a (+/-5) +155 +155 150/147
AT&T Inc. Baa1/A- 4.25% 3/01/2027 2,000 +195a +185a (+/-5) +180 +180 170/168
AT&T Inc. Baa1/A- 5.25% 3/01/2037 3,000 +235a +225a (+/-5) +220 +220 207/204
AT&T Inc. Baa1/A- 5.45% 3/01/2047 2,000 +250a +245a (+/-5) +240 +240 229/226
AT&T Inc. Baa1/A- 5.70% 3/01/2057 1,000 +275a +270a (+/-5) +265 +265 257/252
Bank of NY Mellon Corp. A1/AA- 2.60% 2/07/2022 1,250 +90a +80a (+/-5) +75 +75 74/72
Bank of NY Mellon Corp. A1/AA- 11NC10 2/07/2028 1,000 +110-115/+112.5a +105a (+/-5) +100 +100 97/93
Commw’th. Bk. of Australia Aa2/NA FRN 8/03/2018 200 N/A N/A N/A 3mL+35 3mL+37/35
National Rural Utilities Coop. A1/A+ 2.95% 2/07/2024 450 +85-90/+87.5a +75-80 +75 +75 73/71
Seagate HDD Cayman Baa3/BBB- 4.25% 3/01/2022 750 +high 200s
+287.5a
+250a (+/-10) +240 +240 248/243
Seagate HDD Cayman Baa3/BBB- 4.75% 3/01/2024 500 +low 300s
+312.5a
+285 (+/-10) +275 +275 280/275
Crown Castle Int’l. Corp. Baa3/BBB- 4.00% 3/01/2027 500 +175-180 +160a (+/-3) +157 +157 157/155
Microsoft Corp. Aaa/AAA 1.85% 2/06/2020 1,500 +60a +45a (+/-5) +40 +40 35/33
Microsoft Corp. Aaa/AAA 2.40% 2/06/2022 1,750 +70a +55a (+/-5) +50 +50 47/46
Microsoft Corp. Aaa/AAA 2.875% 2/06/2024 2,250 +90a +75a (+/-5) +70 +70 59/57
Microsoft Corp. Aaa/AAA 3.30% 2/06/2027 4,000 +100a +90a (+/-5) +85 +85 77/75
Microsoft Corp. Aaa/AAA 4.10% 2/06/2037 2,500 +115a +105a (+/-5) +100 +100 88/87
Microsoft Corp. Aaa/AAA 4.25% 2/06/2047 3,000 +130a +120a (+/-5) +115 +115 106/104
Microsoft Corp. Aaa/AAA 4.50% 2/06/2057 2,000 +155a +145a (+/-5) +140 +140 129/126
USAA Capital Corp. Aa1/AA FRN 2/01/2019 350 3mL+high30s/
+37.5a
3mL+23-25 3mL+23 3mL+23 3mL+23
IFC
(tap) New Total: $750mm
Aaa/AAA FRN 12/15/2021 250 N/A 3mL+13a 3mL+13 3mL+13 3mL+15/14

 

Indexes and New Issue Volume

Please note that the below index levels are as of 4:30pm ET.
*Denotes new tight.

 

Index Open Current Change
IG27 65.548 63.605 <1.943>
HV27 138.23 138.31 0.08
VIX 11.93 10.95 <0.98>
S&P 2,280 2,297 17
DOW 19,884 20,071 187
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $44.575 bn WTD: $47.325 bn
MTD: $12.575 bn MTD: $15.075 bn
YTD: $184.958 bn YTD: $242.358 bn

 

Lipper Report/Fund Flows – Week ending January 25th     

     

  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $2.657b into Corporate Investment Grade Funds (2016 YTD net inflow of $12.354b) and a net inflow of $412.595m into High Yield Funds (2016 YTD net inflow of $291.062m).
  • Over the same period, Lipper reported a net inflow of $991.469m into Loan Participation Funds (2016 YTD net inflow of $4.760b).
  • Emerging Market debt funds reported a net outflow of $21.098m (2016 YTD inflow of $144.504m).

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 21.00 bps wider versus their post-Crisis lows. (more…)

European Corporate Debt Issuance Mkt: Fill ‘Yer Boots Mode
January 2017      Debt Market Commentary   

Quigley’s Corner 01.24.17 Eye on European Corporate Debt Issuance: Fill Yer Boots

“..Today’s all-in US Investment Grade day total issuance makes January issuance $182.433b; the 3rd busiest month on record..”

 

Investment Grade Corporate Debt New Issue Re-Cap – January 2017 Now 3rd Highest Volume Month on Record!
Global Market Recap

IG Primary & Secondary Market Talking Points

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

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 January 18th     

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

It was perhaps a rather subdued IG primary market today in the U.S. but we did wind up featuring 3 IG Corporate issuers that priced 8 tranches between them totaling $4.65.  SSA also assisted in boosting the volume totals as 2 issuers priced 2 tranches amounting to $3.25b.  Today’s all-in IG day total is now $182.433b making it as the 3rd busiest month on record.

However, allow me to tell you about London’s European issuance where the primary market remains “hot.”  What’s that mean?  How about this – today, according to friend, former BNP Paribas colleague and Bloomberg Editorial Primary Market Strategist, Paul Cohen, “Europe remains in a “fill yer boots” mode across the pond.  Notably, of the 151 YTD syndicated transactions, 100 of them (66%) have trended tighter vs. launch/final pricing.  Despite that Europe was expecting a busy week this week they certainly did not anticipate the €32b priced in the in first two sessions.  It’s staggering! Today in particular saw 10 issuers price 11 tranches totaling €27.68b making it the third largest issuance day in Europe in 3 years according to his Bloomberg records. Today’s U.K. 40-year gilt transaction amassed a record £23b in investor order interest while total demand for 3 sovereign bond new issues eclipsed €80b equivalent.  Paul said the reason is that “the latest rise in underlying rates, fueled by improving macro sentiment, appears to be buoying risk appetite.” It sure does.

 

Global Market Recap

 

  • U.S. Treasuries – Bad day for USTs & bonds in Europe. JGB’s closed mixed. Supply a factor.
  • Stocks – Good day for U.S. stocks with record highs for the S&P and NASDAQ.
  • Overseas Stocks – Europe had a good day (not Ireland), Japan red and China mixed.
  • Economic – Markit manufacturing improved. Low inventory holding back existing home sales.
  • Overseas Economic – Solid data in Japan & Europe.
  • Currencies – USD outperformed all of the Big 5. Yesterday was the opposite.
  • Commodities – Big day for copper. Crude oil higher & gold lower.
  • CDX IG: -1.32 to 65.12
  • CDX HY: -5.52 to 346.69
  • CDX EM: -0.81 to 236.23

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Mischler Financial served as a passive underwriter on Morgan Stanley’s $1b (40mm share) 5.85% PerpNC10 fixed-to-floating rate non-cumulative $25 par preferred Series “K” today.  Thank you to MS Preferred Syndicate’s Michael “Captain Morgan” Borut for selecting Mischler as an underwriter from among the many diversity broker-dealers to choose from. It is always appreciated Mike! The transaction rated (Ba1/BB/BB+) started with IPT’s in the 6.125% “area” before tightening 25 bps to revised 5.875% “area” guidance and 2.5 bps tighter into the 5.85% launch for an impressive <27.5> of spread compression throughout price evolution.
    The average spread compression from IPTs thru the launch/final pricing of today’s 8 IG Corporate-only new issues was 18.12 bps.
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +122.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • 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 $17.1b on Monday versus $15.2b on Friday.
  • The 10-DMA stands at $18.7b.

 

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

 

IG Corporate New Issuance This Week
1/23-1/27
vs. Current
WTD – $13.70b
January 2017
Forecasts
vs. Current
MTD – $130.433b
Low-End Avg. $19.09b 71.77% $107.87b 120.92%
Midpoint Avg. $20.46b 66.96% $108.41b 120.31%
High-End Avg. $21.83b 62.76% $108.96b 119.71%
The Low $15b 91.33% $80b 163.04%
The High $26b 52.69% $145b 89.95%

 

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 Monday’s session followed by the averages over the prior six weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
AVERAGES
WEEK 12/19
AVERAGES
WEEK 12/12
New Issue Concessions 0.94 bps 3.42 bps 0.85 bps 2.25 bps N/A N/A <0.50> bps
Oversubscription Rates 2.60x 2.40x 2.85x 2.45x N/A N/A 2.41x
Tenors 8.54 yrs 12 yrs 7.83 yrs 6.52 yrs N/A N/A 10.67 yrs
Tranche Sizes $1,006mm $1,123mm $927mm $859mm N/A N/A $708mm
Avg. Spd. Compression
IPTs to Launch
<15.61> yrs <14.69> bps <18.77> bps <15.27> bps N/A N/A <17.17> bps

 

New Issues Priced

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

For ratings I use the better two of Moody’s, S&P or Fitch.

 

IG          

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
IBM Aa3/AA- FRN 1/27/2020 500 3mL+equib 3mL+equiv 3mL+23 3mL+23 BNPP/CS/HSBC/MIZ/RBC
IBM Aa3/AA- 1.90% 1/27/2020 750 +60a +45-50 +45 +45 BNPP/CS/HSBC/MIZ/RBC
IBM Aa3/AA- 2.50% 1/27/2022 1,000 +75a +60-65 +60 +60 BNPP/CS/HSBC/MIZ/RBC
IBM Aa3/AA- 3.30% 1/27/2027 500 +100a +90-95 +90 +90 BNPP/CS/HSBC/MIZ/RBC
Jackson Nat’l. Life Glbl. Fdg. AA/AA 2.20% 1/30/2020 400 +85a +75 the # +75 +75 BARC/CS/DB/MS
Jackson Nat’l. Life Glbl. Fdg. AA/AA 3.25% 1/30/2024 500 +110a +100 the # +100 +100 BARC/CS/DB/MS
Tech Data Corporation Baa3/BBB- 3.70% 2/15/2022 500 +low 200s
+212.5a
+185a (+/-5) +180 +180 BAML/CITI/JPM
Tech Data Corporation Baa3/BBB- 4.95% 2/15/2027 500 +high 200s +287.5a +255a (+/-5) +250 +250 BAML/CITI/JPM

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Nordic Investment Bank Aaa/AAA 2.125% 2/01/2022 1,250 MS +19a MS +18a MS +17 +23.5 CITI/JPM/RBC/TD
Province of Quebec Aa2/AA- 2.375% 1/31/2022 2,000 MS +46a MS +44a MS +43 +49.15 BAML/BMO/DB/SCOT

 

Indexes and New Issue Volume

Please note that below levels are as of 3:45pm ET.

 

Index Open Current Change  
IG27 66.447 65.188 <1.259>
HV27 140.44 138.89 <1.55>
VIX 11.77 11.28 <0.49>  
S&P 2,265 2,282 17
DOW 19,800 19,919 119  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $4.65 bn DAY: $7.90 bn
WTD: $13.70 bn WTD: $16.95 bn
MTD: $130.433 bn MTD: $182.433 bn
YTD: $130.433 bn YTD: $182.433 bn

 

Lipper Report/Fund Flows – Week ending January 18th     

     

  • For the week ended January 18th, Lipper U.S. Fund Flows reported an inflow of $1.893b into Corporate Investment Grade Funds (2016 YTD net inflow of $8.108b) and a net outflow of $887.116m from High Yield Funds (2016 YTD net inflow of $410.884m).
  • Over the same period, Lipper reported a net inflow of $548.36m into Loan Participation Funds (2016 YTD net inflow of $2.745b).
  • Emerging Market debt funds reported a net inflow of $77.439m (2016 YTD inflow of $314.867m).

 

IG Credit Spreads by Rating (more…)

The Day’s New Debt Issuance: USD 22.5bil Floated Across 15 Deals
January 2017      Debt Market Commentary   

Quigley’s Corner 01.11.17-$22.5bil in New Debt Issuance Floated / 15 Deals; Led by Broadcom and GM Financial

 

Investment Grade Corporate Bond New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for January 

Rates Trading Lab

General Motors Financial Co. Inc. $2.5b 3-part 5yr FXD/FRN and 10yr Senior Unsecured Notes Deal Dashboard

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 January 4th     

IG Credit Spreads by Rating / Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Tomorrow’s Calendar

It was yet another very busy and high volume day today in our IG dollar DCM that featured 6 IG Corporate issuers across 13 tranches totaling $20.50b led by a $13.55b 4-part from Broadcom and a $2.5b 3-part deal from General Motors Financial Co. Inc.  Additionally, 2 SSA issuers brought 2 tranches adding another $1.75b thereby bringing the all-in IG day totals to 8 issuers, 15 tranches and $22.25b.

The WTD IG Corporate-only total is now $32.05b or 10% more than this week’s $30.13b syndicate midpoint average estimate.
MTD we have now realized $85.283b or 79% of the syndicate forecast for all of January which is $108.41b.
All-in IG Corporate plus SSA MTD issuance currently stands at: $111.533b.

Mischler Financial served as an active Co-Manager on today’s $2.5b 3-part Senior Unsecured Notes new issue for General Motors Financial Co. Inc. and so it is today’s Deal-of-the-Day.  You know the routine, let’s re-cap the day first and then it’s on to the GM Deal Dashboard and drill-down.

 

Global Market Recap

 

  • U.S. Treasuries –  USTs had small gains. Strong 10yr auction. Afternoon selling hit market.
  • Overseas Bonds – Europe traded with a bid. JGB’s mixed. Supply was a factor.
  • 3mth Libor – Set at the highest yield since April 2009 (1.02178%).
  • Stocks – U.S. stocks higher heading into close. Today was a roller coaster ride.
  • Overseas Stocks – FTSE (12) & HS (10) with double digit session winning streaks.
  • Economic – IBD/TIPP economic optimism at a 10-year high.
  • Currencies – USD had a bid until the Trump press conference & then rolled over.
  • Commodities – Crude oil with a strong rally despite bearish inventory data.
  • CDX IG: +0.16 to 66.24
  • CDX HY: +1.40 to 352.25
  • CDX EM: +0.68 to 241.96

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 13 IG Corporate-only new issues was <21.46> bps.
  • BAML’s IG Master Index was unchanged at +129.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +122.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +166.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.3b on Tuesday versus $16.7b on Monday (the 7th highest day since 2006) and $22.4b the previous Tuesday.

 

Syndicate IG Corporate-only Volume Estimates for January 

 

IG Corporate New Issuance This Week
1/09-1/13
vs. Current
WTD – $32.05b
January 2017
Forecasts
vs. Current
MTD – $85.283b
Low-End Avg. $29.04b 110.37% $107.87b 79.06%
Midpoint Avg. $30.13b 106.37% $108.41b 78.67%
High-End Avg. $31.22b 102.66% $108.96b 78.27%
The Low $20b 160.25% $80b 106.60%
The High $40b 80.13% $145b 58.82%

 

Rates Trading Lab

If you were hoping to hear news on the Trump Administration’s plans for the economy (fiscal policy) in today’s press conference you were sorely disappointed. The mass media proved once again they are pretty close to being worthless. The majority of the questions directed to President-Elect Trump concerned Russia and Putin. Some of the things we did learn from Trump today were his plans to step away from the Trump Organization, he will pick a Supreme Court nominee within 2 weeks of his inauguration, he thinks leaks are coming from the intelligence community and CNN is not high on his list.

UST’s dealt with conflicting items today. The 10yr had a bid heading into the $20b 10yr auction and rallied after the auction results were very strong (details below). It was the 4th very strong Treasury auction in a row. Treasuries came under pressure after the auction bounce and the most likely reason for the selling was the 4-part $13.55b Broadcom deal. The deal was much bigger than expected ($6b). Broadcom was the highlight deal but not the only one today. The new issue markets in the U.S. and Europe remained very active. At the 3pm close  benchmark UST’s were better bid by 0.3 bps (5yr: 1.876%) to 1.4 bps (30yr: 2.957%).
-Tony Farren

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-29 100-29+ 100-28+ 97-09+ 99-27+
RESISTANCE LEVEL 99-272 100-262 100-25+ 97-04 99-11
RESISTANCE LEVEL 99-26 100-222 100-18+ 96-29 98-26
           
SUPPORT LEVEL 99-22+ 100-156 100-10+ 96-18 97-27
SUPPORT LEVEL 99-20+ 100-12+ 100-05+ 96-11 97-08
SUPPORT LEVEL 99-18+ 100-09 100-00+ 96-04+ 96-17

 

General Motors Financial Co. Inc. $2.5b 3-part 5yr FXD/FRN and 10yr Senior Unsecured Notes Deal Dashboard (more…)

Corporate Bond New Issuance Elasticity: Get It While Its Hot
January 2017      Debt Market Commentary   

Quigley’s Corner 01.06.17 Weekend Edition: Investment Grade Corpoate Bond New Issuance & Spread Elasticity: Get It While It’s Hot

 

Investment Grade New Issue Re-Cap 

My Thoughts re: Next Week’s Issuance

IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for January 

The Best and the Brightest” – Investment Grade New Issuance Forecasts Next Week 

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

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

Lipper Report/Fund Flows – Week ending January 4th     

IG Credit Spreads by Rating / Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

It was a no-print Friday today and a well-deserved one at that considering yesterday was the 4th busiest ever in our dollar IG DCM. We priced $53.233b in new IG Corporate-only product this week in just three days and $65.233b including SSA issuance!  What a heck of a start to the New Year!  This morning’s NFP number was another very strong one posting a 156k payroll increase versus 175k estimates or 17% better than expected.  You know what that means…….with labor shortages expected throughout 2017, wages will increase and when wages increase people spend more money and when people spend more money the Fed is more likely to raise rates!  But let’s not get ahead of ourselves.  We have a big January 20th inauguration ahead of us that should make for great TV before Trump & Co. institute rapid change with a Republican controlled Beltway. But before that our U.S. six-pack big FIGs release earnings beginning on January 13th thru the 18th which leaves next week open prior to that deluge.  In speaking to the “Best and the Brightest” in the world of syndicate this morning it’s looking like we drop off a lot from this week but then again $30b, $35b, $40b speaks volumes about just how incredible this week was.  Allow me to opine therein and then let’s re-cap things first before I invite you all to join me as we visit with each of the top 23 syndicate desks in our IG dollar DCM to hear their thoughts, numbers and ranges for next week.

 

My Thoughts re: Next Week’s Issuance

Tuesday’s deals were tighter, and Wednesday’s deals were tighter BUT some widened while yesterday’s deals were 48% wider? What’s it mean? It means “get it while it’s hot,” and the hotter it gets, the more they compress spreads and the more they compress spreads the more likely they are to leak out. So, with the U.S. six-pack banks set to release earnings beginning on January 13th thru the 18th, we have a bit before that money center bank deluge happens. In the interim, next week will seem like a drop off in issuance but why wouldn’t it? We priced the 4th busiest day in history for both IG Corporate AND for IG Corporates and SSA yesterday ($53.233b and $65.233b respectively). By those standards any other week will pale in comparison. However, I believe things hold in and we get $40bn-plus of all-in Corp + SSA issuance next week. Call IG Corporates $35b.

 

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 67 deals that printed, 38 tightened versus NIP for a 56.50% improvement rate while 16 widened (24.00%) and 13 were flat (19.50%).
  • For the week ended January 4th, Lipper U.S. Fund Flows reported an inflow of $2.186b into Corporate Investment Grade Funds (2016 YTD net inflow of $2.186b) and a net inflow of $734.107 into High Yield Funds (2016 YTD net inflow of $734.107b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s XX IG Corporate-only new issues was XX.XX bps.
  • BAML’s IG Master Index widened 1 bp to +129 vs. +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +122 vs. +121.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +167 vs. +166.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $22b on Thursday (7th highest day since 2006) versus $22.4b on Wednesday (6th highest volume day) and $4.1b the previous Thursday.
  • The 10-DMA stands at $9.6b.

 

Syndicate IG Corporate-only Volume Estimates for January 

 

IG Corporate New Issuance January 2017
Forecasts
vs. Current
MTD – $53.233b
Low-End Avg. $107.87b 49.35%
Midpoint Avg. $108.41b 49.10%
High-End Avg. $108.96b 48.86%
The Low $80b 66.54%
The High $145b 36.71%

 

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

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2016’s top 24 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  The participating desks represent 81.59% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

 

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

To best frame our weekly poll i.e.  projected new issue activity, we posed the following to our  Best & Brightest”respondents:

This week’s $53.233b of IG Corporate only new issue volume ranks as the 4th largest of all-time.

  • This week’s $65.233b of all-in (IG Corporate and SSA) issuance also ranks as the 4th highest of all-time. 
  • This week’s IG Corporate only volume total ($53.233b) represents just over 49% of the syndicate midpoint average forecast for all of January ($108.41) after only 3 sessions!  

Here are this week’s five IG Corporate-only key primary market driver averages after the close of yesterday’s: 

o   NICS:  2.25 bps

o   Oversubscription Rates: 2.45x

o   Tenors:  6.52 years

o   Tranche Sizes: $859mm

o   Spread Compression from IPTs to the Launch: <15.27> bps


Here’s the performance data comparing this week’s averages versus those of the week ending December 15th:

 

  • NICs widened 1.75 bps to 2.25 bps vs. <0.50> bps..
  • Over subscription or bid-to-cover rates increased marginally by 0.04x to 2.45x vs. 2.41x. 
  • Average tenors shortened dramatically by 4.15 years to 6.52 years vs. 10.67 years.
  • Tranche sizes increased noticeably by $151mm to $859mm vs. $708mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 62 IG Corporate new issues widened by <1.90> bps to <15.27> vs. <17.17>.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +167 vs. +169.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +129 versus +130 on Thursday, December 15th
  • Spreads across the four IG asset classes tightened by 0.75 bps to 20.00 vs. 22.00 bps on Thursday, December 15th and as measured against their post-Crisis lows. 
  • Looking at the 19 major industry sectors, spreads tightened 1.57 bps to 26.32 vs. 27.89 on Thursday, December 15th, also against their post-Crisis lows.

 

……and now for the first time of 2017, I’d like to know your thoughts and your numbers for next week’s IG Corporate new issue volume. You all know that I greatly appreciate your participation week in and week out.
Thanks very much, Ron!

 

The “Best and the Brightest” in Their Own Words

 

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

Distilling Yellen Comments; Mischler ROTC Cadet Thought-Leadership Sound Off
December 2016      Debt Market Commentary   

Quigley’s Corner 12.14.16 FOMC  Talking Points; UCLA ROTC Cadet Chamberlain On Leadership

 

Investment Grade New Issue Re-Cap – Fed Raises Rates 0.25bps to a Range of 0.50% to 0.75

Global Market Recap

FOMC Statement Key Talking Points

The FOMC Statement Comparison – December 14th vs. November 2nd

IG Primary & Secondary Market Talking Points

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

“At What Point Do Rising Rates Derail the New Issue Market?”

Mischler’s Favorite Army Cadet On Leadership ; UCLA ROTC Rachel Chamberlain Sounds Off

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 7th     

IG Credit Spreads by Rating & Industry

 Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

New Issue Pipeline

M&A Pipeline    

 

As expected issuers stood down today in the face of the session’s all-important FOMC Rate Decision combined with the quiet holiday period we are in.  That’s not to say we don’t see some very limited issuance tomorrow however, before markets truly shut-down for the holidays.

I have a LOT for all of you today. Up top are the New Issue Re-Cap followed by Tony’s Global Market Re-Cap.  Then the fun starts. Trust me it’s good.

First up are today’s FOMC Talking Points or the things you want and need to know. Then we transition into Janet Yellen’s comments titled “In Yellen’s Own Words” as made in the post decision Q&A.  It is in depth and highlights those key points.  In order to present a bit more granularity I have the FOMC statement strikethrough comparison versus last November’s statement.  It’s the best way to illustrate what new language was added in – highlighted in yellow – and what old language was dropped – strikethroughs in red.  It takes time to put that into this format but it’s well worth it for you.

Always saving the best for last, I have a special piece for you all this evening that speaks to Mischler, it’s SDVBE certification and the wonderful story of our CEO’s daughter, Rachel who accepted an Army ROTC scholarship to UCLA.  It’s an essay on “Leadership” written in her own words and I would appreciate it if all you loyal readers give it particular attention that this evening.  It’s very reassuring folks.

 

Global Market Recap

 

  • FOMC Day – I am shocked the FOMC is already drinking the Trump Kool-Aid.
  • S. Treasuries USTs were hammered after the FOMC was more hawkish than expected.
  • Overseas Bonds – Long end led rallies in JGB’s, Bunds, Gilts & EU semi core.
  • 3mth Libor – Set at highest yield (0.97039%) since May 2009.
  • Stocks – U.S. stocks did not react well to the FOMC.
  • Overseas Stocks – Europe closed in the loss column. Nikkei unchanged & China red.
  • Economic – Weaker U.S. data with higher inflation but the FOMC was the story.
  • Currencies – Big rally for the USD after the FOMC.
  • Commodities – headed south after the FOMC.
  • CDX IG: +0.88 to 68.71
  • CDX HY: +4.81 to 360.60
  • CDX EM: -0.99 to 242.65

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

-Tony Farren

 

FOMC Statement Key Talking Points

 

  • Fed raises rates by 25 bps, repeats gradual policy path plan.
  • Increases Federal Funds rate target range to 0.5%-0.75%.
  • Raises Discount Rate to 1.25% from 1.0%.
  • Repeats “risks to the outlook appear roughly balanced.”
  • FOMC’s policy is supporting “some further strengthening” on goals.
  • Says labor markets continued to strengthen, growth moderate.
  • Market-based inflation compensation gauges are up considerably.
  • Repeats survey-based inflation expectations are little changed.
  • Says spending is rising moderately, investment stayed soft.
  • Maintains its balance sheet reinvestment policy.
  • Says FOMC vote was “unanimous.”
  • Officials see three 2017 rate hikes vs. two in September dots.
  • Officials see three 2018 rate hikes, unchanged vs. September dots.
  • The New York FED expects around $2 trillion in Treasuries are available for reverse repurchase operations.

 

In Yellen’s Own Words:

 

fed-awakens-FOMC-mischler-comment

Janet Yellen

 

  • Yellen: “Rate hike is a reflection of confidence in economic progress.”
  • I do not judge that we are behind the curve.
  • Says the FOMC is recognizing the considerable progress of the economy.
  • Changes in fiscal policy could impact the economic outlook.
  • Not trying to provide advice to the new administration.
  • Fed staff have been in touch with the Trump transition team.
  • Some participants included changes in fiscal policy.
  • Declines to say how Fed policy is impacted by fiscal change.
  • Don’t want to speculate until we know more details.
  • Investors anticipate expansionary fiscal policy.
  • Never said that I favor running a high-pressure economy.
  • Fiscal boost not obviously needed for full employment.
  • FOMC judged the course of the U.S. economy to be strong.
  • Policy remains accommodative to a moderate degree.
  • Economic outlook is highly uncertain.
  • Repeats that Fed policy isn’t on a pre-set course.
  • Shift in the dot plot is a “very modest adjustment.”
  • Shift involves changes by only some Fed participants.
  • Expect economy will warrant only gradual rate increases.
  • Fed funds rate is only modestly below neutral rate.
  • Neutral rate is quite low by historic standards.
  • Fed officials see moderate growth over the next few years.
  • Inflation has moved closer to our longer-term goal.
  • Expect overall inflation to rise to 2% over a couple of years.
  • We remain committed to our 2% inflation objective.
  • We will carefully monitor actual/expected inflation progress.
  • Says broader measures of labor slack have moved lower.
  • Expects job conditions will strengthen somewhat further.
  • Tax policy changes could boost productivity and investment.
  • Repeats that the Fed will shrink its balance sheet over time
  • Will take several years to allow its balance sheet to run off.
  • Don’t want to comment on level of stock prices.
  • Must take the debt-to-GDP ratio into account.
  • Important to reduce the regulatory burden on smaller banks.
  • Broad agreement that we should end “too big to fail.”
  • Don’t roll back progress made on making banks safer.
  • I intend to serve out my four-year term.

 

The FOMC Statement Comparison – December 14th vs. November 2nd

 

On Wednesday, November 2nd, the date of the last FOMC I wrote here in the “QC” that the key takeaway was that the Fed WILL raise rates in December “IF” things remain relatively stable over the next 6 weeks.  The major support for that November statement was:

“Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further.”  …………..Remember the Fed’s all-important 2% inflation target! It is pretty clearly laid out for us right there!

Well today, true to the projection, the Fed raised both its upper and lower bound rates 0.25% to 0.75% and 0.50% respectively. The FOMC also noted that it likely sees three rate hikes in 2017 vs. the consensus two.  However, projecting a year’s worth of rate hikes in a year in advance is like forecasting new issue volume for the year. There are simply way too many global event risk factors that can and will influence rate decisions, let alone across the span of one full year.  So, take the three hike statement with a massive grain of salt. We have a new Administration taking over the Beltway on January 20th that certainly leans aggressively on the economic front but the Fed may be playing on the projected success of Trump’s plans to “Make America Great Again.”  Time will tell.

 
Strikethrough Comparison of today’s FOMC Statement

Here it is.  Red crossed out represent deletions and yellow highlights reflect today’s new added language.

Information received since the Federal Open Market Committee met in September November indicates that the labor market has continued to strengthen and growth of that economic activity has picked up from the modest been expanding at a moderate pace seen in the first half of this since mid-year. Job gains have been solid in recent months and the unemployment rate has declined. Household spending has been rising moderately but business fixed investment has remained soft. Inflation has increased somewhat since earlier this year but is still below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation have moved up considerably but remain still are low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects 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 is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

 

Against this backdrop In view of realized and expected labor market conditions and inflation, the Committee decided to maintain raise the target range for the federal funds rate at 1/4 to 1/2 to 3/4 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting some further improvement strengthening in labor market conditions and a 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. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only 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 Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action were: Esther L. George and Loretta J. Mester, each of whom preferred at this meeting to raise the target range for the federal funds rate to ½ to ¾ percent.

[Implementation Note issued November 2 December 14, 2016]

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs 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 +131 vs. +132.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.25 vs. 1.26.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +171 vs. +172.  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 Tuesday versus $16.5b on Monday and $20.1b the previous Tuesday.

 

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

 

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

 

“At What Point Do Rising Rates Derail the New Issue Market?”

 

fed-funds-rate-history-image-credit-bob-rich-hedgeye-mischler

image courtesy of Bob Rich, Hedgeye Risk Mgt

 

I was asked that very question from a buy side account late last week.  We had a nice weekend conversation about it.  The account in question pointed out that “Disney has issued 10-year notes at 1.85% and CSX at 2.35%…..municipalities are going to cut down on refinancings and while the 10-year is hovering at key support levels, 5s and 2s are at 5-year highs.   Meanwhile we have a President-elect talking about 3-4% GDP.”

 

Here’s my take –

Rates are at historically low levels and after today they will still remain there.  January is always a robust issuance month and January 2017 will be no different. In fact, including SSA issuance we may likely see $150b-160b next month.  Near term rates, propelled by Trump’s surprise victory, got some smaller issuers off the fence who did not want to contend with the crowd and rush to print in January – which again, is historically busy. Long-term, however, there are growing material problems and global event risk factors in the world.  Some are BIG and some are potentially very BAD.  The EU will likely dismantle and have recently returned to their “kick-the-can” mentality. Following today’s Fed rate hike, the FOMC will immediately return to the snail’s pace of interest rate hikes with the present consensus calling for 2 hikes in 2017 which is a defacto return to “lower-for-longer” in a historical context.  There will be many speed bumps in the road ahead but Trump’s first 200 days will implement change quickly. I personally think we continue to see very robust issuance in 2017.  I do not like and am not a fan of taking annual projections. Next week?  Of course!  Next month?  Also a good reason to project. But for an entire year? I mean who really knows?  There are too many events in the world that can dampen issuance.

Assuming the incoming Administration succeeds in implementing change, markets will reflect that.  We live in an inextricably linked global economy in which what happens in the South China Seas, or in MENA, or in Europe, for example and to name a mere few events, has impact here in the U.S.  European investors and high net worth for example, are beginning to disregard exchange rate risk with the dollar that is closing in on parity with the Euro. That European money has consistently displayed quick flight into better rated dollar-denominated credit products and equities.  To say it is an immense amount of money is an understatement.  The more the EU “kicks-the-can” the more it is postponing the inevitable and the quicker we’ll see that money invested here.  That alone will help keep a lid on rates to a degree…….and that’s just one way of the many ways a return to our nation’s historically low interest rate environment will manifest itself in 2017.

 

If a picture is worth a thousand words well, this best captures the 2017 interest rate environment:

rate-hike-mischler-hedgeye

image courtesy of Bob Rich for Hedgeye

image courtesy of Bob Rich for Hedgeye Risk Management

 

Relax!……..I mean really c’mon folks. Pull yourselves together!

 

 

 

Mischler’s Favorite Army Cadet On Leadership

Rachel Chamberlain is a 2016 graduate of Greenwich High School, and was one of two graduates to accept an Army ROTC scholarship. Rachel is currently pursuing a pre-medical neuroscience major at the University of California, Los Angeles. She was awarded a 3.5 year Army ROTC scholarship. Rachel is an Army cadet in the “Bruin Batallion”.

During her first semester as an Army ROTC cadet, Rachel, like all of her battalion buddies, was asked to write about leadership qualities that she observes and experiences throughout her initial cadet training. I thought it a wonderful value-added piece for you.  It’s insightful while dually addressing Mischler’s commitment to bring you yet another innovative piece on diversity and inclusion.  Not only is Mischler the nation’s oldest Service Disabled Veteran broker dealer but it’s CEO and certified SDV, Dean Chamberlain has a very bright daughter carrying on a wonderful family military tradition. So, I proudly present for your reading pleasure Rachel Chamberlain’s essay on leadership.

 

“Leadership” by Rachel Chamberlain

 

Brisk wind screamed in my ears as they were filled with the sound of panting and sneakers thumping on the ground. I wiped sweat from my forehead with the back of my hand, then moved my arms back into the brisk rhythm of my strides. It was the middle of our 2nd perimeter, and I was hurtling down Hilgard Avenue alongside my two battle buddies. “Halfway done- keep it up guys!” yelled one buddy. We all pushed through the run together, encouraging each other whenever one of us started to fall back. The run was draining, and as the final steep uphill came into sight, all energy and drive left my body- my legs came to a crawling jog and my posture slumped as I tried to make it up the hill. Had I been running on my own, I would have continued my steady tread up the slope. However, my cadet peers knew that I could do better; I was letting myself off easy because I was exhausted but I would ultimately benefit more both mentally and physically if I could dig up the energy for a strong finish. “Rachel, you’ve got this”, “You’re faster than this, come on push it! Almost there.”, “We’ve got this.” I absolutely did not want to “push it” at this moment, but their words triggered a burst of energy in me and we picked it up until we reached Drake Stadium.

“Ultimately, leadership is not about glorious crowning acts. It’s about keeping your team focused on a goal and motivated to do their best to achieve it, especially when the stakes are high and the consequences really matter. It is about laying the groundwork for others’ success, and then standing back and letting them shine.” (an excerpt from Chris Hadfield’s, retired Astronaut, ‘An Astronaut’s Guide to Life on Earth’). Instead of using all their energy to sprint independently to the stadium, my buddies stayed back and made sure that I was doing my “best to achieve” my potential; they displayed leadership the moment that they “stood back” and let me “shine”. The workout wasn’t significantly important, yet the temporary display of selfless leadership indicated the beginning of the fulfillment of cadet responsibility.

UCLA-ROTC-Cadet-Chamberlain

Team Mischler’s Favorite Army Cadet Rachel Chamberlain (front row left) with the rest of “Bruin Battalion”

 

 

rotc-cadet-rachel-chamberlain

Mischler’s Very Own ROTC Cadet Rachel “Private Benjamin” Chamberlain (left)

Now those are some UCLA Bruins who make it easy for this USC Trojan to salute.

Fight On!

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 four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/12
TUES.
12/13
WED.
12/14
AVERAGES
WEEK 12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
New Issue Concessions <1.83> bps N/A N/A 4.26 bps 3.53 bps 4.5 bps 3.62 bps
Oversubscription Rates 2.15x N/A N/A 3.68x 3.38x 2.99x 2.78x
Tenors 6 yrs N/A N/A 9.21 yrs 10.84 yrs 12.14 yrs 11.28 yrs
Tranche Sizes $688mm N/A N/A $760mm $711mm $929mm $1,039mm
Avg. Spd. Compression
IPTs to Launch
<15.75> bps N/A N/A <22.24> bps <17.60> bps <16.07> bps <17.69> bps

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.25 1.25 0
IG27 67.827 69.43 1.603
HV27 136.56 139.86 3.30
VIX 12.72 13.19 0.47
S&P 2,271 2,253 <18>
DOW 19,911 19,792 <119>
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $2.75 bn WTD: $2.75 bn
MTD: $38.955 bn MTD: $44.905 bn
YTD: $1,283.717 bn YTD: $1,623.651 bn

 

Lipper Report/Fund Flows – Week ending December 7th     

     

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

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 23.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/13 12/12 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 1-Day Change 10-Day Trend PC
low
IG Avg. 131 132 133 133 134 134 135 135 135 136 <1> <5> 106
“AAA” 74 75 75 75 75 75 75 75 75 75 <1> <1> 50
“AA” 81 82 81 82 82 82 82 83 83 84 <1> <3> 63
“A” 105 106 106 106 106 107 107 107 107 108 <1> <3> 81
“BBB” 168 170 170 171 172 172 173 174 174 175 <2> <7> 142
IG vs. HY 289 293 295 305 308 316 323 329 327 331 <4> <42> 228

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 28.95 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/13 12/12 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 1-Day Change 10-Day Trend PC
low
Automotive 121 121 121 121 121 121 121 122 122 123 0 <2> 67
Banking 122 124 123 124 124 125 125 126 125 125 <2> <3> 98
Basic Industry 169 170 170 172 173 174 175 176 175 177 <1> <8> 143
Cap Goods 99 99 99 99 100 100 100 101 101 102 0 <3> 84
Cons. Prod. 107 108 109 109 109 109 109 110 109 110 <1> <3> 85
Energy 166 168 170 172 173 174 175 177 177 180 <2> <14> 133
Financials 152 153 152 153 154 154 155 155 154 155 <1> <3> 97
Healthcare 117 117 117 117 117 117 118 118 118 119 0 <2> 83
Industrials 133 134 135 135 136 136 137 137 137 139 <1> <6> 109
Insurance 144 145 145 146 146 146 146 147 146 147 <1> <3> 120
Leisure 134 135 135 135 134 134 135 135 135 135 <1> <1> 115
Media 158 159 157 158 158 159 159 160 159 161 <1> <3> 113
Real Estate 143 144 143 143 143 143 144 144 144 144 <1> <1> 112
Retail 112 114 114 115 115 116 116 116 116 117 <2> <5> 92
Services 125 127 127 127 127 128 128 128 128 128 <2> <3> 120
Technology 107 108 108 109 109 110 110 110 110 112 <1> <5> 76
Telecom 161 163 163 163 164 165 165 166 165 166 <2> <5> 122
Transportation 130 131 131 132 133 135 135 135 135 136 <1> <6> 109
Utility 132 133 133 134 135 135 135 136 135 135 <1> <3> 104

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications Dec. 9 —- <0.4%> <0.7%> —-
Retail Sales Advance MoM November 0.3% 0.1% 0.8% 0.6%
Retail Sales Ex Auto MoM November 0.4% 0.2% 0.8% 0.6%
Retail Sales Ex Auto MoM and Gas November 0.4% 0.2% 0.6% 0.5%
Retail Sales Control Group November 0.3% 0.1% 0.8% 0.6%
PPI Final Demand MoM November 0.1% 0.4% 0.0% —-
PPI Ex Food and Energy MoM November 0.2% 0.4% <0.2%> —-
PPI Ex Food, Energy and Trade MoM November 0.2% 0.2% <0.1%> —-
PPI Final Demand YoY November 0.9% 1.3% 0.8% —-
PPI Ex Food and Energy YoY November 1.3% 1.6% 1.2% —-
PPI Ex Food, Energy, Trade NSA YoY November 1.7% 1.8% 1.6% —-
Industrial Production MoM November <0.3%> <0.4%> 0.0% 0.1%
Manufacturing (SIC) Production November <0.2%> <0.1%> 0.2% 0.3%
Capacity Utilization November 75.1% 75.0% 75.3% 75.4%
                   Business Inventories                   October <0.1%> <0.2%> 0.1% 0.0%
FOMC Rate Decision (Upper Bound) Dec. 14 0.75% 0.75% 0.50% —-
FOMC Decision (Lower Bound) Dec. 14 0.50% 0.50% 0.25% —-

 

Rates Trading Lab

 

If you were concerned that the markets were too complacent about the Fed, today proved you right. The Eurodollar curve steepened sharply (edh7/edh8 was 12bp steeper) reflecting the steeper projected path of removal of policy accommodation. I must admit that Yellen’s history of dovishness lulled me as well. But when she said “I believe my predecessor and I called for fiscal stimulus when the unemployment rate was substantially higher than it is now,” the market took it as a sign that the times, they are a changin’. That was pretty hawkish as it implies (to me) that fiscal policy, if/when it is enacted could provide the excess economic stimulus that necessitates a more aggressive Fed. More than a few people out there were looking/hoping for a bounce, but the dots and Yellen got them. Looking forward, I would be looking to put some money to work in the 3yr sector. However, though the 2017 voters (Evans, Kashkari, Harker, Kaplan) are less hawkish than the 2016 group, Yellen still calls the shots and recall that many established doves have crossed into the hawkish camp in the past year. As I say every time I advocate buying the market, it is in the context of a bond bear market. As of today, there is less doubt about that, at least.
-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-182 99-01 98-29+ 95-28+ 96-05
RESISTANCE LEVEL 99-16+ 98-29 98-25+ 95-22 95-21
RESISTANCE LEVEL 99-15 98-26 98-22 95-16 95-00
         
SUPPORT LEVEL 99-12 98-19 98-10 94-28 93-16
SUPPORT LEVEL 99-10 98-14+ 98-05+ 94-18+ 92-27
SUPPORT LEVEL 99-08 98-11 98-00 94-10 92-08

 

Tomorrow’s Calendar

 

  • China Data: Nothing Scheduled
  • Japan Data: Japan Foreign Bond Buying, Nikkei Japan PMI Mfg, Machine Tool Orders
  • Australia: Consumer Inflation Expectation, Employment, RBA FX Transactions
  • EU Data: EU-Markit Eurozone Manufacturing/Services/Composite PMI GE- Markit Manufacturing/Services/Composite U.K. Retail Sales
  • S. Data: Current Account Balance, Empire Manufacturing, CPI, Real Avg Weekly Earnings, Initial Jobless Claims, Philadelphia Fed Business Outlook, Markit U.S. Manufacturing PMI, NAHB Housing Market Index, Total Net TIC Flows
  • Supply: Japan 20yr / Ireland bills / Spain 2021 & 2026 / Romania 2019 / Poland auctions TBD
  • Events: Bank of England Bank Rate
  • Speeches: Nothing Scheduled

(more…)

What’s Next: FOMC Rate Decision+ 18 Economic Data Releases
December 2016      Debt Market Commentary   

Quigley’s Corner 12.13.16 -Baked In FOMC Rate Decision+ 18 Major Economic Releases

 

Investment Grade New Issue Re-Cap – FOMC Tomorrow and then We’re Back to Zero for the 2017 IG Primary Markets

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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 7th     

IG Credit Spreads by Rating & Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

No new issues priced today ahead of tomorrow’s all-important FOMC rate decision in which the Fed will likely announce a rate hike of 0.25%. We have no less than 18 major economic data releases tomorrow which should help us read the tea leaves for table-setting come January. The first month of each year is historically a prolific one. January 2017 will be no different. We could see $130-140b price…….and likely more when factoring in SSA issuance! So welcome and enjoy the holiday reprieve while we have it because we’ll be starting all over again and “back to zero” before you can blink in a couple of weeks.

 

Global Market Recap

 

  • S. Treasuries – Closed mixed & flatter. The 30yr auction was well received.
  • Overseas Bonds – Bonds in Europe were very well big. JGB’s closed mixed.
  • 3mth Libor – Set at the highest yield (0.96344%) since May 2009.
  • Stocks – S&P, Dow and NASDAQ traded at all-time times.
  • Overseas Stocks – Europe rallied (banks) & Asia closed with gains.
  • Economic – U.S. small business optimism at a 2-year high.
  • Overseas Economic – Better data in China & Europe. Germany & U.K. CPI remained low.
  • Currencies – USD stabilized after a poor session yesterday.
  • Commodities – Crude oil unchanged. Gold, copper & silver down. CRB small gain.
  • CDX IG: -0.68 to 67.41
  • CDX HY: -4.59 to 353.11
  • CDX EM: -1.92 to 243.65

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index tightened 1 bp to +132 vs. +133.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.26 vs. 1.27.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +172 vs. +173.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.5b on Monday versus $15.7b on Friday and $14.0b the previous Monday.

 

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

 

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

 

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 four weeks:

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

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.26 1.26 0
IG27 68.095 67.827 <0.268>
HV27 136.005 135.56 <0.445>
VIX 12.64 12.72 0.08  
S&P 2,256 2,271 15
DOW 19,796 19,911 115  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $2.75 bn WTD: $2.75 bn
MTD: $38.955 bn MTD: $44.905 bn
YTD: $1,283.717 bn YTD: $1,623.651 bn

 

Lipper Report/Fund Flows – Week ending December 7th     

     

  • For the week ended December 7th, Lipper U.S. Fund Flows reported an inflow of $2.583b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.047b) and a net inflow of $2.034bm into High Yield Funds (2016 YTD net inflow of $6.973b).

(more…)

US Debt Markets Salute 75th Anniversary of Pearl Harbor; Mischler Comments
December 2016      Debt Market Commentary   

Quigley’s Corner 12.07.16 Commemorating 75th Anniversary of Pearl Harbor

 

 75TH Anniversary of Pearl Harbor

Investment Grade Corporate Bond New Issue Re-Cap

Global Market Recap

IG Primary & Secondary Market Talking Points

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

New Issues Priced

Indexes and New Issue Volume

IG Credit Spreads by Rating

IG Credit Spreads by Rating

New Issue Pipeline

M&A Pipeline

Lipper Funds Flow Report

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Everyone should stop to give more than mere pause to remember or recall Pearl Harbor today, not just the nation’s oldest Service Disabled Veteran broker dealer However, it does resonate with us here at team Mischler that much more since we do own the privilege and honor of that bragging right.

It all began on a quiet, peaceful and unassuming Sunday, December 7th, 1941 at 7:55 a.m. when a fleet of 353 Japanese dive bombers, level bombers and fighters bearing the Rising Sun on their wings first appeared above the blue skies over Oahu island.  At 8:06 a.m. four armor-piercing bombs struck the USS Arizona – one penetrating the ship and exploding three decks below the surface. The detonation ignited one hundred tons of black powder in the interior of the vessel. The resulting explosion broke the battleship in half sending a column of fire and red smoke a thousand feet into the air. Within eight minutes of that first bomb strike, the Arizona lay on the floor of Pearl Harbor. 1,177 officers, sailors and marines including 23 sets of brothers, went down with it making the Day that Will Live in Infamy – the worst single disaster in U.S. naval history. About half of the total number of Americans killed that day were on this ship. In total 2,403 Americans including 63 civilians were killed and 1,178 more were wounded.

Today, the wreckage of the USS Arizona leaks about one quart of oil each day.  Veteran survivors call them tears, believing that the USS Arizona will continue to leak until all survivors have joined their shipmates in the watery grave.

 

remember-pearl-harbor-mischler-veteran-owned-broker-dealer
The USS Arizona, December 7th, 1941 8:05 a.m. (0805)

 

On that fateful day, Pearl Harbor became just as pivotal to our American identity as July 4th 1776.  The United States bounced back in double time as all but three of the ships that were damaged or sunk on December 7th were raised, repaired and sailed again. In fact, by the end of World War II our great nation and its honored veterans of the Greatest Generation chased down and completely destroyed every Japanese aircraft carrier used to launch the attack on Pearl Harbor.  That was a priority – a statement to the world.

 

Many do not realize that on that same day, Japanese air forces also attacked Hong Kong, Guam, the Philippine Islands, Wake Island, Midway Island and American ships were torpedoed on the high seas between San Francisco and Hawaii.

The distance of Hawaii from Japan made it very clear that this was a surprise attack.  As Roosevelt expressed in his famous speech, No matter how long it may take us to overcome this premeditated invasion, the American people in their righteous might will win through to absolute victory. I believe I interpret the will of the Congress and of the people when I assert that we will not only defend ourselves to the uttermost, but will make very certain that this form of treachery shall never endanger us again. Hostilities exist. There is no blinking at the fact that that our people, our territory and our interests are in grave danger.  With confidence in our armed forces – with the unbounding determination of our people – we will gain the inevitable triumph – so help us God.”

The man, our military and we as a people kept that promise. It was our entrance into World War II the end of which left our great country the beacon of hope to the rest of the free world forever.

pearl-harbor-anniversary-mischler-veteran-owned-broker-dealer

Cover of The New York Times 75 years ago today.

 

Famous Leadership Quotes Born out of Pearl Harbor onto Victory in World War II

 

“Yesterday, December 7, 1941 – a date that will live in infamy – the United States of America was suddenly and deliberately attacked by naval and air forces of the Empire of Japan.”

-Franklin D. Roosevelt

 

“You ask what is our aim? I can answer in one word: Victory. Victory at all costs. Victory in spite of all terror. Victory however long and hard the road may be. For without victory there is no survival.”

-Winston Churchill

“May God have mercy upon my enemies, because I won’t.”

-George S. Patton           

 

“Soldiers, Sailors and Airmen of the Allied Expeditionary Force! You are about to embark upon a great crusade, toward which we have striven these many months. The eyes of the world are upon you. The hopes and prayers of liberty loving people everywhere march with you.”

-Dwight Eisenhower


75th Anniversary: Pearl Harbor Veteran Remembrance Day

 

It is our responsibility and our duty to remember and pay tribute to our veterans and especially today to those of the Greatest Generation who took part in World War II, the global war that was the most widespread in global history directly involving over 100 million people across 30 nations.  The result – 3% of the world’s population were killed or 80 million people. The collective memory of what happened 75 years ago today is fading as our veterans grow older. To this very day many of those surviving veterans make journeys to Hawaii annually to pay their respects to their fellow sailors and marines and to remember and reflect upon the day that changed their lives forever. The challenge for all of us is to keep their remembrance alive.

 

I’d like to share with you all an e-mail I received from the Senior Funding Manager at one the top 15 U.S. corporations so, it’s one that you all bank.

The person wrote:

Ron,

  • I get a lot of these newsletters/e-mails and most are the same…good, but the same.  Yours is different and I have been reading them (and forwarding parts to family members who may also enjoy your “editorial” pieces).
  • I appreciate having a true veteran-owned firm on my team. My Dad was a Korean vet and my father-in-law actually fought in the Army in Korea.

 

I can’t tell you how much it means to me personally, given the time and effort put into the “QC” each and every day to receive a note like this. However, it means that much more to team Mischler Financial when critically important clients of and relationships with our great nation’s oldest Service Disabled veteran broker dealer take the time to share their own personal veteran stories with us.  It makes all this worthwhile.  Team Mischler and I thank the person in question for sharing that.  You know who you are and it is very much appreciated.

mischler-pearl-harbor-anniversary-veteran-salute

Today’s Ceremony at the USS Arizona Memorial

 

The names of all the sailors who perished aboard the Arizona are inscribed on the wall inside the USS Arizona Memorial.

The names of all of our U.S. Marines who were killed is to the right.

 

The inscription reads:
“To the memory of the gallant men here entombed and their shipmates who gave their lives in action on December 7, 1941 on the U.S.S. Arizona.”

 

  • There were 16,112,566 members of the United States Armed Forces during World War II.
  • There were 291,557 battle deaths.
  • 113,842 other deaths in service (non-theater).
  • …..and 670,846 non-mortal woundings.
  • According to the Department of Veterans Affairs, around 620,000 (3.85%) American veterans from the war are estimated to still be alive as of 2016.
  • During the World War II conflict 464 United States military personnel received the Medal of Honor, 266 of them posthumously.
  • There are currently six living World War II Medal of Honor recipients.
  • The Department of Veterans Affairs estimates that 372 American World War II veterans die every day.

It took all of one day 75 years ago today for the United States of America to become the world’s defender of humanity, democracy, liberty and of all the value systems cherished by free people everywhere. America and Americans turned our national tragedy into the birth of our becoming the leader of the Free World.  The war to end all wars is the very thing that bound our country and our people together.  Decades later Vietnam ripped us apart.  Today with prevailing divides it’s time to learn once again that a nation under duress and divide can come together to realize its full potential.  To once again have the world endear themselves to us knowing we will always do the right thing.  We will always be a beacon of hope and the land of opportunity and dreams.

“America will forever remain the land of the free, only so long as it is the home of the brave.” –Elmer Davis

 

pearl-harbor-survivor-us-military-veterans

Pearl Harbor Survivor of Hickam Field that was bombed and strafed resulting in 139 killed and 303 wounded.

 

Have a great evening and God Bless our Veterans!
Ron Quigley

 

Investment Grade New Issue Re-Cap 

 

Yesterday seemed very slow despite that some issuers tapped.  Today was a similarly slow day although 3 IG Corporate issuers priced 4 tranches between them totaling $2.70b.  The SSA space featured a small $200mm KBN tap of an outstanding FRN due 2020 bringing the all-in IG day total to $2.90b. Many agreed the holiday lull has officially begun to manifest itself in our IG DCM.  Sure there is a bit more to get done -opportunistic issuers, Roper Industries – but for the most part, heavy issuance days may be in hibernation until January.

Our WTD total is now over 93% of this week’s estimates $16.675b vs. $17.87b and the MTD tally is at 76% of forecasts or $31.605b vs. $41.52b.

 

Global Market Recap

 

Today is the 75th Anniversary of Pearl Harbor: God Bless! -TF

 

  • S. Treasuries – USTs, Bunds, Gilts & Peripherals rallied despite a sizable stock rally.
  • Stocks – Global stock rally. S&P’s and Dow at all-time highs. EU banks on fire.
  • Economic – U.S. non-event today. China foreign reserves down. Weak U.K. data.
  • Currencies – USD was weaker vs. 4 of the Big 5.
  • Commodities – CRB, crude oil & copper down while gold & silver (+2.8%) rallied.
  • CDX IG: -1.57 to 67.97
  • CDX HY: -10.80 to 363.0
  • CDX EM: -9.02 to 247.22

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • EPR Properties upsized today’s 10-year Senior Notes new issue to $450mm from $300m at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 4 IG Corporate-only new issues, including today’s KeyCorp Pfd., was <27.19> bps.
  • BAML’s IG Master Index tightened 1 bp to +134 vs. +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +128.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +175.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.1b on Tuesday versus $14.0b on Monday and $18.4b the previous Tuesday.
  • The 10-DMA stands at $16.2b.

 

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

 

IG Corporate New Issuance This Week
12/05-12/09
vs. Current
WTD – $16.675b
December 2016
Forecasts
vs. Current
MTD – $31.605b
Low-End Avg. $16.78b 99.37% $40.87b 77.33%
Midpoint Avg. $17.87b 93.31% $41.52b 76.12%
High-End Avg. $18.96b 87.95% $42.17b 74.95%
The Low $10b 166.75% $30b 105.35%
The High $25b 66.70% $60b 52.67%

 

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

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

 

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 four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/05
TUES.
12/06
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
New Issue Concessions <1.05> bps 17.43 bps 3.53 bps 4.5 bps 3.62 bps <3.60> bps
Oversubscription Rates 4.16x 3.43 bps 3.38x 2.99x 2.78x 4.26x
Tenors 15.09 yrs 5.68 bps 10.84 yrs 12.14 yrs 11.28 yrs 13.31 yrs
Tranche Sizes $575mm $1,093m $711mm $929mm $1,039mm $692mm
Avg. Spd. Compression
IPTs to Launch
<19.43> bps <29.32> bps <17.60> bps <16.07> bps <17.69> bps <22.96> bps

 

New Issues Priced

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

For ratings I use the better two of Moody’s, S&P or Fitch.

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Bank of Montreal Aa3/AA- FRN 12/12/2019 250 3mL+equiv 3mL+equiv 3mL+60 3mL=60 BAML/BMO/CITI/GS/WFS
Bank of Montreal Aa3/AA- 2.10% 12/12/2019 1,250 +high 80s/+87.5a +77a (+/-2) +75 +75 BAML/BMO/CITI/GS/WFS
BNP Paribas BBB-/BBB- 6.75% 3/14/2022 750 7.25%-7.375%
7.3125%a
6.875%a (+/-12.5) 6.75% $100.00 BNPP-sole
EPR Properties Baa2/BBB- 4.75% 12/15/2026 450 +high 200s
+287.5a
+265a (+/-5) +260 +260 CITI/JPM/RBC

           

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Kommunalbanken
(tap) New Total: $1bn
Aaa/AAA FRN 6/16/2020 200 N/A 3mL+27a 3mL+27 3mL+27 BAML/JPM/NATW

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.28 1.28 0
IG27 69.54 68.035 <1.505>
HV27 143.40 138.77 <4.63>
VIX 11.79 12.22 0.43
S&P 2,212 2,241 29
DOW 19,251 19,549 298
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $2.70 bn DAY: $2.90 bn
WTD: $16.675 bn WTD: $16.875 bn
MTD: $31.605 bn MTD: $37.555 bn
YTD: $1,276.367 bn YTD: $1,616.301 bn

 

Lipper Report/Fund Flows – Week ending November 30th    

     

  • For the week ended November 30th, Lipper U.S. Fund Flows reported an outflow of $1.302b from Corporate Investment Grade Funds (2016 YTD net inflow of $41.464b) and a net inflow of $341.7m into High Yield Funds (2016 YTD net inflow of $4.939b).
  • Over the same period, Lipper reported a net inflow of $339.2b into Loan Participation Funds (2016 YTD net inflow of $561.5m).
  • Emerging Market debt funds reported a net outflow of $188.9m (2016 YTD inflow of $5.743b).

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 25.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/06 12/05 12/02 12/01 11/30 11/29 11/28 11/25 11/24 11/23 1-Day Change 10-Day Trend PC
low
IG Avg. 134 135 135 135 136 136 136 136 136 136 <1> <2> 106
“AAA” 75 75 75 75 75 75 75 75 75 75 0 0 50
“AA” 82 82 83 83 84 84 83 84 84 84 0 <2> 63
“A” 107 107 107 107 108 108 108 108 108 108 0 <1> 81
“BBB” 172 173 174 174 175 177 177 177 177 177 <1> <5> 142
IG vs. HY 316 323 329 327 331 333 330 328 330 330 <7> <14> 228

 

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 31.53 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/06 12/05 12/02 12/01 11/30 11/29 11/28 11/25 11/24 11/23 1-Day Change 10-Day Trend PC
low
Automotive 121 121 122 122 123 123 123 124 124 124 0 <3> 67
Banking 125 125 126 125 125 126 126 126 126 126 0 <1> 98
Basic Industry 174 175 176 175 177 175 175 175 175 175 <1> <1> 143
Cap Goods 100 100 101 101 102 101 101 102 101 101 0 <1> 84
Cons. Prod. 109 109 110 109 110 110 110 111 111 111 0 <2> 85
Energy 174 175 177 177 180 181 180 181 180 180 <1> <6> 133
Financials 154 155 155 154 155 157 157 157 157 157 <1> <3> 97
Healthcare 117 118 118 118 119 118 118 119 119 119 <1> <2> 83
Industrials 136 137 137 137 139 139 139 139 140 140 <1> <4> 109
Insurance 146 146 147 146 147 147 147 147 147 147 0 <1> 120
Leisure 134 135 135 135 135 135 134 135 135 135 <1> <1> 115
Media 159 159 160 159 161 161 160 161 161 161 0 <2> 113
Real Estate 143 144 144 144 144 142 142 143 143 143 <1> 0 112
Retail 116 116 116 116 117 117 117 118 119 119 0 <3> 92
Services 128 128 128 128 128 127 127 128 128 128 0 0 120
Technology 110 110 110 110 112 112 113 113 113 113 0 <3> 76
Telecom 165 165 166 165 166 167 167 168 169 169 0 <4> 122
Transportation 135 135 135 135 136 135 135 136 135 135 0 0 109
Utility 135 135 136 135 135 135 135 136 135 135 0 0 104

 

New Issue Pipeline

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

 

  • The Republic of South Africa (Baa2/BBB-) mandated HSBC, J.P. Morgan and Nedbank to arrange fixed income investor meetings in the U.S., Europe, Middle East and Asia that began on Sunday, November 6th in Dubai.  Meetings took place thru Friday, November 11th.
  • Korea Hydro and Nuclear Power Co. Ltd. (Aa2/AA) mandated BNP Paribas and Citigroup to arrange fixed income investor meetings in the U.S. that began Tuesday, October 18th in New York, continued on the 19th in Boston and wrapped up in Chicago on the 20th.
  • Hyundai Capital Services (Baa1/A-) mandated Citigroup, HSBC and Nomura as joint book runners to arrange investor meetings that began on Monday, October 17th in preparation for a dollar-denominated 144a/REGS new issue.
  • Nacional Financiera SNC (A3/BBB+) mandated Bank of America/Merrill Lynch and HSBC as joint leads to arrange fixed income meetings that took place Wednesday, September 27th thru Thursday the 28th in London, New York, Boston and Los Angeles in preparation for a possible dollar-denominated new issue that could soon follow their conclusion.
  • Banco Inbursa (BBB+/BBB+) mandated Bank of America/Merrill Lynch, Citigroup and Credit Suisse as joint book runners to arrange fixed income investor meetings in the U.S., Mexico and Europe that began on Wednesday, September 7th and continued through the 12th making stops in Mexico, London, Boston, New York and L.A. Fitch recently assigned an expected long-term rating of “BBB+” to Banco Inbursa’s proposed $1.5b 10-year Senior Notes.
  • Industrial Bank of Korea (Aa2/AA-) mandated HSBC and Nomura to arrange fixed income investor meetings in Hong Kong and Singapore that began on Monday, August 22nd in preparation for a 144a/REGS dollar-denominated offering that could soon follow its conclusion.

 

M&A Pipeline – $303.84 Billion in Cumulative Enterprise Value!

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

Weekend Edition Mischler Debt Market Comment: SecDef Soundoff
December 2016      Debt Market Commentary   

Quigley’s Corner 12.02.16 –DCM Weekend Edition-Debt Market Outlook; SecDef Soundoff

 

Investment Grade New Issue Re-Cap – Next Week and “DONE” for the Year!

Global Market Recap

IG Corporate Bond Primary & Secondary Market Talking Points

Citigroup, Inc. Deal Dashboard – Thursday’s FRN Prints Flat and 5yr Fixed Prices with Nickel NIC

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

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

On James “Mad Dog” Mattis as SecDef, Veteran Marine, Jonathan Herrick’s Scope

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

New Issues Priced

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 30th    

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:

IG Credit Spreads by Industry

Snapshot of the major investment grade sector credit spreads for the past ten sessions

New Issue Pipeline

M&A Pipeline – $301.04 Billion in Cumulative Enterprise Value!

Economic Data Releases

Rates  Trading Lab

Tomorrow’s Calendar

I have a lot for you this evening beginning with the Primary and Global Market Re-caps followed by IG Primary/Secondary Market Talking Points and a review of the WTD and MTD new issue volume performance against respective syndicate estimates.  Then of course, like every Friday, the “Best and the Brightest” that IG syndicate has to offer have all unanimously chimed in once more to let you know what to expect for next week’s IG Corporate issuance.  I think most all of us in the world of new issues feel next week is the last “GO” week of the year.  We have history to back that up, an FOMC Rate Decision meeting on Tuesday the 13th and well, a nice and well-deserved slow down for us all.  It’s also time to re-energize for January when we’re all “back-to-zero” to start it all over again.

I also bring to you this evening a nice piece written by our own Marine Veteran Jonathan Herrick – in his own words – on last evening’s President-elect Donald Trump’s nomination of General James “Mad Dog” Mattis as Secretary of Defense.  Please do take the time to read that piece.

Without further ado, let’s get to it…………


Investment Grade New Issue Re-Cap – Next Week and “DONE” for the Year!

Timing is everything as they say.  2 issuers braved the market today as NFP met expectations while the Unemployment Rate beat big time delivering a 4.60% vs. 4.90% though wages surprised to the downside.  Rates rallied, yields compressed and 2 deals got done totaling $1.1b.  We’ve now priced 15% more than this week’s syndicate midpoint average forecast or $26.40b vs. $22.89b.  Already, one third of the entire December IG Corporate new issue estimate has been achieved ($14.93b vs. $41.52b).

Please note that yesterday’s $3b Citigroup, Inc. 5-year FXD/FRN priced with a 5 bp concession.  As I wrote, “The comparable used for relative value is the outstanding Citigroup 2.35% Senior Unsecured 5-year due 8/02/2021 that opened in the morning pre-announcement T+93 (G+100) pegging NIC on the new 5-year two-part FXD/FRN transaction at 5 bps.”  However, I had a typo in my “Deal Dashboard” that showed 8 bps.  So, to be clear, both the FXD/FRN printed with a nickel or 5 bps NIC.  Thanks! –RQ.

Revised Citigroup, Inc. Deal Dashboard – Thursday’s FRN Prints Flat and 5yr Fixed Prices with Nickel NIC

 

Citi Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5yr FRN 3mL+equiv 3mL+equiv 3mL+107 3mL+107 <15> bps 5 bps 3mL+105/103 <2>
5yr FXD +120a +105 the # +105 +105 <15> bps 5 bps 105/103 0/flat

 

Global Market Recap

 

  • S. Treasuries – had a strong rally on the mixed U.S. Employment Report.
  • Overseas Bonds – Bonds in Europe had a big time rally into the Italy referendum.
  • 3mth Libor – Set at its highest yield since May 2009 (0.94639%).
  • Stocks – U.S. stocks were little changed 3:30pm. Stocks overseas closed in the red.
  • Economic – U.S. Employment Report was a mixed bag. Higher EU PPI than expected/last.
  • Currencies – USD underperformed 4 of the Big 5 & was unchanged vs. the Euro.
  • Commodities – Crude oil was higher again. Gold up and big gains for silver/wheat.
  • CDX IG: -0.74 to 72.77
  • CDX HY: -4.23 to 388.23
  • CDX EM: -2.77 to 270.30

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Nabors Industries Inc. upsized today’s new 6yr NCL Senior Notes transaction to $600mm from $500m .
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 44 deals that printed, 28 tightened versus NIP for a 50% improvement rate while 8 widened (18.25%) and 6 were flat (13.75%) and 2 was not available or “N/A” (4.50%).
  • For the week ended November 30th, Lipper U.S. Fund Flows reported an outflow of $1.302b from Corporate Investment Grade Funds (2016 YTD net inflow of $41.464b) and a net inflow of $341.7m into High Yield Funds (2016 YTD net inflow of $4.939b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 2 IG Corporate-only new issues was <37.5> bps.
  • BAML’s IG Master Index tightened 1 bp to +135 vs. +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +128 vs. +129.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bp2 to +175 vs. +177.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $23.3b on Thursday versus $25.2b on Wednesday.

The last two trading sessions represent the #1 and #2 ranked high volume sessions since record keeping began in December 2005.

  • The 10-DMA stands at $16.5b.

 

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

 

IG Corporate New Issuance This Week
11/28-12/02
vs. Current
WTD – $26.40b
December 2016
Forecasts
vs. Current
MTD – $14.93b
Low-End Avg. $21.91b 120.49% $40.87b 36.53%
Midpoint Avg. $22.89b 115.33% $41.52b 35.96%
High-End Avg. $23.87b 110.60% $42.17b 35.40%
The Low $15b 176.00% $30b 49.77%
The High $30b 88.00% $60b 24.88%

 

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

 

Once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2016’s top 24 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  The participating desks represent 81.55% 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.

The question posed to the “Best and the Brightest” early this morning was framed as follows:

Entering today, we’ve produced $25.30b in new IG Corporate volume or over 10% more than the $22.89b syndicate midpoint average estimate. We have the big FIGs to thank for yesterday’s incredible volume.  For the most part we have next week and the following Monday before the FOMC meeting closes the door on any meaningful 2016 issuance. Given today’s payroll pickup and dramatic unemployment rate decline to 4.6% from 4.9% it’s now more than ever a foregone conclusion that a rate hike will take place on Tuesday December13th.
Here are this week’s five IG Corporate-only key primary market driver averages entering this morning’s session:

  • NICS:  3.53 bps
  • Oversubscription Rates: 3.56x
  • Tenors:  10.97 years
  • Tranche Sizes: $723mm
  • Spread Compression from IPTs to the Launch: <16.46> bps
  • Versus last Friday’s key primary market driver averages, NICs widened 0.97 bps to 3.53 bps vs. 4.50 bps.
  • Over subscription or bid-to-cover rates increased 0.57x to 3.56x vs. 2.99x vs. 2.78x vs. last week. 
  • Average tenors narrowed out by 1.17 years to 10.97 years vs. 12.14 years.
  • Tranche sizes decreased by $206mm to $723mm vs. $929mm.  
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate new issues compressed +0.39 bps to <16.46> bps vs. <16.07> bps last week.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +175 vs. +179.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +135 vs. last Friday’s +136 close. 
  • Spreads across the four IG asset classes tightened by 2 bps to 25.75 vs. 27.75 bps as measured against their post-Crisis lows. 
  • Looking at the 19 major industry sectors, spreads tightened 1.63 bps to 32.05 vs. 33.68 bps also against their post-Crisis lows.
  • Of interesting note Investment grade corporate bond trading posted a final Trace count of $23.3b on Thursday versus $25.2b on Wednesday.

Those two trading sessions represent the #1 and #2 ranked IG Corporate high volume sessions since record keeping began in December 2005! Please let me know your thoughts and numbers for next week.

Thanks as always for your time and enjoy a wonderful weekend!  -Ron”

 

The “Best and the Brightest” in Their Own Words

This section available exclusively to QC distribution list recipients

…………………………………………………………………………………………..

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
12/05-12/09
Low-End Avg. $16.78b
Midpoint Avg. $17.87b
High-End Avg. $18.96b
The Low $10b
The High $25b

A Look at How the Voting Brackets Broke-Out for Next Week

 

Next Week
12/05-12/09
2: 10-15b
4: 15b
1: 16b
1: 17b
5: 15-20b
1: 18b
6: 20b
3:20-25b

 

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SecDef designate James Mattis

On the Nomination of James “Mad Dog” Mattis as Secretary of Defense, in the Words of Mischler’s very own Veteran Marine, Jonathan Herrick

 

“Demonstrate to the world there is ‘No better friend – No worse enemy’ than a U.S. Marine.”

-General James “Mad Dog” Mattis

 

Last evening I watched on the overhead office flat screen television, President-elect Donald Trump’s announcement that “We are going to appoint “Mad Dog” Mattis as our Secretary of Defense.  But we’re not announcing it until Monday so don’t tell anybody.”  That was a great nomination and also a lighthearted and very funny Trump-ism that I personally thought was a great moment.  Trump continued with, “They say he’s the closest thing to General George Patton that we have and it’s about time.”  That definitely makes me feel good about America.  But since Mischler is our great nation’s oldest Service Disabled Veteran broker dealer, why not hear about who he is from our very own veteran Marine, Jonathan Herrick, who signed on as fixed income desk analyst six months ago.  Jonathan is an 8-year veteran Marine who served multiple tours of duty in the mid-East and was honorably discharged from the U.S. Marine Corps as a Sergeant 1st Battalion, 8th Marine Regiment, 2nd Division.  His is a great story and he’s made an immediate impact supporting our capital markets team.  For a photo of Jonathan, please see the “QC” dated July 5th, 2016 when I featured a piece on a VOWS event or” Veterans on Wall Street” in which Jonathan and a team of other veterans rang the bell to close the Nasdaq exchange. 

Given Donald Trump’s SecDef nomination of James “Mad Dog” Mattis, Jonathan took the time to write his thoughts on the Secretary of Defense nominee from his perspective as a former Marine who served two tours in Afghanistan and one tour in Iraq. Take it away, Jon!

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Veteran US Marine Jon Herrick (l) Khaki Bridge” Afghanistan in 2012.

I am proud and honored to have it featured in the “QC” for your reading pleasure: Take it away, Jon!

Our current nominee for Secretary of Defense, General James Mattis, is a legend amongst Marines of the Global War on Terror era.  One of the most respected generals of our time, Mattis is known for his aggressive “can-do” attitude, emphasis on the mental and intellectual aspects of war, and his leadership and care for the Marines he commanded.  He led the 1st Marine Division during the invasion of Iraq on the march to Baghdad and worked with General Petraeus to develop the counterinsurgency tactics that helped pacify the Anbar Province to the point that when I arrived there in 2009, our battalion took fire on only a small handful occasions over a seven month deployment.

 

A life-long bachelor, he is known in military circles as the Warrior Monk due to his focus on the military arts and emphasis on the value of education.  He would often encourage his subordinate commanders to further their own education, and that of their Marines, as he believed that lessons learned from the past can “light what is often a dark path ahead.”  Famously, he stated that “the most important six inches on the battlefield are between your ears.”  Known as an aggressive leader, he earned the nickname “Mad Dog” and went by the call sign “Chaos” during the war.  As a testament to his ability to understand the complexities of a counterinsurgency environment, he coined the term “First, do no harm” as a guideline for Marines deployed in the war zone.

Another story that is shared widely in military circles, that I first heard when I spent Christmas in Boot Camp on Parris Island in 2007, is when General Mattis took over the duty of a young married Marine on Christmas Day.  On every Marine facility, from Baghdad to Washington, there is a Marine on duty at all times.  While reading at the duty roster, he noticed that the officer scheduled to have duty on that day was married.  General Mattis, being a bachelor, sent the married Marine home to spend Christmas with his family while General Mattis himself took over the duty.  He displayed that same kind of caring leadership for his Marines both during combat deployments in Iraq and Afghanistan, and back home in the United States.

Mattis is also known to speak his mind when he disagrees with decisions that are being made and is perhaps better known for his rather blunt quotes.  One of the mantras we learned as we were moving into theater was “Be polite, be professional, but have a plan to kill everyone you meet” which on the surface may seem uncivilized, but was key to overcoming threats and working with the population in an environment where the enemy was hiding amongst civilians and using suicide bomber tactics.  Mattis’ tactics, I am convinced, prevented immeasurable loss of life on all sides of the conflict.

I believe I speak for all veterans when I say that I am incredibly excited to see what he can do for the Department of Defense.  A free thinker with a winning mindset he is just what our military needs in these uncertain times.  I will leave you with a copy of his letter to the 1st Marine Division on the eve of the invasion in 2003, and this Mattis quote; “I don’t lose any sleep at night over the potential for failure. I cannot even spell the word.”

Gen. Mattis requires a supermajority to garner Senate confirmation. Thus far he is the only Trump nominee who the Democratic Party can unilaterally block. The reason is that there is a mandated seven year “seasoning period” for military personnel post-retirement before being able to serve in a cabinet post.  Five-star General Omar Bradley is the lone exception to this rule following World War II.  As a result, Congress needs to pass legislation that would waive the 7-year requirement in order for Mattis to be confirmed.  So, perhaps we’re a bit ahead of ourselves although I personally would love to see “Mad Dog” as our “Doctor of Defense.”  Professional pundits typically frame their opinions with “most likely” and/or approaches such as “despite the prevailing view from this perch leads me to believe that the outcome will be…….” Rather than presenting future outcomes with unabashed certainty. So, now that that’s crystal clear for everyone please allow me to say “Mattis will be confirmed as our next Secretary of Defense!” There, that felt good!   I’ve never been one to leave room to invent excuses on the spot or simply switch my narrative to a different topic altogether and squirm out of something.  The record shows that and what’s more the ”QC” is still waiting to be wrong on the big calls.  I will, one day, and when I am I’ll say “ I was wrong!”  Italy will vote “NO” on the referendum this weekend and I do believe Austria’s Norbert Hofer will become the first Nationalist head of state in Europe since WWII.  It speaks volumes as to the volatility coming to Europe and a continued dismantling of the EU as we know.

 

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 weekend!
Ron Quigley

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