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Beige Book; Geopolitical Risks Revisited-Mischler Debt Market Comment
December 2016      Debt Market Commentary   

Quigley’s Corner 11.30.16 Beige Book; Geopolitical Risks Revisited


Investment Grade New Issue Re-Cap 

Global Market Recap

The Fed’s Beige Book –All You Need to Know

IG Primary & Secondary Market Talking Points

Time to Evaluate Geopolitical Risks – Austria

MENA, IDPs, Refugees and a Graying Europe

European Assimilation – Shopping for New Neighbors

A Look at the EU 14 Months Later – Multicultural Utopia

New Issues Priced

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

Indexes and New Issue Volume

Lipper Funds Flow Report Week-ending Nov 23rd

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Rates were certainly under heavy pressure today as crude oil rallied thanks to OPEC’s first supply cut in 8 years.  In the mid-morning session crude was up 3% while USTs were battered with the CT10 off a point and the Long Bond off over 2 points as yields rose 10 and 11 bps respectively.  NYMEX closed up $3.75 (8.29%) and Brent was up $4.12 (8.71%) on the day.  CT5 widened 7 bps; CT10 yields moved out 9 bps and the Long Bond closed down over 1.5 points and is now yielding 3.03% (+9 bps). The move in rates stymied issuance with just over one full week left before the December FOMC Rate Decision.  There were a couple deals that decided to stand down today, no surprise given the fluctuation in rates and especially occurring at month-end and ahead of Sunday’s Italian referendum vote and Austrian elections.

 

Still, Analog Devices Inc. issued a $2.1b 4-part across 5s/7s/10s/20s.  NAB’s $1b 5-year in the SSA space brought the all-in IG day totals to 2 issuers, 5 tranches and $3.4b.

Global Market Recap

  • S. Treasuries – Poor performance today to end a terrible month for Treasuries.
  • Overseas Bonds – JGB’s had small losses. Bunds & Gilts followed USTs south.
  • Stocks – Mixed heading into close. NASDAQ red. S&P and Dow at all-time highs.
  • Overseas Stocks – Nikkei was unchanged. China closed down. Europe rallied.
  • Economic – Good news with ADP employment, Personal Income & Chicago PMI.
  • Overseas Economic: Japan & Europe with full calendars with more good than bad
  • Currencies – USD was very strong vs. the Yen & outperformed the Euro & AUD.
  • Commodities – Crude oil was the story with a big rally on the OPEC deal. Big rally for the CRB.
  • CDX IG: -1.01 to 72.49
  • CDX HY: -5.80 to 388.03
  • CDX EM: -2.94 to 265.27

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

-Tony Farren

 

The Fed’s Beige Book –All You Need to Know

 

  • Fed says U.S. economy continued to expand across most regions.
  • Outlooks were mainly positive, with six regions expecting moderate growth.
  • Three Fed districts saw moderate growth, four saw a modest pace.
  • A majority of districts reported higher retail sales.
  • Districts noted slight upward pressure on overall prices.
  • Strong dollar was cited as a “headwind” in a few districts.
  • Seven districts displayed tightening job market conditions.
  • Banking was largely stable, with some loan-demand improvement.
  • Investment in oil and gas drilling rose slightly.
  • The Beige book included several references to election uncertainty.
  • Demand for manufactured goods was mixed.
  • Report says new auto sales declined in most districts.
  • Philadelphia, Cleveland and Kansas City saw “slight” growth.
  • The Fed’s New York district reported flat activity; Richmond was mixed.
  • Fed beige book was prepared by the Cleveland Fed for the period through Nov. 18th.
  • Federal reserve announces changes to beige book in 2017.
  • Beige book changes will provide a more consistent summary.

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 4 IG Corporate-only new issues was <33.125> bps.
  • BAML’s IG Master Index was unchanged at +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +178 vs. +179.  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 Tuesday versus $16.9b on Monday and $18.8b the previous Wednesday.
  • The 10-DMA stands at $15.6b.

 

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

 

IG Corporate New Issuance This Week
11/28-12/02
vs. Current
WTD – $11.47b
November 2016 vs. Current
MTD – $75.981b
December 2016
Forecasts
Low-End Avg. $21.91b 52.35% $90.70b 83.77% $40.87b
Midpoint Avg. $22.89b 50.11% $92.11b 82.49% $41.52b
High-End Avg. $23.87b 48.05% $93.52b 81.25% $42.17b
The Low $15b 76.47% $71b 107.02% $30b
The High $30b 38.23% $110b 69.07% $60b

 

Time to Evaluate Geopolitical Risks – Austria

Austria’s Presidential election this Sunday is the first in the EU post-Trump victory. The two front runners are Nationalist/Populist Norbert Hofer and a moderate, Alexander Van der Bellen.  Austria’s Populist movement is much more Nationalistic and is fueled by voter discontent with the status quo and establishment as well as being fiercely anti-immigration. I call your attention to a “QC” I wrote here 14 months ago back on September 14th, 2015 and well ahead of the curve. (See “Quigley’s Corner” 09-14-2015).  But many of you who were not yet onboarded for the “QC” here is a full re-print of my geopolitical edition of that particular day.  I’ve included all of it including the very last bit considering Trumps election day victory. 


The boxed in section is the re-print and is then followed by a look at the current state of the EU and the world.

 

MENA, IDPs, Refugees and a Graying Europe

Syria’s population was 23 million in 2014.  50% of those people or 11.5 million are now officially displaced!  Forced out of their homes taking virtually nothing with them but themselves.  Words used to describe the mass exodus from their respective homelands are “unprecedented”, “emergency situation”, “overwhelming”, “perilous”, “volatile” and “extremely challenging.” IDPs has entered our vernacular as a result.  It stands for “Internally Displaced People”.  They are headed for Europe.  Since we are a numbers oriented society please allow me to put 11.5 million into proper perspective and context.

Here’s what 11.50mm people look like in the United States according to the most recent domestic city populations followed by their respective national rankings:

Los Angeles – 3,928,864 (#2)

Philadelphia – 1,560,297 (#5)

Phoenix – 1,537,058 (#6)

San Diego – 1,507,402 (#8)

Dallas – 1,281, 047 (#9)

Seattle – 668,342 (#20)

Washington, D.C. – 658,893 (#22)

Las Vegas – 613,599 (#29)

 

Imagine all the people in those cities, fleeing their homes for another country!  There’s some dramatic perspective for you!

 

Internationally known demographer William Frey, an analyst at the Brookings Institution think tank, predicts that the median age in Europe will increase to 52.3 years old by 2050 from 37.7 years old in 2003 while the median age of Americans will rise to only 35.4 years old.  Frey specializes in urban populations, migration, immigration, race, aging, political demographics and the U.S. Census.  He is also a research professor in population studies at the University of Michigan.  Some factors contributing to that dramatic rise of the European population is a decrease in the fertility rate, a decreasing mortality rate and extended life expectancy.  By 2050 the ratio of retirees to workers in Europe is expected to double from four workers per retiree to two. What all this points to is a dramatic, no an unfathomable decrease in economic output.  The OECD estimates that only 39% of Europeans aged 55-65 work.  The resultant consequences of a “graying” Europe is that there will be considerable labor shortages.  With that comes a call for assimilation.  Simply put Europeans will begin to lose their cultural identity.  Immigrants will flock to the continent as they are now doing out of necessity and the hope that they can take jobs.  Here’s another reality folks – immigration can lead to ethnic conflict in the EU and we all know too well that there is a contagion of European Nationalism sweeping throughout that continent and its happening coincident with the current flood of MENA refugees.

France’s birth rate is 2.08 children per woman with 2.1 needed to grow the population. France’s population will exceed Germany by 2050.  Germany’s birth rate is 1.42 children per woman and represents one of the lowest in the world.  Here are some interesting statistics from the Central Intelligence Agency that cut to the point:

*Italy either has to raise its retirement rate to 77 (yeah right!) or admit 2.2mm immigrants every year to maintain its worker ratio in a country that has had 62 governments since the end of World War II (that’s 70 years or a new government every 1.13 years folks!)  10% of schools in Genoa, Italy’s 11th most populated city with 861,318, closed for lack of children due to the low birth rate! A quarter of Italian women don’t have kids and another quarter have one child.

*Portugal’s fertility rate is 1.45 meaning the population will contract by 7.5mm by 2050.

*Spain’s fertility rate is 1.48

Fact – the Syrian IDP and refugee situation is so critical that people are resorting to harmful coping mechanisms to survive which is a professional way to say they are resorting to crime and violence.  This is what happens and history shows it.  It is not isolated to Syrian refugees, rather it’s a harsh human survival mechanism when there is lack of food.

*Syria – 11.25mm DTPs and Refugees

*Iraq – 1.8mm DTPs

*Yemen – 580k (including 223k Somalis)

*Total – 13.63mm

 

A Word About European Assimilation – Shopping for New Neighbors

 

The word “assimilate” means to take in, absorb and integrate people, ideas and cultures into a wider society and understand them fully. Because of Germany’s standing as the EU’s keystone and economic engine combined with the aforementioned statistics, it is being touted in the press and media as being “equipped” to take in refugees along with all the subsequent humanitarian feel good that it brings.  It’s a premature set-up to something much more fragile and highly inaccurate.  Case in point, Grillenburg, Germany a town with a population of 114.  It has no food store, no police station and no public transportation system.  It lies just 20 kilometers southwest of Dresden.  Grillenburg’s forestry school is being converted into a camp to house 80 refugees thereby swelling the villages population by 70%.  Villagers are concerned about the crime rate and adding fuel to the fire of nationalist organizations that, in turn instigates social unrest.  The reason Germany is the preferred point of destination is not because of the prior analysis rather it’s the safety net that Germany’s liberal welfare policy invites.  It’s angering many Germans who are already infuriated by supporting the way of life in bordering France throughout the current ongoing financial/sovereign debt crisis.  (Added 11/29/2016 – The ECB has thrown trillions of euros into the EU to stoke inflation and it’ is still nowhere to be found!) Of the 625,000 refugees coming into the EU in 2014, most were…….. Syrian.  That was a 275,000 increase over 2013.  90,000 refugees sought asylum in Germany from in Q1 2015 and 40,000 crossed into Germany this weekend alone!  Germany, in fact, received more asylum applications in the first half of 2014 than any other country in the world including 42% more (47.500) than the United States.  Digest that statistic for a second.

 

Isn’t it an easier and much more practical solution to assimilate in Turkey?  Turkey’s census bureau does not ask about people’s religious beliefs but according to the Turkish government 99.8% of Turkey’s population is Muslim.  I hate to be so obviously pragmatic about it but the refugees are dragging themselves through Turkey, Bulgaria, Serbia, Hungary and Austria to reach Germany.  That’s a brutally difficult trek for people with no jobs, no food and no shelter.  Why?  Why not stay along their border across into Turkey so that if and when things settle down in their homeland they can return to their rightful nation, culture and history.  Nope.  They are going straight towards the grand prize which they are going to find challenging.  The Germans know it and Europeans in general know it.  The distance from Aleppo, Syria to Munich, Germany is 3,106 km.  The distance from Aleppo, Syria to Ankara is 759km.  Look at what’s going on in Turkey – it’s lira fell to 3.069 at one point today and ranks as the second worst performance of 24 emerging market currencies besides Brazil that was cut to junk by S&P last week.  So, is the mass exodus from Syria about survival, three squares and a roof or is it about something else?  This story will add to the carnage.

Attempting Assimilation in Austria

Case in point, overnight, 7,000 refugees crossed from the Hungarian border into the beautiful little Austrian town of Nickeldorf – population 1,549.  Now that’s a BIG PROBLEM.

Hungary joined Serbia in constructing a wire border fence to prevent the inflow of immigrants, refugees and asylum seekers.  Hungarian Prime Minister Viktor Orban expressed his nation’s outright  “fear” that European leaders are not capable of controlling the situation.”  He says it’s Germany’s problem because that’s where the displaced people are trying to go.  Meanwhile, earlier today, Germany is trying to stanch the flow of people by installing heavy border controls restricting the former and once highly coveted free flow of movement in Europe.  So much for passport free travel throughout Europe.  Great time for the Fed to raise rates huh?  Think again folks. Stronger dollar, weaker Euro.  Rail systems between Germany, Austria and Hungary have been suspended. Are we having fun yet?  Angela Merkel is already feeling the brunt end of Germans’ resistance to the mass exodus from Syria and into the Hinterland.  I haven’t even broached the subject of terrorist sleeper cells.

Since last year anti-immigration groups and Nationalist organizations have rallied in the tens of thousands against the influx.  In fact, the state had been well-equipped and prepared a year or so ago in advance of the steady flows of asylum seekers to the point that shelters and housing were built specifically for them in advance.  Not so anymore.  Local communities are feeling the overflow and are working with  authorities in Germany to prioritize who they want in their towns and who they least desire?  Are you getting this?  This is what happens.  For example, families with children are the most desirable with single adult males at the bottom of the list.  Townsfolk are bartering with Germany to shop for their desirable refugees!  It’s unreal.  The cloud of radical Muslim extremism is on everyone’s minds here and much more so in Europe.  All the good that Europeans will be able to muster in facing this challenge will be wiped away with those first acts of crime and violence perpetrated by desperate refugees and asylum seekers.  It may very likely fuel European Nationalism and show up at the voting booth.  Is there a solution for our increasingly secular society?  If you write a check, who’s it go to?  Who is managing the money?  How many cents on the dollar/euro find its way to the families?  Mismanagement……misappropriation!  Welcome to more chaos amidst our new world order.

Meanwhile, Where There’s Trouble There’s Antagonism, Spelled: V-L-A-D

It’s common knowledge that Russia led by Vlad-the-Terrible Putin, is embarking upon an unprecedented military build-up in MENA specifically in Syria’s port city of Latakia.  Even Russia’s foreign minister Sergey Lavrov openly acknowledged that military supplies are being flown into the Syrian city by massive Russian condor planes over Iranian and Iraqi airspace.  Our very own powerful and world respected Commander-in-Chief President Barack Obama expressed his displeasure and has his A-Team trying to negotiate with Iraqi leadership to restrict Russian planes from flying over its airspace.  Obama said he is “displeased” with Russia’s continued build-up. So, the U.S. is displeased.  Isn’t displeased such a kind and civilized  non-action word? Like everything else readers, it starts from the top down.  Most of the Russian flights spend much longer flying time over Iranian skies which beckons the question, “since we’ve given away everything but the kitchen sink to Iran in recent nuclear talks, isn’t it about time they did something…..one thing……..ANYTHING for us?  More of the blind leading the blind folks in our new unraveling and inextricably global-linked new world order.  Get used to it until someone comes along to shake things up!

A Look at the EU 14 Months Later – Multicultural Utopia

europe-nationalism-mischler-11302016

Rather than “stoke” inflation following the trillions of euros the ECB has thrown at its financial crisis, about the only thing that has been successfully stoked on that continent is fear and distrust.  We’ve witnessed terror attacks in Belgium, Paris and Nice among many others.  More and more Europeans are shocked at the influx of immigrants in the name of “assimilation” to their countries. People are scared and when people are scared they turn inward. Politically that is expressed as a trend toward Nationalism/Populism which is winning out throughout Europe.  The Schengen Agreement has been suspended throughout much of the continent with borders redefining the once “open” EU.  The single currency itself and the Schengen Accord together represent the two legs on which a the EU stands.  They are foundational to a successful EU.

The ECB’s target inflation rate is 2% but MANY economists feel it should be 3-4%. The higher rate would be to prioritize economic growth and to reduce high unemployment.
EU inflation in September 2015 was <0.1%> vs. 0.6% in November 2016. It’s going down further before it reaches the target.  Economists suggest that won’t happen until maybe 2020-2021……if at all.  Euro Area unemployment is 10%.  EU youth unemployment is 20.3%.
EU immigration in the past year reached a new record of 1.30 million refugees who applied for asylum to the EU’s 28 member nations and including Norway and Switzerland. That’s double the previous record of 700k set in 1992 following the downing of the Berlin Wall and collapse of the former U.S.S.R.

According to Germany’s Körber Foundation that studies among other things demographic change in its commitment to international dialogue, found that two-thirds of Germans feel the EU is not heading in the right direction and 42% wish that Germany would hold a referendum vote on its membership to the EU.  To no one’s surprise European Commission President Jean-Claude Juncker immediately responded by urging Europe’s member nations “not to hold referendums on membership.”  Well, well, well, given BREXIT – does that surprise anyone?  Oh yes, BREXIT happened since the aforementioned piece was written as well!

The Körber survey showed that the current migrant crisis is the greatest challenge for German foreign policy.  82% are against Turkey’s accession; 64% reject expansion; meanwhile Turkey’s President Erdogan intends to flood the EU with 3,000 migrants per day should the EU not include his nation in the Union. Neighboring Greece has been on high naval alert given the deteriorating nature of relations between Turkey and the EU.  Given Greece’s financial state of disarray, it’s the last country that needs or wants the 60,000 migrants that call the Hellenic nation their current home since the Balkan route was unilaterally closed to the mass immigration.

Insofar as France is concerned, today’s most recent political poll conducted by Elabe in the land of wine and cheese shows that conservative party candidate Francois Fallon would defeat Marie le Pen 66% to 34%.  The two look destined to face-off on May 7th, 2017 .  Please keep in mind THAT A 33% showing for the National Front Party in France is an amazingly high number that may only grow should other EU member elections produce Nationalist/Populist victories. Le Pen is fiercely anti-European Union and anti-immigrant. As for the failure of European Socialism, the poll also showed that current Socialist President Francois Hollande would receive 9%. To that extent I turn to Winston Churchill who famously said, “For a nation to try to tax itself into prosperity it’s like a man standing in a bucket and trying to lift himself up by the handle.”

As for the tiny village of Nickelsdorf, Austria, they managed to hold their annual Nova Rock festival from June 9th thru June 12th.  The Festival first started back in 2005.  50,000 heavy metal music fans descended on the town as they do each year to listen to the likes of the Red Hot Chili Peppers, Alice Cooper, Korn, Motorhead, Iron Maiden, Black Sabbath and other hard rock acts.  Not my type of music. Still, it’s a snapshot of the crowd it attracts.  Clean-up was smooth, seamless and painless for the townsfolk.  Contrast that with the local Catholic Church serving the villagers that opened its doors to the refugees who took over the enclave last year.  Here’s what happened – the Church housed the refugees as the church would.  In a matter of a couple of days, the building was evacuated by public health officials and had to be completely disinfected due to amoebic dysentery.  This is something that was NOT reported on national or local TV.  The point, when it comes to open borders – the devil is also in the details.  Europe is NOT happy about the immigration situation at all.

Look at it this way.  When YOU travel to Europe on business or leisure, you are most likely staying at very nice hotels and visiting state-of-the-art corporate headquarters in Europe’s larger cities.  Conversely, when Europeans come to the U.S. most of them are not here visiting rural Americans to get their take on the political state of a local town or county. Yet remember just a few short weeks ago the look of despair at DNC headquarters in the early morning of Wednesday, November 9th when it became quite clear that all the politicians, pollsters and media had it way wrong when it was announced that Donald Trump will become the next president of the United States.  What’s grass roots here is grass roots in Europe.  It’s important to know that.

Making the Right Call
I have aggressively called “lower-for-longer” here in the “QC” every single time the rest of the crowd was calling for a rate hike (of which there were several occasions over the past five years). I was right; I was also very vocal about the rationality and likelihood of the U.K.’s departure from the EU,.yet another unpopular call that I happened to also get right. I then toned things down during our own U.S. Presidential primaries.  Only one time did I announce that Trump would most likely win, but I did say it and he won contrary to virtually everyone’s opinion. Just as I have shouted out that we WILL see a rate hike this December we WILL.  Now for the past few weeks it’s become essentially a foregone conclusion. So, I also believe that that Austria’s Norbert Hofer, the Austrian populist and far right Freedom Party candidate will likely win the Austrian election this Sunday and that Italians will vote “NO” to their referendum.  If elected, Hofer will become the first rightwing populist head of state in Europe World War II.

One thing is clear and certain – we live in an inextricably global-linked world economy folks. I always say that here in the “QC.” The world is trending a certain way. Trends happen when other trends grow stale or fall out of favor. That sentiment is sweeping the globe and is about to show the depth and scope of the disparity between failed European styled Socialism and Nationalism/Populism.  It will most likely continue into France as well, where the once unthinkable prospect of the National Front Party assuming power is actually a conversation. It is happening in Greece; it is happening in Holland; it is happening in Hungary and Germany. “Populist movements” have even landed in New Zealand. The world is full of problems and the unification of the world or “globalization” is in reverse mode.  Nations are looking inward.  Our planet’s advanced nations and industrial powers are doubting and questioning the legitimacy of institutions and principles of governing.  Voters are punishing parties and candidates that grew out of touch with corrupt and ineffective governments.  If it works, we could – and I hope we do – see Europe change for the better.  It could also mean the end of the EU.  If, however, the global trend fails, it could be something much more daunting and dangerous.  Either way “Decentralization” is en vogue.

So, the overwhelming trend WILL continue to be “lower-for-longer” but there will be a hike in December after which we’ll be back to our snail-like pace of incremental rate hikes.

The world is changing readers, and it’s going to be changing real fast.  Geopolitical risk has never been higher in the post war period. In the throes of the Cold War, the world at least had the benefit of knowing the good guys from the bad guys. In today’s world, all of that has to play out.  We still have North Korea; we still have Vlad-the-Terrible Putin in expansion mode; we still have issues in the South China Sea; MENA political uncertainty; currency wars; the slow dismantling of the EU; a new and dramatically different U.S. Presidential Administration; terrorism; the continued battle between global Nationalism and Socialism; Europe’s very fragile recovery etc.

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 Tuesday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/28
TUES.
11/29
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
New Issue Concessions 0.20 bps 1.11 bps 4.5 bps 3.62 bps <3.60> bps <0.87> bps
Oversubscription Rates 3.12x 3.43x 2.99x 2.78x 4.26x 3.32x
Tenors 10. 99 yrs 13.50 yrs 12.14 yrs 11.28 yrs 13.31 yrs 11.33 yrs
Tranche Sizes $538mm $512mm $929mm $1,039mm $692mm $491mm
Avg. Spd. Compression
IPTs to Launch
<14.71> yrs <14.79> yrs <16.07> bps <17.69> bps <22.96> bps <17.87> yrs

 

Indexes and New Issue Volume

Please note that yesterday’s Constellation Brands 10yr Senior Notes were upsized to $600mm from $500mm. The volume tables below have been updated to reflect the increase. Thanks! -RQ

Index Open Current Change
LUACOAS 1.30 1.30 0
IG27 73.50 72.751 <0.749>
HV27 160.07 153.49 <6.58>
VIX 12.90 13.33 0.43
S&P 2,204 2,198 <6>
DOW 19,121 19,123 2
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $2.10 bn DAY: $3.10 bn
WTD: $11.47 bn WTD: $13.97 bn
MTD: $75.981 bn MTD: $81.181 bn
YTD: $1,244.762 bn YTD: $1,578.746 bn

 

Lipper Report/Fund Flows – Week ending November 23rd   

     

  • For the week ended November 23rd, Lipper U.S. Fund Flows reported an inflow of $1.559b into Corporate Investment Grade Funds (2016 YTD net inflow of $42.996b) and a net inflow of $597.5m into High Yield Funds (2016 YTD net inflow of $4.598b).
  • Over the same period, Lipper reported a net inflow of $1.119b into Loan Participation Funds (2016 YTD net inflow of $222.3m).
  • Emerging Market debt funds reported a net outflow of $531.4m (2016 YTD inflow of $5.932b).

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications Nov. 25 —- <9.4%> 5.5% —-
ADP Employment Change November 170k 216k 147k 119k
Personal Income October 0.4% 0.6% 0.3% 0.4%
Personal Spending October 0.5% 0.3% 0.5% 0.7%
Real Personal Spending October 0.3% 0.1% 0.3% 0.5%
PCE Deflator MoM October 0.3% 0.2% 0.2% —-
PCE Deflator YoY October 1.5% 1.4% 1.2% —-
PCE Core MoM October 0.1% 0.1% 0.1% —-
PCE Core YoY October 1.7% 1.7% 1.7% —-
Chicago Purchasing Manager November 52.5 57.6 50.6 —-
Pending Home Sales MoM October 0.1% 0.1% 1.5% 1.4%
Pending Home Sales NSA YoY October —- 0.2% 2.0% —-

(more…)

BAML Reduces Debt Offering: No Need for FRN Tranche!
November 2016      Debt Market Commentary   

Quigley’s Corner 11.21.16-BAML Cuts Back on Debt Offering; Deal pared to $2b 

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Bank of America $2 11NC10 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 November 16th   

IG Credit Spreads (by Rating/Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Today’s session saw 5 IG Corporate issuers price 7 tranches between them, including a $500mm $25 PerpNC5 preferred from Capital One Financial Corp. totaling $6.50b thereby taking care of 80% of this week’s syndicate midpoint average forecast calling for $8.11b.  We’ve now achieved 70% of the November syndicate midpoint estimate or $64.51b vs. $92.11b.

Global Market Recap

 

  • U.S. Treasuries – 2yr supply weighed on the front end of the curve.
  • Overseas Bonds – JGB’s mixed and little changed. Europe unchanged to better. Peripheral’s mixed.
  • 3mth Libor – Set at its highest yield (0.9193%) since May 2009.
  • Stocks – S&P, Dow & NASDAQ all traded at their all-time highs today.
  • Overseas Stocks – Europe more green than red. Japan and China also closed higher.
  • Economic – U.S., Europe & China not a factor. Japan exports and imports were weak.
  • Currencies – USD lost ground vs. 4 of the Big 5 but traded better during NY hours.
  • Commodities – Big day for the CRB and crude oil.
  • CDX IG: -1.20 to 75.59
  • CDX HY: -8.52 to 407.92
  • CDX EM: -6.53 to 271.85

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Bank of America dropped the FRN tranche from today’s initially announced 11NC10 FXD/FRN having found sufficient funding in the fixed tranche that launched and priced $2b at the tightest side of +190a (+/-5) guidance or +185.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 6 IG Corporate-only new issues was <16.67> bps.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate new issues including Capital One’s $25 par Pfd, was <16.07> bps.
  • BAML’s IG Master Index widened 1 bp to +136 vs. at +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +130 vs. +129.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +179  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.7b on Friday versus $20.1b Thursday and $19.8b the previous Friday.

 

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

 

IG Corporate New Issuance This Week
11/21-11/25
vs. Current
WTD – $6.50b
November 2016 vs. Current
MTD – $64.511b
Low-End Avg. $7.15b 90.91% $90.70b 71.13%
Midpoint Avg. $8.11b 80.15% $92.11b 70.04%
High-End Avg. $9.07b 71.66% $93.52b 68.98%
The Low $1b 650.00% $71b 90.86%
The High $15b 43.33% $110b 58.65%

 

Bank of America $2 11NC10 Deal Dashboard

 

BAC Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
11NC10 +205a +190a (+/-5) +185 +185 <20>  bps N/A 183/185 0/flat

 

The comparable used for today’s relative value is the outstanding BAC 4.45% due 3/2026 bullet Subordinated Notes that were G+175 bid pre-announcement this morning.  Adding in a dime or 10 bps for the call optionality takes fair value to T+185 which is where today’s deal priced flat or with no concession.

 

………and here’s a look at final book sizes and oversubscription rates:

 

BAC  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
11NC10 $2b $5.7b 2.85x

 

Final Pricing – Bank of America (NYSE:BAC)
BAC $2b 4.183% due 11/25/2027 NC10 @ $100.00 to yield 4.183% or T+185

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 S

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/14
TUES.
11/15
WED.
11/16
TH.
11/17
FRI.
11/18
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
New Issue Concessions 2.85 bps 2.79 bps 3.45 bps 5.33 bps N/A 3.62 bps <3.60> bps <0.87> bps <0.51> bps
Oversubscription Rates 2.38x 3.23x 3.01x 2.66x N/A 2.78x 4.26x 3.32x 2.61x
Tenors 11.05 yrs 10.74 yrs 9.57 yrs 10.56 yrs N/A 11.28 yrs 13.31 yrs 11.33 yrs 7.77 yrs
Tranche Sizes $991mm $707mm $704mm $1,839mm N/A $1,039mm $692mm $491mm $818mm
Avg. Spd. Compression
IPTs to Launch
<14.5> bps <21.57> bps <18.35> bps <17.11> bps N/A <17.69> bps <22.96> bps <17.87> yrs <17.42> 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 America Baa3/A- 4.183% 11/25/2027 2,000 +205a +190a (+/-5) +185 +185 BAML-sole
BP Capital Markets PLC A2/A- 3.216% 11/28/2023 1,200 +120-125 +115a (+/-5) +110 +110 BAML/CITI/BNPP/CS/GS
MUFG
BP Capital Markets PLC A2/A- 3.723% 11/28/2028 800 +145-150 +145a (+/-5) +140 +140 BAML/CITI/BNPP/CS/GS
MUFG
Capital One Finc’l. Corp. Baa3/BB 6.00% PerpNC5 500 RG: 6-6.125%
6.125%a
N/A 6.00% $25 Pfd MS(phys)BAML/JPM/UBS
WFS
Enbridge Inc Baa2/BBB+ 4.25% 12/01/2026 750 +225a +205a (+/-5) +200 +200 BARC/DB/MIZ/MUFG
Enbridge Inc. Baa2/BBB+ 5.50% 12/01/2046 750 +275a +255a (+/-5) +250 +250 BARTC/DB/MIZ/MUFG
New York St. Electric & Gas A3/A- 3.25% 12/01/2026 500 +110a N/A +100 +100 BAML/MIZ/MUFG/RBC

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.30 0  
IG27 76.786 75.733 <1.053>
HV27 159.565 157.265 <2.30>
VIX 12.85 12.42 <0.43>  
S&P 2,181 2,198 17
DOW 18,867 18,956 89  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $6.50 bn DAY: $6.50 bn
WTD: $6.50 bn WTD: $6.50 bn
MTD: $64.511 bn MTD: $65.611 bn
YTD: $1,233.292 bn YTD: $1,564.276 bn

 

Lipper Report/Fund Flows – Week ending November 16th   

     

  • For the week ended November 16th, Lipper U.S. Fund Flows reported an inflow of $470.0m into Corporate Investment Grade Funds (2016 YTD net inflow of $41.437b) and a net outflow of $2.284b from High Yield Funds (2016 YTD net inflow of $4.001b).
  • Over the same period, Lipper reported a net inflow of $666.3m into Loan Participation Funds (2016 YTD net outflow of $896.7m).
  • Emerging Market debt funds reported a net outflow of $1.058b (2016 YTD inflow of $6.464b).

 

IG Credit Spreads by Rating (more…)

Yellen Signals Rate Move: Higher; Will Serve Under Trump
November 2016      Debt Market Commentary   

Quigley’s Corner 11.17.16  Yellen Speak Signals What We Know-Higher Rates

 

Investment Grade New Issue Re-Cap 

Capitol Hill Answers Rep. David Young’s Call for “Veterans Crisis Line”

Global Market Recap

Yellen’s Fed About to Raise Rates; Plans to Remain in Trump Administration

The Economic Outlook

Monetary Policy

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

Lipper Report/Fund Flows – Week ending November 9th

IG Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Well, last evening I wrote, “We do know that both Abbott Labs and Chevron Phillips Chemical Company LLC wrapped their respective investor calls today so they are both clear to “go” from that perspective in terms of issuance.  In the current environment, I’m not so sure issuers want to print sizeable deals on a Friday or hold back jumbo deals over the weekend.  What’s that mean? Simple. Both could price tomorrow in which case we could see a $20bn or more day tomorrow in our IG dollar DCM.  Stay tuned.”  It is now today and both Abbot Labs and Chevron priced deals today along with a $750mm 2-part 5yr FXD/FRN from Keybank.  So, the re-cap shows 3 IG Corporate issuers pricing 9 tranches between them today totaling $16.55b. As a result, we blew past this week’s syndicate midpoint average forecast of $29.45b by 41%. The MTD total now stands at $58.01b or 63% away from the $92.11b syndicate midpoint average November IG Corporate only estimate.

Of note is that typically jumbo M&A related financings attract heftier bid-to-cover or “oversubscription rates” as they are deals that need to get done. It was well telegraphed that Abbott would be downgraded heading into today’s transaction but the consensus was that investors would expect a nice concession considering Abbott’s four notch downgrade. Book sizes were heard to be just under $36b across all 6-tranches which for a $15.1 “no grow” transaction is only a 2.38x bid-to-cover.  Considering that oversubscription rates over the last four weeks have been 4.26x, 3.32x, 2.61x and 3.05x across all of those respective weekly issuances combined, I have to admit it left me wondering if this is, in part, due to starting a bit on the tight side with IPTs along with year-end, a new incoming Administration in Washington and the uncertainty markets might have therein as well as a looming rate hike.  Of course I am not second guessing the timing and would strongly suggest that healthcare has rallied post-Election Day helping to promote Abbott’s issuance.

Helpful in setting the tone for today’s primary markets was the rash of important economic data (scroll to near page bottom for the Economic Date Releases table. Housing Starts MoM outperformed 25.5% against 10.4% expectations as did Building Permits MOM 0.3% vs. <2.7%>.  Initial Jobless Claims fell 22k to 235k vs. 257k estimates and Continuing Claims shed 53k to 1977k vs. 2030k.  All the other numbers were for the most part spot on.

Capitol Hill Answers Rep. David Young’s Call for “Veterans Crisis Line” –
Bill Passes Unanimously in Senate – Now on President Obama’s Desk

I am elated to report here in the “QC” that yesterday U.S. Republican Rep. David Young’s “No Veterans Crisis Line Call Should Go Unanswered Act” that was already passed in the House by a 357-0 vote was given final and unanimous legislative approval in the Senate and is now on its way to the desk of President Barack Obama to be signed into law.  Prior to last evening’s approval, the bill “hit a wall” in the Senate due to the actions of one senior and retiring member.  Harry Reid’s name comes to mind folks! Iowa Congressman Young introduced the legislation in the U.S. House of Representatives earlier this year and South Dakota Senator John Thune introduced a companion version of the legislation in the U.S. Senate.

This is one immediate example of great changes coming to the Beltway.  The Department of Veterans Affairs would have to ensure that all telephone calls and messages received by the crisis hotline are answered in a timely manner under the bill now on its way to the President.  U.S. Rep. David Young a fervent veteran supporter got behind this cause after a report he found in which more than one-third of calls to a hotline for troubled veterans were not being answered by front-line staffers because of poor work habits and other problems. The hotline’s former director said calls frequently rolled over to back-up centers where workers have less training to deal with veterans’ problems. From the get go the sponsor of the bill, Rep. David Young of Iowa, said “A veteran in need cannot wait for help. Our veterans make tremendous sacrifices in defense of our freedoms and liberties and when a veteran is in crisis, they deserve our full support, no exceptions.”

We all look forward to President Obama signing this bill into law without any delays.

Here’s to good people doing great things for veterans on Capitol Hill and a hearty “QC” congratulations to Rep. Young.

 

Global Market Recap

  • S. Treasuries – struggled as the negatives against USTs continue to pile up.
  • Overseas Bonds – BOJ said enough of the sell-off. Bunds better and Gilts were weaker.
  • Stocks – U.S. were higher at 3:15pm. Europe better and Asia closed mixed.
  • Economic – U.S. economic data was tremendous today.
  • Overseas Economic – U.K. retail sales was strong, EU CPI low and the French Unemployment Rate was weaker.
  • Currencies – The USD started slow but rallied big in NY hours. DXY is at its 2003 high.
  • Commodities – Crude oil, gold  and silver were down.
  • CDX IG: -0.25 to 75.01
  • CDX HY: -3.22 to 413.40
  • CDX EM: +4.35 to 274.25

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

-Tony Farren


Yellen’s Fed About to Raise Rates

 

yellen-speaks-signals-higher-rates-trump-mischlerThis morning Fed Chair Janet Yellen spoke before the Joint Economic Committee at the U.S. Congress.

Here’s what you need to know in her own words:

  • Yellen says, “rate hike could be appropriate relatively soon.”
  • Says, “U.S. economy made more progress toward the Fed’s goals.”
  • FOMC judged rate hike case continued to strengthen.
  • Delaying hikes too long could mean tightening faster.
  • Keeping rates on hold could spur excess risk-taking.
  • Economy to warrant only gradual rate increases.
  • Stance of policy only moderately accommodative.
  • Risk of falling behind curve appears limited.
  • FOMC judged risks to outlook roughly balanced.
  • S. economic growth picked up from subdued pace.
  • Expects economic growth to continue at a “moderate pace.”
  • Stable unemployment gives economy “a bit more” room to run.
  • There appears to be scope for some more labor-market gains.
  • Cites signs that wage growth pace has risen recently.
  • Says inflation to move to 2% as labor market improves.
  • Inflation increased somewhat since earlier this year.
  • Housing fundamentals are favorable for a pickup.
  • Consumer spending is moderate, business investment is soft.

 

…….and here is Yellen’s complete Testimony:

Chair Janet L. Yellen

The Economic Outlook

Before the Joint Economic Committee, U.S. Congress, Washington, D.C.

November 17, 2016

 

Chairman Coats, Ranking Member Maloney, and members of the Committee, I appreciate the opportunity to testify before you today. I will discuss the current economic outlook and monetary policy.

 

The U.S. Economic Outlook

The U.S. economy has made further progress this year toward the Federal Reserve’s dual-mandate objectives of maximum employment and price stability. Job gains averaged 180,000 per month from January through October, a somewhat slower pace than last year but still well above estimates of the pace necessary to absorb new entrants to the labor force. The unemployment rate, which stood at 4.9 percent in October, has held relatively steady since the beginning of the year. The stability of the unemployment rate, combined with above-trend job growth, suggests that the U.S. economy has had a bit more “room to run” than anticipated earlier. This favorable outcome has been reflected in the labor force participation rate, which has been about unchanged this year, on net, despite an underlying downward trend stemming from the aging of the U.S. population. While above-trend growth of the labor force and employment cannot continue indefinitely, there nonetheless appears to be scope for some further improvement in the labor market. The unemployment rate is still a little above the median of Federal Open Market Committee (FOMC) participants’ estimates of its longer-run level, and involuntary part-time employment remains elevated relative to historical norms. Further employment gains may well help support labor force participation as well as wage gains; indeed, there are some signs that the pace of wage growth has stepped up recently. While the improvements in the labor market over the past year have been widespread across racial and ethnic groups, it is troubling that unemployment rates for African Americans and Hispanics remain higher than for the nation overall, and that the annual income of the median African American household and the median Hispanic household is still well below the median income of other U.S. households.

Meanwhile, U.S. economic growth appears to have picked up from its subdued pace earlier this year. After rising at an annual rate of just 1 percent in the first half of this year, inflation-adjusted gross domestic product is estimated to have increased nearly 3 percent in the third quarter. In part, the pickup reflected some rebuilding of inventories and a surge in soybean exports. In addition, consumer spending has continued to post moderate gains, supported by solid growth in real disposable income, upbeat consumer confidence, low borrowing rates, and the ongoing effects of earlier increases in household wealth. By contrast, business investment has remained relatively soft, in part because of the drag on outlays for drilling and mining structures that has resulted from earlier declines in oil prices. Manufacturing output continues to be restrained by the weakness in economic growth abroad and by the appreciation in the U.S. dollar over the past two years. And while new housing construction has been subdued in recent quarters despite rising prices, the underlying fundamentals–including a lean stock of homes for sale, an improving labor market, and the low level of mortgage rates–are favorable for a pickup.

Turning to inflation, overall consumer prices, as measured by the price index for personal consumption expenditures, increased 1-1/4 percent over the 12 months ending in September, a somewhat higher pace than earlier this year but still below the FOMC’s 2 percent objective. Much of this shortfall continues to reflect earlier declines in energy prices and in prices of non-energy imports. Core inflation, which excludes the more volatile energy and food prices and tends to be a better indicator of future overall inflation, has been running closer to 1-3/4 percent.

With regard to the outlook, I expect economic growth to continue at a moderate pace sufficient to generate some further strengthening in labor market conditions and a return of inflation to the Committee’s 2 percent objective over the next couple of years. This judgment reflects my view that monetary policy remains moderately accommodative and that ongoing job gains, along with low oil prices, should continue to support household purchasing power and therefore consumer spending. In addition, global economic growth should firm, supported by accommodative monetary policies abroad. As the labor market strengthens further and the transitory influences holding down inflation fade, I expect inflation to rise to 2 percent.

Monetary Policy

I will turn now to the implications of recent economic developments and the economic outlook for monetary policy. The stance of monetary policy has supported improvement in the labor market this year, along with a return of inflation toward the FOMC’s 2 percent objective. In September, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent and stated that, while the case for an increase in the target range had strengthened, it would, for the time being, wait for further evidence of continued progress toward its objectives.

At our meeting earlier this month, the Committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee’s objectives. This judgment recognized that progress in the labor market has continued and that economic activity has picked up from the modest pace seen in the first half of this year. And inflation, while still below the Committee’s 2 percent objective, has increased somewhat since earlier this year. Furthermore, the Committee judged that near-term risks to the outlook were roughly balanced.

Waiting for further evidence does not reflect a lack of confidence in the economy. Rather, with the unemployment rate remaining steady this year despite above-trend job gains, and with inflation continuing to run below its target, the Committee judged that there was somewhat more room for the labor market to improve on a sustainable basis than the Committee had anticipated at the beginning of the year. Nonetheless, the Committee must remain forward looking in setting monetary policy. Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee’s longer-run policy goals. Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.

The FOMC continues to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability. This assessment is based on the view that the neutral federal funds rate–meaning the rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel–appears to be currently quite low by historical standards. Consistent with this view, growth in aggregate spending has been moderate in recent years despite support from the low level of the federal funds rate and the Federal Reserve’s large holdings of longer-term securities. With the federal funds rate currently only somewhat below estimates of the neutral rate, the stance of monetary policy is likely moderately accommodative, which is appropriate to foster further progress toward the FOMC’s objectives. But because monetary policy is only moderately accommodative, the risk of falling behind the curve in the near future appears limited, and gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years.

Of course, the economic outlook is inherently uncertain, and, as always, the appropriate path for the federal funds rate will change in response to changes to the outlook and associated risks.

Thank you.

The conclusion is clear: No more lower-for-longer; interest rates headed higher.

…………..be ready.

IG Primary & Secondary Market Talking Points

(more…)

Corporate Bond Issuers Stand Down-But Not For Long
November 2016      Debt Market Commentary   

Quigley’s Corner 11.16.16- What’s a Corporate Bond Issuer To Do Now?

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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 November 9th   

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

6 IG Corporate issuers tapped the dollar DCM today pricing 13 tranches between them totaling $9.15b and bringing the WTD total to nearly 85% of this week’s syndicate midpoint average forecast or $25b vs. $29.45b.  The SSA space hosted BNG’s $600mm 3-year for an all-in IG day total of 7 issuers, 14 tranches and $9.75b.

We do know that both Abbott Labs (NYSE: ABT) and Chevron Phillips Chemical Company LLC wrapped their respective investor calls today so they are both clear to “go” from that perspective in terms of issuance.  In the current environment, I’m not so sure issuers want to print sizeable deals on a Friday or hold back jumbo deals over the weekend.  What’s that mean? Simple. Both could price tomorrow in which case we could see a $20bn or more day tomorrow in our IG dollar DCM.  Stay tuned.

Global Market Recap

 

  • S. Treasuries – USTs hit overnight but rallied during NY hours and were led by the 30yr.
  • Overseas Bonds – JGB’s very weak. Core EU little changed and Peripherals hit hard.
  • Stocks – U.S. stocks mixed at 3:30pm, Europe down, Nikkei higher and China unchanged.
  • Economic – U.S. PPI was lower than expected/last and IP and Cap U were weaker.
  • Currencies – USD mixed vs. Big 5. DXY Index strongest 2003 and ADXY weakest since 2009.
  • Commodities – Crude oil with a small loss, gold little changed and copper sold off.
  • CDX IG: +1.31 to 75.30
  • CDX HY: +4.98 to 415.03
  • CDX EM: +8.97 to 271.81

*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 that displayed price evolution was 18.35 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 2 bps to +128 vs. 1.30.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +180 vs. +181.  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 $18.2b Monday and $15b the previous Tuesday.  That’s the 5th highest Tuesday session since 2005 and the 2nd highest Monday session since November 2005.
  • The 10-DMA stands at $17.4b.

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

 

IG Corporate New Issuance This Week
11/14-11/18
vs. Current
WTD – $25.00b
November 2016 vs. Current
MTD – $41.461b
Low-End Avg. $28.32b 88.28% $90.70b 45.71%
Midpoint Avg. $29.45b 84.89% $92.11b 45.01%
High-End Avg. $30.59b 81.73% $93.52b 44.33%
The Low $20b 125.00% $71b 58.40%
The High $40b 62.50% $110b 37.69%

 

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 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.
11/14
TUES.
11/15
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
New Issue Concessions 2.85 bps 2.79 bps <3.60> bps <0.87> bps <0.51> bps 3.31 bps
Oversubscription Rates 2.38x 3.23x 4.26x 3.32x 2.61x 3.05x
Tenors 11.05 yrs 10.74 yrs 13.31 yrs 11.33 yrs 7.77 yrs 9.16 yrs
Tranche Sizes $991mm $707mm $692mm $491mm $818mm $1,137mm
Avg. Spd. Compression
IPTs to Launch
<14.5> bps <21.57> bps <22.96> bps <17.87> yrs <17.42> 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
AEP Transmission Co. LLC A2/A- 3.10% 12/01/2026 300 +110a +90-95 +90 +90 BARC/CS/JPM/SCOT(a)
BAML/MIZ/RBS/STRH(p)
AEP Transmission Co. LLC A2/A- 4.00% 12/01/2046 400 +140a +115-120 +115 +115 BARC/CS/JPM/SCOT(a)
BAML/MIZ/RBS/STRH(p)
American Honda Fin. Corp. A1/A+ FRN 11/19/2018 750 3mL+equiv 3mL+31a (+/-3) 3mL+28 3mL+28 BNPP/DB/JPM/MS
American Honda Fin. Corp. A1/A+ 1.50% 11/19/2018 450 +low-mid 60s
+63.75
+55a (+/-3) +52 +52 BNPP/DB/JPM/MS
ANZ Banking Group Ltd./NY Aa3/AA- FRN 9/23/2019 850 3mL+equiv 3mL+equiv 3mL+66 3mL+66 ANZ/GS/JPM/WFS
ANZ Banking Group Ltd./NY Aa3/AA- 2.05% 9/23/2019 900 +90-95 +85a (+/-5) +80 +80 ANZ/GS/JPM/WFS
ANZ Banking Group Ltd./NY Aa3/AA- FRN 9/23/2021 400 3mL+equiv 3mL+equiv 3mL+87 3mL+87 ANZ/GS/JPM/WFS
ANZ Banking Group Ltd./NY Aa3/AA- 2.55% 9/23/2021 850 +100-105 +95a (+/-5) +90 +90 ANZ/GS/JPM/WFS
HollyFrontier Corp. (tap)
New Total: $1bn
Baa3/BBB- 5.875% 4/01/2026 750 +hi 300s/+387.5a +362.5 the # +362.5 +362.5  
HSBC Holdings Inc. A2/A+ 4.375% 11/23/2026 1,500 +235a +215-220 +215 +215 HSBC-sole
Mastercard Inc. A2/A 2.00% 11/21/2021 650 +70a +50a (+/-5) +45 +45 BAML/CITI/HSBC/MIZ/USB
Mastercard Inc. A2/A 2.95% 11/21/2026 750 +100a +80a (+/-5) +75 +75 BAML/CITI/HSBC/MIZ/USB
Mastercard Inc. A2/A 3.80% 11/21/2046 600 +120a +100a (+/-5) +95 +95 BAML/CITI/HSBC/MIZ/USB

 

  (more…)

Rate Rise Realities; No More “Lower for Longer”-Mischler Debt Market Comment
November 2016      Debt Market Commentary   

Quigley’s Corner 11.15.16-Trump and Rate Rise Realities; No More “Lower for Longer”

 

Below is the opening extract from Quigley’s Corner aka “QC” Tuesday November 15, 2016 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

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

Investment Grade Corporate Debt New Issue Re-Cap :

Rates Are Going Up in December Folks! Dalio, Montag and…Quigley?!

Chronology of a Politician and a Great Veteran Story

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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 November 9th   

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

 

4 IG Corporate issuers priced 7 tranches between them totaling $4.95b with one $500mm assist from the SSA space thanks to EDC’s new 4-year, bringing the all-in IG day totals to 5 issuers, 8 tranches at $5.45b.  We’ve now priced 53.82% of this week’s syndicate midpoint average forecast or $15.85b vs. $29.45b.

rate-rise-realities-mischler-debt-marketInflation is Coming Back and Rates Are Going Up in December Folks! Dalio, Montag and..Quigley!?!?

You hear that sound?  That’s the sound of banks revving up their engines.  Not only did I write about the post-Election rally yesterday, but I also got specific about previous Washington dysfunction, over regulation and higher rates and inflation.”  Today Tom Montag, COO of Bank of America Corp chimed in with similar promise of the new incoming President-elect Trump’s first term saying, there is a “sense of optimism” that “the government will work better together to supply the foundation of growth that we as a bank can optimize.”  He continued, “We have a lot of regulations, so it’s probably healthy to take a breath.”

Bridgewater Chief Ray Dalio said today, “There is a good chance that we are at one of those major reversals that last a decade.  We believe that we will have a profound President-led ideological shift that is of a magnitude, and in more ways than one, analogous to Ronald Reagan’s shift to the right. Of course, all analogies are also different, so I should be clearer. Donald Trump is moving forcefully to policies that put stimulation of traditional domestic manufacturing above all else, that are far more pro-business and that are far more protectionist.”

IG CDX tightened 1.5 bps, HV reeled in 4.8, the VIC compressed 1.11 while the DOW reached another all-time high closing up 55 to 18,923 with the S&P up 16 and Nasdaq up 57.

And now, continuing on where I left off yesterday in the “QC” – President-elect Donald Trump will unleash inflation and rates WILL go up! The populist/Republican platform is so expansionary he will single handedly create inflation.  If you are or were a detractor, forget it. That was politics folks. Get ready to dive deep into reality.  The Fed will raise money on net interest margins and create inflation.  The Fed has no choice.  How’s that from one of the first and most vocal prognosticators of “lower-for-longer” after all these years?  It will hurt overseas as a result, but that was then and this is now!  The U.S.A. cannot worry as much about impacts overseas when we have a US-focused agenda designed to improve operating efficiency.  A hike in December will roil Europe, but it will not be done to hurt Europe. Rather, it’s going to happen to take care of our nation.  The ramifications will be plenty and they will most assuredly crack the fragile Euro egg wide open.  Fret not, however, as the risk reward for IG fixed income will remain healthy.  Although investors are switching into equities, foreign and specifically European investors will find a substantially improved risk/reward upside to investing in U.S. IG credit markets.  More yield, less risk than staying investing in the EU with so much discord.  So strap yourselves in because long-term interest rates are about to go up and the inflationary spending spree is about to take place.  Good bye to the low rates that have been hitting bank earnings and revenues.  A healthier banking system is the foundation for a healthier economy.

How Congressman David Young Led the Way for Veteran Change

Well, here we are on November 15th, 2016 one week detached from our historic November 8th national elections and 2 years and 5 months away from David Young’s first Congressional district win (R-IA).  He has wasted no time getting things done having arrived on the scene in Washington in a big way by working hard and producing results.  To capture part of the sweeping positive changes about to take place in our country, there is more to report on David Young. My favorite Iowans spent the last week picking up all their big barn signs, etcetera around their 16 county district. Now, David Young, can go back to the Beltway and continue to fight for good change. One of his many passions is his No Veterans Crisis Line Call Should Go Unanswered Act (H.R. 5392) bill that passed in the House 357-0.  Re-read that folks.  That’s right…..357-0!  Now, perhaps his bill can get thru the Senate and onto Obama’s desk.  (It should be known and WILL be now known here in the “QC” that none other than Harry Reid stopped it prior to the election).  Reid can’t retire soon enough!

Congressman Young’s legislation seeks to provide necessary responsiveness and performance improvements to the Veterans Crisis Line, which is the confidential, toll free hotline for veterans seeking suicide prevention and crisis resources help from U.S. Department of Veterans Affairs (VA) responders.

As Congressman Young said, “Our veterans, who have made such significant sacrifices on behalf of our nation and in defense of our freedoms, deserve quality mental health care resources which are accessible and responsive. There is absolutely no excuse for a veteran to contact the Veterans Crisis Line and not get the help they are seeking. Our veterans deserve better, which is why I have put forth this important bipartisan legislation to make critical fixes to the Veterans Crisis Line – fixes it clearly needs. I thank my colleagues for working with me to advance this bill and put our veterans first.”

 

Chronology of How Young’s Veteran Bill Happened in the House

 

  • September 21, 2016 – Congressman Young’s No Veterans Crisis Line Call Should Go Unanswered Act was approved in a markup by the full U.S. House Veterans Affairs Committee.
  • September 14, 2016 – Congressman Young urges his colleagues to support the No Veterans Crisis Line Call Should Go Unanswered Act on the floor of the U.S. House of Representatives.
  • September 8, 2016 – South Dakota Senator John Thune introduces companion legislation to Congressman Young’s No Veterans Crisis Line Call Should Go Unanswered Act.
  • September 1, 2016 – Congressman Young sends a letter to VA Secretary McDonald highlighting continued problems with the Veterans Crisis Line.
  • June 28, 2016 – Congressman Young reacts to a Government Accountability Office (GAO) report finding approximately 30 percent of text messages sent as tests to the Veterans Crisis Line went unanswered.
  • June 23, 2016 – Congressman Young testifies before the U.S. House Veterans Affairs Committee on the importance of the legislation.
  • June 7, 2016 – Congressman Young introduces the No Veterans Crisis Line Call Should Go Unanswered Act in response to concerns voiced by Iowa veterans about unanswered calls, emails or other communications, and failed attempts to receive help from the Veterans Crisis Line.

Congratulations to Iowa’s David Young for fighting for our nations veterans and for being such a part of great changes taking place in the United States. David is the recipient of this evening’s Mischler five-star salute from all of us here at team Mischler.  He is the first recipient that has nothing to do with a bond deal.  It’s all about his work for our veterans.
Global Market Recap

 

  • U.S. Treasuries – USTs mixed with more red and flatter. JGB’s sold off. Europe big rally.
  • Stocks – NASDAQ leads U.S. stocks higher. Europe  and Asia closed mixed.
  • Economic – U.S. retail sales were stronger than expected and had upward revisions to the last.
  • Overseas Economic – U.K. CPI lower than expected/last. German data a touch softer.
  • Currencies – USD was under pressure overnight but rallied during NY hours to lose higher.
  • Commodities – Big rally in crude oil drives the CRB higher.
  • CDX IG: -2.91 to 74.60
  • CDX HY: -17.60 to 413.31
  • CDX EM: -14.97 to 267.30

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Plains All American Pipeline LP upsized today’s 10-year Senior Notes new issue to $750mm from $500mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues that displayed price evolution was 21.57 bps.
  • BAML’s IG Master Index was unchanged at +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.30.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +181 vs. +182.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Monday versus $19.8b Thursday and $14.1b the previous Monday.
  • The 10-DMA stands at $16.9b.

 

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

 

IG Corporate New Issuance This Week
11/14-11/18
vs. Current
WTD – $15.85b
November 2016 vs. Current
MTD – $32.311b
Low-End Avg. $28.32b 55.97% $90.70b 35.62%
Midpoint Avg. $29.45b 53.82% $92.11b 35.08%
High-End Avg. $30.59b 51.81% $93.52b 34.55%
The Low $20b 79.25% $71b 45.51%
The High $40b 39.62% $110b 29.37%

 

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 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.
11/14
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
New Issue Concessions 2.85 bps <3.60> bps <0.87> bps <0.51> bps 3.31 bps
Oversubscription Rates 2.38x 4.26x 3.32x 2.61x 3.05x
Tenors 11.05 yrs 13.31 yrs 11.33 yrs 7.77 yrs 9.16 yrs
Tranche Sizes $991mm $692mm $491mm $818mm $1,137mm
Avg. Spd. Compression
IPTs to Launch
<14.5> bps <22.96> bps <17.87> yrs <17.42> 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
21st Century Fox America Baa1/BBB+ 3.375% 11/15/2026 450 +140a +120a (+/-3) +117 +117 JPM-sole
21st Century Fox America Baa1/BBB+ 4.75% 11/15/2046 400 +200a +180a (+/-3) +177 +177 JPM-sole
Plains All American Pipeline Baa3/BBB 4.50% 12/15/2026 750 +mid 200s/+250a +230-235 +230 +230 BAML/BNPP/JPM/WFS
Simon Property Group LP A2/A 2.35% 1/30/2022 550 +95-100 +80a (+/-5) +75 +75 BAML/CITI/GS/USB
Simon Property Group LP A2/A 3.25% 11/30/2026 750 +120-125 +110a (+/-5) +105 +105 BAML/CITI/GS/USB
Simon Property Group LP A2/A 4.25% 11/30/2046 550 +145-150 +135a (+/-5) +130 +130 BAML/CITI/GS/USB
Westpac Banking Corp. A3/A+ 4.322% 11/23/2031 1,500 +237.5 +215a (+/-5) +210 +210 BAML/CITI/JPM/MS

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
EDC Aaa/AAA FRN 11/23/2020 500 3mL+13a 3mL+13a 3mL+13 3mL+13 BNPP/BARC/DB

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.30 0  
IG27 75.503 73.988 <1.515>
HV27 166.425 161.645 <4.78>
VIX 14.48 13.37 <1.11>  
S&P 2,164 2,180 16
DOW 18,868 18,923 55  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $4.95 bn DAY: $5.45 bn
WTD: $15.85 bn WTD: $16.35 bn
MTD: $32.311 bn MTD: $32.811 bn
YTD: $1,201.092 bn YTD: $1,531.476 bn

 

Lipper Report/Fund Flows – Week ending November 9th   

     

  • For the week ended November 9th, Lipper U.S. Fund Flows reported an inflow of $675.4m into Corporate Investment Grade Funds (2016 YTD net inflow of $40.967b) and a net outflow of $668.6m from High Yield Funds (2016 YTD net inflow of $6.285b).
  • Over the same period, Lipper reported a net outflow of $45.4m from Loan Participation Funds (2016 YTD net outflow of $1.563b).
  • Emerging Market debt funds reported a net inflow of $345.7m (2016 YTD inflow of $7.522b).

 

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 26.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/14 11/11 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 1-Day Change 10-Day Trend PC
low
IG Avg. 136 136 136 137 139 140 141 141 140 139 0 <3> 106
“AAA” 75 76 76 80 82 82 83 83 83 82 <1> <7> 50
“AA” 82 83 83 85 85 86 87 87 87 86 <1> <4> 63
“A” 107 107 107 109 110 111 112 112 112 111 0 <4> 81
“BBB” 178 177 177 178 180 181 183 182 181 180 +1 <2> 142
IG vs. HY 375 361 361 357 359 361 379 374 375 366 +14 +9 228

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 33.42 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 11/14 11/11 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 1-Day Change 10-Day Trend PC
low
Automotive 119 119 119 121 121 122 122 120 122 121 0 <2> 67
Banking 124 124 124 127 128  129 130 130 130 129 0 <5> 98
Basic Industry 178 176 176 177 179 180 182 181 181 180 +2 <2> 143
Cap Goods 101 102 102 103 105 105 107 106 106 105 <1> <4> 84
Cons. Prod. 108 108 108 109 110 111 112 112 112 111 0 <3> 85
Energy 182 179 179 179 180 182 184 183 183 180 +3 +2 133
Financials 161 161 161 162 163 164 167 166 165 164 0 <3> 97
Healthcare 117 118 118 121 124 124 126 124 123 122 <1> <5> 83
Industrials 139 138 138 140 141 142 144 143 143 141 +1 <2> 109
Insurance 147 148 148 150 152 153 154 154 153 153 <1> <6> 120
Leisure 136 138 138 139 138 138 139 138 138 138 <2> <2> 115
Media 160 161 161 163 164 165 167 166 165 164 <1> <4> 113
Real Estate 144 146 146 147 145 146 146 146 146 146 <2> <2> 112
Retail 117 118 118 121 122 122 123 123 122 121 <1> <4> 92
Services 129 129 130 130 130 130 130 130 130 129 0 0 120
Technology 113 112 112 115 117 118 120 120 120 119 +1 <6> 76
Telecom 167 165 165 168 170 171 173 172 172 170 +2 <3> 122
Transportation 138 137 136 137 138 139 140 140 139 138 +1 0 109
Utility 137 137 137 137 138 138 139 139 138 138 0 <1> 104

 

New Issue Pipeline

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

Quigley’s Corner Veterans Day: Good Day for Green Bonds & Diversity
November 2016      Debt Market Commentary   

Quigley’s Corner 11.10.16  Veterans Day Edition; Investment Grade Debt Market Pulses: Green Bonds + Diversity


Honoring Veterans Day

Investment Grade New Issue Re-Cap 

Reviewing This Week’s IG Primary Market Driver Averages by the Numbers

IG Primary & Secondary Market Talking Points

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

The Goldman Sachs Group, Inc. $2.75b 10NC9 Deal Dashboard

Southern Power Co. $1.3b 3-part 3s/5s/30s

J.P. Morgan Chase & Co. $1.10b 11NC10 Deal Dashboard

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

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 November 9th  

Investment Grade Credit Spreads

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

mischler-veterans-day-debt-market-green-bonds-diversity

I have a lot for you here today – a tribute to our Vets on Veterans Day, the Global Market Recap, a Review of this Week’s Primary Market Driver Averages, IG Primary and Secondary Market Talking Points, The WTD and MTD Volume Tables and then Deal Dashboards for the three deals that Mischler was involved in today namely Goldman Sachs, Southern Power and J.P. Morgan Chase. Following that are today’s “Thank yous”, a drill down into the EEI’s Green panel discussion and of course the “Best and Brightest” numbers and thoughts for next week’s IG new issue volume.

Why is the “QC” so late tonight?  Because it was a VERY busy day today for your humble corner correspondent.  But rather than leave for the long weekend, I read the below and thought, “the veterans we celebrate tomorrow (today actually) are the ones who had it tough.”  Ours is a cakewalk compared to what the men and women in uniform do day in and day out – for all of us.  That was about all I needed to read to realize, the “QC” gets out in its entirety tonight with nothing missing.  No short cuts, no skipping sections. If people read it great. If they don’t, well at least I left it on the floor and finished the job the way you all expect it be finished – complete.

It’s more than the trade, it’s more than the new investor, it’s more than the coverage and the capital.  This firm is owned by Service Disabled Veterans.  Metal joints, limps, shrapnel stuck in their bodies, scars where you know something near fatal happened.  All humble all dedicated and all fiercely patriotic.  It makes decisions like sticking around to finish this job pretty damned easy and I do it because they earned the certification that gives all of us here at team Mischler the opportunity to do what we do.    It’s a no brainer.  1:00AM on Veterans Day.  That’s my small give back and tribute to the great team of veterans who run the nation’s oldest SDVBE.  Thank each and every one of you from the top, down.

Investment Grade New Issue Re-Cap 

 

6 IG Corporate issuers priced 11 tranches between them totaling $8.05b and taking the WTD total to 91% of this week’s syndicate midpoint average forecast or $8.995b vs. $9.83b.

Global Market Recap

  • S. Treasuries – JGB’s, Bunds, Gilts, etc., are having a rough go with President-elect Trump.
  • 3mth Libor – Set at the highest yield (0.90206%) since May 2009.
  • Stocks – Big rally for the Dow & a new all-time high. NASDAQ was red.
  • Economic – U.S. claims data was solid. Weaker data in France & Italy.
  • Currencies – USD outperformed 4 of the Big 5 but the Pound was the star today.
  • Commodities – Copper with another strong bid. Crude oil & gold closed red.
  • CDX IG: -0.28 to 74.18
  • CDX HY: +6.34 to 411.11
  • CDX EM: +29.47 to 272.20

CDX spreads mover wider after 3pm

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

-Tony Farren

 

Reviewing This Week’s IG Primary Market Driver Averages by the Numbers

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

 

  • NICS:  <3.60> bps
  • Oversubscription Rates: 4.26x
  • Tenors:  13.31 years
  • Tranche Sizes: $692mm
  • Spread Compression from IPTs to the Launch: <22.96> bps

 

Versus last Friday’s key primary market driver averages, NICs tightened a hefty <2.68 bps> to an average <3.60> bps vs. <0.92> bps while over subscription or bid-to-cover rates grew 0.93x to 4.26x vs. 3.33x last week.  Average tenors pushed way out 1.98 years to 13.31 yrs vs. 11.33 yrs while tranche sizes grew by $223mm to $692mm vs. $469mm..

Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +184 versus last Friday’s +186.

For the week ended November 9th, Lipper U.S. Fund Flows reported an inflow of $675.4m into Corporate Investment Grade Funds (2016 YTD net inflow of $40.967b) and a net outflow of $668.6m from High Yield Funds (2016 YTD net inflow of $6.285b).

Week-on-week, BAML’s IG Master Index tightened a dramatic 5 bps to +136 vs. last Friday’s +141 close.  Spreads across the four IG asset classes also tightened a dramatic 5.25 bps to  bps to 26.75 vs. 32 as measured against their post-Crisis lows.  Looking at the 19 major industry sectors, spreads tightened 4.05 bps to 33.37 vs. 37.42 also against their post-Crisis lows.

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 13 deals that printed, 11 tightened versus NIP for a 50% improvement rate while with 2 trading flat (15.50%).
  • For the week ended November 9th, Lipper U.S. Fund Flows reported an inflow of $675.4m into Corporate Investment Grade Funds (2016 YTD net inflow of $40.967b) and a net outflow of $668.6m from High Yield Funds (2016 YTD net inflow of $6.285b).
  • BAML’s IG Master Index tightened 1 bp to +136 vs. +137.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 2 bps to 1.30 vs. 1.32.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +184.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.2b on Wednesday versus $15b Tuesday and $17.5b the previous Wednesday.
  • The 10-DMA stands at $16.6b.

 

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

 

IG Corporate New Issuance This Week
11/07-11/11
vs. Current
WTD – 8.995b
November 2016 vs. Current
MTD – $16.461b
Low-End Avg. $8.09b 111.19% $90.70b 18.15%
Midpoint Avg. $9.83b 91.51% $92.11b 17.87%
High-End Avg. $11.57b 77.74% $93.52b 17.60%
The Low $0.1b 8995.00% $71b 23.18%
The High $20b 44.97% $110b 14.96%

 

The Goldman Sachs Group, Inc. (NYSE:GS) $2.75b 10NC9 Deal Dashboard

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
10NC9 +150a +140a (+/-2.5) +137.5 +137.5 <12.5>  bps N/A 134/132 <3.5>

 

………and here’s a look at final book sizes and oversubscription rates:

 

GS  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
10NC9 $2.75b $7.5b 2.73x

 

Final Pricing – The Goldman Sachs Group, Inc.
GS $2.75b 3.50% due 10yr 11/16/2026 NC9 @ $99.741 or T+137.5

Southern Power Co. (NYSE:SO) $1.3b 3-part 3s/5s/30s

 

SO Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
1.95% 2019 +95-100 +85a (+/-5) +80 +80 <17.5> bps 0 80/78 flat
2.50% 2021 +110-115 +105a (+/-5) +100 +100 <12.5> bps 0 100/98 flat
4.95% 2046 +235a +215a (+/-5) +210 +210 <25> bps <1> 209/207 <1>

 

………and here’s a look at final book sizes and oversubscription rates:

 

SO  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr $600mm $1.2b 2x
5yr $300mm $700mm 2.33x
30yr $400mm $1.2b 3x

 

Final Pricing – Southern Power Co.

SO $600mm 1.95% due 12/15/2019 @ $99.975 to yield 1.958% or T+80  MW+12.5
SO $300mm 2.50% due 12/15/2021 @ $99.781 to yield 2.546% or T+100  MW+15
SO $400mm 4.95% due 12/15/2046 @ $98.562 to yield 5.043% or T+120  MS +35

J.P. Morgan Chase & Co. (NYSE:JPM) $1.10b 11NC10 Deal Dashboard

 

JPM Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
11NC10 +170a +155a (+/-3) +152 +152 <18> bps N/A 151/148 <1>

 

Final Pricing – J.P. Morgan Chase & Co.

JPM $1.1b 3.625% due 12/01/2027 @ $99.827 to yield 3.644% or T+152


Team Mischler thanks today’s three issuers who rewarded the nation’s oldest Service Disabled Veteran certified broker dealer with Co-Manager roles  –
The Goldman Sachs Group, Inc., J.P. Morgan Chase & Co. and Southern Power Co.

There are a lot of people on the issuance side as well as syndicate to thank.  The day has been relentlessly busy – which is always a good thing –

Next up was Southern Company and today’s $1.3B three-part 3s/5s/30s transaction that will use 3- and 5-year proceeds to fund eligible “Green” projects including solar and wind facilities located in the U.S. As I have written here many times before, the social responsibility overlay between Green initiatives and Diversity and Inclusion procurement initiatives are clear.  Why not turn to one of the power sector’s top financial minds none other than Southern Company’s Executive Vice President and Chief Financial Officer, Art Beattie who participated in a very meaningful panel discussion titled, Financing the Clean Energy Future at this week’s 51st Annual EEI Financial Conference in Phoenix that ran Sunday thru Wednesday.  The panel discussed Sustainability Reporting, Environmental, Social, Governance (ESG) Assessment, and of course Green Bonds.  The new buzzwords in the burgeoning field of socially and environmentally conscious investing.  The panel discussion also focused on current challenges that investment restrictions present, how they may grow in the future, and the potential path forward for old and new technologies.  Capturing new investment opportunities were also explored.

Today Southern Power Company illustrated what I mean when I say mandates and initiatives start from the top/down.  Quite literally, “SO’s” own CFO introduced new initiatives, he talked about them in front of the most seasoned power professionals in Phoenix replete with industry CEO’s other CFOs and movers and shakers. Sure enough, today Southern Power bridged Green bonds with D&I to create a wonderful opportunity that helped capture new high quality investors to the transaction.  Mischler is proud to say that we were active co-managers on Southern Company’s earlier green bond as well as today’s along with Apple’s and MTA green issuances.  Considering that Green bonds represent less than one half of one percent of the $20 trillion bond market we feel we’re in privileged company.  It’s not about where we are today, rather it’s about tomorrow and green is good as is social responsibility.  We see this mandate extending into asset backed issuance.

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 22 syndicate desks surveyed in today’s Best & Brightest poll.  21 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 22 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 79.82% 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.

Syndicate IG Corporate-only Volume Estimates for Next Week

 

IG Corporate New Issuance Next Week
11/14-11/18
Low-End Avg. $28.32b
Midpoint Avg. $29.45b
High-End Avg. $30.59b
The Low $20b
The High $40b

 

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

 

Next Week
11/14-11/18
1: 20b
1: 20-25b
3: 25b
6: 25-30b
4: 30b
2: 30-35b
3: 35b
1: 35-40b
1:38b

 

 

Enjoy a safe and happy Veteran’s Day weekend!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

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

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 Corporates followed by this week’s and the prior three week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/07
TUES.
11/08
WED.
11/09
THUR.
11/10
FRI.
11/11
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
New Issue Concessions <3> bps N/A N/A <3.67> bps Holiday <3.60> bps <0.87> bps <0.51> bps 3.31 bps
Oversubscription Rates 2.50x N/A N/A 4.44x Holiday 4.26x 3.32x 2.61x 3.05x
Tenors 4.50 yrs N/A N/A 14.91 yrs Holiday 13.31 yrs 11.33 yrs 7.77 yrs 9.16 yrs
Tranche Sizes $472mm N/A N/A $732mm Holiday $692mm $491mm $818mm $1,137mm
Avg. Spd. Compression
IPTs to Launch
<16.5> bps N/A N/A <24.14> bps Holiday <22.96> bps <17.87> yrs <17.42> 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
CF Industries Inc. Baa3/BBB 3.40% 12/01/2021 500 <50> curve +195a (+/-5) +190 +190 GS/MS
CF Industries Inc. Baa3/BBB 4.50% 12/01/2026 750 +high 200s/+287.5 +250a (+/-5) +245 +245 GS/MS
Con Edison Co. of NY Inc. A2/A- 2.90% 12/01/2026 250 +100a +85a (+/-5) +80 +80 CITI/JPM/MIZ/MUFG
Con Edison Co. of NY Inc. A2/A- 4.30% 12/01/2056 500 +165a +145a (+/-5) +140 +140 CITI/JPM/MIZ/MUFG
Goldman Sachs Group, Inc. A3/A 3.50% 11/16/2029 2,750 +150a +140a (+/-2.5) +137.50 +137.5 GS-sole
J.P. Morgan Chase & Co. Baa1/BBB+ 3.625% 12/01/2027 1,100 +170a +155a (+/-3) +152 +152 JPM-sole`
Southern Power Co. Baa1/BBB+ 1.95% 12/15/2019 600 +95-100 +85a (+/-5) +80 +80 BAML/BNPP/BARC/MIZ/SCOT/USB
Southern Power Co. Baa1/BBB+ 2.50% 12/15/2021 300 +110-115 +105a (+/-5) +100 +100 BAML/BNPP/BARC/MIZ/SCOT/USB
Southern Power Co. Baa1/BBB+ 4.95% 12/15/2046 400 +235a +215a (+/-5) +210 +210 BAML/BNPP/BARC/MIZ/SCOT/USB
Virginia Electric & Power A2/A 2.95% 11/15/2026 400 +105a +90a (+/-5) +85 +85 BNPP/MUFG/SCOT/STRH/USB
Virginia Electric & Power A2/A 4.00% 11/15/2046 500 +135a +115a (+/-5) +110 +110 BNPP/MUFG/SCOT/STRH/USB

 

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 13 deals that printed, 11 tightened versus NIP for a 84.50% improvement rate while with 2 trading flat (15.50%).

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 LEADS
CF Industries Inc. Baa3/BBB 3.40% 12/01/2021 500 <50> curve +195a (+/-5) +190 +190 177/174
CF Industries Inc. Baa3/BBB 4.50% 12/01/2026 750 +high 200s/+287.5 +250a (+/-5) +245 +245 231/228
Con Edison Co. of NY Inc. A2/A- 2.90% 12/01/2026 250 +100a +85a (+/-5) +80 +80 79/77
Con Edison Co. of NY Inc. A2/A- 4.30% 12/01/2056 500 +165a +145a (+/-5) +140 +140 137/135
Goldman Sachs Group, Inc. A3/A 3.50% 11/16/2029 2,750 +150a +140a (+/-2.5) +137.50 +137.5 134/132
J.P. Morgan Chase & Co. Baa1/BBB+ 3.625% 12/01/2027 1,100 +170a +155a (+/-3) +152 +152 151/148
Southern Power Co. Baa1/BBB+ 1.95% 12/15/2019 600 +95-100 +85a (+/-5) +80 +80 80/78
Southern Power Co. Baa1/BBB+ 2.50% 12/15/2021 300 +110-115 +105a (+/-5) +100 +100 100/98
Southern Power Co. Baa1/BBB+ 4.95% 12/15/2046 400 +235a +215a (+/-5) +210 +210 209/207
Virginia Electric & Power A2/A 2.95% 11/15/2026 400 +105a +90a (+/-5) +85 +85 84/82
Virginia Electric & Power A2/A 4.00% 11/15/2046 500 +135a +115a (+/-5) +110 +110 109/107
Kellogg Co. Baa2/BBB 2.65% 12/01/2023 600 +120-125 +110a (+/-3) +107 +107 105/103
Stanley Black & Decker A-/BBB+ 1.622% 11/17/2018 345 +95-100 N/A +80 +80 75/73

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.32 1.30 <2>
IG27 74.467 75.447 0.98
HV27 168.795 163.29 <5.505>
VIX 14.38 14.74 0.36
S&P 2,163 2,167 4
DOW 18,589 18,807 218
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $8.05 bn DAY: $8.05 bn
WTD: $8.995 bn WTD: $8.995 bn
MTD: $16.461 bn MTD: $16.461 bn
YTD: $1,185.242 bn YTD: $1,515.126 bn

 

Lipper Report/Fund Flows – Week ending November 9th   

     

  • For the week ended November 9th, Lipper U.S. Fund Flows reported an inflow of $675.4m into Corporate Investment Grade Funds (2016 YTD net inflow of $40.967b) and a net outflow of $668.6m from High Yield Funds (2016 YTD net inflow of $6.285b).
  • Over the same period, Lipper reported a net outflow of $45.4m from Loan Participation Funds (2016 YTD net outflow of $1.563b).
  • Emerging Market debt funds reported a net inflow of $345.7m (2016 YTD inflow of $7.522b).

 

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 26.75 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 10/31 10/28 1-Day Change 10-Day Trend PC
low
IG Avg. 136 137 139 140 141 141 140 139 138 137 <1> <1> 106
“AAA” 76 80 82 82 83 83 83 82 82 80 <4> <4> 50
“AA” 83 85 85 86 87 87 87 86 86 85 <2> <2> 63
“A” 107 109 110 111 112 112 112 111 111 110 <2> <3> 81
“BBB” 177 178 180 181 183 182 181 180 178 176 <1> +1 142
IG vs. HY 361 357 359 361 379 374 375 366 353 339 +4 +22 228

 

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 33.37 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 10/31 10/28 1-Day Change 10-Day Trend PC
low
Automotive 119 121 121 122 122 120 122 121 120 119 <2> 0 67
Banking 124 127 128  129 130 130 130 129 129 128 <3> <4> 98
Basic Industry 176 177 179 180 182 181 181 180 179 179 <1> <3> 143
Cap Goods 102 103 105 105 107 106 106 105 105 103 <1> <1> 84
Cons. Prod. 108 109 110 111 112 112 112 111 110 109 <1> <1> 85
Energy 179 179 180 182 184 183 183 180 179 177 0 +2 133
Financials 161 162 163 164 167 166 165 164 162 160 <1> +1 97
Healthcare 118 121 124 124 126 124 123 122 120 118 <3> 0 83
Industrials 138 140 141 142 144 143 143 141 140 139 <2> <1> 109
Insurance 148 150 152 153 154 154 153 153 153 153 <2> <5> 120
Leisure 138 139 138 138 139 138 138 138 138 138 <1> 0 115
Media 161 163 164 165 167 166 165 164 162 160 <2> +1 113
Real Estate 146 147 145 146 146 146 146 146 146 146 <1> 0 112
Retail 118 121 122 122 123 123 122 121 120 118 <3> 0 92
Services 130 130 130 130 130 130 130 129 129 129 0 +1 120
Technology 112 115 117 118 120 120 120 119 117 115 <3> <3> 76
Telecom 165 168 170 171 173 172 172 170 168 167 <3> <2> 122
Transportation 136 137 138 139 140 140 139 138 137 137 <1> <1> 109
Utility 137 137 138 138 139 139 138 138 138 137 0 0 104

 

New Issue Pipeline

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

 

  • HollyFrontier Corp. (Baa3/BBB-) asked Bank of America/Merrill Lynch, Citigroup, Goldman Sachs, MUFG and Toronto Dominion to arrange fixed income investor calls are scheduled for Monday and Tuesday, November 14th and 15th.  Citigroup coordinated.
  • Bank Nederlandse Gemeenten (Aaa/AAA) the Dutch bank and Local Government Funding Agency mandated BNP Paribas, HSBC and Toronto Dominion to arrange fixed income investor calls in preparation for its inaugural 144a/REGS Sustainability Bond transaction that could soon follow their conclusion.
  • 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 – $330.60 Billion in Cumulative Enterprise Value!

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

 

  • General Electric Co. (A3/A), a primarily equipment manufacturer, announced on November 1st that it will partner with Baker Hughes Inc. (A/A-), which is essentially a drilling and hydraulic fracturing company in what is being billed as the first “full stream” oil services company including upstream exploration and production, midstream transportation and downstream refining and marketing. Together the GE-controlled entity will represent the world’s second largest oi-field services company with projected revenues of $34bn in 2020. GE will be a 62.5% owner. GE is expected to borrow $7.4b to fund the deal.
  • Qualcomm Inc. (A1/A+) agreed to acquire NXP Semiconductors NV (Ba2/BB+) for $39b in what is the largest semiconductor purchase in history. It’s also the second largest tech merger behind Dell’s purchase of EMC.  Qualcomm will pay a 34% premium and including debt the deal is worth $47b. The deal will be financed with offshore cash and new debt. Goldman Sachs and Evercore advised Qualcomm.  Goldman Sachs and J.P. Morgan are providing debt financing for the deal.
  • AT&T (A-/BBB+) agreed to buy Time Warner (Baa2/BBB+) for $85.4b.  This follows Comcast’s purchase of NBCUniversal and Verizon’s acquisition of Yahoo. Both AT&T and Time Warner boards approved the deal that now has to confront regulatory hurdles. It hopes to complete the transaction by the end of 2017.  To finance the half cash, half stock deal will involves AT&T taking on $40b in bridge loans.
  • American Electric Power (“AEP) (Baa1/BBB+) today agreed to sell four power plants in the Midwest for a total of $2.17b to a private equity firm created by Blackstone Group and ArcLight Capital Partners. AEP is divesting of many wholesale power markets focusing instead more on its regulated utility businesses.  The closing of the transaction is expected sometime in Q1 2017.
  • Bayer AG (Baa3/BBB+) agreed to buy Monsanto Co. (A3/A-) in a deal valued at $66 billion. Bayer agreed to pay $128 per share in cash – a 21% premium to Monsanto’s closing price on 9/13.  It represents the year’s largest deal and the single largest takeover by a German company.
  • NextEra Energy Inc. (Baa1/A-) agreed to purchase Dallas-based, Oncor Electric Delivery Co. LLC (Baa1/A) for $18.4b. Oncor is the largest electric transmission operator in Texas serving approximately 10 million customers in the Lone Star state.  This not only gives NextEra a dominant position in Texas’ electric sector but is critical in taking Energy Future Holdings out of chapter 11 bankruptcy.
  • Zimmer Biomet (Baa3/BBB) completed its offer to purchase all outstanding shares of LDR stock on Wednesday, July 13th.  Zimmer announced on June 7th that it agreed to purchase medical device maker LDR Holding Corp. for $37 per share in cash for a total transaction value of $1b. Zimmer expects to maintain its IG rating and to issue $750mm in Senior Unsecured Notes in order to repay the credit facility. Goldman Sachs is acting as advisor to Zimmer Biomet.
  • This past February, Algonquin Power & Utilities Corp. (NR/BBB) announced it will acquire The Empire District Electric Company (N/A) in a $3.4b CAD or $2.4b USD equivalent all cash transaction and today, Thursday, June 16th, Empire’s shareholders overwhelmingly voted in support of the merger to the tune of 95%.  Regulatory approvals are the next step before finalizing the sale expected sometime in Q1 2017. The merger assumes $900mm in USD debt.
  • Symantec (Baa3/BBB-) announced on June 13th that it entered into an agreement to purchase Blue Coat (Caa2/CCC) for $4.56b in cash. The deal will close sometime in Q3 2016.  Both company boards approved the deal. The transaction will be funded with available cash and $2.8b of new debt. J.P. Morgan is the lead adviser to Symantec.  Bank of America/Merrill Lynch, Barclays and Wells Fargo are also advisers.
  • On Friday, April 29th the Alere Inc. (Caa1/CCC+) Board of Directors rejected a request by Abbott Labs (A2/A+) to terminate their merger agreement in return for around $40mm for transaction expenses. Abbott cited concerns about various Alere representations in their merger agreement including a delayed 2015 Form 10-K filing as well as government investigations. Abbott Labs (A2/A+) had announced on Monday, February Baa1/BBB+1st, that it would acquire Alere Inc. (Caa1/CCC+) for $5.8b in which “ABT” would pay $56 per share of ”ALR.”  The deal was to be financed with debt.  ABT expects a strong IG rating despite the new debt. The deal is subject to “ALR” shareholder as well as regulatory approvals.
  • Abbott Labs (A2/A+) announced on Thursday, April 28th that it will buy St. Jude’s Medical Inc. (Baa2/A-) in a cash-stock deal valued at $25b to reinforce the medical devices maker’s stake in cardiovascular care. Abbott will fund the cash portion of the transaction with new medium- and long-term debt. Bank of America/Merrill Lynch and Evercore are acting as advisors to Abbott. The deal is expected to close by Q4 2016.
  • Sherwin Williams (A2/A-) announced on Monday, March 21st that it will purchase Valspar Corp. (Baa2/BBB) for $9.3b or $113 per share.  The acquisition will help Sherwin-Williams gain access to big-box retailers like Lowe’s where Velspar has access. It will also provide overseas expansion opportunities.  Sherwin Williams will finance the merger with available cash, existing credit facilities and new debt.  The deal should close sometime before the end of Q1 2017.
  • TE Connectivity (A-/A-) announced it will buy medical device maker Creganna Medical for $895mm in cash.  The deal will be funded with available cash and debt.
  • Anthem Inc. (Baa2/A) in July 2015, proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal is expected to close sometime during the second half of 2016. The merger would involve 53mm members and will include $22b in new debt and loans.
  • Amphenol Corporation (Baa1/BBB+) announced on June 29th 2015 that it made a binding offer to acquire 100% of FCI Asia
TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Initial Jobless Claims Nov. 5 260k 254k 265k —-
Continuing Claims Oct. 29 2025k 2041k 2026k 2023k
Bloomberg Consumer Comfort Nov. 6 —- 45.1 44.6 —-
Mortgage Delinquencies Q3 —- 4.52% 4.66% —-
MBA Mortgage Foreclosures Q3 —- 1.55% 1.64% —-
Monthly Budget Statement October <$70.0b> <$44.2b> <$136.6b> —-

 

Rates Trading Lab

 

U.S. Treasuries had another poor performance today but not even close to the disaster that occurred yesterday. Today the benchmarks lost between 1.3 bps (2yr: 0.907%) to 6.1 bps (7yr: 1.890%). It has been a brutal week for the Treasury market. Overseas bond markets were also taken to the woodshed today (JGB’s, Bunds, Gilts, etc…). Supply was a factor today ($15 bn 30yr auction / details below) but the Trump victory on Tuesday night is 99% of the reason for the extremely heavy pressure on the Treasury market. Today the Trump camp was talking about rolling back Dodd-Frank and that type of talk leads to risk on and rates selling. I think the Treasury sell off is overdone but who wants to step in front of a freight train heading down hill with no breaks? USTs need a catalyst to offset the Trump sell off and at this point I am not sure what that catalyst will be. The Dow closed up over 200 points and traded at a new all-time high today. On the flip side the NASDAQ was in the loss column. It has been a volatile and wild two days since Trump won the Presidential election. What will the next four years bring?

-Tony Farren

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-23+ 99-00+ 98-28+ 99-11+ 89-01+
RESISTANCE LEVEL 99-21+ 98-26+ 98-17+ 99-03+ 88-03+
RESISTANCE LEVEL 99-19 98-20+ 98-11+ 98-29 87-08+
         
SUPPORT LEVEL 99-166 98-176 97-30 98-22 85-27+
SUPPORT LEVEL 99-146 98-12 97-23 98-13+ 85-11
SUPPORT LEVEL 99-116 98-08 97-18 98-01 84-24+

 

Tomorrow’s Calendar

 

  • China Data: Nothing Scheduled
  • Japan Data: Loans & Discounts Corp, PPI, Tertiary Industry Index MoM
  • Australia: Nothing Scheduled
  • EU Data: German Oct CPI U.K. Sep Const Output
  • S. Data: Nov U Mich
  • Supply: Italy 3, 7, 24, 31y (€5.25-7.25bn), Spain/France details
  • Events: Ratings reviews, U.S. closed
  • Speeches: Fischer, Debelle, Poloz, Lane

(more…)

America Has Spoken. What’s Next re USD and IG Corporate Debt?
November 2016      Debt Market Commentary   

Quigley’s Corner 11.09.16- It’s Done. America Voted for a New US President. What’s Next re USD and IG Corporate Debt Market?

 

How It Happened Across the U.S.A.
Dr. Scott MacDonald Writes a Piece for the  “QC”

Smith’s Research and Gradings – The Global Economic Doctor on the Election of 2016 and its Implications

Investment Grade New Issue Re-Cap 

IG Primary & Secondary Market Talking Points

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 2nd  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

One of the great things about being in this business for 26 years are the superlative friends and colleagues I have had the privilege to know and work with during that time. There’s a saying that you are as good as the people around you.  I have been blessed with stellar talent and thought leaders throughout my career. One such person is Dr. Scott MacDonald, who I have occasionally quoted here in the “QC.” Scott B. MacDonald or as I’ve always referred to him as simply “The Doctor”, is Chief Economist at Smith’s Research & Gradings.  Prior to his current post, he was Senior Managing Director and Chief Economist at KWR International, Inc.  Prior to that was Head of Research for MC Asset Management LLC, an asset management unit of Mitsubishi Corporation based in Stamford, Connecticut (2012-2015) and Head of Credit & Economics Research at Aladdin Capital (2000-2011) where he and I worked closely together.  He served as Chief Economist for KWR International (1999-2000) prior to which he worked at Donaldson, Lufkin & Jenrette, Credit Suisse and the Office of the Comptroller of the Currency (in Washington, D.C.).  He was ranked by Institutional Investor magazine as one of the top sovereign analysts in the financial services industry.

Scott did his Ph.D. in Political Science at the University of Connecticut, Masters in Asian Studies at the University of London’s School of Oriental and African Studies, and BA in History (Honors) and Political Science at Trinity College (Hartford). He has written 18 books and has had numerous articles published. His areas of expertise are macroeconomics, international finance and geopolitical risk.

I am privileged and honored to present “The Doctor’s” piece on President-elect Donald Trump’s Election Day victory that was penned today and appears here in the “QC”.

mischler-post-election-debt-market-comment-110816

 

Smith’s Research and Gradings – The Global Economic Doctor on the Election of 2016 and its Implications

 

The U.S. presidential election of 2016 was decidedly one for the history books.  Although 2016 is certainly not 1860, which led to the U.S. Civil War, it was a dirty, brutal and personalized campaign that tapped into the angst of a voting public angry with widening socio-economic disparities, sub-par economic growth and a dysfunctional Washington.

Why did Donald Trump, the Republican candidate, win?

  1. Public frustration with Washington’s corruption and its seeming ineffectiveness in addressing the country’s major problems.  Clinton was clearly seen as more of a Washington insider than Trump, who has never held an elected political office before.
  1. The ongoing whiff of corruption that surrounded Democratic contender Hillary Clinton (not that Trump is a saint), related to her emails and the finances of the Clinton Foundation. Past Clinton “scandals” did not help.
  1. The intervention of the FBI and WikiLeaks into the electoral process via disclosing embarrassing emails, which only maintained attention of Clinton’s email scandal. Furthermore, having her name associated with former Congressman Anthony Weiner (with his sexting scandal) obviously did not help Clinton in the last days of the campaign.
  1. The growing divisions in U.S. society, especially along an urban-rural divide. One thing that gave Trump an appeal to many living in rural areas was that he appeared to listen to them and mocked the political correctness that many found stifling.  
  1. The Democrats underestimated Trump. As General Colin Powell stated: “No battle plan survives contact with the enemy.”  This was certainly the case of Clinton with Trump.
  1. The appeal of a strongman leader. The last reflects a major paradigm change in global politics – the rise of strongman leaders, who offer simple solutions to complex problems. Considering the scope of U.S. problems and the challenging nature of international relations, Trump’s “tough guy” persona was a point of attraction to some voters. There are certainly echoes of this in other countries.

What next?  A Trump victory was not expected by global markets or political leaders in many other countries (many of whom have been critical of the Republican leader now president-elect).  The next week is likely to see an unwinding of the “Clinton trade” (risk on) in global debt and equity markets, downward pressure on oil prices, and a further pounding of the Mexican peso.

Investors find a Trump victory unsettling from the standpoint that during the campaign he was anti-trade, opened up the possibility of negotiating the U.S. debt, and wants to overhaul of the U.S. alliance system around the world (such as with NATO). The last time the U.S. embraced protectionist trade policies in a major fashion was the 1930s, in the form of the Smoot-Hawley Tariffs. U.S. protectionism was a major cause of the deepening of the global Depression. The extent of the market downdraft will depend on Trump’s acceptance speech, his comments on policy matters before he gets into the White House and who he appoints to his cabinet.

The major challenge in the days ahead will be to find a way to reunite the country after the election.  In many regards, this may be an impossible process, considering the bad blood between Democrats and Republicans since 2008.  A dangerous development in U.S. politics is the destruction of the political center – the area where compromise and dialogue are reached and policies can move forward.

The U.S. sovereign ratings are Aaa/AA+/AAA, with a stable outlook.  The policy format of the incoming Trump administration will no doubt be carefully examined, in particular on its debt management and trade policies.

For American politics to become more workable, President Trump will have to demonstrate an ability to lead, but also work within a constitutional system that he might find constraining.  As he moves to “drain the swamp”, Trump will have to make the transition from candidate to elected official and from someone who is critical of Congress to a leader who will have to find the means to work with it.  For their part, both the Republican Party (which held on to both the Congress and Senate) and Democratic Party will have to adjust to a President who has not emerged from their ranks.  A new Washington looms on the horizon – hopefully it works.

Dr. Scott B. MacDonald, Chief Economist

 

Investment Grade New Issue Re-Cap

Needless to say there was no activity in today’s IG dollar DCM.

 

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index tightened 1 bp to +139 vs. +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.34 vs. 1.35.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +184 vs. +185.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15b on Tuesday versus $14.1b Monday and $19.8b the previous Tuesday.
  • The 10-DMA stands at $16.5b.

 

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

 

IG Corporate New Issuance This Week
11/07-11/11
vs. Current
WTD – $945mm
November 2016 vs. Current
MTD – $8.411b
Low-End Avg. $8.09b 11.68% $90.70b 9.27%
Midpoint Avg. $9.83b 9.61% $92.11b 9.13%
High-End Avg. $11.57b 8.17% $93.52b 8.99%
The Low $0.1b 945.00% $71b 11.85%
The High $20b 4.725% $110b 7.65%

 

 

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 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.
11/07
TUES.
11/08
WED.
11/09
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
New Issue Concessions <3> bps N/A N/A <0.87> bps <0.51> bps 3.31 bps 1.87 bps
Oversubscription Rates 2.50x N/A N/A 3.32x 2.61x 3.05x 3.28x
Tenors 4.50 yrs N/A N/A 11.33 yrs 7.77 yrs 9.16 yrs 11.51 yrs
Tranche Sizes $472mm N/A N/A $491mm $818mm $1,137mm $640mm
Avg. Spd. Compression
IPTs to Launch
<16.5> bps N/A N/A <17.87> yrs <17.42> bps

 

Indexes and New Issue Volume

Index levels are as of 2:00pm ET

Index Open Current Change
LUACOAS 1.34 1.34 0
IG27 75.757 74.823 <0.924>
HV27 172.135 170.27 <1.865>
VIX 18.74 15.45 <3.29>
S&P 2,139 2,158 19
DOW 18,332 18,541 209
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $0.945 bn DAY: $0.945 bn
WTD: $0.945 bn WTD: $0.945 bn
MTD: $8.411 bn MTD: $8.411 bn
YTD: $1,177.192 bn YTD: $1,507.076 bn

 

Lipper Report/Fund Flows – Week ending November 2nd  

     

  • For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).
  • Over the same period, Lipper reported a net inflow of $146.468m into Loan Participation Funds (2016 YTD net outflow of $1.518b).
  • Emerging Market debt funds reported a net outflow of $345.7m (2016 YTD inflow of $7.337b).

 

IG Credit Spreads by Rating (more…)

Twas The Eve Before the US Presidential Election and the Debt Markets Indicated..
November 2016      Debt Market Commentary   

Quigley’s Corner 11.04.16 “’ Twas the Eve Before the Election..and Debt Markets Indicated Volatility Risk … ”

“…Please be mindful that this event could give rise to volatile market conditions; consequently, there is a risk of FX and Rates markets trading in wide ranges during the period.  Voice and electronic trading desks will endeavor to operate at as close to normal levels of service as conditions allow.  With respect to electronic trading specifically, you should bear in mind that low levels of liquidity or high volatility during the period could impact bid-offer spreads, or result in potential delays in order execution…” Head of Rates Trading,  Primary Dealer/Global Investment Bank

 “QC” Call to “Get Out and Vote” next Tuesday November 8th

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Potential Election Day Trade Volatility

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

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

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 2nd  

Investment Grade Corporate Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Your humble fixed income servant already voted in my home state of Connecticut via absentee ballot two weeks ago, as I would not have made it in time to cast my ballot traveling back from Phoenix on Election Day.  Each of us understands what a contentious election this one is.  Whoever floats your boat please just get out and cast yours on Tuesday the 8th or hopefully you sent in your ballot in your home state. If you do not vote you do not have a right to complain.  It’s not the voting that is democracy rather it’s the counting.  SO, GET OUT AND VOTE – IT’S A CIVIC SACRAMENT! For those of us blessed enough to have been called to citizenship in a country in which we govern ourselves by choosing our own leaders, voting is one of the duties of our vocation. Enough said.

Sunrise and sunset will be about 1 hour earlier on Nov 6, 2016 than the day before. There will be more light in the morning. Thank Goodness!

Investment Grade New Issue Re-Cap

Bank of America was the sole visitor to today’s IG dollar DCM printing a $1bn 4NC3 Senior Notes new issue due 11/09/2020.  The “Green Bond” is callable after 3 years on 11/09/2019 at par.  BAML was the sole book runner.  Proceeds from the transaction will be used to fund renewable energy projects including the financings of or investments in equipment and systems that facilitate the use of energy from renewable sources such as solar, wind and geothermal energy.

Please continue through the below right into the “Best & Brightest’s” IG Corporate new issue supply forecasts for next week from the street’s top syndicate gurus.  I have all their numbers and thoughts about next week’s Election Day/Veteran’s Day influenced and shortened week waiting for you. It’s all here folks and I make it easy – I write it, I talk to all of them and conveniently deliver it to your desktop or hand held device free of charge!  I’m told it’s good and so, naturally I think it’s good but why listen to me? Wall Street Letter has awarded the “QC” it Best Broker Dealer research for three years in a row – 2014, 2015 and 2016.  What’s not to like about that? I mean really! So, relax, be informed and have yourselves a great weekend!

Global Market Recap

 

  • S. Treasuries – The 30yr lead the UST rally despite the solid Employment Report.
  • Overseas Bonds – Gilts led the core EU bond rally while Peripheral sold off.
  • Stocks – U.S. stocks with small losses at 3:45pm. Bad day for Nikkei & Europe.
  • Economic – The U.S. Employment Report was solid. The trade balance improved.
  • Currencies – USD lost vs. Euro & Pound but had a small gain vs. the Yen, CAD & AUD.
  • Commodities – The crude oil sell off continued. Gold was unchanged.
  • CDX IG: +0.15 to 80.85
  • CDX HY: -2.52 to 433.56
  • CDX EM: -2.76 to 250.86

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

-Tony Farren

 

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 23 deals that printed, 11 tightened versus NIP for a 00% improvement rate while only 8 widened (35.00%) 4 were trading flat (17.00%).
  • For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 1 IG Corporate-only new issue was 10.00 bps.
  • BAML’s IG Master Index widened 1 bp to +141 vs. +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +135.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +186 vs. +185.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.9b on Thursday versus $17.5b Wednesday and $20.3b the previous Thursday.
  • The 10-DMA stands at $16.8b.

 

Note About Potential Election Day Trade Volatility

I thank my Corporate Secondary trader, Annie Bonner for the following prescient note that she sent around today and that definitely has a place in the “QC”.
It is self-explanatory:

As we saw with Brexit, dealers are sending out notices to prep for Election Day markets.

 

For example, from one Primary Dealer wrote:

“……….Please be mindful that this event could give rise to volatile market conditions; consequently, there is a risk of FX and Rates markets trading in wide ranges during the period.  Voice and electronic trading desks will endeavor to operate at as close to normal levels of service as conditions allow.  With respect to electronic trading specifically, you should bear in mind that low levels of liquidity or high volatility during the period could impact bid-offer spreads, or result in potential delays in order execution.”

 

As Annie concluded, “We’ll probably be seeing more of these today & Monday.”

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

 

IG Corporate New Issuance This Week
10/31-11/04
vs. Current
WTD – $11.791b
November 2016 vs. Current
MTD – $7.466b
Low-End Avg. $24.26b 48.60% $90.70b 8.23%
Midpoint Avg. $25.13b 46.92% $92.11b 8.11%
High-End Avg. $26.00b 45.35% $93.52b 7.98%
The Low $15b 78.61% $71b 10.52%
The High $35b 33.69% $110b 6.79%

 

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 23 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 80.93% 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 was prefaced with the following:

If anyone says the U.S. Presidential election is not important in our inextricably linked new world order just point to our IG dollar DCM this week in which we managed to price a mere 42% of this week’s syndicate midpoint average forecast or $10.79b vs. $25.13b.

Here are some impactful events coming up next week that should keep a damper on issuance……among other things:

  • Mon thru Wed. 11/7-11/09 – EEI’s 51st Annual Financial Conference in Phoenix taking Utility issuers off the radar.
  • Tuesday, 11/08 – U.S. Presidential Election
  • Friday, 11/11 – Veteran’s Day (Federal Holiday, many leave work a bit earlier the day before – Thursday 11/10).


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

 

  • NICS:  <0.92> bps
  • Oversubscription Rates: 3.33x
  • Tenors:  11.33 years
  • Tranche Sizes: $469mm
  • Spread Compression from IPTs to the Launch: <178.26> bps

Versus last Friday’s key primary market driver averages, NICs widened a mere 0.06 bps to <0.92> vs. <0.98> bps while over subscription or bid-to-cover rates grew 0.72x to 3.33x vs. 2.61x last week.  Average tenors moved way out 3.62 years to 11.33 yrs vs. 7.71yrs while tranche sizes decreased by a lot – by $357mm to $469mm vs. $826mm.  

Standard and Poor’s Investment Grade Composite Spreads widened 5 bps to +186 versus last Friday’s +181.

For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).

Week-on-week, BAML’s IG Master Index widened 4 bps to +141 vs. last Friday’s +137 close.  Spreads across the four IG asset classes also widened 3.75 bps to 32 vs. 28.25 as measured against their post-Crisis lows.  Looking at the 19 major industry sectors, spreads widened 4.58 bps to 37.42 vs. 32.84 also against their post-Crisis lows.
Please let me know your number and most importantly your thoughts for next week’s IG Corporate issuance.  

……and here are their formidable responses:

(this section available exclusively to Quigley’s Corner distribution list recipients)

 

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, Managing Director and Head of Fixed Income Syndicate

 

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

Please note: The below table averages for this week includes today’s BAML 4NC3 new issue. As a result, the numbers differ ever so slightly from the averages in my question to the “Best & Brightest” which was written and sent at the open this morning.  Thanks! -RQ

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

 

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/31
TUES.
11/01
WED.
11/02
TH.
11/03
FRI.
11/04
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
New Issue Concessions 0.50 bps <2.29> bps 3 bps <3.75> bps flat or 0 bps <0.87> bps <0.51> bps 3.31 bps 1.87 bps
Oversubscription Rates 2.99x 2.90x 2.73x 4.80x 3.25x 3.32x 2.61x 3.05x 3.28x
Tenors 8.39 yrs 11.93 yrs 11.30 yrs 15.50 yrs 4 yrs 11.33 yrs 7.77 yrs 9.16 yrs 11.51 yrs
Tranche Sizes $721mm $379mm $393mm $370mm $1,000mm $491mm $818mm $1,137mm $640mm
Avg. Spd. Compression
IPTs to Launch
<14.21> bps <17.71> bps <22.50> bps <22.20> bps <10> bps <17.87> yrs <17.42> 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 23 deals that printed, 11 tightened versus NIP for a 48.00% improvement rate while only 8 widened (35.00%) 4 were trading flat (17.00%).

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
Johns Hopkins University Aa3/AA- 3.837% 5/15/2046 500 +135a N/A +123 +123 127/125
Principal Finc’l. Group Inc. Baa1/BBB+ 3.10% 11/15/2026 350 +160a +130-135 +130 +130 129/127
Principal Finc’l. Group Inc. Baa1/BBB+ 4.30% 11/15/2046 300 +200a +170-175 +170 +170 165/162
PSE&G Baa2/BBB 1.60% 11/15/2019 400 +85-90 +70a (+/-2) +68 +68 66/64
PSE&G Baa2/BBB 2.00% 11/15/2021 300 +95-100 +80a (+/-2) +78 +78 76/74
Bank of Nova Scotia Aa3/A+ FRN 11/01/2018 166 N/A N/A N/A 3mL+45 3mL+47/45
Children’s Hosp. Med. Ctr. Aa2/AA 2.853% 11/15/2026 100 N/A N/A N/A +105 106/104
Danske Bank A/S A2/A FRN 11/10/2020 200 N/A N/A N/A 3mL+73 3mL+73/70
Occidental Petroleum A3/A 3.00% 2/15/2027 750 +145a +130a (+/-5) +125 +125 122/120
Occidental Petroleum A3/A 4.10% 2/15/2047 750 +180a +160a (+/-5) +155 +155 152/150
EQT Midstream Partners LP BBB-/BBB- 4.125% 12/01/2026 500 +262.5a +245a (+/-5) +240 +240 240/238
Kimco Realty Baa1/BBB+ 2.70% 3/01/2024 400 +130-135 +120a (+/-3) +117 +117 118/116
Kimco Realty Baa1/BBB+ 4.125% 12/01/2046 350 +180-185 +165a (+/-5) +160 +160 159/157
Lazard Group LLC A-/BBB+ 3.625% 3/01/2027 300 +200a +190a (+/-5) +185 +185 189/187
Rogers Communications Inc. Baa1/BBB+ 2.90% 11/15/2026 500 +125a N/A +125 +125 130/128
Ryder System Inc. Baa1/A- 2.25% 9/01/2021 300 +120-125 +100a (+/-3) +97 +97 97/95
Southwest Airlines Co. Baa1/BBB+ 3.00% 11/15/2026 300 +mid-100s/+150a +130a (+/-3) +127 +127 128/126
Axis Capital Holdings Ltd. Baa3/BBB 5.50% PerpNC5 550 N/A N/A5.50-5.625%a
+5.5625%a
5.50% $25 Pfd $25.75/.80
CMS Energy Corp. Baa2/BBB 2.95% 2/15/2027 275 +135a +120a (+/-5) +115 +115 115/113
Illinois Tool Works A2/A+ 2.65% 11/15/2026 1,000 +95a +85 the # +85 +85 80/78
Proctor & Gamble Co. Aa3/AA- 1.70% 11/03/2021 875 +55a +45a (+/-2) +43 +43 42/40
Proctor & Gamble Co. Aa3/AA- 2.45% 11/03/2026 875 +75a +65a (+/-2) +63 +63 62/60
Wabtec Baa3/BBB 3.45% 11/15/2026 750 +187.5a +165a (+/-2.5) +162.5 +162.5 158/155

 

Indexes and New Issue Volume

Please note that Index levels are as of 4:15pm ET

Index Open Current Change  
LUACOAS 1.35 1.35 0  
IG27 80.702 80.967 0.265
HV27 179.245 180.23 0.985
VIX 22.08 22.91 0.83  
S&P 2,088 2,085 <3>
DOW 17,930 17,888 <42>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $1.00 bn DAY: $1.00 bn
WTD: $11.791 bn WTD: $11.791 bn
MTD: $7.466 bn MTD: $7.466 bn
YTD: $1,176.247 bn YTD: $1,506.131 bn

 

Lipper Report/Fund Flows – Week ending November 2nd  

     

  • For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).
  • Over the same period, Lipper reported a net inflow of $146.468m into Loan Participation Funds (2016 YTD net outflow of $1.518b).
  • Emerging Market debt funds reported a net outflow of $345.7m (2016 YTD inflow of $7.337b).

 

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 32.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/03 11/02 11/01 10/31 10/28 10/27 10/26 10/25 10/24 10/21 1-Day Change 10-Day Trend PC
low
IG Avg. 141 140 139 138 137 136 136 135 135 135 +1 +6 106
“AAA” 83 83 82 82 80 80 80 78 78 77 0 +6 50
“AA” 87 87 86 86 85 85 84 83 83 83 0 +4 63
“A” 112 112 111 111 110 109 109 108 108 108 0 +4 81
“BBB” 182 181 180 178 176 175 176 175 174 175 +1 +7 142
IG vs. HY 374 375 366 353 339 333 330 325 325 327 <1> +47 228

 

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 37.42 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 11/03 11/02 11/01 10/31 10/28 10/27 10/26 10/25 10/24 10/21 1-Day Change 10-Day Trend PC
low
Automotive 120 122 121 120 119 119 119 117 117 117 <2> +3 67
Banking 130 130 129 129 128 127 128 127 127 127 0 +3 98
Basic Industry 181 181 180 179 179 178 179 177 177 179 0 +2 143
Cap Goods 106 106 105 105 103 102 102 101 101 101 0 +5 84
Cons. Prod. 112 112 111 110 109 108 108 107 105 105 0 +7 85
Energy 183 183 180 179 177 176 176 175 174 175 0 +8 133
Financials 166 165 164 162 160 159 160 160 160 160 +1 +6 97
Healthcare 124 123 122 120 118 117 117 115 114 114 +1 +10 83
Industrials 143 143 141 140 139 138 138 137 136 136 0 +7 109
Insurance 154 153 153 153 153 153 153 154 154 155 +1 <1> 120
Leisure 138 138 138 138 138 137 138 137 136 135 0 +3 115
Media 166 165 164 162 160 160 159 157 157 157 +1 +9 113
Real Estate 146 146 146 146 146 146 146 147 147 147 0 <1> 112
Retail 123 122 121 120 118 117 117 116 115 114 +1 +9 92
Services 130 130 129 129 129 128 128 128 128 128 0 +2 120
Technology 120 120 119 117 115 114 115 113 112 112 0 +8 76
Telecom 172 172 170 168 167 165 165 163 162 161 0 +11 122
Transportation 140 139 138 137 137 136 136 136 136 136 +1 +4 109
Utility 139 138 138 138 137 136 136 136 136 137 +1 +2 104

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Trade Balance September <$38.0b> <$36.4b> <$40.7b> <$40.5b>
Change in Nonfarm Payrolls October 173k 161k 156k 191k
Two-Month Payroll Net Revisions October —- 44k <7k> —-
Change in Private Payrolls October 170k 142k 167k 188k
Change in Manufacturing Payrolls October <4k> <9k> <13k> —-
Unemployment Rate October 4.9% 4.9% 5.0% —-
Average Hourly Earnings MoM October 0.3% 0.4% 0.2% 0.3%
Average Hourly Earnings YoY October 2.6% 2.8% 2.6% 2.7%
Average Weekly Hours All Employees October 34.4 34.4 34.4 —-
Change in Household Employment October —- <43.0> 354.0 —-
Labor Force Participation Rate October —- 62.8% 62.9% —-
Underemployment Rate October —- 9.5% 9.7% —-

  (more…)

IG Corporate Spreads Widen as Clinton-Trump Spread Tightens
November 2016      Debt Market Commentary   

Quigley’s Corner 11.03.16 : IG Corporate Spreads Widen as Presidential Election Spread Narrows

 

Investment Grade New Issue Re-Cap  : Gaming Spreads as Presidential Polls Yield Uncertainty

Global Market Recap

BOE Rate Decision Talking Points

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 26th  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

With only five days detached from what could be the single most pivotal U.S. Presidential election in our nation’s history, definitely the most contentious, the slow pace of our IG DCM reflects just how critical this election is to the world.  4 IG Corporate issuers priced 5 tranches between them totaling only $1.85b.  The IG Corporate WTD total is now only 42% of this week’s syndicate midpoint average forecast or $10.791b vs. $25.13b.

 

Global Market Recap

 

  • S. Treasuries – USTs & European bonds closed mixed & steeper. JGB’s were closed.
  • Stocks – S&P & NASDAQ posted their 8th losing session in a row.
  • Overseas Stocks – Europe & Asia closed mixed.
  • Economic – Today’s U.S. data summed up the economic recovery: Some good & some bad.
  • Currencies – 3rd losing session in a row for DXY Index. Big rally for the Pound.
  • Commodities – How low can crude oil go? Gold gave back some of its recent gains.
  • CDX IG: -0.28 to 79.69
  • CDX HY: -0.51 to 431.75
  • CDX EM: -2.06 to 251.58

CDX spreads mover wider after 3pm

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

-Tony Farren

 

BOE Rate Decision Talking Points

 

  • BOE keeps benchmark interest rate at 0.25%; vote 9-0.
  • Keeps gilt-purchase program at £435 bn; vote 9-0.
  • Keeps corporate-bond plan at £10 bn; vote 9-0.
  • MPC drops signal that another rate cut likely this year.
  • Policy can respond “in either direction” to outlook change.
  • Persistent uncertainty on EU deal to weigh on U.K. Economy.
  • Says MPC has limited tolerance for above-target inflation.
  • Sees inflation breaching 2% target in Q2 2017.
  • Sees inflation staying above 2% to end of forecast period.
  • Raises 2017 CPI forecast to 2.7% vs. 2%; 2018 to 2.7% vs. 2.4%.
  • Says medium-term slowdown due to CPI squeeze on consumers.
  • Sees 4Q GDP at 0.4%, raises 2016 forecast to 2.2%.
  • Raises 2017 GDP to 1.4% vs. 0.8%; cuts 2018 to 1.5% vs. 1.8%.
  • Says near-term outlook stronger, medium-term weaker.
  • GBP impact on CPI temporary, policy offset may have costs.
  • GBP impact on CPI “adversely affected” MPC trade-off.

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate-only new issues that displayed price evolution was 22.20 bps.
  • BAML’s IG Master Index widened 1 bp to +140 vs. +139.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bps to +135 from +134.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research widened 2 bps to +185 vs. +183.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.5b on Wednesday versus $19.8b Tuesday and $18.9b the previous Wednesday.
  • The 10-DMA stands at $16.9b.

 

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

 

IG Corporate New Issuance This Week
10/31-11/04
vs. Current
WTD – $10.791b
November 2016 vs. Current
MTD – $6.466b
Low-End Avg. $24.26b 44.48% $90.70b 7.13%
Midpoint Avg. $25.13b 42.94% $92.11b 7.02%
High-End Avg. $26.00b 41.50% $93.52b 6.91%
The Low $15b 71.94% $71b 9.11%
The High $35b 30.83% $110b 5.88%

 

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 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.
10/31
TUES.
11/01
WED.
11/02
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
New Issue Concessions 0.50 bps <2.29> bps 3 bps <0.51> bps 3.31 bps 1.87 bps 4.36 bps
Oversubscription Rates 2.99x 2.90x 2.73x 2.61x 3.05x 3.28x 4.20x
Tenors 8.39 yrs 11.93 yrs 11.30 yrs 7.77 yrs 9.16 yrs 11.51 yrs 12.16 yrs
Tranche Sizes $721mm $379mm $393mm $818mm $1,137mm $640mm $523mm
Avg. Spd. Compression
IPTs to Launch
<14.21> bps <17.71> bps <22.50> bps <17.42> 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
Johns Hopkins University Aa3/AA- 3.837% 5/15/2046 500 +135a N/A +123 +123 JEFF/JPM
Principal Finc’l. Group Inc. Baa1/BBB+ 3.10% 11/15/2026 350 +160a +130-135 +130 +130 CITI/CS/HSBC
Principal Finc’l. Group Inc. Baa1/BBB+ 4.30% 11/15/2046 300 +200a +170-175 +170 +170 CITI/CS/HSBC
PSE&G Baa2/BBB 1.60% 11/15/2019 400 +85-90 +70a (+/-2) +68 +68 BARC/JPM/RBC
PSE&G Baa2/BBB 2.00% 11/15/2021 300 +95-100 +80a (+/-2) +78 +78 BARC/JPM/RBC

 

Indexes and New Issue Volume

Please note that Index levels are as of 4:45pm ET.

Index Open Current Change  
LUACOAS 1.35 1.35 0  
IG27 79.977 80.702 0.725
HV27 178.86 179.72 0.86
VIX 19.32 22.08 2.76  
S&P 2,097 2,088 <9>
DOW 17,959 17,930 <29>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $1.85 bn DAY: $1.85 bn
WTD: $10.791 bn WTD: $10.791 bn
MTD: $6.466 bn MTD: $6.466 bn
YTD: $1,175.247 bn YTD: $1,505.131 bn

 

Lipper Report/Fund Flows – Week ending October 26th  

     

  • For the week ended October 26th, Lipper U.S. Fund Flows reported an inflow of $1.701b into Corporate Investment Grade Funds (2016 YTD net inflow of $42.787b) and a net outflow of $48.26m from High Yield Funds (2016 YTD net inflow of $11.070b).
  • Over the same period, Lipper reported a net inflow of $290.611m into Loan Participation Funds (2016 YTD net outflow of $1.665b).
  • Emerging Market debt funds reported a net inflow of $390.9m (2016 YTD inflow of $7.723b).

 

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 31.75 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/02 11/01 10/31 10/28 10/27 10/26 10/25 10/24 10/21 10/20 1-Day Change 10-Day Trend PC
low
IG Avg. 140 139 138 137 136 136 135 135 135 135 +1 +5 106
“AAA” 83 82 82 80 80 80 78 78 77 76 +1 +7 50
“AA” 87 86 86 85 85 84 83 83 83 83 +1 +4 63
“A” 112 111 111 110 109 109 108 108 108 108 +1 +4 81
“BBB” 181 180 178 176 175 176 175 174 175 174 +1 +7 142
IG vs. HY 375 366 353 339 333 330 325 325 327 327 +9 +48 228

 

IG Credit Spreads by Industry

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

US Election + FOMC Angst = Gold Rally; Mischler Debt Market Comment
November 2016      Debt Market Commentary   

Quigley’s Corner 11.01.16 : US Election + FOMC Angst = Gold Rally

 

Investment Grade Corporate Bond New Issue Re-Cap  – U.S. Election and Fed Anxiety Send Gold and Sfr Up

Global Market Recap

IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for This Week

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 26th  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

November kicked off today with 6 IG Corporate issuers pricing 7 tranches between them totaling $2.65b.  We are two days into the week and yet we’ve only priced $6.975b or 27% of the weekly syndicate forecast of $25.13b.  Election jitters and tomorrow’s FOMC Rate Decision sent the DOW down 105 points and the S&P off 15.  It’s probably a good thing that tomorrow’s Fed meeting is not followed by a summary of economic projections and a press conference by Chair Yellen.  When gold and the Swiss franc rise it means investors are uneasy, skittish and edgy about something.  In our inextricably linked new world economy, replete with myriad global event risk factors, today’s catalyst has everything to do with the U.S. Presidential election.  The VIX pushed out 1.5.  CDX HV gapped out 7.15. Gold was up $16 and the Swiss franc gained 1.36% on the USD.……..In financial terms, that spells …“A-N-X-I-E-T-Y”

 

Global Market Recap

 

  • U.S. Treasuries – USTs closed with a gain & had a very impressive rally from the low prices.
  • Overseas Bonds – JGB’s had small gains. Bonds in Europe traded poorly.
  • Stocks – Down day for stocks in the U.S. & Europe while Asia rallied.
  • Economic – U.S. data had more good than bad. China PMI data was very strong.
  • Currencies – USD lost ground vs. 4 of the Big 5 & the DXY Index was hit hard.
  • Commodities – Crude oil small loss, natural gas down and gold & silver were bid.
  • CDX IG: +0.812 to 79.52
  • CDX HY: +8.04 to 430.71
  • CDX EM: +5.62 to 247.84

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Kimco Realty Corp. upsized today’s 2-part 7s/30s Senior Notes new issue to $750mm from $600mm at the launch and at the tightest side of guidance on both tranches.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 17.71 bps.
  • BAML’s IG Master Index widened 1 bp to +138 vs. +137.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +132.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +183 vs. +182.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.9b on Monday versus $14.3b Friday and $14b the previous Monday.
  • The 10-DMA stands at $16.7b.

 

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

 

IG Corporate New Issuance This Week
10/31-11/04
vs. Current
WTD – $6.975b
October 2016 vs. Current
MTD – $6.975b
November 2016
Low-End Avg. $24.26b 28.75% $87.83b 7.94% $90.70b
Midpoint Avg. $25.13b 27.76% $88.59b 7.87% $92.11b
High-End Avg. $26.00b 26.83% $89.35b 7.81% $93.52b
The Low $15b 46.50% $75b 9.30% $71b
The High $35b 19.93% $125b 5.58% $110b

 

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 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.
10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
New Issue Concessions 0.50 bps <0.51> bps 3.31 bps 1.87 bps 4.36 bps
Oversubscription Rates 2.99x 2.61x 3.05x 3.28x 4.20x
Tenors 8.39 yrs 7.77 yrs 9.16 yrs 11.51 yrs 12.16 yrs
Tranche Sizes $721mm $818mm $1,137mm $640mm $523mm
Avg. Spd. Compression
IPTs to Launch
<14.21> bps <17.42> bps      

 

New Issues Priced

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

(more…)

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