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Corporate Debt Market & The Week Before the US Presidential Election; Mischler Comment
October 2016      Debt Market Commentary   

Quigley’s Corner 10.28.16-Corporate Debt Market & The Week Before the US Presidential Election

 

Investment Grade Corporate Debt New Issue Re-Cap & Look to the Last Full Week before the Presidential Election

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

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

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

Investment Grade Credit Spreads

Lipper Funds Flow

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Happy Friday everyone!  The big news today is the FBI’s announcement that it is “re-opening” its probe into the Hilary Clinton private e-mail controversy.  Oh my.  This election could go down to the wire folks!  Or, FBI Director Jim Comey might have found himself boxed into a corner when he issued the late Friday email to Congress, without first determining whether the emails in question are anything new, or whether the only ‘new update’ that Comey shared is that FBI agents determined that HRC assistant Huma Abedin’s email account was installed on a device shared with her former husband and suspected pedophile, Anthony Weiner. Meaning: Nothing really new! A bunch of jerks have in theory, been able to see those emails. But, WikiLeaks already published them! Just another 9th inning curve ball that every media outlet will swing at in the course of the 2016 US Presidential elections!

I think we see $30bn next week. I do have a strong tendency to err to the upside.  The next two weeks “could be” challenging thanks to these following obstacles that can typically dampen issuance:

 

  • Tuesday, 11/01 – BoJ
  • Wednesday, 11/02 – FOMC
  • Thursday, 11/03 – BOE
  • Friday, 11/04 – NFP
  • 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).

However, I would counter that next week also happens to be the LAST full week before the U.S. Presidential election so issuers may very well want to print before then. Despite all the hoopla about the massive rates sell-off, I simply remind you that we are at May levels. Lest we forget May 2016 is the single most prolific month of IG issuance in history at $213.4b in all-in IG Corporate plus SSA issuance. So, don’t be surprised.

Due to the election, however, ranges could be….well…..VERY rangy! I still think we get $110b in IG Corporate issuance in November.

We had one well-telegraphed $500mm tap of Banco de Bogota’s 6.25% 10-year due 5/12/2026 144a Subordinated Notes price.  The amount added to our already record October volume for all-in IG issuance. For all the pertinent data points, please scroll down to the question I posed of the 23 participating top shelf, top gun syndicate desks.  In that question lay all the gold nugget technical tidbits you want and need to know about this week’s primary markets and the potential hurdles that lay ahead for next week.  Following that, of course, are the very thoughtful responses that I am grateful to have received today from those top tier syndicate operatives.  They took their time today with nice soundbites so remember it’s not only about their forecasts for next week and for the month of November, rather it’s about their thoughts.  I also take a look at the past decade of November IG new issuance so that you can put the next week’s and month’s numbers into the proper historical context.  Of course I have today’s Global Market Re-cap first just below followed by secondary and primary market talking points, the “at-a-glance” IG issuance WTD and MTD volume table and then the “Best and the Brightest” that the world of syndicate has to offer in their own words.

So, relax, it’s Friday!  Kick up your feet, read through the “QC” or as CFO of Ford Credit, Marion Harris often does, print it out, staple it together and read it at home at your leisure.  It’s all here; it’s all for you AND the guy-in-the-corner does for free………What’s not to like about that!

 

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 folks!

Ron  Quigley, Managing Director & Head of Fixed Income Syndicate

 

Global Market Recap

 

  • S. Treasuries – USTs & JGB’s mixed & steeper. Core Europe mixed & Peripherals lost.
  • Stocks – U.S. red at 3:15pm (small).
  • Overseas Stocks – Europe closed mixed, Nikkei higher & China & HS closed red.
  • Economic – GDP printed at its highest level since Q3 2014.
  • Overseas Economic – Full in Japan & Europe with more good than bad with low inflation.
  • Currencies – USD lost ground vs. the Euro, Pound & Yen. DXY Index had a poor day.
  • Commodities – CRB, crude oil & wheat down while gold, copper & silver were up.
  • CDX IG: +1.27 to 77.53
  • CDX HY: +6.27 to 418.11
  • CDX EM: +6.47 to 237.56
  • HY & EM have struggled the last 2 days

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • 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).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 1 IG Corporate-only new issue was 30.00 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 +131.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +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 Thursday versus $18.9b Wednesday and $16.5b the previous Thursday.
  • The 10-DMA stands at $16.2b.

 

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

 

IG Corporate New Issuance This Week
10/24-10/28
vs. Current
WTD – $34.375b
October 2016 vs. Current
MTD – $102.97b
Low-End Avg. $24.61b 139.68% $87.83b 117.24%
Midpoint Avg. $25.48b 134.91% $88.59b 116.23%
High-End Avg. $26.35b 130.46% $89.35b 115.24%
The Low $15b 229.17% $75b 137.29%
The High $35b 98.21% $125b 82.38%

 

“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.  21 of those participants are among 2016’s top 22 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 80.96% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

The question posed to the “Best and the Brightest” early this morning was prefaced with the following note to 30+ book-running fixed income syndicate gurus throughout Wall Street:

We some-what quietly experienced the highest volume October on record this week for all-in IG Corporate and SSA supply.  If Monday is a decent volume day, October 2016 will become the 10th busiest month of all-time for all-in issuance. WTD, we entered today’s Friday session 33% above the syndicate midpoint average estimate for the week or $33.875b vs. 25.48b.  We also eclipsed the MTD syndicate forecast by over 15% or $102.47b vs. $88.59b. Those are both for IG Corporates only. This week’s M&A calendar grew by $132.4b thanks to Qualcomm’s $47b acquisition of NXP and AT&T’s mega $85.4b purchase of Time Warner. Both will meet regulatory scrutiny but that’s a lot of debt just between those two.  The 14 highest profile M&A deals on the calendar now total $323.3b.  Debt anyone? Next week looks like it could be sizeable, but there are some Central Bank hurdles to get over.  Here they are:

 

  • Tuesday, 11/01 – BoJ
  • Wednesday, 11/02 – FOMC
  • Thursday, 11/03 – BOE
  • Friday, 11/04 – NFP
  • 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 IG Corporate-only key primary market driver averages:

 

  • NICS:  <0.98> bps
  • Oversubscription Rates: 2.61x
  • Tenors:  7.71 years
  • Tranche Sizes: $826mm
  • Average Spread Compression from IPTs to the Launch: <17.12> bps

 

Versus last Friday’s key primary market driver averages, NICs tightened a resounding 4.29 bps to <0.98> vs. 3.31 bps; over subscription or bid-to-cover rates narrowed by 0.44x to 2.61x vs. 3.05x last week.  Average tenors shortened by 1.45 years to 7.71 yrs vs. 9.16yrs while tranche sizes decreased a hefty $311mm to $826mm vs. $1,137mm.

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).

Week-on-week, BAML’s IG Master Index widened 1 bp to +136 vs. last Friday’s +135 close.  Spreads across the four IG asset classes also widened 1 bps to 28.25 vs. 26.25 as measured against their post-Crisis lows.  Looking at the 19 major industry sectors, spreads widened 0.73 bps to 32.84 vs.32.11 also against their post-Crisis lows.

November kicks off next Tuesday so I’d like your thoughts and numbers for BOTH November AND next week.  It’s our last full week before the Election and it should be a big one as a result.

Many thanks for your responding with projected volumes; wishing you and yours a great weekend!  -Ron”

(responses to the weekly QC survey of projected deal activity for the upcoming week are available only to QC distribution list recipients)

 

Syndicate IG Corporate-only Volume Estimates for Next Week & November

 

IG Corporate New Issuance Next Week
10/31-11/04
November 2016
Low-End Avg. $24.26b $90.70b
Midpoint Avg. $25.13b $92.11b
High-End Avg. $26.00b $93.52b
The Low $15b $71b
The High $35b $110b

 

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

Next Week
10/03-11/04
November
1: 15-20b 1: 71b
4: 20b 1: 75-85b
5: 20-25b 2: 80b
1: 23b 4: 85b
4: 25b 1: 85-90b
2: 25-30b 1: 80-100b
4: 30b 1:90b
2: 35b 1: 85-100b
  1: 90-95b
  2: 95b
  5: 100b
  1: 100-110b
  2: 110b

 

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

 

  • Across the past ten years, all-in dollar-denominated IG Corporate plus SSA November new issuance averaged $95.72b.
  • Over the past five years, all-in IG November new issuance averaged $120.05b.
  • Over the past three years, all-in IG November issuance has averaged $118.51b.
  • The past three years of November saw IG Corporate only issuance average $105.74b.
  • November SSA issuance has averaged $12.77b across the last three years.

 

August
(Year)
All-in IG Issuance (bn) IG Corps
only (bn)
SSA
only (bn)
2015 110.14 102.56 7.57
2014 138.53 118.91 19.62
2013 106.86 95.75 11.11
2012 147.87 136.91 10.96
2011 96.87 77.21 19.66
2010 67.56 63.65 3.91
2009 92.05 67.53 24.52
2008 47.75 27.35 20.40
2007 58.98 50.08 8.90
2006 90.56 73.87 16.69

Note: includes TARP/TALF & FDIC insured issuance

 

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

 

Please note that the below weekly NICs and tenors, tranche sizes and average spread compression numbers differ slightly from those included in my early morning survey question to syndicate heads due to the fact that later in the day I was able to incorporate the final data from today’s Banco de Credito tap into the averages.  For that reason average weekly NICs went from <0.98> bps to <0.51> bps, etc.  Bid-to-cover rates remained unchanged. Thank you! –Ron

 

Here’s 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.
10/24
TUES.
10/25
WED.
10/26
THUR.
10/27
FRI.
10/28
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
New Issue Concessions 2.67 bps 1.75 bps <4.36> bps <2.71> bps 15 bps <0.51> bps 3.31 bps 1.87 bps 4.36 bps
Oversubscription Rates 2.52x 2.77x 2.13x 3.08x 2.40x 2.61x 3.05x 3.28x 4.20x
Tenors 6.75 yrs 5.71 yrs 5.64 yrs 11.29 yrs 10 yrs 7.77 yrs 9.16 yrs 11.51 yrs 12.16 yrs
Tranche Sizes $985mm $700mm $964mm $656mm $500mm $818mm $1,137mm $640mm $523mm
Avg. Spd. Compression
IPTs to Launch
<15.20> bps <15.79> bps <16.05> bps <20.21> bps <30> bps <17.42> bps      

(more…)

Central Banks and Big Government; Mischler Debt Market Comment
October 2016      Debt Market Commentary   

Quigley’s Corner 10.27.16: Central Banks and Big Government

 

Investment Grade New Issue Re-Cap 

Global Market Recap

Uncle Tony on Central Banks and Big Government

IG Primary & Secondary Market Talking Points

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

Below is the opening extract from Quigley’s Corner aka “QC” Thursday October 27, 2016 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 is 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.
To receive Quigley’s Corner, please contact Ron Quigley, Managing Director and Head of Fixed Income Syndicate via email: rquigley@mischlerfinancial.com or via phone.

 

7 IG Corporate issuers priced 13 tranches between them totaling $8.525b bringing the WTD total to $33.875b or 33% above this week’s syndicate midpoint average estimate calling for $25.48b. What’s more the MTD total is now $102.47b surpassing the October syndicate midpoint average forecast of $88.59b by over 15%. The all-in IG MTD volume is now $149.22b furthering the new all-time October issuance record for IG Corporate plus SSA supply by 20.21%.  The old October all-in record was $124.131b set in 2015.

Global Market Recap

  • S. Treasuries – USTs traded poorly & steeper but not nearly as bad as Europe.
  • Stocks – U.S. closed in the red. Europe was mixed & Asia lost ground.
  • Economic – It is not about the data right? It is all about the Central Banks.
  • Currencies – USD outperformed all of the Big 5.
  • Commodities – CRB & crude oil improved but crude remained below 50.
  • CDX IG: +0.59 to 75.93
  • CDX HY: +4.67 to 410.68
  • CDX EM: +6.47 to 237.56

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

-Tony Farren

Uncle Tony on Central Banks and Big Government

I have 3 questions for the market:

1) Are short-term or long-term rates more important to growth?

2) Has there ever been a time when higher long-term rates were better for growth than lower-long term rates?

3) Should Central Banks be advocating higher long-term rates when growth & inflation are both below target?

The Central Banks around the world are currently getting a bad rap. Central Banks are getting blamed for the low growth low inflation environment. I may not agree with all the policies of the Central Banks but at least they are trying. Where is the fiscal stimulus? If the market wants to point fingers for the current environment it should be at the governments & not the Central Banks.

 

IG Primary & Secondary Market Talking Points

 

  • PNC Financial Services Group, Inc. upsized today’s $1,000 par FXD/FRN non-cumulative PerpNC10 preferred, Series “S” to $525mm vs. $500mm.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 13 IG Corporate-only new issues was 20.21 bps.
  • BAML’s IG Master Index widened 1 bp to +136 vs. +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +131 vs. +130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +181 vs. +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 $18.9b on Wednesday versus $19.5b Tuesday and $18.1b the previous Wednesday.
  • The 10-DMA stands at $16b.

 

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

 

IG Corporate New Issuance This Week
10/24-10/28
vs. Current
WTD – $33.875b
October 2016 vs. Current
MTD – $102.47b
Low-End Avg. $24.61b 137.65% $87.83b 116.67%
Midpoint Avg. $25.48b 132.95% $88.59b 115.67%
High-End Avg. $26.35b 128.56% $89.35b 114.68%
The Low $15b 225.83% $75b 136.63%
The High $35b 96.79% $125b 81.98%

 

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 and Sizes

Please note: I always try to find ways to incrementally increase and improve the “QC” value-added proposition.  So, this evening I have added a fifth key primary market driver average to the below daily table.  The new category tracks the daily average spread compression from IPTs to the launch of each day’s IG Corporate and IG-rated preferreds when applicable. I always use that number on calls with issuers, follow-ups and in fact, on my market update calls wherein Mischler has been a joint lead.  Treasury/Funding finds it valuable as do syndicate desks and accounts.  So, there it is – yet another reason to keep reading the “QC.”

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.
10/24
TUES.
10/25
WED.
10/26
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
New Issue Concessions 2.67 bps 1.75 bps <4.36> bps 3.31 bps 1.87 bps 4.36 bps 2.71 bps
Oversubscription Rates 2.52x 2.77x 2.13x 3.05x 3.28x 4.20x 3.52x
Tenors 6.75 yrs 5.71 yrs 5.64 yrs 9.16 yrs 11.51 yrs 12.16 yrs 10.51 yrs
Tranche Sizes $985mm $700mm $964mm $1,137mm $640mm $523mm $646mm
Avg. Spd. Compression
IPTs to Launch
<15.20> bps <15.79> bps <16.05> 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
Buckeye Partners LP Baa3/BBB- 3.95% 12/01/2026 600 +250a +220a (+/-5) +215 +215 BARC/JPM/STRH/WFS
Equate Petrochemical Co. Baa2/BBB+ 3.00% 3/03/2022 1,000 MS +low 200s
+212.5
MS +212.5a MS +195 +198.8 CITI/HSBC/IMI/JPM/MIZ/MUFG
NBK/SMBC
Equate Petrochemical Co. Baa2/BBB+ 4.25% 11/03/2026 1,250 MS +hi 200s-300
or +293.75
MS +287.5a MS +270 +255.2 CITI/HSBC/IMI/JPM/MIZ/MUFG
NBK/SMBC
PNC Financial Services Baa2/BBB- 5.00% PerpNC10 525 5.125%a 5.00%a (+/-5) 5.00% 3mL+330 CITI/JPM/MS/PNC
Sirius International Group BBB/BBB- 4.60% 11/01/2026 400 +300a +285 the # +285 +285 ABC/BOCOM/CITI/HSBC/HUARONG
HSBC/JPM/SHK/TD
Trinidad Generation BBB/BBB- 5.25% 11/04/2027 600 +400a +375a (+/-12.5) +362.5 +362.5 CS/SCOT
United Technologies A3/A- FRN 11/01/2019 350 3mL+equiv 3mL+equiv 3mL+35 3mL+35 BAML/CITI/GS/MIZ/MS + 5 (p)
United Technologies A3/A- 1.50% 11/01/2019 650 +70a +55a (+/-5) +50 +50 BAML/CITI/GS/MIZ/MS + 5 (p)
United Technologies A3/A- 1.95% 11/01/2021 750 +80a +70a (+/-5) +65 +65 BAML/CITI/GS/MIZ/MS + 5 (p)
United Technologies A3/A- 2.65% 11/01/2026 1.150 +105a +85a (+/-2) +83 +83 BAML/CITI/GS/MIZ/MS + 5 (p)
United Technologies A3/A- 3.75% 11/01/2046 1.100 +145a +120a (+/-2) +118 +118 BAML/CITI/GS/MIZ/MS + 5 (p)
Wake Forest Medical Ctr. A2/A 3.093% 6/01/2026 75 +135a +130a (+/-5) +125 +125 GS/MS/WFS
Wake Forest Medical Ctr. A2/A 4.175% 6/01/2046 75 +165a +160a (+/-5) +157.5 +157.5 GS/MS/WFS

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
JBIC A1/A+ 2.00% 11/04/2021 1,000 MS +65a MS +64a MS +63 +65.4 BAML/JPM/MIZ/NOM
JBIC A1/A+ 2.25% 11/04/2026 1,800 MS +67a MS +65a MS +64 +49.6 BAML/JPM/MIZ/NOM
OKB Aa1/AA+ FRN 11/04/2019 600 3mL+17a 3mL +16a 3mL +16 3mL+16 GS/HSBC

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.31 0.01  
IG27 75.345 76.257 0.912
HV27 162.61 162.38 <0.23>
VIX 14.24 15.36 1.12  
S&P 2,139 2,133 <6>
DOW 18,199 18,169 <30>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $8.525 bn DAY: $11.925 bn
WTD: $33.875 bn WTD: $37.275 bn
MTD: $102.47 bn MTD: $149.22 bn
YTD: $1,166.606 bn YTD: $1,493.84 bn

 

Lipper Report/Fund Flows – Week ending October 19th  

     

  • For the week ended October 19th, Lipper U.S. Fund Flows reported an inflow of $2.431b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.086b) and a net outflow of $160m from High Yield Funds (2016 YTD net inflow of $11.119b).
  • Over the same period, Lipper reported a net inflow of $514.8m into Loan Participation Funds (2016 YTD net outflow of $1.956b).
  • Emerging Market debt funds reported a net inflow of $621.7m (2016 YTD inflow of $7.333b).

 

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 28.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 10/26 10/25 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 1-Day Change 10-Day Trend PC
low
IG Avg. 136 135 135 135 135 135 136 137 136 137 +1 <1> 106
“AAA” 80 78 78 77 76 76 76 78 78 79 +2 +1 50
“AA” 84 83 83 83 83 82 83 84 84 84 +1 0 63
“A” 109 108 108 108 108 108 109 109 109 110 +1 <1> 81
“BBB” 176 175 174 175 174 175 176 176 176 177 +1 <1> 142
IG vs. HY 330 325 325 327 327 331 336 339 336 345 +5 <15> 228

(more…)

Goldman Sachs Raises the D&I Barbell w 1bil Debt Issuance
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.25.16- Goldman Sachs Raises the D&I Barbell

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard

Goldman Sachs Diversity Dealer Game Changer

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller
New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

6 IG Corporate issuers priced 7 tranches between them totaling $4.90b bringing the WTD total to $14.75b or 60% of this week’s syndicate midpoint average estimate calling for $25.48b.  But today was all about one deal –  a TLAC deal for The Goldman Sachs Group, Inc.  The deal had much more to do about breaking and shattering new ground for diversity and inclusion.  And you know what?  THAT is the story I’m telling tonight.  Let’s check our various recaps first and then continue scrolling down to another great read from the House of Gold!

Global Market Recap

 

  • S. Treasuries – USTs closed mixed & little changed with a flatter curve.
  • Overseas Bonds – Core Europe were little changed & JGB’s had small gains.
  • 3mth Libor – Set at the highest yield since May 2009 (0.88567%).
  • Stocks – U.S. red at 3:30pm. Europe closed red except the FTSE. Asia closed higher.
  • Economic – The U.S. data was solid except for consumer confidence (-4.9 points).
  • Overseas Economic – Strong IFO data in Germany but the data in France was weaker.
  • Currencies – USD mixed vs. the Big 5. DXY Index reached highs since early February.
  • Commodities – Good day for gold, copper & silver but not for crude oil.
  • CDX IG: +0.75 to 74.52
  • CDX HY: +2.97 to 400.24
  • CDX EM: -1.13 to 231.09

*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 7 IG Corporate-only new issues was 15.79 bps.
  • BAML’s IG Master Index was unchanged at +135.  +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 Global Fixed Income Research was unchanged at +181.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14b on Monday versus $12b Friday and $13.9b the previous Monday.
  • The 10-DMA stands at $15.3b.

 

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

 

IG Corporate New Issuance This Week
10/24-10/28
vs. Current
WTD – $14.75b
October 2016 vs. Current
MTD – $83.345b
Low-End Avg. $24.61b 59.93% $87.83b 94.89%
Midpoint Avg. $25.48b 57.89% $88.59b 94.08%
High-End Avg. $26.35b 55.98% $89.35b 93.28%
The Low $15b 98.33% $75b 111.13%
The High $35b 42.14% $125b 66.68%

 

The Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
11NC10 FRNs 3mL+180a 3mL+175 # 3mL+175 3mL+175 <5> +5 3mL+176/174 +1

Here’s a look at the relative value analysis to derive NIC on today’s GS 11NC10 FRNs.

  • The outstanding GS 10yr was G+144 pre-announcement this morning.
  • Add 5 bps for the 10s/11s curve = G+149
  • Add in 16 bps for 10yr mid swaps = G+165
  • Interpolating 10yr m/s to 11yr m/s = 5 bps or G+170 to get an 11yr bullet equivalent.
  • NIC = 5 bps.

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

 

GS  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
11NC10 FRNs $1b $2.7b 2.7x

 

Goldman Sachs Final Pricing
GS $1b 11NC10 FRNs due 10/28/2026 @ $100.00 or 3mL+175

goldman sachs-diversity-D&I

Goldman Sachs Diversity Dealer Game Changer: It’s All About Capability & Distribution
What Goldman Sachs did today was something they tried about 18 months ago.  They were experimenting then and carried thru today with the single most formidable ratcheting up of meaningful diversity and inclusion initiatives that I have ever seen before in this space.  What they did, and as I wrote in this morning’s very early deal announcement at 7:47 am ET, was to encourage strong participation among today’s 12 diversity co-managers on their $1bil 11NC10 FRNs.  It was Goldman’s most inclusive transaction.  Everyone started from the same playing field upon today’s announcement. The built-in ‘incentive’ was where the pedal meets the metal so to speak by “rewarding unique orders in addition to each firm’s underwriting liability.” In Mischler’s case, that was 0.5%.  It was all completely about distribution. What that did was send a signal to diversity firms to ratchet up their game and prove their capabilities by delivering on each of their respective promises to provide meaningful incremental/tertiary tier II and III HIGH QUALITY distribution.  These are the true value add elements that separate the wheat from the chaff.

Let me explain the above: Irrespective of industry, and notwithstanding cultural and/or corporate guidelines designed to embrace and advance diversity and inclusion (D&I) initiatives with regard to internal hiring, strategic engagements and/or outsourcing, the fact is Goldman “gets the joke.” Based on my own lengthy tenure on Wall Street, it is clear to me, if not most that GS’s goal is not to simply “check the box” and  arbitrarily select from the myriad of “minority-owned brokerdealers” when they are the Issuer or the lead bookrunner of a particular underwriting. For those who didn’t get the memo, Goldman is a globally-recognized thought-leader i.e. best practices, and when it comes to D&I, they don’t simply ‘check the box’; their internal mandate is to enlist only truly capable firms, not merely those whose owners fall into one of the various minority classifications (e.g. Woman-owned aka WMBEs, African American-owned, Hispanic American owned, Service-Disabled Veteran owned, etc).

At Mischler, we agree with the GS philosophy wholeheartedly. It is imperative to embrace diversity, but the embrace should be driven by capability and excellence, not merely whether the firm is owned by a ‘certified minority’ . It is an approach that Mischler embraces when selecting the Veteran-centric philanthropic organizations that we support year round and during the months of May and November, when we pledge a portion of the entire month profits to honor Memorial Day and Veterans Day. NO enterprise, whether it be a Fortune Corporation/Issuer, a Public Plan Sponsor, a global investment bank, or an Investment Manager that has D&I goals and/or mandates should be ‘checking the box’ without first checking the actual capabilities of the respective service provider!

In the case of today’s $1bil placement, GS remained focused on reviewing their myriad diversity order books and to only select co-manager firms according to an internal and granular set of criteria.  Among other things, Goldman would have the right to scrutinize accounts and reflect their thoughts through their final allocations to each firm.

With our underwriting liability of 0.5% applied to today’s deal size of $1b that equates to $5mm allocation. Assuming we secured our full 5mm underwriting liability (given our typical high quality order books), it would be a tall order to allocate each of several dozen institutional accounts with a meaningful amount of paper.  The prospective allocations would simply not prove meaningful enough to those fund managers. But Goldman wanted to capture new, quality middle markets accounts that include a range of investor profiles, as well as geographically diverse placement opportunities across the globe. Goldman included a good firm today when they called Mischler Financial, the nation’s oldest Service Disabled Veteran broker dealer. We are grateful for the bulge bracket firms who look for the distribution value-add.  That said, one particular firm (shall I say notorious shop?) recently asked us to build a book, encouraged our orders and claimed they’d work together on securing us the best possible allocation, only to give us an otherwise deminimis allocation of bonds once the books were closed.

Before readers infer a sense of sour grapes on the part of this writer, that is not the case.  We’re big boys and girls here and we’ve been to more rodeos than many of our peers insofar as the new issue allocation process. But, as I shared that story with several bulge bracket firms during the past several days, the senior syndicate team members I spoke with genuinely found it “deplorable” that any desk would put a prospective co-manager or selling group member through the exercise of building a book of firm IOIs, only to leave that firm and their accounts with less than crumbs for the effort. In fact, one syndicate head said, “If we know allocations will be very difficult we will always tell you there’s no distribution this go ‘round, but we would NEVER be so egregious to encourage it and then disrespect you like that. It’s plain bad business that hurts what you guys are trying to do and you work so hard at doing it right!”  Indeed! And that story got around folks, but then there is Goldman Sachs–a firm that has historically proven to have honor and integrity whenever interacting with their underwriting group partners.

Conclusion, Goldman did something bold and daring today for diversity and inclusion and for their transaction.  It IS a game changer that incentivizes on a much grander scale.  The message sent is clear – Goldman will partner with you, but you need to work hard at it; you need to deliver and execute consistently and you need to show us quality accounts, solid order books and be able to place the paper when we give it to you.

Who and where are the Mischler investor accounts that participated in today’s GS transaction?  They represented a total of 13 different investor profile types. They exist throughout the United States. They are in the United Kingdom and throughout Europe. They are in Asia, they are in the Caribbean and LATAM.  There were over 3 dozen MFG clients on today’s GS order book.  They are true quality accounts; good, solid, reliable investors who are often crowded out in our new world order by global money managers who pin down most of today’s new issues.  These middle market investors yield too. They want to buy the best, highest-rated IG credits.  They often add to positions in the secondary market.

And, they all showed up today.  I personally thank each and every one of them.  They get the “QC” and they read it.  They understand all the hard labor we expend in this space, and they understand we are led by an executive team that is honorable and financially committed to stick with it for the long haul.  We are called Mischler Financial Group. We’re about a proudly earned certification; we’re about the strongest distribution in the business; we’re about very strong capital, a fantastic operations team that is second to none, and we’re about stellar relationships across the DCM and Syndicate ecosystem. That’s what it takes in today’s competitive landscape and we greatly appreciate the wonderful partnership we share with Goldman Sachs. We’re also grateful for Goldman’s revolutionary transaction today; one that was focused on best-in-class financial industry partners who can help extend the GS brand with integrity and reliability!

Words Count, Most of All These Two Words: Thank You.

Before this “guy-in-the-corner” walks out of his bedroom each morning, I say “thank you”.  It’s important folks.  Sometimes the only prayer we ever have in life is “thank you” and it will be enough.  You know that I mean that.  It’s time for roll call again and it gives me great pleasure to shout out Team Goldman Sachs not only for being there for our firm today, but for Diversity & Inclusion in general.  Thank you to Team GS not for merely moving the needle forward today for inclusive initiatives, but for bulldozing it ahead with a new powerful distribution incentive.  Your trajectory in finding new ways to lend meaning to the mandate never surprises, rather it overwhelms because you are doing great things the right way.  Our firm, and others with proven capabilities grow as a result and all the accounts that participated today in yet another major bank’s TLAC issuance will come to us to execute across myriad other product lines.  So, from the desk of Chairman and CEO Lloyd Blankfein to Jonny Fine; from Tony Shan to Matt Jackson; from Salina Lee and Elizabeth Plunkett to Jason Ghilarducci, you are all part of one team that came together again on deal day to raise the bar for D&I while fortifying your own self-funding with new global investors that cover a diversity of profiles and regions.

Simply said, “Thank you all!”

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller

Mr. Scott Stringer seems like a nice enough fellow. His resume includes being the 44th and current New York City Comptroller and a New York Democratic politician who previously served as the 26th Borough President of Manhattan.  Regarding Mr. Stringer’s recent and LOUD October 16th press request for The Goldman Sachs Group Inc. (among 14 other major companies) to disclose data on the diversity of their suppliers and to increase spending with firms owned by minorities and women and veterans.  The fact is, there is currently no mandate on the part of NYC Comptroller to include SDV-owned broker-dealers, although select managers do informally include such firms. I invite Mr. Stringer and/or his designates to read the “QC.” They’ll find what they’re looking for, which is nothing but a best-in-class procurement initiative in the IG dollar DCM; no, make that Global Debt Capital Markets.

Contrary to the less-than-subliminal context of the above noted press release, Goldman does understand and fully embraces the notion that supplier diversity is the next frontier for companies seeking to manage risk and create sustainable shareowner value. In fact, Goldman has ‘gotten it’ for many years. Starting from inside the office of Chairman and CEO Lloyd Blankfein right on down to the DNA of his top lieutenants like Jonathan “Jonny” Fine, who heads syndicate at the House of Gold, Goldman knows that a broader pool of diverse financial suppliers provides tangible benefits to corporations in terms of price and quality.  In today’s case, their very own company!  As Mr. Stringer said, and I quote, “The Company talks the talk but absent disclosure, it’s impossible to measure the impact of their efforts.”

Mr. Stinger, I’m the guy-in the corner and I’m here to RESPECTFULLY suggest to you that Goldman has not only moved the needle forward for all of D&I in the financial services industry, they are at the cutting edge. Contrary to what you implied in the press statement, and despite the ubiquitous trend of bashing big banks in general, I’d humbly argue that for GS, it’s not all about the money, rather it’s about incentivizing us (minority firms) to grow so that we’re around in the future.  Goldman has created such a meaningful diversity mandate that it has literally helped my firm, Mischler Financial Group, Inc. to become one of the best in the country in the fixed income markets. We are a sustainable proposition. GS has raised the bar in a healthy spirit of competition in the entire diversity space across our industry in order to bring out the best in all of us and our respective platforms.

As opposed to ‘calling out’ GS and challenging their D&I process, we respectfully encourage the NYC Comptroller’s office to take a page from the GS playbook vis a vis the process by which NYC’s pension funds determine how and who they include within their own “minority broker” approvals and respective allocation of order schemes. The NYC Comptroller’s Office does not [yet] recognize Service-Disabled veteran brokerdealers; but does recognize other minority classifications within this industry. At such time as you expand the minority classifications to include SDV-owned/operated BDs,  you’ll discover that Mischler was one of the very first firms to be certified by State of New York in connection with the 2014 NYS legislation that established mandates for NYS agencies to procure from Service-Disabled Veteran owned enterprises. While the NYC Comptroller office has not yet embraced State of New York’s SDV legislation, we are hopeful that you will, and when you do, it will likely prove additive in many ways.

Mr. Stringer, if you’d like more perspective and/or insight about this topic, I’m happy to have a dinner with you. We’ll go “Dutch treat.”   I promise you it’ll be a fun and informative meeting, and I’ll happily share with you the history of outreaches made to your office specific to this subject that have seemingly fallen through the cracks. You’ll have one less thing to check off your “to do” list! Hopefully, our firm will not be penalized for creating ‘greater transparency’ via this “op-ed.”  My contact info is at the bottom of the page.

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 and Sizes

 

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.
10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
New Issue Concessions 2.67 bps 3.31 bps 1.87 bps 4.36 bps 2.71 bps
Oversubscription Rates 2.52x 3.05x 3.28x 4.20x 3.52x
Tenors 6.75 yrs 9.16 yrs 11.51 yrs 12.16 yrs 10.51 yrs
Tranche Sizes $985mm $1,137mm $640mm $523mm $646mm

 

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
Comm. Bank of Australia Aa2/AA- FRN 11/07/2019 500 3mL+equiv 3mL+equiv 3mL+64 3mL+64 CBA/HSBC/JPM
Comm. Bank of Australia Aa2/AA- 1.75% 11/07/2019 1,000 +90-95 +80 the # +80 +80 CBA/HSBC/JPM
Goldman Sachs Group, Inc. A3/A FRN 11NC10 1,000 3mL+180a 3mL+175 the # 3mL+175 3mL+175 GS-sole
Lennox International Inc. Baa3/BBB 3.00% 11/15/2023 350 +180a +155a (+/-5) +145 +145 JPM/WFS
M&T Bank Corp. Baa2/BBB- 5.125% 11/01/2026 500 5.25%a 5.125% the # 5.125% 3mL+352 CS/JPM/RBC/UBS
National Rural Utilities Coop Fin. Corp. A2/A 1.50% 11/01/2019 300 +65-70 +55a (+/-5) +50 +50 JPM/MIZ/PNC/STRH
Orange SA Baa1/BBB+ 1.625% 11/03/2019 1,250 +80-85 +70a (+/-3) +67 +67 BAML/JPM/MS/MUFG

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.30 1.30 0
IG27 73.767 74.537 0.77
HV27 161.385 161.635 0.25
VIX 13.02 13.46 0.44
S&P 2,151 2,143 <8>
DOW 18,223 18,169 <54>
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $4.90 bn DAY: $4.90 bn
WTD: $14.75 bn WTD: $14.75 bn
MTD: $83.345 bn MTD: $126.695 bn
YTD: $1,158.081 bn YTD: $1,481.915 bn

 

Lipper Report/Fund Flows – Week ending October 19th  

     

  • For the week ended October 19th, Lipper U.S. Fund Flows reported an inflow of $2.431b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.086b) and a net outflow of $160m from High Yield Funds (2016 YTD net inflow of $11.119b).
  • Over the same period, Lipper reported a net inflow of $514.8m into Loan Participation Funds (2016 YTD net outflow of $1.956b).
  • Emerging Market debt funds reported a net inflow of $621.7m (2016 YTD inflow of $7.333b).

 

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 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
low
IG Avg. 135 135 135 135 136 137 136 137 137 137 0 <2> 106
“AAA” 78 77 76 76 76 78 78 79 79 79 +1 <1> 50
“AA” 83 83 83 82 83 84 84 84 84 84 0 <1> 63
“A” 108 108 108 108 109 109 109 110 110 110 0 <2> 81
“BBB” 174 175 174 175 176 176 176 177 177 177 <1> <3> 142
IG vs. HY 325 327 327 331 336 339 336 345 338 338 <2> <13> 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 32.21 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
low
Automotive 117 117 117 117 117 118 118 119 119 119 0 <2> 67
Banking 127 127 128 128 129 130 129 130 129 130 0 <3> 98
Basic Industry 177 179 179 180 180 180 179 180 179 180 <2> <3> 143
Cap Goods 101 101 101 101 101 102 102 102 102 102 0 <1> 84
Cons. Prod. 105 105 105 104 105 106 106 106 106 107 0 <2> 85
Energy 174 175 175 177 179 179 178 180 180 181 <1> <7> 133
Financials 160 160 161 161 162 163 163 163 163 163 0 <3> 97
Healthcare 114 114 114 114 114 114 114 114 115 116 0 <2> 83
Industrials 136 136 135 136 136 137 137 137 137 138 0 <2> 109
Insurance 154 155 155 155 156 155 155 156 156 156 <1> <2> 120
Leisure 136 135 136 136 137 137 137 137 138 138 +1 <2> 115
Media 157 157 155 155 155 157 157 158 158 159 0 <2> 113
Real Estate 147 147 147 148 148 149 149 148 149 149 0 <2> 112
Retail 115 114 114 114 114 115 115 115 115 115 +1 0 92
Services 128 128 128 128 129 129 129 130 130 130 0 <2> 120
Technology 112 112 112 111 112 113 113 114 114 115 0 <3> 76
Telecom 162 161 156 155 156 157 158 158 158 158 +1 +4 122
Transportation 136 136 137 137 137 137 137 138 138 137 0 <1> 109
Utility 136 137 137 138 138 138 139 139 139 139 <1> <3> 104

 

New Issue Pipeline

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

(more…)

Investment Grade Corporate Debt Deal Dashboard-Mischler Comment
October 2016      Debt Market Commentary   

Quigley’s Corner 10.24.16 : Investment Grade Debt Deal of the Day.

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

The BNY Mellon $1.25b 2-part Deal Dashboard

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

 5 IG Corporate issuers priced 10 tranches between them totaling $9.85b for a strong start to what could be a sizeable week.  We have already achieved 38% of the syndicate midpoint average forecast for this week which is $25.48b.  Last year was the highest volume October on record at $124.131b for all-in IG issuance. That’s including IG Corporates and SSA and according to my calculations.  That puts us a mere $2.337b away from a new October record.

 

Today’s Deal-of-the-day belongs to none other than Bank of New York Mellon Corporation (NYSE:BNY) in view of the $1.25b two-part consisting of $750mm 7NC6 Senior FRNs and $500mm 12yr Fixed Subordinated Notes.   But first let’s check the Global Re-cap, our IG Primary and Secondary Market Talking Points and take a look at where we stand in relation to this week’s and month’s IG volume.  Then we’ll get into the BNY Mellon deal drill-down, etcetera!

 

Global Market Recap

 

o   U.S. Treasuries – Down day for USTs led by the 5yr.

o   Overseas Bonds – Europe traded poorly during NY hours. JGB’s were little changed.

o   3mth Libor – Set at the highest yield since May, 2009 (0.88372%).

o   Stocks – U.S. stocks well bid at 3:15pm. Europe more green than red. Asia rallied.

o   Economic – Solid to stronger Markit PMI data in the U.S., EU & Germany.

o   Japan Economic – Exports/imports were better than expected/last but remained terrible.

o   Currencies – USD outperformed all of the Big 5. The Yen is back over 104.

o   Commodities – Losing day for commodities to start the week

o   CDX IG: +0.01 to 73.81

o   CDX HY: -0.14 to 397.91

o   CDX EM: -1.13 to 231.09

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Honeywell International Inc. dropped the 5yr FRN tranche from today’s $4.5b 4-part transaction finding sufficient 5yr demand in the fixed tranche.  All 4 tranches priced at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 11 IG Corporate-only new issues was 15.14 bps.
  • BAML’s IG Master Index was unchanged 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 Global Fixed Income Research was unchanged at +181.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12b on Friday versus $16.5b Thursday and $11.7b the previous Friday.
  • The 10-DMA stands at $13.9b.

 

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

 

IG Corporate New Issuance This Week
10/24-10/28
vs. Current
WTD – $9.85b
October 2016 vs. Current
MTD – $78.445b
Low-End Avg. $24.61b 40.02% $87.83b 89.31%
Midpoint Avg. $25.48b 38.66% $88.59b 88.55%
High-End Avg. $26.35b 37.38% $89.35b 87.80%
The Low $15b 65.67% $75b 104.59%
The High $35b 28.14% $125b 62.76%

 

The BNY Mellon $1.25b 2-part Deal Dashboard

 

BNY Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
Comparable Bid
Pre-Announcement
NICs
(bps)
Trading at
the Break
+/-
(bps)
7NC6 FRN 3mL+115a 3mL+105 # 3mL+105 3mL+105 <10> JPM 7NC6 10/2023 3mL+120
20bps diff. BK & JPM = 3mL+100
+5 3mL+103/ <2>
12yr FXD +145a +130a (+/-5) +125 +125 <20> BK 2.45% 8/2026 G+88
15 bps 10s/12s curve = +103
+25 Sr/Sub diff. = +128
<3> 120/118 <5>

 

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

 

BNY Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
7NC6 FRN $750mm $1.85b 2.47x
12yr FXD $500mm $2.85b 5.7x

 

BNY Mellon Final Pricing
BNY $750mm 7NC6 Senior FRNs due 10/30/2023 @$100.00 or 3mL+105
BNY $500mm 3.00% Sub Notes due 10/30/2028 @ $99.980 to yield 3.011% or T+125

 

Thank Yous

 

Thank you to BNY Mellon’s Frank Vasta, Ryan MacGregor and Karl Schultz for the opportunity to demonstrate Mischler’s capital markets capabilities.  We appreciate the Treasury/Funding team’s strong emphasis on developing relationships with a diverse financial supplier network that includes Mischler Financial, the nation’s oldest SDVBE. BNY Mellon’s diversity and inclusion network is a successful one thanks to the active leadership of its Global Diversity & Inclusion Council comprised of 40 of the institution’s most senior executives and chaired by BNY Mellon’s President Karen Peetz.

 

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 and Sizes

 

…..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.
10/17
TUES.
10/18
WED.
10/19
TH.
10/20
FRI.
10/21
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
New Issue Concessions 6.62 bps 3.17 bps 1.71 2 bps N/A 3.31 bps 1.87 bps 4.36 bps 2.71 bps
Oversubscription Rates 2.11x 2.91x 2.86x 5.31x N/A 3.05x 3.28x 4.20x 3.52x
Tenors 6.06 yrs 10.71 yrs 12 yrs 6.25 yrs 3 yrs 9.16 yrs 11.51 yrs 12.16 yrs 10.51 yrs
Tranche Sizes $1,043mm $1,050mm $1,249mm $1,225mm 300mm $1,137mm $640mm $523mm $646mm

 

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 NY Mellon Corp. A1/AA- FRN 10/30/2023 750 3mL+115a 3mL+105 the # 3mL+105 3mL+105 BARC/BNY/DB/MS/UBS
Bank of NY Mellon Corp. A2/A+ 3.00% 10/30/2028 500 +145a +130a (+/-5) +125 +125 BARC/BNY/DB/MS/UBS
Charles Schwab Corp. Baa2/BBB 4.625% PerpNC5 600 4.875%a 4.625% the # 4.625% 3mL+331.5

 

CITI/CS/GS/JPM/WFS
Honeywell International A2/A FRN 10/30/2019 250 3mL+equiv 3mL+equiv 3mL+28 3mL+28 DB/JPM/MS/WFS
Honeywell International A2/A 1.40% 10/30/2019 1,250 +55-60 +45a (+/-2) +43 +43 DB/JPM/MS/WFS
Honeywell International A2/A 1.85% 11/01/2021 1,500 +70-75 +60a (+/-2) +58 +58 DB/JPM/MS/WFS
Honeywell International A2/A 2.50% 11/01/2026 1,500 +90-95 +80a (+/-2) +78 +78 DB/JPM/MS/WFS
Roche Holdings Inc. AA/AA 1.75% 1/28/2022 650 +70a +57a (+/-2) +55 +55 BARC/CITI/SANT
Roche Holdings Inc. AA/AA 2.375% 1/28/2027 850 +90a +75a (+/-2) +73 +73 BARC/CITI/SANT
Wells Fargo & Co. A2/AA- FRN 10/31/2023 2,000 3mL+130a 3mL+123 the # 3mL+123 3mL+123 WFS-sole

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.30 0  
IG27 73.799 73.767 <0.32>
HV27 161.195 161.385 +0.19
VIX 13.34 13.02 <0.32>  
S&P 2,141 2,151 10
DOW 18,145 18,223 78  
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $9.85 bn DAY: $9.85 bn
WTD: $9.85 bn WTD: $9.85 bn
MTD: $78.445 bn MTD: $121.795 bn
YTD: $1,153.181 bn YTD: $1,477.015 bn

 

Lipper Report/Fund Flows – Week ending October 19th  

     

  • For the week ended October 19th, Lipper U.S. Fund Flows reported an inflow of $2.431b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.086b) and a net outflow of $160m from High Yield Funds (2016 YTD net inflow of $11.119b).
  • Over the same period, Lipper reported a net inflow of $514.8m into Loan Participation Funds (2016 YTD net outflow of $1.956b).
  • Emerging Market debt funds reported a net inflow of $621.7m (2016 YTD inflow of $7.333b).

(more…)

Draghi Talk; Mischler Debt Market Comment via Quigley’s Corner
October 2016      Debt Market Commentary   

Quigley’s Corner 10.20.16- Draghi Talk; The BIGGEST Oct in IG Bond History

 

Investment Grade New Issue Re-Cap 

Global Market Recap

La Dolce Vita – Draghi Talks About “The Good Life” in the EU (?!)

IG Primary & Secondary Market Talking Points

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

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Corporate Debt Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Believe it or not, we very quietly slid into 9th place among the top 10 highest all-in IG issuance weeks.  All-in IG issuance combines both IG Corporates and SSA deals.  Generally speaking,  SSA weekly issuance typically accounts for about 20%-25% of all-in weekly volume, give or take.  This week, however, thanks to The Kingdom of Saudi Arabia’s $17.5b 3-part inaugural deal, EIB’s $4.5b 3yr and today’s $4.25b IBRD two-part 3s and 10s, SSA issuance has thus far eclipsed IG Corporates 50.36% vs. 49.64%.

On the day, 3 IG Corporates priced 3 deals totaling $1.4b bringing the WTD total to $28.34b vs. $23.17b or 22% above this week’s syndicate midpoint average estimate. SSA added IBRD $4.25b two-part 3s & 10s bringing the all-in IG day total to 4 issuers, 5 tranches and $5.65b.  The all-in MTD total is now $108.145b.  This month is on pace to finish as the most prolific October in IG history.

 

Global Market Recap

 

  • U.S. Treasuries – USTs closed mixed, little changed & flatter.
  • Overseas Bonds – Long end Bunds had a strong session. JGB’s were little changed.
  • 3mth Libor – Set at the highest yield since May 2009 (0.88178%).
  • Stocks – U.S. small losses (3:15pm) Europe rallied after Draghi. Nikkei well bid.
  • Economic – U.S. data fine. Germany PPI remained negative. U.K. retail sales weaker.
  • Currencies – Strong day for the USD outperforming all of the Big 5.
  • Commodities – Crude hit hard after rallying to a 15-month high yesterday.
  • CDX IG: +0.15 to 73.87
  • CDX HY: +0.66 to 398.69
  • CDX EM: -2.93 to 234.07

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

-Tony Farren

 

La Dolce Vita – Draghi Talks About “The Good Life” in the EU…..N-O-T!  

ECB Head Mario Draghi announced that the ECB will not stop QE without first tapering it fortifying the opinion that it will extend well beyond March 2017. Draghi said, “an abrupt ending to bond purchases is unlikely” and “it is not present in anybody’s mind.”

Here are all the pertinent talking points from today’s short news conference with ECB President Mario Draghi:

  • The ECB left its benchmark rates unchanged as expected.
  • ECB’s Main Refinancing Rate was left unchanged at 0.0% as expected.
  • The ECB’s Deposit Facility Rate persisted at -.40% ……as expected.
  • ECB’s Marginal Lending Facility Rate continued at 0.25% also as expected.
  • ECB’s Asset Purchase Target also remained unchanged at €80 bln per month.
  • Draghi sees rates at present or lower level for extended period.
  • Sees rates at present, lower level well past QE horizon.
  • Says QE will run through March 2017 or beyond if needed.
  • QE will run until inflation path is consistent with goal.
  • ECB to preserve stimulus needed to raise inflation.
  • ECB policy ensures very favorable conditions.
  • ECB ready to act using all instruments within mandate.
  • December assessment will benefit from new forecasts.
  • Council will review committee work on QE in December.
  • Baseline remains subject to downside risks.
  • Sees moderate economic growth at steady pace.
  • No signs of convincing upward trend in core inflation.
  • Sees gradual rise in inflation.
  • Inflation rates rising further in 2017, 2018.
  • Economy resilient to global, political uncertainty.
  • Domestic demand supported by policy pass-through.
  • Investment supported by favorable financing conditions.
  • Low oil prices, job gains provide support for consumers.
  • Sluggish pace of reforms also a risk.
  • Loan dynamics follow path of gradual recovery.
  • ECB measures significantly helping credit.

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 3 IG Corporate-only new issues was 21.83 bps.
  • BAML’s IG Master Index tightened 1 bp to +135 vs. +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +129 vs.  +130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Investment grade corporate bond trading posted a final Trace count of $18.1b on Wednesday versus $17.3b Tuesday and $16.7b the previous Wednesday.
  • The 10-DMA stands at $15.8b.

 

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

 

IG Corporate New Issuance This Week
10/17-10/21
vs. Current
WTD – $28.34b
October 2016 vs. Current
MTD – $64.795b
Low-End Avg. $22.30b 127.09% $87.83b 73.77%
Midpoint Avg. $23.17b 122.31% $88.59b 73.14%
High-End Avg. $24.04b 117.89% $89.35b 72.52%
The Low $15b 188.93% $75b 86.39%
The High $30b 94.47% $125b 51.836%

 

Have a great evening!
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 and Sizes

 

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.
10/17
TUES.
10/18
WED.
10/19
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
New Issue Concessions 6.62 bps 3.17 bps 1.71 1.87 bps 4.36 bps 2.71 bps 0.69 bps
Oversubscription Rates 2.11x 2.91x 2.86x 3.28x 4.20x 3.52x 3.23x
Tenors 6.06 yrs 10.71 yrs 12 yrs 11.51 yrs 12.16 yrs 10.51 yrs 9.36 yrs
Tranche Sizes $1,043mm $1,050mm $1,249mm $640mm $523mm $646mm $964mm

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.29 <0.01>  
IG27 73.725 73.938 0.213
HV27 162.135 161.645 <0.49>
VIX 14.41 13.75 <0.66>  
S&P 2,144 2,141 <3>
DOW 18,202 18,162 <40>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $1.40 bn DAY: $5.65 bn
WTD: $28.34 bn WTD: $57.09 bn
MTD: $64.795 bn MTD: $108.145 bn
YTD: $1,139.531 bn YTD: $1,463.365 bn

 

Lipper Report/Fund Flows – Week ending October 19th   (more…)

House of Saud Staggering SSA Deal; 6-Pack Bank Earnings; Sprint Debt Distilled
October 2016      Debt Market Commentary   

Quigley’s Corner 10.19.16: House of Saud Syndicates Staggering SSA Deal; Sprint : HY or IG?!

Investment Grade New Issue Re-Cap 

The Great Debate:  Not Clinton vs. Trump; But Rather: Is Sprint IG Countable”, or ABS

The Super Six-Pack U.S. Banks

Why Next Week Should Be a REALLY Big One for IG Issuance. REALLY BIG! ONE of THE BIGGEST this year!
IG Primary & Secondary Market Talking Points

Fed Beige Book Headlines – All You Need to Know

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

Indexes and New Issue Volume

Investment Grade Credit Spreads (by Rating/Industry)

Lipper Fund Flows

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Before our deep dive tonight here are the session’s impressive IG primary market numbers

  • 5 IG Corporate issuers priced 9 tranches totaling $11.24b. WTD we’re now 16% above the syndicate midpoint average estimate or $26.94b $23.17b.
  • 3 IG SSA issuers priced 5 tranches totally a new record $19b thanks to the Kingdom of Saudi Arabia’s $17.5b inaugural debt issue across 5s/10s and 30s.
  • All-in IG Corporate and SSA issuance was 8 issuers, 14 tranches totaling $30.24bMTD, all-in IG issuance has officially breached the $100b mark at $102.495b ranking October 2016 as the 3rd most prolific October on record with 8 business days remaining in the month.

 

Saudi Arabia’s 3-Part Inaugural Bond Lays Claim to Record IG SSA Issuance Day

saudi-debt-deal-bloomberg-image

Image courtesy of Bloomberg LP

Today when the Kingdom of Saudi Arabia launched its inaugural $17.5b 3-part  5s/10s/30s transaction it single-handedly trumped the previous all-in IG SSA issuance daily record of $12.5b set back on  January 10th, 2010.  That’s right the Saudi issue beat the entire record by 40% or $5b.  In fact, along with two other telegraphed SSA issuances – a $1b 2-year from the AFDB and a $500mm 4-year Green Bond from KBN, today’s IG SSA total is a staggering $19b.

Here are 10 staggering talking points about the Saudi Kingdom’s new issue:

  • The final cumulative order book total was $67b or 3.83-times oversubscribed.
  • Even as a stand-alone transaction, it is 40% larger than the single largest ever total IG SSA issuance day in the GCM or $17.5b vs. $12.5b.
  • It is the largest IG EM SSA issue on record beating out Qatar’s $9b issue by 94.45% or $17.5b vs. $9b.
  • It’s an inaugural deal for The Kingdom of Saudi Arabia.
  • It is the largest transaction ever originated from the Middle East.
  • The final cumulative order book total was $67b or 3.83-times oversubscribed.
  • Saudi Arabia’s A1/A-/AA- credit ratings are higher than either of Portugal, Italy, Ireland, Spain, Belgium and the Czech Republic.
  • With a $67b final cumulative order book investors clearly found something in the desert that’s as good as gold insofar as their pursuit of yield is concerned.
  • Given that Europe and Japan are in negative rates, it helps explain the voracious appetite for today’s Saudi paper.
  • This record may not last for long as Saudi Aramco is planning MASSIVE issuance.

Having said all that, friend, former colleague and author of 19 geopolitical and macro-economic books, Dr. Scott MacDonald and I discussed balancing out the euphoria surrounding this landmark Saudi transaction.  Investors should be aware of these 10 points……among others:

  • Saudi Arabia is currently in a fierce Cold War with Iran.
  • Saudi Arabia is at war with Yemen.
  • Sunni- Shia tensions prevail (enough said).
  • The Kingdom hosts significant geopolitical tension.
  • In as much as Deputy Crown Prince Mohammed bin Salman is focused on weaning the country’s economy off of its oil dependency, it remains unmistakably oil reliant.
  • According to the IMF, Saudi Arabia is expected to grow at a meager 1.2% pace this year.
  • Emerging Markets could be far from hitting bottom despite investors beginning to buy Mexico, although in that case it’s that driven more by the U.S. Presidential election polls showing Clinton ahead.
  • The new bonds and any future issuance will be exposed to wild fluctuations thanks to future U.S. interest rate risks especially should the Fed raise rates sooner rather than later.
  • The United States, in and of itself, will have far reaching impact on the Saudi Kingdom especially in a new Administration whether it’s Clinton or Trump.
  • Lastly, but certainly not least, is the impact on the Saudi Kingdom of a European banking crisis.  So, the exposure to myriad impacts could be harsh.

 

The Great Debate:  Not Clinton vs. Trump; But Rather: Is Sprint IG Countable”, or ABS?

 

Sprint Spectrum Co. LLC (Baa2/BBB) announced it will issue a $3.5b Class A-1 5-year NC4 (WAL 3 years) Senior Secured Notes transaction thru joint leads Goldman Sachs (sole global coordinator), J.P. Morgan and Mizuho sometime following the current road show that kicked off Monday, October 17th in New York, followed by the 18th in Boston along with a group lunch in L.A. and that concluded today in San Francisco. Price talk is in the 3.50% “area” (+/- 12.5).  Books closed today at 1:00pm ET with pricing expected sometime during tomorrow’s session. Clearly Baa2/BBB is an investment grade rating BUT does this count toward IG Corporate new issue supply or ABS/Structured products issuance?  Many info sources had to make a tough call on this one.

It is a securitized lease deal, so it is not countable as an IG Corporate. It’s also getting a rating higher than the issuer typically commands, which means it’s securitized by leases…It also includes collateral, so any way you slice or dice it, I would humbly but emphatically state it is NOT an IG corporate countable new issue. The funny thing about it is the deal is (ironically) being run off high yield syndicate desks.

This Bud’s for You – The Super Six-Pack U.S. Banks

On Friday,  October 7  I wrote, “beginning next Friday the FIGs release Q3 earnings with reports from Citigroup, J.P. Morgan and Wells Fargo on Friday the 14th followed by BAML on Monday the 17th, Goldman Sachs on Tuesday the 18th and Morgan Stanley on Wednesday the 19th. ……….“chatter” suggests they will post positive earnings.” Then on Tuesday, October 11th I scribed, “the 6-pack U.S. banks begin earnings releases this Friday and expectations seem to be for overall positive earnings from them.

Well they’ve all reported as of this morning, with Morgan Stanley leaving quite an inflection point across the bulge bracket.  All beat earnings estimates, while others annihilated forecasts.  Here’s a brief look at the six-pack U.S. banks!  I’ll save the editorializing and just post the numbers, which do speak for themselves, and “yes” there’s a Bud for all six of them!

Bank/Q3
Release Date
EPS AVG. EPS Estimate Net Q3 ‘16 Profit/Loss Net Q3 ‘15 Profit/Loss Revenue
Q3 2016
Revenue
Q3 2015
JPM – 10/14 $1.58 $1.39 $6.3b $6.8b $24.7 $22.8b
CITI 10 – 10/14 $1.24 $1.16 $3.8b $4.3b $17.8b $18.7b
WFC – 10/14 $1.03 $1.01 $5.6b $5.8b $22.3b $21.9b
BAML – 10/17 $0.41 $0.34 $5.0b $4.6b $21.6b $21.0b
GS – 10/18 $4.88 $3.82 $2.1b $1.4b $8.2b $6.9b
MS – 10/19 $0.81 $0.63 $1.6b $1.0b $8.9b $7.8b

 

Next Week Should Be a Big One for IG Issuance. REALLY BIG! (#ManyPeopleAreSaying!)

Below insight courtesy of extrapolating seasoned views via MFG Rates Trading Desk..

Next week, by default, has got to be an immense week for issuance.  The bulk of this week’s issuance is behind us and all eyes will be on tomorrow’s ECB Policy Decision, subsequent address and Q&A.  The BoJ then meets on Tuesday, November 1st followed by the FOMC Rate Decision on Wednesday, November 2nd which is then followed by the BOE’s next decision and policy discourse on Thursday, November 3rd with NFP on Friday, November 4th.  Additionally, the Edison Electric Institute’s 51st Annual Financial Conference begins on Sunday, November 6th and lasts 4 days through the close of business on Wednesday, November 9th effectively taking the utility sector out of action for those three work days.  Tuesday, November 8th is the U.S. Presidential Election.  That Friday, November 11th is Veteran’s Day which is a Federal holiday and is usually preceded by senior market participants filing out a bit early from work the day before or Thursday, November 10th.

So, looking out across the forward calendar it’s clear to see that next week, the week of October 24th thru the 28th is a clear week for issuers to P-R-I-N-T.  It should be a monster week for IG Corporate issuance.

 

IG Primary & Secondary Market Talking Points

 

  • Mondelez International Holdings Netherlands BV dropped the 5yr FRN from today’s $3.75b three-part 3yr FXD/FRN and 5yr FXD which all priced at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 9 IG Corporate-only new issues was 16.00 bps.
  • 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 was unchanged at +130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Investment grade corporate bond trading posted a final Trace count of $17.3b on Tuesday versus $13.9b Monday and $15.4b the previous Tuesday.
  • The 10-DMA stands at $14.1b.

 

Fed Beige Book Headlines – All You Need to Know

 

  • Most fed districts noted modest or moderate pace of expansion.
  • Fed says economy continued to expand late-August to early October.
  • Several Fed districts continue seeing slight to moderate growth.
  • Beige Book says job market tight, outlooks mostly positive.
  • Modest employment growth was noted over period.
  • Wage growth was modest, prices rose slightly on net.
  • Manufacturing mixed, strong dollar slowed exports.
  • Most districts saw an uptick in retail spending.
  • Demand for nonfinancial services generally increased.
  • Home price appreciation continued at modest pace.
  • Residential construction and real estate picked up.
  • Commercial real estate activity and construction improved.
  • Demand for business and consumer loans increased.
  • Saw signs of stabilization in oil and natural gas sectors.
  • Most Dallas Fed contacts saw 2017 better for oil, gas sector.
  • Credit quality remained strong or improved.
  • Some contacts saw election source of economic uncertainty.

 

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

 

IG Corporate New Issuance This Week
10/17-10/21
vs. Current
WTD – $26.94b
October 2016 vs. Current
MTD – $63.395b
Low-End Avg. $22.30b 120.81% $87.83b 72.18%
Midpoint Avg. $23.17b 116.27% $88.59b 71.56%
High-End Avg. $24.04b 112.06% $89.35b 70.95%
The Low $15b 179.60% $75b 84.53%
The High $30b 89.80% $125b 50.72%

 

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 and Sizes

 

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.
10/17
TUES.
10/18
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
New Issue Concessions 6.62 bps 3.17 bps 1.87 bps 4.36 bps 2.71 bps 0.69 bps
Oversubscription Rates 2.11x 2.91x 3.28x 4.20x 3.52x 3.23x
Tenors 6.06 yrs 10.71 yrs 11.51 yrs 12.16 yrs 10.51 yrs 9.36 yrs
Tranche Sizes $1,043mm $1,050mm $640mm $523mm $646mm $964mm

 

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
Mondelez Int’l. Hldgs. Netherlands BV Baa1/BBB FRN 10/28/2019 500 3mL+equiv 3mL+equiv 3mL+61 3mL+61 BAML/CS/HSBC/MIZ (a)
GS/JPM/MUFG (p)
Mondelez Int’l. Hldgs. Netherlands BV Baa1/BBB 1.625% 10/28/2019 1,750 +95a +80a (+/-5) +75 +75 BAML/CS/HSBC/MIZ (a)
GS/JPM/MUFG (p)
Mondelez Int’l. Hldgs. Netherlands BV Baa1/BBB 2.00% 10/28/2021 1,500 +110a +90a (+/-5) +85 +85 BAML/CS/HSBC/MIZ (a)
GS/JPM/MUFG (p)
Morgan Stanley A3/A 7NC6 10/24/2023 2,500 3mL+145-150 3mL+140 the # +140 +140 MS-sole
RWJ Barnabas Health A1/A+ 2.954% 7/01/2026 100 +130a +120 the # +120 +120 CITI/JPM
RWJ Barnabas Health A1/A+ 3.949% 7/01/2046 394.952 +160a +145a (+/-2) +143 +143 CITI/JPM
United Parcel Service Inc. A1/A+ 2.40% 11/15/2026 500 +80a +70a (+/-5) +65 +65 BAML/GS/MS/UBS (a) + 2 (p)
United Parcel Service Inc. A1/A+ 3.40% 11/15/2046 500 +110a +95a (+/-2) +93 +93 BAML/GS/MS/UBS (a) + 2 (p)
Wells Fargo & Co. A2/AA- 3.00% 10/23/2026 3,500 +140-145 +130 the # +130 +130 WFS-sole

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
AFDB Aaa/AAA 1.00% 11/02/2018 1,000 MS+4a MS+4a MS+4 +27.4 BNPP/GS/NOM/TD
Kingdom of Saudi Arabia A1/AA- 2.375% 10/26/2021 5,500 +160a +140a (+/-5) +135 +135 BOC/BNPP/CITI/DB/GS/HSBC
JPM/MS/MUFG/NCB
Kingdom of Saudi Arabia A1/AA- 3.25% 10/26/2026 5,500 +165a +170a (+/-5) +165 +165 BOC/BNPP/CITI/DB/GS/HSBC
JPM/MS/MUFG/NCB
Kingdom of Saudi Arabia A1/AA- 4.50% 10/26/2046 6,500 +235a +215a (+/-5) +210 +210 BOC/BNPP/CITI/DB/GS/HSBC
JPM/MS/MUFG/NCB
Kommunalbanken
(Green Bond)
Aaa/AAA 1.375% 10/26/2020 500 MS+29a MS+28a MS+27 +48.65 CITI/CACIB/SEB

 

Indexes and New Issue Volume

*Denotes new tight or tie

 

Index Open Current Change  
*LUACOAS 1.30 1.30 0  
*IG27 75.003 73.725 <1.278>
HV27 167.81 162.135 <5.675>
VIX 15.28 14.41 <0.87>  
S&P 2,139 2,144 5
DOW 18,161 18,202 41  
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $11.24 bn DAY: $30.24 bn
WTD: $26.94 bn WTD: $51.44 bn
MTD: $63.395 bn MTD: $102.495 bn
YTD: $1,138.131 bn YTD: $1,457.715 bn

 

 

(more…)

Corporate Bond Market: Noisy Silence from…
October 2016      Debt Market Commentary   

Quigley’s Corner 10.18.16 : Corporate Bond Market Noisy Silence from A Really Big Bank; Halloween Scare for European Banks?

 

Investment Grade New Issue Re-Cap – “If there’s anything I can’t stand, it’s a lot of noisy silence!”

As Halloween Approaches, How “Scary” are European Banks?

Global Market Recap

IG Primary & Secondary Market Talking Points

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 12th  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

noisy-silence-mischler-debt-market-commentAs James Stewart’s character Charlie Anderson quips at the family dinner table in Andrew McLaglen’s Civil War 1965 film Shenandoah, “If there’s anything I can’t stand, it’s a lot of noisy silence!’

 

Yes, the Kingdom of Saudi Arabia is printing a suspected $15b three-part 5-, 10- and 30-year inaugural debt transaction tomorrow, but that wasn’t the big subject of talk in today’s primary market session.  Nor, surprisingly, was it Bank of America/Merrill Lynch’s $5b 3-part Senior Unsecured callable, the largest of its kind, 6NC5 FXD/FRN and 11NC10 notes issued to lower costs related to compliance with loss-absorbing debt requirements. Rather it was Wells Fargo & Co. that announced a 10-year Senior Notes new issue carrying IPTs in the +140-145 range that never went to guidance and had many/most suspecting it would go straight to the launch.  Lo and behold just after 3:30pm ET it was heard that the deal would not price until tomorrow, as apparently news would hit the tapes that would be relevant to bondholders that resulted in Wells deciding not to “rush everything.”  The order book was “heard” to have $10b in orders at 2:30pm ET.

On the day 4 IG Corporate issuers priced 7 tranches between them totaling $7.35b while the SSA space hosted 2 issuers, 2 tranches and $5.50b for an all-in IG day total of 6 issuers, 9 tranches and $12.85b.  WTD we’ve now issued 67% of this week’s syndicate midpoint average forecast for IG Corporates or $15.70b vs. $23.17b. MTD we’ve issued 58% of the syndicate average or $52.155b vs. $88.59b.  The all-in IG MTD total (Corporates & SSA) is $72.255b.

 

Mischler Financial is proud to announce that it served as a Co-Manager on today’s new Bank of America $5b 3-part callable new issue.  Demand was strong for the structure with the 6yr FXD book heard to be $5b (2.5x); the 6yr FRN $2b (4x) and the 11yr $7b (2.5x) when the deal went subject.  In fact, Mischler served as a Co-Manager on both of JPM’s similar structures, and as a proud active Co-Manager on Goldman Sach’s two-part 5NC4 FXD/FRNs. Once again, Mischler is proud to have been involved on all the recently priced callable structures among the six-pack – two with JPM, a two-part with GS and today’s 3-part with BAML.  Therein, we thank all of those firms for including us.

 

As Halloween Approaches, How “Scary” are European Banks?

mischler-debt-market-bloomberg-chart

Screen shot courtesy of Bloomberg LP

 

 

Capital flows suggest that some people aren’t waiting to find out if Italy will follow the U.K.’s example and leave the European Union, according to Bloomberg View’s Mark Whitehouse. Italy’s central bank liabilities to the Euro system stood at about 354 billion euros ($390 billion) at the end of September, up 118 billion euros from a year earlier and up 78 billion euros since the end of May, before the U.K. voted to leave the bloc. The outflow isn’t quite as large as during the sovereign-debt crisis of 2012, but it’s still significant and compares to the main beneficiary, Germany, which has seen its credits to the Euro system increase by 160 billion euros over the past year.

 

Global Market Recap

 

  • S. Treasuries – USTs, Gilts & Bunds all improved with the Gilts the catalyst.
  • Stocks – Global stock rally.
  • Economic – CPI y/y in the U.S. & U.K. both printed at the highest rate in 2 years.
  • Currencies: Big day for the Pound vs. the USD. Euro lost ground & Yen unchanged.
  • Commodities; Small gains for the CRB, crude oil & gold.
  • CDX IG: -1.20 to 74.88
  • CDX HY: -4.84 to 403.19
  • CDX EM: -3.19 to 244.31

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points – Tone Goes Out Strong; Nice Set Up For Next Week

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 13.93 bps.
  • BAML’s IG Master Index widened 1 bp to +137 vs. +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to a new tight of +130 vs. +131.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +183.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $13.9b on Monday versus $11.7b Friday and $11.2b the previous Friday.
  • The 10-DMA stands at $14.1b.

 

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

 

IG Corporate New Issuance This Week
10/17-10/21
vs. Current
WTD – $15.70b
October 2016 vs. Current
MTD – $52.155b
Low-End Avg. $22.30b 70.40% $87.83b 59.38%
Midpoint Avg. $23.17b 67.76% $88.59b 58.87%
High-End Avg. $24.04b 65.31% $89.35b 58.37%
The Low $15b 104.67% $75b 69.54%
The High $30b 52.33% $125b 41.724%

 

Now let’s end tonight’s piece where I started it – as James Stewart’s character Charlie Anderson quips at the family dinner table in the 1965 film Shenandoah, “If there’s anything I can’t stand, it’s a lot of noisy silence!”

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 and Sizes

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.
10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
New Issue Concessions 6.62 bps 1.87 bps 4.36 bps 2.71 bps 0.69 bps
Oversubscription Rates 2.11x 3.28x 4.20x 3.52x 3.23x
Tenors 6.06 yrs 11.51 yrs 12.16 yrs 10.51 yrs 9.36 yrs
Tranche Sizes $1,043mm $640mm $523mm $646mm $964mm

 

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 BBB+/A FRN 10/21/2022 500 3mL+equiv 3mL+121a (+/-3) 3mL+118 3mL+118 BAML-sole
Bank of America BBB+/A 2.503% 10/21/2022 2,000 +137.5a +130a (+/-3) +127 +127 BAML-sole
Bank of America BBB+/A 3.248% 10/21/2027 2,500 +162.5a +155a (+/-5) +150 +150 BAML-sole
Export Credit Bank of Turkey Ba1/BBB- 5.375% 10/24/2023 500 MS+420a MS+410a MS+400 +386.8 CITI/HSBC/ING/MIZ/MUFG/STAN
Jackson Nat’l. Life Glbl. Fdg. AA/AA 2.10% 10/25/2021 350 +high 90s/+97.5 +90a (+/-2) +88 +88 BAML/GS
Nike Inc. A1/AA- 2.375% 11/01/2026 1,000 +80-85 +70a (+/-5) +65 +65 BAML/CITI/DB
Nike Inc. A1/AA- 3.375% 11/01/2046 500 +110a +95a (+/-2) +93 +93 BAML/CITI/DB

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
EIB Aaa/AAA 1.25% 12/16/2019 4,500 MS+17a MS+17a MS+83 +31.2 CITI/GS/HSBC
JFM A1/A+ 2.125% 10/25/2023 1,000 MS+90a RG: MS+84a +/-1
MS+87a
MS+83 +70.18 BAML/CITI/DAIWA/MIZ

  (more…)

Corporate Bond Issuance: Tone Is Firm and Firmer; Mischler Comment
October 2016      Debt Market Commentary   

Quigley’s Corner 10.17.16 Corporate Bond Issuance; Its About Price, Not Politics

 

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 October

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 12th  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

 

6 IG Corporate issuers priced 8 tranches between them totaling $8.35b with no assist from the SSA space today and representing 37% of this week’s syndicate midpoint average forecast for $23.17b.

 

Global Market Recap

 

o   U.S. Treasuries – USTs better despite more hawkish Fed Speak (Fischer & Rosengren).

o   Overseas Bonds – Gilts hammered overnight but rallied during NY hours.

o   Stocks – U.S. stocks red (3:30pm). Down day in Europe. Asia red except the Nikkei.

o   Economic – U.S. data on weaker side. EU CPI as expected (too low) & solid data in Japan.

o   Currencies – USD lost ground vs. all of Big 5. DXY Index only had a small loss.

o   Commodities – Small down day for crude oil & small up day for gold.

o   CDX IG: +0.26 to 75.93

o   CDX HY: +1.77 to 407.45

o   CDX EM: +5.10 to 247.82

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points – Tone Goes Out Strong; Nice Set Up For Next Week

 

  • ICBC (NY Branch) dropped the 10yr tranche from today’s earlier announced two-part 5s/10s Senior Unsecured Notes new issue.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 8 IG Corporate-only new issues was 15.375 bps.
  • 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 1 bp to a new tight of +131 vs. +132.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +183.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $11.7b on Friday versus $17.8b Thursday and $11.2b the previous Friday.
  • The 10-DMA stands at $13.9b.

 

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

 

IG Corporate New Issuance This Week
10/17-10/21
vs. Current
WTD – $8.35b
October 2016 vs. Current
MTD – $44.805b
Low-End Avg. $22.30b 37.44% $87.83b 51.01%
Midpoint Avg. $23.17b 36.04% $88.59b 50.58%
High-End Avg. $24.04b 34.73% $89.35b 50.15%
The Low $15b 55.67% $75b 59.74%
The High $30b 27.83% $125b 35.84%

 

Have a great evening!
Ron Quigley, Managing Director, 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 and Sizes

 

…..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.
10/10
TUES.
10/11
WED.
10/12
TH.
10/13
FRI.
10/14
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
New Issue Concessions Holiday 3.19 bps 2.00 bps 0.54 bps N/A 1.87 bps 4.36 bps 2.71 bps 0.69 bps
Oversubscription Rates Holiday 3.48x 2.80x 3.17x N/A 3.28x 4.20x 3.52x 3.23x
Tenors Holiday 11.33 yrs 3 yrs 13.04 yrs N/A 11.51 yrs 12.16 yrs 10.51 yrs 9.36 yrs
Tranche Sizes Holiday $663mm $500mm $635mm N/A $640mm $523mm $646mm $964mm

 

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM: (more…)

Investment Grade Debt: Who Will Issue at Record Low Yield?
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.13.16  Who Will Issue at Record Low Yield?

 

Investment Grade Debt New Issue Re-Cap – Strong Day for IG Issuance

Toyota Motor Credit Corp. $2b 3-part Deal Dashboard

Toyota Finance Eyes Bond Issue with Record-Low 0.0003% yield

Global Market Recap

IG Primary & Secondary Market Talking Points

Oversubscription Rates for IG New Issuance

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 5th  

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab
 

It was a nice day for IG primary markets as 5 IG Corporate issuers priced 13 tranches between them totaling $8.25b.  SSA chimed in as well with 2 issuers, 2 prints and a total of $3.5b bringing the all-in IG day total to 7 issuers, 15 tranches and $11.75b.  We broke right thru the low-, midpoint and high-end syndicate estimates for IG Corporate issuance this week.  Versus the midpoint forecast, we priced $19.855b against $15.02b so, weekly supply is 32% above that number.  We are now 41% of the syndicate IG Corporate outlook for the month of October or $36.455b vs. $88.59b.

It was also a great day for Mischler Financial, the nation’s oldest SDVBE as we were privileged and honored to serve as a 1.00% active Co-Manager on Toyota Motor Credit Corp’s. $2b three-part 3yr FXD/FRN and 7yr FXD Senior Unsecured Notes new issue.

As you all recall from last week’s “QC” dated Wednesday, October 5, 2016 edition (time-stamped at 10:22PM ET I might add…..check your incomings!), “Toyota made Diversity & Inclusion history with a Mischler sponsored investor luncheon that gathered together 12 accounts in person in Manhattan and 46 dial-in investor participants.”  Needless to say we’re glad TMCC issued so close to that historic day last week.  Here’s an example of the type of investor feedback I received as orders were placed in to me today during the internal book build:

“We are very grateful and feeling up to speed and more well informed on TMCC than we have in some time thanks to your call last week.” 
toyota-motor-credit-corp-mischler
Toyota Motor Credit Corp. $2b 3-part Deal Dashboard

 

TMCC Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
Comparable Bid
Pre-Announcement
NICs
(bps)
Trading at
the Break
+/-
(bps)
3yr FRN 3mnL+equiv 3mL+equiv 3mL+44 3mL+44 <14.5> bps TMCC 1.40% due 5/2019 G+53
*2bps 3s/5s cdt. curve adj.
3 bps

 

3mL+43/45 <1>
3yr FXD +low 70s/+72.5 +60a (+/-2) +58 +58 <14.5> bps TMCC 1.40% due 5/2019
G+53
*2bps 3s/5s cdt. curve adj.
3 bps 57/56 <1>
7yr FXD +hi 80s/+87.5 +77a (+/-2) +75 +75 <12.5> bps TMCC 2.625% due 1/2023
G+70
5 bps 72/70 <3>

 

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

 

TMCC Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr FRN 500mm $920mm 1.84x
3yr FXD 1,000mm $2.2b 2.20x
7yr FXD 500mm $1.15b 2.30x

 

 

And before I sign off, Mischler would like to congratulate Toyota Finance, a different issuer under the same Toyota umbrella, for setting a new yen record low yield.  That’s right!  I cannot say if it’s in “modern history” or “of all time” because I do not know of a John Murphy in Japan!  There’s only one JM.  However, suffice it to say, Nikkei Asian Review published the following as of this writing that was then also published as a Bloomberg news article as well:

 

October 14, 2016 3:15 am JST

 

Toyota Finance Eyes Bond Issue with Record-low 0.0003% yield

 

TOKYO — Toyota Finance is expected to issue new three-year bonds with an annual yield of about 0.0003%, the first Japanese corporate debt with an issue yield of less than 0.001%.

The Toyota Motor unit will iron out details as early as Friday, with plans to issue the debt by the end of the month. The company plans to raise about 25 billion yen ($241 million). At 0.0003%, the total annual borrowing cost for the debt comes to just 75,000 yen, or little more than $720.

 

The Bank of Japan decided to lead long-term interest rates to about 0% when it conducted a comprehensive review of its monetary easing policy in September. But yields on 10-year, five-year and two-year Japanese government bonds remain in negative territory, exerting downward pressure against yields on corporate debt. Amid a lack of options, mutual funds and institutional investors are turning even to corporate bonds with extremely low returns.

(Nikkei)

 

Toyota’s financial arm certainly lives up to the parent company’s slogan of “Let’s Go Places.”  Thanks for breaking new ground and for taking us onboard to one of those new “places.”

Global Market Recap

  • S. Treasuries – Strong session for USTs & long end in Europe. U.S. bill market was well bid.
  • Stocks – U.S. stocks under heavy pressure early but are staging an afternoon rally.
  • Overseas Stocks – Poor day for Europe & HS. Nikkei small loss & China small gain.
  • Economic – The U.S. jobless claims data were off the charts good. Best in 43 years.
  • Currencies – USD lost ground vs. all of the Big 5.
  • Commodities – Copper down big & wheat up big. Crude small gain despite bearish inventories.
  • CDX IG: +0.18 to 75.70
  • CDX HY: +3.11 to 407.80
  • CDX EM: +0.50 to 237.34

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 13 IG Corporate-only new issues was 22.19 bps.
  • BAML’s IG Master Index was unchanged at +137.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +132 vs. +133.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +183 vs. +184.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.7b on Wednesday versus $15.4b Tuesday and $18.7b the previous Wednesday.
  • The 10-DMA stands at $15.9b.

 

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

 

IG Corporate New Issuance This Week
10/10-10/14
vs. Current
WTD – $19.855b
October 2016 vs. Current
MTD – $36.455b
Low-End Avg. $14.15b 140.32% $87.83b 41.51%
Midpoint Avg. $15.02b 132.19% $88.59b 41.15%
High-End Avg. $15.89b 124.95% $89.35b 40.80%
The Low $10b 198.55% $75b 48.61%
The High $20b 99.275% $125b 29.16%

 

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 and Sizes

 

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.
10/10
TUES.
10/11
WED.
10/12
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
AVERAGES
WEEK 9/12
New Issue Concessions Holiday 3.19 bps 2.00 bps 4.36 bps 2.71 bps 0.69 bps 4.66 bps
Oversubscription Rates Holiday 3.48x 2.80x 4.20x 3.52x 3.23x 3.47x
Tenors Holiday 11.33 yrs 3 yrs 12.16 yrs 10.51 yrs 9.36 yrs 11.28 yrs
Tranche Sizes Holiday $663mm $500mm $523mm $646mm $964mm $710mm

 

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
CSX Corp. Baa1/BBB+ 2.60% 11/01/2026 700 +110a +95a (+/-5) +90 +90 CITI/CS/JPM/UBS
CSX Corp. Baa1/BBB+ 3.80% 11/01/2046 800 +155a +140a (+/-5) +135 +135 CITI/CS/JPM/UBS
CSX Corp. Baa1/BBB+ 4.25% 11/01/2056 700 +200a +180a (+/-2) +178 +178 CITI/CS/JPM/UBS
Ecolab Inc. Baa1/A- 2.70% 11/01/2026 750 +130a +105a (+/-5) +100 +100 CITI/CS
Ecolab Inc. Baa1/A- 3.70% 11/01/2046 250 +165a +135a (+/-5) +125 +125 CITI/CS
Global Bank Corp. BBB-/BBB- 4.50% 10/20/2021 550 +mid 300s/+350a +337.5a (+/-12.5) +325 +325 CITI/DB/JPM
KEXIM Aa2/AA FRN 10/21/2019 750 3mL+equiv 3mL+equiv 3mL+46 3mL+46 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
KEXIM Aa2/AA 1.50% 10/21/2019 750 +80a +65a (+/-5) +60 +60 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
KEXIM Aa2/AA 1.875% 10/21/2021 300 +90a +75a (+/-5) +70 +70 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
KEXIM Aa2/AA 2.375% 4/21/2027 700 +100a +75a (+/-5) +70 +70 ANZ/BAML/CA/MS/MIZ
SG/ SAM/UBS
Toyota Motor Credit Corp. Aa3/AA- FRN 10/18/2019 500 3mL+equiv 3mL+equiv 3mL+44 3mL+44 BAML/RBC/SMBC/SG
Toyota Motor Credit Corp. Aa3/AA- 1.55% 10/18/2019 1,000 +low 70s/+72.5 +60a (+/-2) +58 +58 BAML/RBC/SMBC/SG
Toyota Motor Credit Corp. Aa3/AA- 2.25% 10/18/2023 500 +hi 80s/+87.5 +77a (+/-2) +75 +75 BAML/RBC/SMBC/SG

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Japan Int’l. Cooperation Agency A+/AA+ 2.125% 10/20/2026 500 N/A RG: MS+60a
MS+62a
MS+59 +42.9 BAML/BARC/DAIW
Kingdom of Sweden Aaa/AAA 1.125% 10/21/2019 3,000 MS+8a MS+7a MS+6 +20.45 BARC/GS/HSBC/SEC

 

Indexes and New Issue Volume (more…)

20th Century Bond Yields-Knowing the Past for the Future-Mischler Comment
October 2016      Debt Market Commentary   

Quigley’s Corner 10.12.16  Investment Grade Corporate Debt Comments: 20th Century Bond Yields

 

Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary & Secondary Market Talking Points

FOMC: Minutes: Headlines & Text

Knowing the Past for the Future – “20th Century Bond Yields”

Consumers Power Company Supplemental Indenture – 2.875% FMBs due 1977 Dated Sept 1, 1947

A Special Salute to Women’s Syndicate Association 2016 Holiday Charity Gala

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 5th  

IG Credit Spreads (by Rating/Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

It was a slow day today in our IG dollar DCM with one lone corporate issuer – Sumitomo Mitsui Trust Bank – pricing a $1b two-part 3-year FXD/FRN. I should add, however, that overall volume benefitted nicely from the SSA’s KfW $5b 3-year bringing the all-in IG day totals to 2 issuers, 3 tranches and $6b.

 

Let’s look at the global re-cap followed by the pertinent IG primary and secondary market talking points and a quick snapshot of WTD and MTD volumes in relation to syndicate forecasts and a look at today’s FOMC Minutes Headlines and Text.

 

o   U.S. Treasuries – Losing session for USTs but they did close above the session low prices.

o   Overseas Bonds – JGB’s closed mixed with long end bid. Poor session in Europe.

o   3mth Libor – Set at the highest yield since May 2009 (0.88111%).

o   Stocks – U.S. mixed at 3:30pm. Europe more red than green. Asia closed down.

o   Economic – The FOMC Minutes were a mixed bag. We have a divided Fed.

o   Currencies – USD mixed. The DXY Index traded over 98 for the 1st time since March.

o   Commodities – Crude oil & gold had small losses. Wheat traded poorly.

o   CDX IG: +0.03 to 75.78

o   CDX HY: -0.31 to 406.40

o   CDX EM: -3.25 to 237.40

*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 2 IG Corporate-only new issues was 15.00 bps.
  • BAML’s IG Master Index tightened 1 bp to +138 vs. +139.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +134 vs. +135.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research 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 $11.2b on Friday versus $17.3b Thursday and $15.3b the previous Friday.
  • The 10-DMA stands at $15.8b.

 

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

 

IG Corporate New Issuance This Week
10/10-10/14
vs. Current
WTD – $11.605b
October 2016 vs. Current
MTD – $28.205b
Low-End Avg. $14.15b 82.01% $87.83b 32.11%
Midpoint Avg. $15.02b 77.26% $88.59b 31.84%
High-End Avg. $15.89b 73.03% $89.35b 31.57%
The Low $10b 116.05% $75b 37.61%
The High $20b 58.025% $125b 22.56%

 

FOMC Minutes: Headlines & Text

 

o   Substantial majority of officials saw risks as roughly balanced.

o   A few officials still saw risks weighted to the downside.

o   Several FOMC members saw rate rise “relatively soon.”

o   The decision to wait was a ”close call.”

o   It was noted that a “reasonable argument” could be made to hike.

o   A number of officials saw policy firming over the next few years.

o   Many FOMC members saw few signs of inflation pressure.

o   Several officials saw multiple headwinds to inflation.

o   Many saw some labor market slack remaining.

o   Differing views were voiced on the extent of labor market slack.

o   Some saw more scope for growth without pressuring the labor market.

o   Cost/benefit of undershooting full employment was discussed.

 

Consumers Energy Company’s John Murphy Transcends The Records for the “QC!” 

When I write my “Best and Brightest” syndicate forecast poll as we enter each new month I include a section titled “Knowing the Past for the Future” that takes a look at a decade’s worth of that month’s IG Corporate and SSA issuance.  It helps put the current forecast into historical perspective.  I then include an average over the past decade, five years and three years showing a year-by-year issuance break-out across that decade.  Many find it very helpful, useful and informative so, I do it.  Well guess what?  History is relative and it seems current market participants continue to enjoy records and “top ten lists” as does most of our nation.  “What’s the largest week of all-time?”..……..”What’s the highest IG Corporate monthly volume of all-time?” or how about ………….”…the lowest yield or coupon of all-time?”  A very astute and super good guy by the name of John Murphy at Consumers Energy Company  (NYSE:CMS) located in Jackson, Michigan reached out to me this morning regarding last evening’s “QC.”

 

Here’s what he wrote:

Ron,

Hope you’re well.  I continue to enjoy your market commentary.  While catching up on the end of last week’s versions, I noted the following info from your Thursday edition:

“However, all issuers should know that if you blinked you might have missed some historic news.  In speaking with Andrea Johnson of Informa Globalmarkets (US) Inc. she discovered and revealed that “the President and Fellows of Harvard College priced the lowest ever 30-year yield and set a new all-time low for 40-year coupons.”

You’ll see from your attached commentary from 2012 in the third paragraph below, you addressed this same subject regarding perceived ‘lowest ever” 30-yr rates.  Certainly today’s low rates are remarkable, but as you indicated below, they are modern low rates, not lowest ever.  I’ve attached a scan from the supplemental indenture of one of Consumers Energy’s (formerly Consumers Power) early 30 year bonds from 1947 (2 7/8%).  Best wishes.

John Murphy

 

And here is a re-print of my closing commentary dated March 10, 2012 that John is referring to:

All time low investment grade rated corporate bond coupons: In addition, I’d like to mention that a respected elder statesman of the U.S. utility industry, who also happens to be an avid reader of this daily, delineated for me the difference between the “modern era” of bond yields with those of the 20th century specifically during the 1950s.  Many financial information and data services publish various top ten or top twenty low coupon rate grids and the like.  People enjoy placing facts and data in historical contexts and quite honestly, our society loves to know “the biggest this” and “the lowest that”, “who is number one” and “what are the top ten”.  It’s an extension of our culture.  The reader was very kind to express his enjoyment of my write ups however he observed that references to all-time low coupons should be modified to “modern history.”  From 1945 thru the early 1950s high grade corporate bond yields hovered at around 2.75% to 3%.  He particularly identified several 30-year FMBs that carried low 3% coupons noting that there are other utilities with similar histories.  So, we acknowledge the history lesson, we enjoy such exchanges and encourage any of our readers to chime in with opinions, suggestions or snippets of history that make for fun and informative exchanges which result in a better product.  As a result of this great “history lesson” going forward I will identify low coupon records in the context of “modern history,”  After all, available data bases are wonderful and helpful sources of information, but history didn’t start when those data bases began.  I’d also like to thank the reader for the friendly and informative exchange as well as for supplying me with a reference page that he stumbled upon in an old textbook. It graphs what interest rate “indices” illustrate from what he jokingly referred to as the “Pleistocene era.”  The sub 3% era on the graph for corporate 30-year bonds corresponds nicely with several U.S. utilities’ “golden age” of coupon rates.  Treasury/Funding teams as well as all market participants should get a kick out the below chart titled “20th Century Bond Yields” and followed by the “Indenture” cover.

Please enjoy!

 

Knowing the Past for the Future – “20th Century Bond Yields”

20th-century-bond-yields-mischler

Consumers Power Company Supplemental Indenture – 2.875% FMBs due 1977 Dated September 1, 1947

 

owest-rates-ever-corporate-debt-mischler

 

 

 

Now THAT right there folks is pretty cool stuff! Definitely a wealth of knowledge whom we appreciate! John is highly respected and regarded in our domestic utility sector and he literally personifies the term “Know the Past for the Future” especially given his 40+ years at CMS.  Thank you John for the e-mail this morning pal.

 

For those of you wondering, Andrea Johnson’s data base dates back to 1993 hence, “of the modern era.”……….and “yes” AJ enjoyed the well-intended and collegial history lesson.

 

Next up………………………………………

 

Women’s Syndicate Association 2016 Holiday Charity Gala to Help Raise Funds for “Strong Women, Strong Girls” (SWSG)

wsa-annual-event-swsg

Speaking of women who are great at what they do, much like Andrea Johnson who is the best at what she does, I received an IPREO wire this morning from The Women’s Syndicate Association (WSA).  I would guess that anyone in syndicate received the same this morning as well.  It is a cordial invitation to attend WSA’s 2016 Holiday Charity Gala on Wednesday, November 30, 2016.

Here it is:

 

Join us for a festive evening with the entire syndicate community, in an effort to raise proceeds for an important charity (listed below). Note:  This is a street-wide event, in which all attendees are welcome (i.e., non-members/members, males/females).

Venue details are as follows:

Date:            Wednesday, November 30, 2016

Time:            6:00pm – 10:00pm

Location:     Brasserie 8 ½

9 West 57th Street (Between 5th/6th Ave)

New York, NY 10017

Cost of the event is $150.00 per person, which includes Hors D’oeuvres, Buffet Dinner and Open Bar. Raffle tickets will be sold at the venue (cash only) to fund the selected charity.

Please use the following link to register and submit payment for all  guests, prior to November 23rd:

https://www.eventbrite.com/e/wsa-holiday-charity-gala-tickets-28511792539

If you are interested in making a generous donation for this event, please contact Gina Kashinsky at gina.kashinsky@ipreo.com or 212.849.0363.  All donations are welcomed and appreciated!

We look forward to commencing the holiday season with you all in the most benevolent fashion!

 

A Word About the Women’s Syndicate Association     


With over 250 active members, including alumni, the Women’s Syndicate Association or “WSA” is valued for its success in helping women form lasting ties with colleagues across the financial services industry.  The WSA sponsors a wide variety of events throughout the year to create unique opportunities for its members to meet and share their experiences.  Through the Women’s Syndicate Association, members have been able to build mutually beneficial relationships that stretch from the workplace to their home life.  The “QC” is only too happy to promote the WSA for all they do to give back to wonderful causes 365 days of the year!  Chances are that most of my 3,500+ readership group, especially those in syndicate, have been attending the annual WSA shindig for years.  Let’s remember all the hard work the members of WSA do away from their meaningful annual reception as in the case of their latest fundraiser for Strong Women Strong Girls.

WSA’s 2016 Beneficiary: Strong Women Strong Girls (SWSG)

Founded in 2004, this non-for-profit organization is dedicated to mentoring females in under-resourced communities to build strength and empowerment. Strong Women, Strong Girls strives to support positive mentoring relationships between college women and pre-adolescent girls in underserved local communities with the vision that every girl realizes her inner strengths to dream and do.

Some glaring FACTS about women and girls that you need to know:

o   Today, a girl’s self-esteem peaks in the 4th grade, when she is just 9 years old.

o   Today, women represent only 11% of the engineers in the work force.

o   Today women make up only 18% of the House of Representatives.

o   Today, working women are only paid 2/3 of what men make doing the same job.

o   Today, only 3% of women are CEO’s of Fortune 500 companies.

 

Those statistics need to be changed for the 52% of the world’s population – who are women.

And now the ask – please find it in yourselves to attend the upcoming WSA event and/or donate to this wonderful worthy cause that helps empower women to achieve their full potential.  Strong women make a difference in our world, our industry and in our personal lives.  As they say at SWSG: “Strong girls will dream farther; Strong women will help them get there.”  I’ll also add that dedicated and encouraging men will co-sign and support those dreams and achievements!  There’s everything right about this folks so get your check books out and write one to SWSG.  I donated today as well.

Please use the following link to register and submit payment for all  guests, prior to November 23rd:

https://www.eventbrite.com/e/wsa-holiday-charity-gala-tickets-28511792539

If you are interested in making a generous donation for this event, please contact Gina Kashinsky at gina.kashinsky@ipreo.com or 212.849.0363.  All donations are welcomed and appreciated

As they say at Strong Women, Strong Girls:

Succeed like a girl.

There is no ceiling.

Thank you and have a great evening!
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 and Sizes (more…)