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Mischler IG Corporate Debt Comment Weekend Edition-Best & Brightest
October 2016      Debt Market Commentary   

Quigley’s Corner 10.07.16 IG Corporate Debt Comment-QC Weekend Edition-Best & Brightest

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

Investment Grade Credit Spreads (by Rating/Industry)

Lipper Report/Fund Flows – Week ending October 5th  

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab 

It was a very well telegraphed and welcome no-print Friday today, at least as of this writing.  Next week hosts two holidays – Columbus Day Monday and Yom Kippur Wednesday. They’ll combine with earnings blackouts to keep a damper on IG issuance that is expected to be similar to this week.  However, 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.  The hope and the “chatter” suggests they will post positive earnings.  With a trend toward hawkish Fed-speak and decent numbers today despite a 0.1% rise in the Unemployment Rate from 5% from 4.9%, the expectation is that IG issuance will pick up considerably the week after next – so, beginning Monday, October 17th.

But, why rely on little old me when I am here to bring you 23 of syndicate’s “cream of the crop” when it comes to all things new issues?  Read what the “Best and the Brightest” have to say just below.  All the comments, all the numbers, all the data!  You too can become a syndicate guru!  Sit back, relax and enjoy the read and then have a great weekend!

 

IG Primary & Secondary Market Talking Points – Strong Market Tone Judging by Secondary Trading Levels of This Week’s New Issues – 80% Tighter!

 

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 30 deals that printed, 24 tightened versus NIP for a 80.00% improvement rate while only 6 widened (20.00%).

  • For the week ended October 5th, Lipper U.S. Fund Flows reported an inflow of $1.396b into Corporate Investment Grade Funds (2016 YTD net inflow of $39.321b) and a net inflow of $1.908b into High Yield Funds (2016 YTD net inflow of $11.352b).
  • BAML’s IG Master Index tightened 1 bp to +139 vs. +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +135 vs. +136.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +185 vs. +186.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.3b on Thursday versus $18.7b Wednesday and $15.8b the previous Thursday.
  • The 10-DMA stands at $16.1b.

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

 

IG Corporate New Issuance This Week
10/03-10/07
vs. Current
WTD – $13.60b
October 2016 vs. Current
MTD – $13.60b
Low-End Avg. $17.35b 78.39% $87.83b 15.48%
Midpoint Avg. $18.54b 73.35% $88.59b 15.35%
High-End Avg. $19.74b 68.90% $89.35b 15.22%
The Low $15b 90.67% $75b 18.13%
The High $26b 52.31% $125b 10.88%

 

“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).  Today’s cumulative underwriting percentage of the participating desks was 80.88% which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead. *Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

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

“Good morning all, TGIF and how much are you looking forward to the long 3-day Columbus Day weekend?  We missed this week’s IG Corporate syndicate midpoint average forecast by nearly 27% or $13.60b vs. $18.54b.  Although only 30 tranches this week including SSA, investors remain starving for IG credit witness yesterday’s 8.75x bid-to-cover rate on Western Gas’s $200mm tap and Harvard achieving the lowest yield for a 30yr and the 3rd lowest 30yr coupon while tying for the 4th lowest 30yr spread at T+70 and then topping that achievement with the lowest 40yr coupon in history at 3.30% vs. Home Depot’s 2nd place 3.50% a resounding 20 bps away!  There’s lots of money waiting to fly into IG credit product and with 13 IG deals in the pipeline and FIGs a week away from beginning Q3 earnings releases one has to think there is supply coming in the next couple of weeks.  


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

 

o   NICS:  4.36 bps

o   Oversubscription Rates: 4.20x

o   Tenors:  12.16 years

o   Tranche Sizes: $523mm

Versus last Friday’s four key primary market driver averages, NICs widened 1.65 bps to 4.36 bps vs. 2.71 bps while oversubscription rates pointed to increasing demand for IG credit gaining 0.68x to 4.20x vs. last week’s 3.52x bid-to-cover rate.  Average tenors again extended by 1.65 years to 12.16 years vs. 10.51 years and tranche sizes also reduced again by $123mm to $523mm vs. $646mm.  

 For the week ended October 5th, Lipper U.S. Fund Flows reported an inflow of $1.396b into Corporate Investment Grade Funds (2016 YTD net inflow of $39.321b) and a net inflow of $1.908b into High Yield Funds (2016 YTD net inflow of $11.352b).

 Week-on-week, BAML IG Master Index tightened 4 bps to +139 vs. last Friday’s +143 close.  Spreads across the four IG asset classes also tightened 3.75 bps to 29.75 vs. 33.50 as measured against their post-Crisis lows.  Looking at the 19 major industry sectors, spreads tightened 3.74 bps to an average 35.42 vs. 39.16 also against their post-Crisis lows.

Lastly, now that you have all the intel and data done for you, allow me to exercise the Quig Pro Quo by asking, ”what is your forecast for IG Corporate new issuance next week?  Numbers are GREAT but thoughtful responses are really quite compelling to the 3,500 readers of the “QC” and are most appreciated by the guy-in-the-corner!”  

Wishing you and yours a safe, healthy and happy Columbus Day weekend! –Ron

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

 

This section available exclusively to Quigley’s Corner DL subscribers

 

Syndicate IG Corporate-only Volume Estimates for Next Week

 

IG Corporate New Issuance Next Week
10/10-10/14
Low-End Avg. $14.15b
Midpoint Avg. $15.02b
High-End Avg. $15.89b
The Low $10b
The High $20b

 

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

Next Week
10/10-10/14
1: 10b
1: 12b
1: 12.5b
4: 10-15b
9: 15b
1: 16b
4: 15-20b
2: 20b

 

Wishing you and yours a fabulous long Columbus Day weekend!
Ron

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 this week’s day-by-day re-cap of 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.
10/03
TUES.
10/04
WED.
10/05
TH.
10/06
FRI.
10/07
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
AVERAGES
WEEK 9/12
New Issue Concessions 2.44 bps 3.5 bps 15 bps <3.33> bps N/A 4.36 bps 2.71 bps 0.69 bps 4.66 bps
Oversubscription Rates 3.80x 3.32x 4.61x 5.58x N/A 4.20x 3.52x 3.23x 3.47x
Tenors 10.18 yrs 7.06 yrs 10.48 yrs 25.62 yrs N/A 12.16 yrs 10.51 yrs 9.36 yrs 11.28 yrs
Tranche Sizes $650mm $475mm $428mm $387mm N/A $523mm $646mm $964mm $710mm

 

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

 

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 30 deals that printed, 24 tightened versus NIP for a 80.00% improvement rate while only 6 widened (20.00%).

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

 

                     Issuer                    Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
Pres. & Fellows of Harvard
College
Aaa/AAA 3.15% 7/15/2046 500 +80a +70 the # +70 +70 65/63
Pres. & Fellows of Harvard
College
Aaa/AAA 3.30% 7/15/2056 500 +100a +90a (+/-2.5) +87.5 +87.5 83/81
Public Storage A3/BBB+ 4.90% PerpNC5 350 4.90%a 4.90% the # 4.90% $25 Pfd $24.72/.76
Western Gas Partners LP
(tap) New total: $600mm
BBB-/BBB- 5.45 4/01/2044 200 +312.5-325
mid = +318.75a
+280a +280 +280 274/270
AFDB Aaa/AAA FRN 6/15/2020 600 3mL+19a 3mL+19a 3mL+19 3mL+19 3mL+20/18
MassMutual Glbl. Funding Aa2/AA+ 1.55% 10/11/2019 600 +low 70s/+72.5a +62a (+/-2) +60 +60 58/56
MTN (Mauritius) Investments Limited Baa3/BB+ 5.373% 2/13/2022 500 5.375-5.50% 5.375% the # 5.375% $100.00 410/405
MTN (Mauritius) Investments Limited Baa3/BB+ 6.50% 10/13/2026 500 6.50%a 6.50% the # 6.50% $100.00 460/455
Spectra Energy Partners LP Baa2/BBB 3.375% 10/15/2026 600 +200a +170a (+/-3) +167 +167 164/162
Spectra Energy Partners LP
(tap) New total: $700mm
Baa2/BBB 4.50% 3/14/2045 200 +237.5a +205a (+/-3) +202 +202 200/202
Tanger Properties Ltd. Part.
(tap) New total: $350mm
Baa1/BBB+ 3.125% 9/01/2026 100 +165a +155a (+/-2) +153 +153 152/148
UPL Corporation Limited Baa3/BBB- 3.25% 10/13/2021 500 +220a +200 the # +200 +200 195/192
Kommunivest Aaa/AAA 1.00% 11/13/2018 500 MS+5a MS+5 N/A +26.9 27/25
World Bank “IBRD” Aaa/AAA FRN 10/13/2020 500 3mL+10a 3mL+10a 3mL+10 3mL+10 3mL+11/9
ERP Operating LP A-/A- 2.85% 11/01/2026 500 +140a N/A +125 +125 119/117
National Retail Properties Baa2/BBB- 5.20% PerpNC5 300 N/A 5.25%a 5.20% $25 Pfd $24.88/92
Realty Income Corp. Baa1/BBB+ 3.00% 1/15/2027 600 +170a +150a (+/-5) +147 +147 138/136
Sempra Energy Baa1/BBB+ 1.625% 10/07/2019 500 +85-90 +75a (+/-3) +72 +72 69/67
Korea Housing Fin. Corp.
(covered)
Aa1/NR 2.00% 10/11/2021 500 +100a +85-90 +85 +85 80/78
General Motors Finc’l. Co. BBB-/BBB- FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+127 3mL+127 3mL+121/119
General Motors Finc’l. Co. BBB-/BBB- 2.35% 10/04/2019 750 +155a +145 the # +145 +145 140/138
General Motors Finc’l. Co. BBB-/BBB- 4.00% 10/06/2026 750 +260a +245a (+/-5) +240 +240 222/219
PepsiCo. Inc. A1/A FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+27 3mL+27 3mL+26/24
PepsiCo. Inc. A1/A 1.35% 10/04/2019 750 +55-60 +50a (+/-5) +45 +45 42/40
PepsiCo. Inc. A1/A FRN 10/06/2021 250 3mL+equiv 3mL+equiv 3mL+53 3mL+53 3mL+52/49
PepsiCo. Inc. A1/A 1.70% 10/06/2021 750 +65-70 +60a (+/-5) +55 +55 50/48
PepsiCo. Inc. A1/A 2.375% 10/06/2026 1,000 +90-95 +80a (+/-5) +75 +75 70/68
PepsiCo. Inc. A1/A 3.45% 10/06/2046 1,500 +130-135 +120a (+/-5) +115 +115 113/110
Xylem Inc. Baa2/BBB 3.25% 11/01/2026 500 +200a +170a (+/-5) +165 +165 148/145
Xylem Inc. Baa2/BBB 4.375% 11/01/2046 400 +250a +215a (+/-5) +210 +210 179/176

 

Lipper Report/Fund Flows – Week ending October 5th  

     

  • For the week ended October 5th, Lipper U.S. Fund Flows reported an inflow of $1.396b into Corporate Investment Grade Funds (2016 YTD net inflow of $39.321b) and a net inflow of $1.908b into High Yield Funds (2016 YTD net inflow of $11.352b).
  • Over the same period, Lipper reported a net inflow of $432m into Loan Participation Funds (2016 YTD net outflow of $2.887b).
  • Emerging Market debt funds reported a net inflow of $116.9m (2016 YTD inflow of $6.666b).

 

New Issue Pipeline (more…)

Mischler IG Debt Market Comment 10-05-16 : TMCC; ECB; Economic Front
October 2016      Debt Market Commentary   

Quigley’s Corner 10.05.16 Mischler IG Debt Market Comment

 

Investment Grade New Issue Re-Cap

Good News on the U.S. Economic Front This Week

Central Banks

Positive Developments Outside of Economic Data & Central Banks

Global Market Recap

A Look at FNMA Placement Statistics
Toyota Motor Credit Corp. Makes D&I History

IG Primary & Secondary Market Talking Points

Lipper Fund Flows

New Issues Prices

Indexes and New Issue Volume

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Well, with tomorrow’s heavy calendar for economic data, it’s one last chance to pick up $6.5b in new issuance to match the syndicate midpoint average forecast for the week. We’re currently at $12.05b vs. $18.54b.  Today saw 5 IG Corporate issuers price 7 tranches between them totaling $3b with two SSA assists for an all-in IG day total of 7 issuers, 9 tranches and $4b. It’s good that I have good old reliable Tony Farren, my rates guru par excellence to rely on when I am out of the office.  Today is one of those days and I’ll tell you all about it in a moment.  First, a look at today’s market moving events reveals that Gallup’s Job Creation Index held steady in September for the fifth month in a row at +33.  That represents the highest score recorded since Gallup began tracking that metric in January 2008.

As Tony wrote today:
Good News on the U.S. Economic Front This Week

 

  • ISM manufacturing PMI moved back over 50 (51.5 from 49.4).
  • ISM non-manufacturing increased 5.7 points to 57.1 after a 4.1 point drop last month.
  • Cap goods non-defense ex-air increased for the 3rd month in a row (Aug +0.9%, July +0.8% & June +0.5%).
  • U.S. Employment Report – ??? (Friday morning).

 

Central Banks

 

  • BOJ – Last Friday the BOJ announced they will cut back on the amount of long end bonds it will be buying in an attempt to steepen the JGB curve.
  • ECB – Yesterday a Bloomberg article stated the ECB was considering tapering QE. Was it a bogus article or a trail-balloon from the ECB? Bonds in Europe have traded poorly this week.
  • Are we seeing a change in the way Central Banks are going to go about their business? If Central Banks are counting on help from the fiscal side I think they are going to be disappointed.

Positive Developments Outside of Economic Data & Central Banks

 

  • Crude oil higher – Crude oil has traded higher after an understanding was reached at last week’s informal OPEC meeting to discuss oil production cuts.
  • U.S. Congress passed a spending bill last week that averts a partial U.S. Government shut down.
  • Deutsche Bank – The sentiment concerning DB has improved substantially since the beginning of last week.
  • The hawkish Fed Speakers are warming up and starting to flex their muscles but they have a large hurdle to get over on Friday…US Employment Report!

 

Global Market Recap

 

  • U.S. Treasuries – had its 4th losing session in a row. Long end in Japan & EU hit.
  • 3mth Libor – Set at the highest yield since May 2009 (0.86794%).
  • Stocks – U.S. stocks with solid gains at 3:15pm.
  • Overseas stocks – Europe mostly down but bank stocks rallied. Asia was higher.
  • Economic – This week U.S. economic data has bolstered the Fed hawks case.
  • Currencies – USD weaker vs. 4 of the Big 5. Yen down for 7th session in a row.
  • Commodities – Good day for commodities as crude oil nearly rallies to 50.
  • CDX IG: -1.23 to 74.47
  • CDX HY: -4.64 to 402.28
  • CDX EM: -3.14 to 234.91

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

-Tony Farren

 

A Look at FNMA Placement Statistics

Thanks in advance to our own Annie “Agency” Bonner for the following information:

 

BY INVESTOR TYPE:

 

  • 40% Fund Mgr
  • 28% Commercial Banks
  • 11% Central Banks
  • 9% Insurance Companies
  • 7% Corporate/Pensions
  • 2% State/Local Govt
  • 2% Other
  • <1% Retail

BY REGION:

 

  • 81% US
  • 11% Asia
  • 6% Europe
  • 1% Other
  • 1% ??

 

Once Upon a Time Four Years Ago or “Where It All Started”

 

Four years ago Zeeshan Naqvi, now with Moody’s Investors Service Inc., and formerly with GECC Treasury/Funding, paid a visit to Mischler to deliver GE’s annual report card of diversity broker dealer performance for 2012.  GECC’s diversity initiative offered the space the most coveted rotation for minority- women- and veteran- investment bank inclusion.  On that November day Mischler was told it finished atop GECC’s diversity broker dealers across their three main criteria:

 

  • Order Book Size
  • Quality of Orders
  • Final Allocations

 

The hour long meeting took place at our offices here at One Stamford Landing in Stamford, Connecticut.  While discussing our middle markets distribution network we suggested that Zeeshan and GECC meet our accounts for a non-deal roadshow.  He thought it was a great idea and soon enough Mischler was asked to conduct the first ever non-deal roadshow by a diversity firm for an issuer that just happened to be the most prolific at the time in our IG dollar DCM.  It resulted in a wonderful luncheon in Manhattan wherein 18 Mischler institutional accounts attended to hear GE’s story. Several took last minute flights on their own coin for the occasion…….that event advanced GE’s brand in the world of diversity in our financial services industry, and has been emulated by other global brands within the financial industry ecosystem…In particular, TMCC….

 

Toyota Motor Credit Corp.  (TMCC) Makes D&I History with Mischler-Sponsored Investor Luncheon Opportunity

 

Earlier today, TMCC’s Kate Oddo and Bill Pang conducted a non-road show investor luncheon/forum in NYC, with the goal of sharing and having open dialogue with existing and prospective institutional investors as to TMCC capital markets initiatives, and also sharing with the audience TMCC’s perspective about Diversity & Inclusion. BAML took the lead and hosted the event and Mischler was designated by TMCC as ‘co-manager’ in coordinating the day’s program, and we presented TMCC a total of 58 new accounts today.  12 accounts were represented in person with 46 dial-ins.  MFG clients that participated included insurance companies, re-insurers, managers of endowments, pensions, charitable trusts and foundations, RIA’s, SFOs, commercial banks, private wealth managers, private banks, trust company managers, fund managers for captive insurance and multi-family offices whose managed assets include some of the wealthiest people in the United States. To all of you accounts out there – you know who you are– you contributed to making history today, for moving the needle forward for D&I in an indelible way for our IG DCM, and for being there for the nation’s oldest Service Disabled Veteran broker dealer.

But most of all I and we would like to thank Toyota’s Kate Oddo and Bill Pang for their foresight to challenge us to be the best we can be with such a formidable.  This was a golden opportunity for Toyota to raise the bar for financial diversity broker dealers and investment banks.  We appreciate your meaningful focus to create a game-changing event for diversity and inclusion and for the thought leadership you both provided for Toyota, Mischler and our debt capital markets.  People have taken note of this.

IG Primary & Secondary Market Talking Points

 

  • Mischler Financial served as an active Co-Manager on today’s FNMA $3.5b 5-year Unsecured Notes new issue.  We thank the fine folks at Fannie Mae for including Mischler, nation’s oldest SDVBE in such a meaningful way.  Thanks also to all the accounts who gave us orders.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 16.92 bps.
  • BAML’s IG Master Index tightened 1 bp to +141 vs. +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +187 vs. +188.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Tuesday versus $12.4b Monday and $18.2b the previous Tuesday.
  • The 10-DMA stands at $15.9b.

 Ya Gotta Believe! Go Mets!

Have a great evening!
Ron

 

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. (more…)

IG Corporate Debt: PepsiCo-Good AND Better For You; Mischler Comment
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.03.16- PepsiCo: Good and Better For You

 

Investment Grade New Issue Re-Cap – New Records, Negative Rates and a Blockbuster from Pepsi

Global Market Recap

IG Primary & Secondary Market Talking Points

The PepsiCo Inc. $4.5b 6-part Deal Dashboard

A Look at Socially-Responsible PepsiCo Inc.: Good and Better For You.

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 28th

IG Credit Spreads (by Rating & Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

In the limited time I had today to thumb through a very interesting Q3 report from friends and financial news reporters John Balassi and Michael Gambale of Thomson Reuters fame, the multi-billion dollar multinational mass media and information firm, I was taken by a couple talking points about Global New Issuance that you should find noteworthy:

o   Global Debt Capital Markets activity is up 27% to $5.5 trillion through Q3.

o   Q3 U.S. Investment Grade Corporate Debt is 9%

o   Global High Yield is down 21%

o   Government and Agency offerings rose 76%

o   Emerging Markets Debt is down 23%

o   Overall Debt Underwriting fees declined 9%

However, what’s more incredible is that we are witnessing an unprecedented surge in bonds the world over that are guaranteed to lose investors’ money if held to maturity given their negative yields.  In an article written by Bloomberg Editorial’s Phil Kuntz, the total face value of negative yielding corporate and sovereign debt in the “Bloomberg Barclays Global Aggregate Index of investment grade bonds jumped to $11.6 trillion as of September 30th, up 6.1% from the prior month……….less than one seventh of the world’s negative yielding debt is owed by businesses. Finance companies issued……almost 80% ….totaling $1.3 trillion!” The number includes debt one year and out.  Corporations account for 15% of the world’s negative debt while 85% is derived from governments.  That’s not good news folks.

This pie chart displays the drama in those numbers:

mischler corporate debt comment

 

So, what’s this got to with new issuance?  Everything because the place investors go to fill their portfolios is the safe haven of better rated IG corporate debt right here is our U.S. dollar-denominated primary markets.  In what continues to be a historically low rate environment, corporations have a wonderful window of opportunity before them to secure favorable funding for M&A, expansions, lower refi levels, you name.  What’s more, investors are attracted to the relative safe haven of these credits that do, in fact offer the best balance in our world in better managing risk exposure while securing a decent return, comparatively speaking.

 

That’s our segue into this evening’s IG DCM that owned the new issues leaderboards as 3 corporate issuers priced 11 tranches between them totaling $7.15b.  But the biggest deal of the day belonged to PepsiCo’s (NYSE:PEP) $4.5b 6-part Senior Notes transaction comprised of 3- and 5-year FXD/FRNs, 10s and 30s.  It also happens to be the Deal-of-the-Day as Mischler Financial, our nation’s oldest Service Disabled veteran broker dealer was more than honored to be named an active 1.00% Co-Manager and was showcased as one of two diversity co’s on today’s deal.  So, I invite you to join me in the relative value story of this deal and PepsiCo’s Diversity & Inclusion initiatives.

But first, here’s the global re-cap and a look at all today’s primary market talking points and issuance!

 

Global Market Recap

 

o   U.S. Treasuries – Better than expected ISM manufacturing hits the front end.

o   Stocks – U.S. stocks red (3:30pm). FTSE, Nikkei & HS rallied. Europe mostly red.

o   Economic – ISM manufacturing moved back over 50. Good news for hawks on the FOMC.

o   Currencies – USD outperformed the Euro, Pound & Yen. Pound had a very bad day.

o   Commodities – Crude oil closed higher while gold, copper, silver & wheat lost.

o   CDX IG: +0.50 to 75.63

o   CDX HY: +2.30 to 403.45

o   CDX EM: -0.65 to 233.06

*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 11 IG Corporate-only new issues was 18.18 bps.
  • BAML’s IG Master Index was unchanged at +143.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.3b on Friday versus $15.8b Thursday and $13.3b 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
10/03-10/07
vs. Current
WTD – $7.15b
October 2016 vs. Current
MTD – $7.15b
Low-End Avg. $17.35b 41.21% $87.83b 8.14%
Midpoint Avg. $18.54b 38.57% $88.59b 8.07%
High-End Avg. $19.74b 36.22% $89.35b 8.00%
The Low $15b 47.67% $75b 9.53%
The High $26b 27.50% $125b 5.72%

 

The PepsiCo Inc. $4.5b 6-part Deal Dashboard

 

PEPSI Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
Comparable Bid
Pre-Announcement
NICs
(bps)
Trading at
the Break
+/-
(bps)
3yr FXD +55-60 +50a (+/-5) +45 +45 <12.5> PEP 1.50% ’19 T+35 (G+42)
Curve adjusted = flat
0 44/43 <1>
3yr FRN 3mL+equiv 3mL+equiv 3mL+27 3mL+27 <12.5> PEP 1.50% ’19 T+35 (G+42)
Curve adjusted = flat
0 3mL+26/24 <1>
5yr FXD +65-70 +60a (+/-5) +55 +55 <12.5> PEP 3.00% ’21 T+54 (G+55) 0 54/53 <1>
5yr FRN 3mL+equiv 3mL+equiv 3mL+53 3mL+53 <12.5> PEP 3.00% ’21 T+54 (G+55) 0 3mL+52/51 <1>
10yr +90-95 +80a (+/-5) +75 +75 <17.5> PEP 2.85% ’26 (T+67/G+71) +4 74/73 <1>
30yr +130-135 +120a (+/-5) +115 +115 <17.5> PEP 4.45% ’46 (T+112) +3 114/ <1>

 

………and here’s a look at final book sizes and over-subscription rates:

 

ETR Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr FXD 250mm 450m 1.8x
3yr FRN 750mm 1,950m 2.6x
5yr FXD 250mm 600mm 2.4x
5yr FRN 750mm 2,200m 2.93x
10yr 1,000m 3,250m 3.25x
30yr 1,500m 4mm 2.67x

 

Thank You’s Galore

 

Let’s see if you’ve been reading the “QC” with a simple test question – “Where does D&I start in corporate America?”  Correct good job!  The answer is it starts from the top down.  At PepsiCo, the world’s second largest food and beverage business that means India-born and naturalized American Chairperson and Chief Executive Officer Indra Nooyi.  It is from her office that Pepsi’s D&I initiative is carried, embraced and filtered through what is among the best-in-class Diversity and Inclusion mandates that we saw in action today, as evidenced by Mischler’s opportunity to demonstrate our capital markets capabilities and to work with PepsiCo’s Treasury/Funding Department.

Mischler sends off its five-star salute this evening to all of you with thanks not only for the privilege to be involved in your transaction, but for the active roll you enabled and supported us to participate with.  As a 1.00% active Co-Manager we were able to introduce nearly one quarter of a billion dollars in volume and 80 individual orders to Pepsi’s six-part order books.  By allocating Team Mischler we then see return business from our middle markets distribution network that executes Corporate, Agency, ABS/MBS, Rates and Municipal business among others.  The sustainable growth trajectory we are on, in turn, helps fund our “giving back and pay forward set asides”  so that we can apply our shared ethos to give back to our Veteran community.  This is a circular process, and it’s how we grow our business while giving back to veteran and service disabled veteran organizations – the root of our diversity certification.  So, thank you all at Team Pepsi from all of us here at Team Mischler for being great stewards for D&I and Veteran causes.

PepsiCo Inc debtA Look at Socially Responsible PepsiCo Inc.: Good and Better For You

But let me tell you a bit more about Pepsi D&I leadership roles. Pepsi’s Supplier Diversity mandate began over 30 years ago at the company and its annual spend is approximately $1.3 billion!  Also, internally, PepsiCo recognizes individuals within the company who are active supporters of diversity and inclusion in the workplace.  Two such honors are the Harvey C. Russell Inclusion Award to honor employees for their outstanding achievements in diversity and inclusion.  Most recently, 76 associates from Pepsi’s Global business were awarded.  Additionally, Pepsi offers the Global Steve Reinemund Diversity and Inclusion Leadership Award recognizing senior Pepsi staff members who model exemplary leadership and a commitment to diversity and inclusion.

Which brings me to PepsiCo’s incredible commitment to hire U.S. military veterans, an initiative that earned it a top 25 ranking for the second consecutive year in the G.I. Jobs ranking of Top 100 Military Friendly Employers in 2013.  Pepsi is the lone food and beverage company in the top 50 companies in that category.  Also in 2013, Pepsi’s online jobs clearinghouse named, Bright.com, secured the top ranking for Pepsi among Fortune 50 companies in “most veterans hired” as a percentage of its workforce.  How awesome is that folks?  For four consecutive years Pepsi’s recycling program provided $1.5million to support Entrepreneurship Bootcamp for Veterans or “EBV” that helps veterans build their own businesses to pursue their dreams. Those are just some of the ways Pepsi is giving back.

They gave the nation’s oldest SDVBE a chance again today to prove our muster and so, it’s our job and expectation to deliver the goods and in addition to extol the virtues and tell the stories of what Pepsi does to make this world a better, more socially responsible place; Pepsi is Good and Better For You!

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

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

 

NICs, Bid-to-Covers, Tenors 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.
9/26
TUES.
9/27
WED.
9/28
TH.
9/29
FRI.
9.30
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
AVERAGES
WEEK 9/12
AVERAGES
WEEK 9/05
New Issue Concessions 2.50 bps N/A 5.69 bps 0 bps/flat N/A 2.71 bps 0.69 bps 4.66 bps 1.30 bps
Oversubscription Rates 3.71x N/.A 2.66x 4.12x N/A 3.52x 3.23x 3.47x 3.23x
Tenors 13.12 yrs 30 yrs 7.71 yrs 7.29 yrs N/A 10.51 yrs 9.36 yrs 11.28 yrs 9.42 yrs
Tranche Sizes $509mm $150mm $862mm $681mm N/A $646mm $964mm $710mm $719mm

 

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
General Motors Finc’l. Co. BBB-/BBB- FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+127 3mL+127 BAML/BNPP/CITI/LLOY/MIZ
General Motors Finc’l. Co. BBB-/BBB- 2.35% 10/04/2019 750 +155a +145 the # +145 +145 BAML/BNPP/CITI/LLOY/MIZ
General Motors Finc’l. Co. BBB-/BBB- 4.00% 10/06/2026 750 +260a +245a (+/-5) +240 +240 BAML/BNPP/CITI/LLOY/MIZ
PepsiCo. Inc. A1/A FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+27 3mL+27 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 1.35% 10/04/2019 750 +55-60 +50a (+/-5) +45 +45 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A FRN 10/06/2021 250 3mL+equiv 3mL+equiv 3mL+53 3mL+53 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 1.70% 10/06/2021 750 +65-70 +60a (+/-5) +55 +55 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 2.375% 10/06/2026 1,000 +90-95 +80a (+/-5) +75 +75 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 3.45% 10/06/2046 1,500 +130-135 +120a (+/-5) +115 +115 BAML/CITI/GS/MIZ
Xylem Inc. Baa2/BBB 3.25% 11/01/2026 500 +200a +170a (+/-5) +165 +165 CITI/WFS(a) JPM (p)
Xylem Inc. Baa2/BBB 4.375% 11/01/2046 400 +250a +215a (+/-5) +210 +210 CITI/WFS(a) JPM (p)

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.38 1.38 0
IG27 75.132 75.232 0.10
HV27 176.145 175.005 <1.14>
VIX 13.29 13.57 0.28
S&P 2,168 2,161 <7>
DOW 18,308 18,253 <55>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $7.15 bn DAY: $7.15 bn
WTD: $7.15 bn WTD: $7.15 bn
MTD: $7.15 bn MTD: $7.15 bn
YTD: $1,081.886 bn YTD: $1,366.37 bn

 

Lipper Report/Fund Flows – Week ending September 28th

     

  • For the week ended September 28th, Lipper U.S. Fund Flows reported an inflow of $2.334b into Corporate Investment Grade Funds (2016 YTD net inflow of $37.925b) and a net inflow of $2.011b into High Yield Funds (2016 YTD net inflow of $9.444b).
  • Over the same period, Lipper reported a net inflow of $480.7m into Loan Participation Funds (2016 YTD net outflow of $3.319b).
  • Emerging Market debt funds reported a net inflow of $209.7m (2016 YTD inflow of $6.549b).

 

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 33.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 9/30 9/29 9/28 9/27 9/26 9/23 9/22 9/21 9/20 9/19 1-Day Change 10-Day Trend PC
low
IG Avg. 143 143 143 143 142 141 141 142 142 142 0 +1 106
“AAA” 84 84 84 84 83 82 82 83 83 83 0 +1 50
“AA” 87 87 87 86 86 85 85 86 85 85 0 +2 63
“A” 113 114 114 114 113 112 112 113 113 113 <1> 0 81
“BBB” 185 185 185 185 184 183 183 185 184 185 0 0 142
IG vs. HY 354 366 371 375 374 369 368 380 382 383 <12> <29> 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 38.95 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 9/30 9/29 9/28 9/27 9/26 9/23 9/22 9/21 9/20 9/19 1-Day Change 10-Day Trend PC
low
Automotive 122 121 121 121 119 119 119 121 120 120 +1 +2 67
Banking 133 136 134 134 131 131 131 133 132 133 <3> 0 98
Basic Industry 186 187 187 187 187 186 186 188 189 189 <1> <3> 143
Cap Goods 106 107 105 106 105 104 104 104 104 104 <1> +2 84
Cons. Prod. 111 111 111 112 110 110 110 111 111 111 0 0 85
Energy 191 191 192 193 193 191 191 192 192 192 0 <1> 133
Financials 169 167 167 167 166 165 165 167 167 167 +2 +2 97
Healthcare 120 119 119 119 118 118 118 119 118 118 +1 +2 83
Industrials 144 144 144 145 143 143 143 144 144 144 0 0 109
Insurance 162 163 163 163 163 162 162 163 162 163 <1> <1> 120
Leisure 140 141 140 141 141 141 142 142 142 142 <1> <2> 115
Media 165 164 165 165 164 164 164 166 165 165 +1 0 113
Real Estate 153 151 151 151 151 151 151 151 151 150 +2 +3 112
Retail 119 119 119 119 118 118 119 120 119 120 0 <1> 92
Services 133 136 135 135 134 134 135 135 135 135 <3> <2> 120
Technology 121 124 124 124 123 123 123 124 124 124 <3> <3> 76
Telecom 163 165 165 165 162 162 162 164 164 164 <2> <1> 122
Transportation 141 138 138 139 139 138 139 139 139 139 +3 +2 109
Utility 141 142 141 141 140 140 140 141 140 141 <1> 0 104

  (more…)

IG Corporate Debt Issuance-7th Busiest Month; Entergy Louisiana Snapshot
September 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 09.28.16 –Entergy Lousiana; Investment Grade Debt Issuance: Sep is 7th Busiest Month Ever

 

QC Quote of The Day: “Demand for IG corporate credit and particularly the defensive nature of the utility sector is resounding..”

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Deal-of-the-Day: Entergy Louisiana, LLC

Entergy Louisiana, LLC Final Pricing Details

A Brief Look at Entergy’s Call to Diversity and Social Responsibility

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 21st

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 European equities were all up across the boards this morning and Deutsche Bank stock (NYSE:DB) rallied back a bit despite “counter party risk” being a topic of discussion in some circles.   September has witnessed market volatility swing 10yr Treasury yields within a very wide 20 bp band from 1.72% to 1.49%.  Driving that volatility are the recent policy decisions and comments from the Central Banks, namely the FOMC, ECB, BOE and BOJ.  Oil markets, highly correlated to the month’s wild equity swings we’ve witnessed hasn’t helped stability at all.  Still, we’ve wound up pricing $136b in new IG Corporate issuance and $161b including SSA.  Heap indigestion on top of that and the fact that corporates are averaging anywhere from 0-10 bps NICs with utilities averaging 0-5 bp NICs and it illustrates just how resilient and amazing this primary market month has been.  All of the recent market volatility elevated the importance of this morning’s Durable Goods Number forecast to be <1.5%> against the 4.4% prior number.  It delivered a 0.00% and primary markets were off to the races given the stable back drop.

Having said all that, it was not a crowded day for issuance today creating a nice opportunity for several companies to print new deals. 5 IG Corporate issuers owned today’s IG primary markets pricing 8 tranches between them totaling $6.90b.  We have now priced 54% of this week’s syndicate midpoint average forecast for IG Corporates or $12.65b vs. $23.30b.  MTD we’re now over 23% above the syndicate estimate or $143.418b vs. $116.02b.  September all-in (IG Corporate plus SSA) issuance is now $168b which ranks as the 7th busiest month on record with two more days remaining! It’s pretty safe to say that September will finish as the second busiest month of 2016.

As Team Mischler was an active 2.50% Co-Manager on today’s Entergy Louisiana, LLC $400mm 10-year Collateral Trust Mortgage Bond new issue, it was the clear winner to be crowned as the session’s Deal-of-the-Day!  For the deal drill-down please scroll just below. Entergy Louisiana is a sub of Entergy Corp., NYSE: ETR

 

Global Market Recap

 

  • S. Treasuries: Small losses across curve. First all-out losing session in the last 11.
  • Stocks – U.S. & Europe stocks rallied. Nikkei traded poorly & China small losses.
  • Economic – Durables were better than expected but nothing to get excited about.
  • Currencies – The CAD rallied with higher crude oil. The USD outperformed the Yen.
  • Commodities – Big rally for crude oil as OPEC agreed on a production cut (no details given).
  • CDX IG: -2.0 to 75.42
  • CDX HY: -9.68 to 404.28
  • CDX EM: -0.53 to 234.0

*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 8 IG Corporate-only new issues was 18.875 bps.
  • BAML’s IG Master Index widened 1 bp to +143 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Tuesday versus $12.8b Monday and $19.1b the previous Tuesday.
  • The 10-DMA stands at $15.8b.

 

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

 

IG Corporate New Issuance This Week
9/26-9/30
vs. Current
WTD – $12.65b
September 2016 vs. Current
MTD – $143.418b
Low-End Avg. $22.13b 57.16% $115.45b 124.23%
Midpoint Avg. $23.30b 54.29% $116.02b 123.61%
High-End Avg. $24.48b 51.67% $116.59b 123.01%
The Low $15b 84.33% $80b 179.27%
The High $36b 35.14% $150b 95.61%

 

Deal-of-the-Day: Entergy Louisiana, LLC

entergy louisianaThe fairly quiet and stable day made it a good one for the few issuers who had the foresight to take advantage of an uncrowded new issue calendar, to print new deals.  One of those astute Treasury/Funding teams was Entergy that announced and priced a $400mm “will not grow” 10-year Collateral Trust Mortgage Bond for Entergy Louisiana, LLC through joint leads BNP Paribas, Goldman Sachs, KeyBanc, SMBC Nikko and U.S. Bancorp.  Co-Managers were Mischler Financial Group, Inc., Regions, Toronto Dominion and Williams Capital.

The deal announced in the early morning session post the 8:30 economic data releases as a $400mm “will not grow” CTMB new issue carrying initial price thoughts in the T+110 “area” before ratcheting in nicely to T+95 “area” guidance with “area” defined as +/-5 bps. It launched at the tightest side of guidance to launch and price at T+90.  That’s a full 20 bps of spread compression wherein the average IG Corporate contraction from IPTs to the launch this month has been more like 15 bps. A great level for the issuer, leads and Co-Managers to have achieved together.

Relative value was straight line on today’s new 10-year.  We looked at the outstanding Entergy Arkansas (A2/A) 3.50% due 4/01/2026 that was T+86 (G+90) pre-announcement, and the Entergy Louisiana 3.25% due 4/01/2028 that was T+103 bid or G+98.  Since the latter is a 12-year I adjusted 5 bps for the 12s/10s curve getting me to G+93. Taking an average of those two comps equates to a G+91.5 inferring that today’s new issue priced with a negative 1.5 bp NIC or <1.5> bp concession at today’s final T+90 pricing spread level.

I know I sound like a broken record, but really folks, demand for IG corporate credit and particularly the defensive nature of the utility sector is resounding.  Today’s order book topped out at $1.6b before the tighter launch level saw several tier I accounts drop their orders. The final order book held in extremely well without them finishing at $1.1b for a still very strong 2.75x bid-to-cover rate.  I am particularly pleased and even more proud to say that our tier II and III incremental/tertiary middle markets accounts did not drop from the book at all except for one limit order.  It was the single most satisfying outcome on a new issue since reinventing myself in the diversity space nearly 12 years ago.  A lot of that satisfaction comes from working with an issuer like Entergy and a lead left like Goldman Sachs who believe in, embrace and WILL reward the value-added proposition.

What Does True “Inclusion” Mean on Deal Day?
It’s all about involvement from start to finish.  Of critical importance is Entergy’s consistent mandate to introduce true best practices throughout the deal day issuance process,  and to include their co-managers on all calls pertaining to the deal as follows:

 

  • Auditor Due Diligence Call
  • Organizational and Market Update Call
  • Business Due Diligence Call
  • Go-No Go Call
  • Guidance Call
  • Launch Call
  • Pre-Pricing Due Diligence Call
  • Pricing Call

 

That right there is called getting us involved.  We feel a part of the deal in that we’re immediately informed as the call takes place.  We sound more informed in discussions with accounts and it just makes for a much more professional and complete approach for Co-Managers.

The Entergy Louisiana, LLC Deal Dashboard

 

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
ETR 10yr +110a +95a (+/-5) +90 +90 <20> bps <1.5> 89/87 <1>

 

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

 

ETR Issue Tranche Size Book at the Top Final Book
Size
Bid-to-Cover
Rate
10yr $400mm $1.6b $1.1b 2.75x

 

A Brief Look at Entergy’s Call to Diversity and Social Responsibility

 

As the nation’s oldest Service Disabled Veteran broker dealer you all know that wear our SDVBE certification/dedication proudly. When the opportunities knock we expect to be the best there is at providing value to our customers (issuers, syndicate teams and accounts).  I extol the virtues of our give-back component at every opportunity I get right here in the “QC” and all of Mischler’s employees embraces our veteran causes with one common, shared ethos.

It follows then that when we are granted opportunities to serve on transactions, we extol those same virtues held near and dear to the Issuers who we serve.  So please give a bit of time to the below.  There’s so much more to what Entergy and its wholly-owned subsidiaries do for diversity and social responsibility, but I thought I’d highlight some recent recognition they’ve received in 2016.  True to their corporate slogan it’s about “The Power of People.” It’s nice for bankers to know how to bank and structure deals, but the below is also helpful for them to better understand the corporate culture behind the issuers whose mandates they seek to secure. It brings the entire process full circle and makes the endeavor more than just about the money!

You should all know that Entergy has once again been named to the Dow Jones Sustainability North America Index. The index measures performance in economic, environmental and social dimensions against industry peers around the globe. Entergy was one of only four U.S. electric utilities named to the index. The company achieved perfect scores of 100 in the focus areas of Corporate Citizenship and Philanthropy, Biodiversity, Climate Strategy and Water-Related Risks. This is the 15th consecutive year Entergy has been included on either the World or North America index or both.

Corporate Responsibility Magazine’s 2016 list of the 100 Best Corporate Citizens

Entergy is also ranked 18th on Corporate Responsibility Magazine’s 2016 list of the 100 Best Corporate Citizens. Entergy was the highest-ranking electric utility on the list. In the category of philanthropy and community support, Entergy was ranked number 4. The list recognizes companies demonstrating transparency and accountability in highly competitive industries. This is the seventh time Entergy has been named to the list.

 

Cogent Reports – 2016 Most Trusted Utility Brand

 

During 2016, Cogent Reports conducted online surveys with more than 50,000 customers of the country’s 129 largest utility companies. Results placed Entergy as one of the top utilities nationwide in brand trust. Cogent Reports attributes the high score to Entergy’s focus on charitable giving, community volunteerism and support of low-income customers.

Saving the best for last, you all know Mischler is the nation’s Oldest Service Disabled Veteran broker dealer and our commitment to giving back to veteran causes is a shared ethos among all Team Mischler employees.  We honor Entergy for winning the 2016 Patria Award and send our heartfelt thanks and Mischler five-star salute to all of you in Treasury/Funding for being part of the Entergy’s culture and commitment to giving back to our nation’s veterans. 

 

Pro Patria Award

In 2016, Entergy won the 2016 Pro Patria Award from the U.S. Department of Defense’s Employer Support of the Guard and Reserve for promoting supportive work environments for members of the National Guard and Reserve. And among 2,400 nominees, Entergy was also named one of the 30 finalists for the 2016 Secretary of Defense Employer Support Freedom Award, the highest recognition given by the Department of Defense’s Employer Support of the Guard and Reserve.

So, I think it’s clear to see that Entergy is not only constantly moving the needle forward for diversity and inclusion in our IG dollar Debt Capital Markets but it is ingrained in ETR’s corporate culture.  This evening’s “QC” lays out a picture perfect illustration of what it means when a company Entergy consistently focuses work on growing and expanding diversity and social responsibility.  When an issuer gives Mischler an opportunity to grow sustainably, this daily owes it to that Company to extol the virtues of all the great things it is doing toward effective and landmark Corporate Governance. We take it seriously and the companies we serve do as well.  That is a story you will always find here in the “QC.”

Issuers do care and are looking for diversity co-managers who consistently deliver quality orders to their transactions in order to capture new investors to their profile.  I also know that when the world’s largest financial institutions lend to and bank the U.S. Fortune 500, issuers care a lot about who does it right, who does it wrong, and who doesn’t do it all.  So, maybe think about that and dedicate a section of your pitch books to diversity and social responsibility.  In our highly competitive financial services industry it just might be the difference between a mandate or not; an active role or a passive one; a role or none at all.  I am telling you this because the guy-in-the-corner really is in your corner.  It’s all helpful advice.
And of course, thanks to all of our tier II and III high quality middle markets accounts  – you all know who you are – yet I can’t mention you by name.  You are all great business partners, not to mention those who are longtime friends outside the office.  You’ve been there from the get go and as I always say, “it’s about the quality of the order” and in that regard, “you’re all BlackRock in our book.”  Thank you!


Entergy Louisiana, LLC Final Pricing Details

$400mm ETR 2.40% CTMBs due 9/01/2026 @ $99.577 to yield 2.448% or T+90. MW+15

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

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

Three’s A Crowd; Durable Goods and Debt Capital Markets-Mischler Comment
September 2016      Debt Market Commentary   

Quigley’s Corner 09.27.16 Durable Goods and Debt Capital Market Issuance

Investment Grade New Issue Re-Cap – Three’s a Crowd

Tomorrow’s Durable Goods Number Should Result in Issuance and Here’s Why:

Global Market Recap

IG Primary & Secondary Market Talking Points

Presidential Debate Ratings Set New Records

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 21th

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Tomorrow’s Calendar

 

Lehigh University stood alone owning today’s IG Corporate calendar with its $150mm 30-year 3(a)4exempt taxable bond, Series 2016 new issue. The reason?  Big problems in Europe.  Three issuers stood down this morning across the pond and ECB President Mario Draghi spoke of a pervasive sense of urgency in the EU in which he urged governments to “act to stem rising public discontent” adding, “they must show that the Union brings tangible benefits to people’s lives.”  (Oh Really????)  He continued with “the ECB cannot sustain the European recovery alone.” (Duh!!!!)  This, after how many years of applying a kick-the-can mentality that segued to helicopter money and a gung ho “whatever it takes the ECB, we’ll do it” attitude.  This is a change of coarse and invites a serious discussion once again about the viability and sustainability of the European Union. Further compounding continental concerns, Deutsche Bank continued as a primary focus and lynchpin to the entire European banking system.  One FIG and one industrial also stood down in the U.S. IG primary markets as well – that I am aware of.

So, when markets are somewhat volatile, as September has been despite $137b IG Corporate and $158b all-in IG, I tend to turn to “go to” contacts for a more detailed discourse.  In other words, those I’ve known forever and who have withstood the test of time.  Believe it or not there aren’t many of THEM around.  They do likewise.  I gave a ring to my favorite Scotsman Mr. Paul Cohen who during his years as a banker at Banque Paribas, BNP Paribas and Dresdner essentially covered most all corporates including some fallen angels.  Besides being an all-around very good guy, he knows his stuff and is a great person for you to reach out to have him add you to his daily disty list.  Paul is a primary market strategist who writes for Bloomberg London covering IG Euro new issuance.  In our inextricably global-linked world economy that I always write about here, minding your dollars and euros makes sense (cents!) Ask him to put you on his loop and please do tell him that the guy-in-the-corner sent you. All free and all informative for each one of YOU! Remember folks, it’s all about timely, accurate information and how you apply it that keeps you on top of your game while better understanding our markets!  So, go ahead and reach out to him.

The Three Musketeers; The Three Little Pigs; The Three Billy Goats Gruff!  Does the power of three really makes things better?  Funnier? Paul and discussed the theory of “threes” this afternoon…….the three deals that stood down that is.  Paul said, “three deals were pulled within 24 hours across the pond as market conditions changed since last week with issuers perhaps needing to be a bit more flexible in terms of their cost of funding expectations.”  He continued………”a flight-to-quality could be in the cards over the next day or two as the market digests the implications of theses pulled transactions beginning with Lufthansa, followed by NordLB and finally Korean Air.” Now, here’s the good part that cuts through the headline –  Lufthansa is a split-rated credit and perceived by many market participants to fall into the lower ratings category due to investment guidelines that typically err on the side of caution while also satisfying the ECB’s CSPP criteria by maintaining one investment grade rating.  NordLB does harbor its own particular “situation” with its shipping business and acquisition of Bremer LB.  Lastly, the Korean Air Lines pull was the result of contagion from Lufthansa.

So, at first blush, market players came in this morning hearing “3 deals were pulled in Europe…..OMG!”  Knowing the smart minds out there and having access to them with a bit of Quig-Pro-Quo thrown in for good measure, reveals a bit more story, a bit more color and a bit more understanding that’s not nearly as frightful as the words Mario Draghi uttered today or that the market is conjecturing as surrounds Deutsche Bank.  Just a helpful tip for you! And a thank you to Paul “Pablo” Cohen.

Tomorrow’s Durable Goods Number Should Result in Issuance and Here’s Why:

 

durable goods reportOn the home front, IG corporates clearly took a breather today which is a good thing.  We have a Durable Goods Orders number out at 8:30am tomorrow morning which is relatively important given recent volatility so, I suspect that number hits first after which if it’s pretty much as expected or <1.5%> we’ll see issuance. The prior number was 4.4% so perhaps it surprises to the upside.  2 out of 3 is 66% so I’ll say I don’t expect it to miss.  Wrightson, for example is generally an outlier but they also happened to be pretty good. They conjecture that tomorrow’s August Durable Goods report will be 1.5% to the upside – a nice swing versus negative expectations.  The reason?  Boeing’s August orders will translate into a 24% increase in civilian aircraft orders in seasonally adjusted terms which will make up for softness elsewhere.  Just putting it out there folks.

 

Global Market Recap

 

o   U.S. Treasuries: 30yr leads UST rally. Bunds & Gilts improved. JGB curve much steeper.

o   Stocks – Bounce back day for U.S. stocks. Europe closed down & Asia rallied.

o   Economic – U.S. consumer confidence stole the show. The strongest since 2007.

o   Overseas economic – China’s industrial profits increased the most in 3 years.

o   Currencies – U.S. outperformed the Euro but lost ground vs. the PND, Yen, CAD & AUD.

o   Commodities – CRB, crude oil, heating oil, gold, copper & silver all down.

o   CDX IG: -1.06 to 78.05

o   CDX HY: +19.57 to 415.59

o   CDX EM: -0.03 to 238.58

*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 1 IG Corporate-only new issue was 10.00 bps.
  • BAML’s IG Master Index widened 1 bp to +142 versus +141.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +138 versus +137.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +190 versus +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.8b on Monday versus $13.3b Friday and $12b the previous Monday.
  • The 10-DMA stands at $15.5b.

 

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

 

IG Corporate New Issuance This Week
9/26-9/30
vs. Current
WTD – $5.75b
September 2016 vs. Current
MTD – $136.518b
Low-End Avg. $22.13b 25.98% $115.45b 118.25%
Midpoint Avg. $23.30b 24.68% $116.02b 117.67%
High-End Avg. $24.48b 22.49% $116.59b 117.09%
The Low $15b 38.33% $80b 170.65%
The High $36b 15.97% $150b 91.01%

 

Presidential Debate Ratings Set New Records

Yesterday, I wrote the following about last evening’s first Presidential debate between Clinton and Trump, “You can watch it on virtually any major broadcast and/or cable news network as all of them will be televising this one.  It WILL break all Presidential debate records by a LOT.” Well, the results are in.  More than 46 million people watched the debate across six broadcast networks according to preliminary Nielsen data released by Univision.  CNN published its own data confirming, along with virtually all media outlets. That’s a new record and 7.7% more than the 42.7mm viewers who watched the first Obama-Romney debate in 2012 on those same six channels.

Including cable news network ratings, the debate audience soared to 83 million viewers officially becoming the most-watched Presidential debate in history breaking the 80.6 million who watched Jimmy Carter debate Ronald Reagan back in 1980.

Yet another good reason for you to stay tuned into the daily “QC.”

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. (more…)

The Circus Comes To Town (Hempstead, NY) -Mischler Debt Market Comment
September 2016      Debt Market Commentary   

Quigley’s Corner Weekend Edition 09.23.16- The Circus Comes to Town; Ringling Brothers Barnum and Bailey Presidential debates

 

Investment Grade Corporate Bond New Issue Re-Cap – “The Ronald” Pre-Debate Comment

IG Primary & Secondary Market Talking Points

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

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Two IG Corporate issuers took advantage to price new prints this afternoon.  5-BBB First Midwest Bancorp issued a 10-year Subordinated Notes deal and Flowers Foods, Inc. brought an upsized $400mm 10-year Senior Notes deal. So, 2 IG Corporate deals, 2 tranches for a total of $550mm.  Additionally, the SSA space featured the Russian Federation that tapped its outstanding 4.75% due 5/27/2026 to the tune of $1.25b bringing its total amount outstanding to $3b and resulting in a Friday all-in IG day total of 3 issuers, 3 tranches and $1.7b.

As we look toward next week, our IG primary markets will slow down a bit from the rabid pace of these last couple of weeks with roughly $20-25b expected.  I am a big fan of the higher end of supply estimates given Central Bank dovishness, the approach of Q3 earnings and the quickly approaching the circus comes to town (of Hempstead, NY, home of Hofstra University where the first round of the Ringling Brothers Barnum and Bailey Presidential debates will be held on Monday, September 26th.  I am personally looking forward to getting back to some good old fashioned comedy, which I’m sure it will be folks.  Election Day is Tuesday, November 8th so, issuers, bankers and syndicate managers have a window open from now through then after which we’ll enter a period of listening defining and second guessing new administration policies beginning in 2017 and cabinet appointments whoever winds up pulling this election off.  As of now it IS very much up in the air and I expect it to be VERY close as in down-to-the-wire and the dark horse could win this one so DO NOT BE SURPRISED.  Take it from…well, Tthe Ronald! Sorry but I couldn’t resist that one!

Anyway, another great week for the IG DCM.  As this is the “QC’s” Friday edition just scroll below to find out what the top syndicate desks have to say about next week’s forecasts.  I personally err to the upside as I said earlier.  I am calling for $30b+ but do the prudent thing and digest the numbers and more importantly read the thoughts of the Best and Brightest that syndicate has to offer in the section named for them just below a bit.

 

IG Primary & Secondary Market Talking Points

 

  • Flowers Foods Inc. upsized today’s 10-year Senior Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 44 deals that printed, 25 tightened versus NIP for a 57.00% improvement rate while only 14 widened (32.00%) 4 were trading flat (9.00%) and 1 was not available or N/A (2.00%).
  • For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 1 IG Corporate-only new issue that posted price evolution was 17.5 bps.
  • BAML’s IG Master Index tightened 1 bp to +141 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +137 versus +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.5b on Thursday versus $16.3b Wednesday and $15.9b the previous Thursday.
  • The 10-DMA stands at $15.7b.

 

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

 

IG Corporate New Issuance This Week
9/19-9/23
vs. Current
WTD – $38.563b
September 2016 vs. Current
MTD – $130.768b
Low-End Avg. $29.09b 132.56% $115.45b 113.27%
Midpoint Avg. $30.28b 127.35% $116.02b 112.71%
High-End Avg. $31.48b 122.50% $116.59b 112.16%
The Low $20b 192.81% $80b 163.46%
The High $40b 96.41% $150b 87.18%

 

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s this week’s day-by-day re-cap of key primary market driver averages for IG Corporates followed by this week’s and the prior three week’s averages:
Please note that this week’s average tenors and tranche sizes are slightly different than what I posted in the aforementioned question to the Best and Brightest as it reflects today’s two new issues for First Midwest Bancorp and Flowers Foods. Those two issues announced after I sent my survey question out. Thanks for understanding! RQ

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/19
TUES.
9/20
WED.
9/21
TH.
9/22
FRI.
9/23
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 9/12
AVERAGES
WEEK 9/05
AVERAGES
WEEK 8/29
New Issue Concessions <2.81> bps 4 bps N/A 1.92 bps N/A 0.69 bps 4.66 bps 1.30 bps 5.47 bps
Oversubscription Rates 3.15x 2.40x N/A 3.32 bps N/A 3.23x 3.47x 3.23x 2.18x
Tenors 12.13 yrs 8 yrs N/A 8.05 yrs 10 yrs 9.36 yrs 11.28 yrs 9.42 yrs 4.47 yrs
Tranche Sizes $1,426mm $642mm N/A $852mm $150mm $964mm $710mm $719mm $820mm

 

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

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

“Good morning and a Happy Friday to you!  One heck of a week eh?  We blew right past this week’s syndicate midpoint average forecast by 26% or $38.16 vs. $30.28b. We also surpassed the syndicate estimates for September IG Corporates by 12% or $130.36b vs. $116.02b……with another week to go!  All-in IG supply including SSA issuance is now at $151.96b.  That represents the fourth busiest month of this prolific year. To put that into proper context, $4b more of all-in supply puts this month into 9th place all-time; $27b puts us third place ALL-TIME.

This week hosted more dovishness from the FOMC and BOJ that fueled yesterday’s $17+b corporate supply.    Here are this week’s IG Corporate-only key primary market driver averages:

 

o   NICS:  0.69 bps

o   Oversubscription Rates: 3.23x

o   Tenors:  9.33 years

o   Tranche Sizes: $1,000mm

 

Versus last Friday’s four key primary market driver averages, NICs tightened 3.97 bps to 0.69 vs. 4.66 bps. while oversubscription rates remain strong at 3.23x losing 0.24x vs. last week’s 3.47x bid-to-cover rate.  Average tenors contracted 1.95 years to 9.33 years vs. 11.28 years but tranche sizes swelled significantly by $290mm to an even $1b vs. last week’s average $710mm.   

For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b). 

Week-on-week, BAML’s IG Master Index tightened 2 bps to +141 vs. last Friday’s +143 close.  Spreads across the four IG asset classes tightened 2 bps to 31.50 vs. 33.50. Looking at the 19 major industry sectors, spreads tightened by 1.74 bps to an average 38.00 vs. 39.74 off their post-Crisis lows..
And now I ask the question what are YOUR thoughts and number for next week’s IG new issue volume? 

 (canvass results of fixed income syndicate desks is available exclusively to recipients of the QC Distribution List)

Have a great weekend!
Ron (“The Ronald”) Quigley, Managing Director / Head of Fixed Income Syndicate

(Above canvass results of fixed income syndicate desks is available exclusively to recipients of the QC Distribution List) 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.)  (more…)

Corporate Bond Issuers Back Up the Trucks In Advance of Delivering New Deals
September 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 09.22.16- Corporate Bond Issuers Back Up The Trucks in Advance of Delivering Big Tranche(s) of Fresh Paper

 

Investment Grade New Issue Re-Cap – Backing up the Trucks

Global Market Recap

Deal-of-the Day: All That Glitters IS Gold..Man Sachs

Goldman Sachs Raising the Bar for Diversity and Inclusion Again, and Again
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 September 14th

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

corporate bond issuersLast evening at 9:13PM I closed my “QC” commentary with this: “Folks, Q3 is about over.  You hear that sound?   That’s the sound of trucks?  They’re backing up to print between now and Election Day – BIG TIME. 12 IG issuers are in the pipeline with a whole lot of M&A deals getting closer.”  Well, today did not disappoint. Treasuries were better bid, yields fell, equity markets rallied the world over thanks to yesterday’s FOMC and BoJ dovishishness as issuers took note to quickly back up their trucks to print.  All told beforehand right here in the little ole “QC”.  Just in case any of you aren’t sure what I meant when I say “back up the truck” perhaps this visual might be of assistance because it’s what I mean when I say that:

All right, now we’re understand each other, let’s get to today!

Today’s IG dollar DCM saw those trucks line up and take charge once again featuring 9 IG Corporate issuers across 20 tranches totaling $17.05b.  Adding in one lone SSA visitor to the mix, the all-in IG day totals were 10 issuers, 21 tranches and $18.05b.

What’s more is that we blew right through the IG Corporate syndicate midpoint average forecast calling for $30.38b this week ….to the tune of over 25% having priced $38.013bMTD it’s more of the same people.  Syndicate estimates expected a September total of $116.02b and we’re now over 12% above that amount sitting pretty at  $130.218b. This week isn’t over and we have yet another full week left next week.  The record for September IG Corporate only issuance is $153.32b set in 2013.

Don’t forget that all-in IG issuance including SSA volume is now at $150.568.  The September all-in record, also set in 2013, is $192.14b. That’s’ $41.572b away.

12 deals remain in the pipeline while 14 M&A deals are on the M&A docket for some point before year end or early 2017…..and those are ones I know about!

………..What do you say?  Are we all up for shattering yet another record?  That’s the spirit!  I think so too!  Issuers line up, ready, aim, FIRE!

Today’s largest transaction was Air Liquide’s $4.5b 5-part Senior Unsecured Notes transaction with proceeds used to repay a portion of the bridge loan credit facility associated with its acquisition of Airgas that completed on May 23rd among others.  However, that’s not to say there weren’t other large new issues.  Team Mischler’s “Deal-of-the-Day” belongs to The Goldman Sachs Group, Inc. $3.5b two-part 5NC4 FXD/FRN for which we were honored to be a part of.

 

Global Market Recap

 

o   U.S. Treasuries – Solid session for USTs. Tremendous session for the long end in Europe.

o   Stocks – Stocks were led higher by NASDAQ. Strong in Europe & Asia closed higher.

o   Economic – U.S. data was mixed. Data in China & France was positive.

o   Currencies – USD lost ground vs. 4 of the Big 5. The Yen was the lone loser.

o   Commodities – Back to back strong days for the commodity market.

o   CDX IG: -2.49 to 76.01

o   CDX HY: -9.50 to 381.91

o   CDX EM: -4.62 to 227.04

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

-Tony Farren

 

Deal-of-the Day: All That Glitters IS Gold..man Sachs

 

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5NC4 FRN 3mL+equiv 3mL+equiv 3mL+117 3mL+117 <20> bps 3.5 112/110 <3>
5NC4 FXD +140a +125a (+/-5) +120 +120 <20> bps 3.5 117/115 <3>

Mischler Financial is always privileged and honored to be named an active Co-Manager for The Goldman Sachs Group, Inc.  Today we served as a 0.5% active Co-Manager on today’s $3.5b two-part 5NC4 FXD/FRN Senior Unsecured Global Notes new issue. Hop on into the “QC” and let me show you around the new dashboard for my relative value study.

So relative value, as we all know is part art and part science but today’s fair value study is much more creative shall we say.  Always careful to tell the right story in the best way I can, this evening’s deal review will walk you through the “logic” art and science.

J.P. Morgan issued a 5NC4 back in August that many concluded priced about 12 bps behind where a bullet would issue.  What happened at the break, however, changed the logic as it tightened 10 bps points.  Given the same structure, let’s look at today’s Goldman deal in as straight-line approach as we can.  Let’s compare it to the outstanding GS 5-year – the 2.625% due 4/25/2021  – that was G+114 at yesterday’s close. That implies today’s new issue that priced at T+120 came with a 6 bp concession. The trick is valuing the 1-year optionality.  What is that worth?  Additionally, the same structured JPM 2.625% due 8/15/2021 (A3/A-) was also G+114 this morning pre-announcement.  Goldman’s deal is A3/NA) so, factoring let’s say a nickel or 5 bps for the S&P ratings differential one could argue that fair value on today’s new print is +119 or 1 bp NIC.  I could also take an average of the two approaches and call it 3.5 bps NIC.  One thing is for sure, now that both JPM and GS have issued this structure, we’ll likely see more of its kind ahead.  I can also tell you that the session closed with Goldman’s new 5NC4 fixed rate tranche framed in a 117/115 market or, not coincidentally, 3 bps tighter and effectively absorbing the 3 bps NIC.  The FRNs traded at 3mL+112/ or 5 tighter on the bid side.  All good stuff.

When markets re-open, like they did today, post FOMC and BOJ doldrums, we all like to see big banks pave the way by leading the way and setting the tone. Goldman did just that, but it didn’t stop there.

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

 

GS Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
FRN 1,250 $2.5b 2x
FXD 2,250 $8b 3.56x


Goldman Sachs Raising the Bar for Diversity and Inclusion Again, and Again

I’m actually having difficulty finding new creative ways to thank the “Fine” crew over at the firm with the Midas touch.  Goldman Sachs’ D&I private eye is Jonny Fine.  He’s nurturing an entire syndicate culture under his watch which is the mandate from the inner sanctum at Goldman Sachs.  Today I had no fewer than 5 hands on deck with me for questions, answers, updates, posts, bulletins, announcements, color…..you name it, they are always there for us on deal day or not, the nation’s oldest SDVBE.  There are just a couple of firms out there that shape their D&I promotions with actionable results on deal day. Goldman is tops. They get it by reviewing and scrutinizing our distribution capabilities. I/we learned years ago to vet only the highest caliber middle market accounts.  It’s a lot of work; it’s a lot of late nights on the DCM front.  Without divulging too much, word-of-mouth as to what we do here at Mischler has resulted in top 25 issuers asking us to put together non-deal roadshows for them. Trust me they are large well-known issuers to all of you.  Other tier I issuers, if you will, have been so impressed with our distribution that they are forming partnerships with us to bring our middle markets accounts to sell “other” products to them, away from new issues.  All because they are hearing about our quality investor base.

Firms like Goldman Sachs and Citigroup, to name another are demanding and they expect results. However, when delivered they help us become the best we can be. They then take us to the next level resulting in the aforementioned opportunities. We take what we do seriously and we WILL NEVER take it for granted. When we are rewarded for that hard work, we apportion some of that toward our give back initiatives to those who served, those who sacrificed, and/or their families and children.  It’s all very circular and one feeds the other. We grow our business; we help wounded veterans, we hire and train veterans returning home after active duty. Case in point: Jonathan Herrick another resident former US Marine who personifies what we’re trying to accomplish here in the bigger picture. We train them to keep them here and make them part of our corporate culture. Quality middle market accounts, such as those MFG client investment managers who count on Mischler’s symbiotic relationships with the 6-pack lead underwriters, like those on today’s Goldman Sachs transaction, represent the best incremental distribution network on the Street.  I’d put these institutional accounts up against anyone else’s and call them the best.  They are here throughout the U.S., Europe, Asia. They are banks, insurance companies, re-insurers, they manage endowments and foundations, they are pension funds, they are RIAs, commercial banks, private wealth managers, SFOs, MFOs, captive insurance, etc.  Thanks to firms like Goldman Sachs among others, we reward their high quality patronage and that’s when they begin transacting treasuries, or equities; ABS and MBS business, agencies and municipals both primary and secondary.

All of it began with a soldier, it grew further thanks to earning a minority certification, and as it flourished it’s been supported by a great operations/back office unit that is as buttoned up as our own front line.  Capital continues to grow with each and every DCM opportunity and we do have award winning debt capital markets coverage and fabulous distribution. So, we get it.  And we really do thank Team Goldman.  Our success is a direct result of what Team Goldman Sachs has done to help us become the best we can be. That is genuine and is delivered from every single employee here to all of you at GS.

Thank you Jonny Fine, James White, Jessica “Jess” Stern and the Fine folks at Team GS Syndicate from Tony Shan to Matt Jackson – you guys are the best, and today’s two new additions Elizabeth Plunkett and Jason Ghilarducci.  The two are learning from the best in the business at 200 West Street.  Leave it on the floor every night and be proud that you’re not only at a great firm,  but you are all part of doing amazing things for social responsibility while working on Wall Street. That IS something to brag about.

IG Primary & Secondary Market Talking Points

 

  • Arch Capital Group Ltd., upsized today’s $25 par PerpNC5 non-cumulative preferred, Series “E” transaction to $450mm from $250mm at the launch and at the tightest side of guidance.
  • For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 20 IG Corporate-only new issues was 22.13 bps.
  • BAML’s IG Master Index was unchanged at +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +139.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.3b on Wednesday versus $19.1b Tuesday and $17b the previous Wednesday.
  • The 10-DMA stands at $15.4b.

 

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

 

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

In Advance of Fed and BoJ Comments, Corporate Debt Issuers Sidelined
September 2016      Debt Market Commentary   

Quigley’s Corner 09.21.16 No Prints and No Rate Increases; Corporate Debt Issuers Sit it Out

 

Investment Grade New Issue Re-Cap 

A Big Red Zero – Land of the Rising “None” as BoJ Keeps Rates at <0.1%> & Introduces More Shifts to Policy

“Fed” Up with Rates, FOMC Holds; November Increase Has No Chance Pre- Election and Santa Claus is Coming to Town…with Coal?

All You Want and Need to Know About Today’s Fed Decision

In Janet’s Words

IG Primary & Secondary Market Talking Points

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

Investment Grade Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

It was a no print day today as corporate debt issuers respected both the impact of the BoJ and FOMC.

dewey moment mischler debt market Not so fast my friends…..not so fast!  It’s not exactly a “Dewey Defeats Truman” moment. Still, let’s call it like it is folks – I did say “the next best thing to having tomorrow’s newspaper today is the ‘QC’”.  Then on Monday, September 19th and alluding to today’s BoJ and FOMC rate decisions, I wrote, “Fed Holds; BoJ Cuts Rate and Then Some.” Well, I guess it’s not “tomorrow’s newspaper today” but I still think it’s the “next best thing to it.” The Fed Held, the BoJ introduced new fringy though convoluted easing details (“and then some”) but the BoJ kept rates unchanged.  Two out of three isn’t bad, but that’s why it’s “the next best thing.” If I played baseball, I’d be in the Hall of Fame with a .666 average.  Joking aside, a Fed that infers raising rates by December should have hiked rates today, but they didn’t. This is more of the same readers.  Look for Fed members – both voting and non-voting – to continue giving speeches and appearing on television to opine about the rate flux that has restricted so many from doing so much.  The street is the leader; the Fed is the ultimate laggard.  It’s how it is.  Today was more of the same. No surprise at all.  The government should consider issuing a gag order on any and all Fed-speak in between meetings for all members, both voting and non-voting.  They only confuse the situation and shock markets.

First up, let’s look at what the BoJ did while we were in REM sleep this morning:

A Big Red Zero – Land of the Rising “None” as BoJ Keeps Rates at <0.1%> & Introduces More Shifts to PolicyBoJ Mischler Debt Market Comment

Central Banks from the FOMC to the BOE and from the ECB to the BoJ all seem to be pointing to the downside risks to continued rate cuts while at the same time highlighting that monetary policy needs to be substantially accommodative while calling on governments to share more of the economic burdens. Here’s what’s clear: growth is anemic to non-existent, inflation unchanged to nowhere, accommodative policies are manifesting themselves in new policy twists and turns and big government needs to get more involved.  Hmmm…..sounds like things aren’t quite working out, eh?

 

Here are the talking points from this morning’s BoJ announcement:

 

o   The BoJ left interest rates at its still record low <0.1%>.

o   Committed to intervene until inflation reaches 2% and remains stable above that level.

o   Will cap 10-year yields at 0.00% by continuing to buy 10yr JGBs implying that the BoJ must continue intervening to prevent borrowing costs from rising and to ensure that it can borrow for a decade for free.

o   Changed its policy from a focus on a base money target to controlling the yield curve.

o   Pledged to maintain its government bond-buying in line with ¥80 trillion annually while buying fewer long-dated maturities hoping to pump up long-term interest rates thereby helping banks boost profits. There was no expansion of its current quantitative easing program.

 

Will this new approach be effective?  Only time will tell.  It certainly is a shift in monetary policy to control the yield curve. It is NOT a bazooka by any stretch and more like “fiddling around the edges.”  As for the 2.00% target? Folks, we all know that’s a loooong way off. Market participants have a lot of questions with many sharing that the “BoJ should’ve just cut rates again.” Equity markets loved the news. The DOW closed up 163, the S&P was in the black 23, the VIX compressed over 2.5 and CDX27 tightened 3.2 bps.

“Fed” Up with Rates, FOMC Holds; November Increase Has No Chance Pre- Election and Santa Claus is Coming to Town…with Coal?

The Fed held rates albeit the subsequent press conference was more optimistic, if one can call it that, saying the economy appeared “slightly balanced” and “the case for an increase in the fed funds rate strengthened but decided, for the time being to wait for further evidence of continued progress toward its objectives.”  You all know about the myriad global event risk factors out there.  There are so many that on any given day in our inextricably global-linked world economy, should one or several of them get worse, which is entirely plausible-to-likely, the Fed can skirt around a hike by once again pointing to global events, as they have in the past, to justify standing down.  In fact, in its statement Chair Yellen said, “we will closely monitor inflation and global developments.” What’s more, the next FOMC meeting will be held on November 1srt and 2nd and is not associated with a Summary of Economic Projections or a press conference by Yellen. It is highly unlikely that the Fed raises rates in November given that the meeting will take places 6 days before one our nation’s most tumultuous and raucous elections.  Last year saw one rate hike to close out 2015 at its December meeting.  Santa Claus will be coming to town early at the year’s last meeting of 2016 held December 13th-14th …………..but don’t be surprised to find coal in the stocking.

Folks, Q3 is about over.  You hear that sound?   That’s the sound of trucks?  They’re backing up to print between now and Election Day – BIG TIME. 12 IG issuers are in the pipeline with a whole lot of M&A deals getting closer.

Here’s All You Want and Need to Know About Today’s Fed Decision

o   The FOMC kept rates unchanged as three officials dissent for a hike.

o   George, Mester, Rosengren dissented in favor of a hike.

o   Case for rate hike strengthened as forecast shows a 2016 increase.

o   Fed “decided to wait for the time being for additional evidence.”

o   Reiterates they expect the economy to “warrant only gradual hikes.”

o   FOMC repeats it will closely monitor inflation and global developments.

o   Job market continued to strengthen and economy picked up.

o   Says “job gains are solid and household spending is growing strongly.”

o   Market-based measures of inflation remain low.

o   Sees inflation rising to 2% over the medium term.

o   Business fixed investments has remained soft.

o   Near-term risks to its outlook “appear roughly balanced.”

o   Maintains its reinvestment policy.

 

In Janet’s Words

o   “FOMC policy should help economy move toward goals.”

o   “Economic growth appears to have picked up.”

o   “Economy to expand at moderate pace in next few years.”

o   “Pace of job gains above rate needed for new entrants.”

o   “Unemployment measures show more people seeking jobs.”

o   “PCE inflation still short of 2% objective.”

o   “Can’t take inflation expectations stability for granted.”

o   “Don’t want to overshoot inflation goal significantly.”

o   “We chose to wait for more evidence of progress.”

o   “On current course, some gradual hikes will be warranted.”

o   “There appears little risk of falling behind curve.”

o   “We’re generally pleased with how U.S. economy is doing.”

o   “Seeing evidence economy is expanding more strongly.”

o   “We’re not seeing pressures suggesting overheating.”

o   “Economy has a little more room to run than thought.”

o   “Zero lower bound is a concern.”

o   “My colleagues and I discussed timing of next rate hike.”

o   “Most of us judged it sensible to wait for more evidence.”

o   “Monetary policy is somewhat accommodative.”

o   “Should be concerned about risks from reach for yield.”

o   “Most of my colleagues agree with my Jackson Hole remark.”

o   “Of course we’re worried bubbles could form.”

o   “Soundness of banking system has improved substantially.”

o   “Less disagreement on FOMC than you might think.”

o   “Important to have a range of views expressed on the FOMC.”

o   “We don’t discuss politics at our meetings.”

 

Global Market Recap

 

o   FOMC – Unchanged as expected but there were 3 dissenters. Dots were dovish (again).

o   BOJ – Main policy target is the yield curve from the monetary base (rates unchanged).

o   U.S. Treasuries – Closed mixed & flatter. USTs traded better after the FOMC/Yellen.

o   Overseas Bonds – Europe was unchanged to red & steeper. JGB’s was all red & flatter.

o   Stocks – Strong session for U.S.

o   Overseas Stocks – Europe closed higher. Nikkei rallied & China small gains.

o   Economic – Nothing of note in the U.S. Data in Japan was weak.

o   Currencies – USD lost ground vs. all of the Big 5. The Yen was very strong.

o   Commodities – CRB, crude oil, gold & silver were all well bid.

o   CDX IG: -3.25 to 78.44

o   CDX HY: -18.52 to 391.26

o   CDX EM: -12.30 to 230.74

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index was unchanged at +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +139 versus +140.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.1b on Tuesday versus $12b Monday and $15.8b the previous Monday.
  • The 10-DMA stands at $15.4b.

 

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

 

IG Corporate New Issuance This Week
9/19-9/23
vs. Current
WTD – $20.963b
September 2016 vs. Current
MTD – $113.168b
Low-End Avg. $29.09b 72.06% $115.45b 98.02%
Midpoint Avg. $30.28b 69.23% $116.02b 97.54%
High-End Avg. $31.48b 66.59% $116.59b 97.06%
The Low $20b 104.81% $80b 141.46%
The High $40b 52.41% $150b 75.45%

 

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

 

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

Shire Bumps; Fed Holds: Lord of the Things-Mischler Debt Market
September 2016      Debt Market Commentary   

Quigley’s Corner 09.19.16 Shire Bumps; Fed Holds: Lord of the Things

 

Investment Grade Corporate Debt New Issue Re-Cap  IG DCM Welcomes “Preciousssssss”

“Shire” Bumps Up the Totals with Lots of Green!

New IG DCM Sets New Record – Fastest Ever to $1.3 Trillion

Lord of the “Things” – “Fed Holds; BoJ Cuts Rate and Then Some”

Global Market Recap

IG Primary & Secondary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows – Week ending September 14th

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline – $204.05 Billion in Cumulative Enterprise Value

Economic Data Releases

Rates Trading Lab

 

You’ve all been reading here these past many days that Shire Acquisitions Investments Ireland DAC and guaranteed by Shire Plc (Baa3/BBB-) mandated Bank of America/Merrill Lynch, Barclays and Morgan Stanley to arrange fixed income investor meetings in the U.S. and London scheduled that began on Monday, September 12th in preparation for a dollar-denominated Senior Notes transaction. BAML coordinated the meetings that took place from the 12th thru the 15th in Boston, New York, Chicago and wrapped up last Thursday in London.  Many, me included, thought Shire could potentially come last Thursday given the time difference between London’s meetings wrapped and the New York tradign session kicked off.  However, there other investor calls to be made. Shire PLC announced in January 2016 that it would acquire Baxalta Inc. (Baa2/BBB) for approximately $32.2 billion in cash and stock.  Shire closed that acquisition on June 3rd securing an $18b bank facility to finance the cash portion and said it would refinance it in debt.  Shire filed to offer the 5-part Senior notes transaction guaranteed by Shire Plc. Today’s transaction will use proceeds to repay loans under a $12.39b 2016 bridge facility to fund the takeover. The deal creates the single largest maker of rare disease drugs in the world.  Fighting the dark side is what this merger is all about hopefully leaving the world in a better place than it currently is.

New IG DCM Sets New Record – Fastest Ever to $1.3 Trillion…by 32 Days!

Today’s tally including Shire’s $12.1b 4-part 3-, 5-, 7- and 10-year transaction came to 6 issuers, 12 tranches and $17.113b.  One SSA deal from IFC totaling $500mm brought the all-in IG day totals to 7 issuers, 13 tranches and $17.613b.  In the process we set yet another new IG DCM record by reaching the $13 trillion mark at the quickest pace in history breaking last year’s record that was set on Thursday, October 22ndWe are a full 32 days ahead of that pace!

Lord of the “Things” – “Fed Holds; BoJ Cuts Rate and Then Some”

Wouldn’t it be great to have tomorrow’s newspaper today?  Well the aforementioned heading is just that.  It’s what’s going to happen by this Wednesday at 2:00pm.  We’ll know the BoJ determination while in REM sleep on Tuesday morning and the FOMC Rate Decision releases on Wednesday at 2:00 PM ET.

I wrote last Monday, September 12th  – just to remind you again – about the state of global affairs adding of course the lone wolf terror atttacks that took place in New York, New Jersey and Minnesota over the weekend.

Here’s the re-print:

Presidential election debates; the election itself is Tuesday, November 8th; world unrest beginning with the aggressive nature and positioning of Vlad the-Terrible Putin; a diminished image of the United States throughout the world makes it a more dangerous place; the South China Sea Islands in which China continues to fearlessly antagonize the region; war in MENA; Terrorism; immigration issues in Europe and specifically Germany; Russia’s dominant role in Syria and intent to build bases in North Africa; as the Islamic State crumbles terrorists will flee throughout the world giving rise to widespread global terror; Nationalism continues to rise throughout the crumbling EU; Brexit is not looking so bad after all for the U.K but what’s it mean for the EU?; North Korea continues its nuclear proliferation ambitions having exploded a 10 kiloton bomb (just over a week ago) with ICBMs capable of hitting California within 5 years; the EU’s inability to spur inflation; negative rates in Japan and hovering negative in Germany.  Japan, in fact, may run out of bonds to buy within 18 months and the EU could soon follow.

Now, adding to what I wrote last week is that Germany’s Angela Merkel suffered what amounted to the single worst (the FT described it as “humiliating”) election defeat yesterday in German regional elections as voters turned out en masse to voice their disapproval of her liberal immigration policies.  More revealing, however, is the massive support for the AfD or Alternative German Party – the anti-immigration party – that ushered in heightened drama to the German political stage. German voters are pummeling Angela Merkel for her very liberal immigration stance that opened the door to millions of immigrants.

 

Here is Germany:

o   A mob of a thousand men of “Arab or North African” origin sexually assaulted more than 500 German women in downtown Cologne on New Year’s Eve. Similar attacks also occurred in Hamburg and Stuttgart. Cologne’s Mayor Henriette Reker, said that “under no circumstances” should the crimes be attributed to asylum seekers. Instead, she blamed the victims for the assaults.

o   “There is nothing wrong with being proud German patriots. There is nothing wrong with wanting Germany to remain free and democratic. There is nothing wrong with preserving our own Judeo-Christian civilization. That is our duty.” — Geert Wilders, Dutch politician, addressing a rally in Dresden.

o   “We are importing Islamic extremism, Arab anti-Semitism, national and ethnic conflicts of other peoples, as well as a different understanding of society and law. German security agencies are unable to deal with these imported security problems, and the resulting reactions from the German population.” — From a leaked government document, published by Die Welt.

o   Germany will spend at least €17 billion ($18.3 billion) on asylum seekers in 2016 — Die Welt.

o   Saudi Arabia is preparing to finance the construction of 200 new mosques in Germany to accommodate asylum seekers. — Frankfurter Allgemeine.

o   Nearly half of Muslim immigrants in Germany consider following Islamic teaching MORE important than abiding by the law.  One in five German-Turks (the most dominant Muslim immigrants in Germany) said they would justify violence if provoked by the West. One third of them said they yearn to live in a society of the times of the prophet Mohammed. 

o   Over 1.1 million migrants entered Germany in 2015 mostly from the North African and the Middle East for which Angela Merkel has consistently berated other European countries for re-introducing border controls to Europe putting a virtual freeze on the critically important Schengen Agreement which along with the single currency itself are the two legs on which the Euro stands.

o   Social Democratic Party MP, Heinz Buchkowsky estimated that the total number of refugees and migrants coming into Germany by 2020 could reach up to 10 million while the german Interior ministry expects at least another 1 million to enter Germany this year.  

These are sound bites, bullet points, if you will,  to express what’s going on in the keystone of Europe.  It is a massive problem both economically and politically.  It also only begins to drill down into the issues and problems of Germany and in a broader discussion of the EU which has a host of other colossal issues to deal with such as the ramifications of Brxit on the EU; the weak banking system in Italy supporting the world’s third largest debtor nation; terror alerts throughout France; swelling support throughout the EU of rising Nationalism; elections in France, Germany and Italy; failure to stoke inflation after trillions of dollars and the ECB essentially asking EU member to do more to help the economic crisis there.

Each one of the earlier mentioned global event risk factors is front page news on their own merits.  This is merely scratching the surface on one of them.  There are so many of them that on any given day they are not being written about at all until the fester and attract attention again.  Collectively they are like Sauron in the Lord of the Rings – personifying the darkness in everyone’s souls.

FOMC?  BoJ?  You have to be kidding me right? The world’s in a whole lot of hurt.  There’s no place like home to this Hobbit and the peace and tranquility of the Shire can be found in the world of investment grade rated corporate bonds.  Remember that there’s no one out there banging that message home louder than the guy-in-the-corner.

 

Global Market Recap

 

o   U.S. Treasuries – The most exciting part today was the front end of the bill market.

o   Stocks – Roller coaster session for U.S. stocks that ended with small losses.

o   Overseas Stocks – Europe & China rallied. The Nikkei was closed.

o   Economic – Positive housing data in the U.S. & China.

o   Currencies – USD lost ground vs. all of the Big 5.

o   Commodities – Up session for crude oil, gold & silver.

o   CDX IG: -0.96 to 75.0

o   CDX HY: -3.96 to 406.18

o   CDX EM: -7.20 to 253.19

 

IG Primary & Secondary Market Talking Points

Please note that I added the Bloomberg Barclays U.S. IG Corporate Bond Index OAS spread to the below daily indexes.  Many market participants use both that and BAML’s and S&P’s levels. Thanks to Anne Daley at Barclays Syndicate and my  Bob Elson at Bloomberg.

  • Providence of St. Joseph Health upsized today’s two-part 10s/long 30s taxable bond new issue notional amount to $700mm from $600mm at the launch and at the tightest side of guidance.
  • Sabine Pass Liquifaction LLC. increased today’s 144a/REGS Senior Secured 10.5NCL Notes new issue to $1.5b from $1b.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 12 IG Corporate-only new issues was 18.75 bps.
  • BAML’s IG Master Index was unchanged at +143.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS at 140 vs 140. “LUACOAS” (ticker) as it’s known 2016 wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +191 versus +192.  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 $15.9b Thursday and $15.7b the previous Friday.
  • The 10-DMA stands at $13.9b.

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Fed NOT Raising Rates-Mischler Debt Market Comment
September 2016      Debt Market Commentary   

Quigley’s Corner 09.15.16 Fed Not Raising Rates

 

Investment Grade Corporate Debt New Issue Re-Cap – IG Lotto:Corporate Volume Tops Weekly Syndicate Estimates

 Global Market Recap

All You Need to Know About Today’s Bank of England Meeting

IG Primary & Secondary Market Talking Points

Fixed Income Syndicate IG Corporate-only Volume Estimates for September

New Issues Priced

Lipper Report/Fund Flows

IG Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Today’s winning lotto numbers are 11-16-945 as in 11 IG Corporate issuers, priced 16 tranches totaling $9.45b.  With that amount we have officially broken through this week’s syndicate midpoint average forecasts by over 7% or $39.745b vs. $36.91b. Notable today was that 4 issuers upsized their transactions from initial morning announcement sizes.

Remember what I wrote this past Monday folks (Check your “QC” dated 9/12/2016.  – “Look folks, the Fed is not raising rates this year.  Many sight December as the next hike but it’s not happening.” The world can barely stand on two feet let alone get economic engines back to growth mode.  Today’s numbers confirm that. With that, read my lips, or read my commentary, but the take-away is the same: Fed NOT Raising Rates (at least not anytime soon, nor with any degree of significance that would upend the current global financial market environment).

Global Market Recap

 

  • S. Treasuries – USTs closed mixed with steeper curve. 5/30’s has steepened 10 days in a row.
  • 3mth Libor – Set at its highest yield (0.85656%) since May 2009.
  • Stocks – US stocks with a strong rally. FTSE leads Europe higher. Nikkei had a bad day.
  • Economic – Very disappointing day on the U.S. economic front.
  • Currencies – USD mixed & little changed vs. Euro & PND but lost ground vs. Yen/CAD/AUD.
  • Commodities – Crude eked out a gain, heating oil higher & gold lost ground.
  • CDX IG: -3.0 to 74.31
  • CDX HY: -11.76 to 405.92
  • CDX EM: -5.58 to 255.94

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

-Tony Farren

 

All You Need to Know About Today’s Bank of England Meeting

 

  • BOE Sees chance of another rate cut this year but holds today at 0.25%; Vote 9-0.
  • BOE keeps gilt purchase plan at £435b; Vote 9-0.
  • Holds corporate bond plan at £10b; Vote 9-0.
  • Monetary Policy Committee Majority expect rate cut “if” August outlook is confirmed.
  • Initial impact of August stimulus is “encouraging.”
  • Some near-term indicators are “better than expected.”
  • Inflation reaching 2% target in first half of 2017.
  • Lower bound is close to but a bit above, zero.
  • Second half slowdown may be less severe than previously forecast.
  • Cannot infer from near-term about 2017 or 2018 projections.
  • MPC view of “contours of economic outlook” are unchanged.
  • Hawkish BOE members Forbes, McCafferty say extra gilt purchases still not warranted.

 

IG Primary & Secondary Market Talking Points

 

  • Kite Realty Group LP upsized today’s 10-year Senior Notes new issue to $300mm from $250mm at the launch and at the tightest side of guidance.
  • CCL Industries Inc. increased today’s 10-year Senior Notes new issue to $500mm from $400mm at the launch and at the tightest side of guidance.
  • Dairy Farmers of America Inc. bumped up its new $1,000 par PerpNC10 cumulative preferred securities, Series “C” new issue to $150mm from $100mm at the launch and at the tightest side of guidance.
  • Pitney Bowes Inc. boosted its 5-year Senior Notes new issue to $600mm from $400mm at the launch.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 16 IG Corporate-only new issues was 23.34 bps.
  • BAML’s IG Master Index widened 1 bp to +143 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +191.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17b on Wednesday versus $15.8b Tuesday and $16.5b the previous Wednesday.
  • The 10-DMA stands at $14b.

(more…)