Browsing articles in "Debt Market Commentary"
Mischler Named Best Broker-Dealer by Wall Street Letter
February 2016      Debt Market Commentary, News and Information   

 Industry’s Oldest Minority Firm Owned and Operated By Service-Disabled Vets Awarded

“Best Broker-Dealer/ Research” by Industry Peers

2016-wsl-award-best-researchStamford, CT Feb 24–Mischler Financial Group, Inc. (“Mischler”) the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans announced today that the firm was awarded “Best Research Provider” at the fifth annual Wall Street Letter (WSL) Institutional Trading Awards this week in New York City. This is the third year in which Mischler was recognized for distinction in this category. The firm was also nominated for “Best Broker-Dealer Overall”, along with industry icons Bloomberg Tradebook and Interactive Brokers.

The WSL’s Institutional Trading Awards recognizes “excellence among providers to the institutional trading industry specifically rewarding brokerage firms, exchanges and financial technology companies for achievements and innovation.” The Wall Street Letter’s audience consists of top management at securities broker/dealers, including executive management, research heads, corporate finance officials, retail heads and trading desk heads.

Ron Quigley, Managing Director of Fixed Income Syndicate at Mischler, who pens the firm’s debt market publication “Quigley’s Corner”, one of several content pieces distributed to Fortune Treasury clients and leading investment managers stated, “It’s a great honor to be selected as a contender, no less to be designated the winner of the WSL award when considering the pedigree of the firms that were nominated. It’s always good to be in good company, and it is a real tribute to be recognized by industry leaders for our capabilities.”

The full list of nominees and winners of Wall Street Letter 5th Annual Institutional Trading Awards is available via this link

About Mischler Financial Group, Inc.

Established in 1994, Mischler Financial Group, Inc. (“Mischler”) was the first FINRA-certified minority broker-dealer to be designated as a Service-Disabled-Veteran-Business Enterprise (SDVBE).  Today, Mischler is recognized as a leading boutique within the financial market ecosystem. The firm is co-headquartered in Newport Beach, CA and Stamford, CT and maintains offices in 6 major cities. The firm is staffed by more than 50 securities industry veterans and specializes in primary and secondary capital market transactions across debt and equities markets. Mischler operates as a conflict-free, institutional brokerage and investment banking platform and serves Fortune Treasury teams, leading investment managers and public plan sponsors. The firm’s website is

For Additional Information:

Dean Chamberlain, Chief Executive Officer

Tel: 203.276.6646



Muni Bond Deals This Week
February 2016      Debt Market Commentary   

Assets flowing into municipal debt issues  indicates institutional appetite for muni bond deals remains strong..

Mischler Muni Market Update for the week commencing 02.16.16 provides public finance investment managers and municipal bond market participants a snapshot of last week’s muni bond activity, including credit spreads, and a look at selected pending municipal finance offerings for this week’s pending issuance.

This is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

mischler muni market 02-16-16

Recession Rattling; Industry Experts Opine-Mischler Commentary
February 2016      Debt Market Commentary   

Quigley’s Corner 02.11.16 – Industry Experts On Recession Talk: Déjà vu All Over Again

  • The IG Re-Cap
  • Special Edition of the Best & Brightest
  • Takin’ It to the Street-Soundbites from Most Influential Accounts and Strategists
  • An Illustrated “Market Circle of Death”
  • Tale of the Tapes
  • Today’s 5-Section Global Market Recap
  • Urgent Bulletin to all Treasurers, Bankers, Accounts and Syndicate managers.
  • “On Black Holes, Politicians and Central Banks”
  • Everything Syndicate and Secondary from the day’s debt capital markets


Investment Grade New Issue Re-Cap – Apocalypse N-O-W ?

That’ll get your attention.  Here’s why – I walked in this morning and turned on the TV to Bloomberg News. Someone was being interviewed and the caption in large font at the bottom of the screen read, “Money out of global markets and into pockets.”  I knew immediately this was a “risk off” day.  I then turned on my systems and saw the extent of the carnage.  There was no IG Corporate issuance today.  We’ve now had “7” no-print non-Friday sessions YTD. That puts us on pace for 61 total non-Friday no-print days for 2016. SSA issuer Rentenbank priced its new 5-year FRN and upsized it to $750mm to $500m. That was all she wrote today.  I immediately started calling global money managers, domestic and overseas accounts, strategists and personal market contacts to get their take on things.  Here are sound bites from some of those conversations. They are very revealing and frighteningly similar.

“The Best and the Brightest” – A Must Read Special Edition

Given recent global market tumult, especially this week and today, it was obvious to me that asking anyone for next week’s forecast of IG Corporate supply would seem foolish as no one has any idea in here.  It speaks to how volatile and uncertain our markets are.  Asking that question of the Best & Brightest in tomorrow’s Friday edition ahead of a long three-day President’s Day weekend would be unfair. So, instead I asked three questions pertinent and critical to our credit markets.  The responses were very thoughtful and the meaningful responses took the Best and Brightest respondents time and reflection.  If you are in the credit markets; if you are a Treasury/Funding operative; if you are a tier I, II or III account, a banker, a salesman, a trader or an executive in this business this is a MUST read.

3 questions posed to the “Best and the Brightest” today:

“Good afternoon! I decided to withhold my usual Friday IG Corporate new issue volume forecast poll.  I simply ask that you reply to any one or each of the following questions, as your time allows.  I will print responses instead in lieu of forecasts.  I am always trying to find new ways to make the “QC” more meaningful to its readership. These questions are on many market participant’s minds including Issuers’ Treasury/Funding teams, other members of the Best & Brightest crew, Accounts and Strategists. Here are the questions:

  1. “When do you think markets unfreeze and we get back to new issue activity again, albeit at wider levels?”
  2. “What do you think it takes for the current cycle to break, and for us to find a firmer footing?”
  3. “This week the NY Fed released a research piece saying they felt there is sufficient liquidity in the U.S. credit markets. Is that true in your opinion?”

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

Corporate Debt Issuance Market Suffers Cold Spell
February 2016      Debt Market Commentary   

Quigley’s Corner 02.10.16 -Corporate Debt Issuance Suffers Cold Spell


Investment Grade New Issue Re-Cap – Timing is Everything – The Go/No Go Conundrum

Overall Market Re-Cap

Yellen’s Headlines re: Testimony Before the House

IG Primary Market Talking Points – One Deal Day

New Issues Priced

Lipper Fund Flows

Investment Grade Credit Spreads (by Industry/Rating)

IG Secondary Trading Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab


One IG-rated 30NC5 $25 par Notes transaction for Senior Housing Properties Trust priced today totaling $250mm.  The deal was upsized from $100mm.  We have now officially gotten on the WTD IG Corporate leaderboards with today’s print albeit we’ve priced a mere 1.50% of this week’s syndicate midpoint average forecast or $250mm vs. $16.70b.  Talk about volatility! Looking at yesterday morning’s markets compared to this morning’s captures the tremendous volatility we’ve been seeing lately.  Volatility used to promote profitability but our new world order has been so restrictive and over-regulated that it’s been made more difficult to generate returns in these kinds of markets.  The severe lack of stability has also resulted in 6 no print non-Friday’s year-to-date. That annualizes out to 52 for the year at the current pace! It implies that when stability returns we have to beware of bottlenecking and congestion in our primary markets as issuers flock to print. Until then the morning “Go/No Go” calls are turning into more like “Market Update Calls” as there are myriad market movements to assess and digest.  Many issuers have shelved their deals until further notice.  According to Informa Global Markets, “YTD FIG new issue spreads have gapped out a resounding average 38 bps versus their initial pricing spread levels. Conversely, non-FIG and non-Energy YTD new issue spreads levels have leaked out just under 4 bps.”

Yesterday Market Update Calls (and/or Go/No Go’s if there were any) probably sounded a bit like this, “Good morning everyone!  I’ll just dive in to the carnage here this morning.  I think that’s the appropriate phraseology.  First off, in Asia overnight treasuries rallied in Tokyo, sold off in London and started to rally back in New York.  Volatility was due to the fact that the 10-year JGB is now trading below zero which marks a first time ever event in Japan and joins other EU instruments with negative yields.  U.S. futures opened down 135 while the seven major European exchanges are down an average 2% with oil falling back well below $30 per barrel. Speaking of oil, just yesterday (Thomson Reuters’ Reporter Hilary Flynn wrote in a story Edited by TR’s Natalie Harrison), “average spreads on junk-rated U.S. energy bonds touched their highest levels ever on Monday as oil prices remained under pressure and as bonds of Chesapeake Energy tumbled. Energy spreads widened by 113bps to T+1851bpthe biggest one day move in more than 13 years – according to Bank of America Merrill Lynch data, with the sector yielding 19.73%. Oil has severely impacted FIG equity prices and credit spreads as the big banks have large exposures to the energy sector that is, in turn, stressing cash levels.”  Spread levels on YTD FIGs widened an average 38 bps versus their new issue spread levels while non-FIG and non-Energy Industrial new issue moved out just under 4 bps YTD. Despite low UST yields that went from 2.05% two-and-a-half weeks ago to 1.73%, corporate spreads have widened against that. In fact, many dealers may have likely rate locked at 2.00% and any issuance inside here could provide highly undesirable double loss on further credit spread widening and we could potentially be looking at a false Treasury bottom here.

Conversely today opened up with stronger market tone with S&P futures up and EU exchanges 2.00% in the black, still, markets experienced another volatile day all told.

Another major issue playing on markets that’s almost lost in the mix of so much market moving news and directly correlated to China’s slow growth are the Emerging Markets.  Friend and former colleague Dr. Scott MacDonald wrote in The National Interest that EM capital markets that have been essentially shut down coming off a year, 2015 that “witnessed net capital outflows of an estimated $735 billion….the first net outflows since 1988.” EM nations are even more concerned now that the Fed is talking higher U.S. interest rates and as the USD strengthens thereby increasing the cost of dollar-denominated debt. With higher costs of debt there will be “less capital available for infrastructure development, tighter budgets and real risks to many of the social gains made over the past decade in much of Asia, Africa and Latin America.”  He continued, “The global economy is not in a good place.  One of the drivers of global economic growth over the past decade has been Emerging Markets. That is now at risk. Combined with competitive currency devaluations, different directions in monetary policy (the U.S. verses the European Central Bank and Bank of Japan), the use of increasingly unconventional monetary policies (negative interest rates, quantitative easing and forward guidance) and risky geopolitical frictions (Russia and the West over Ukraine and Russia and Turkey over Syria), policy coordination among G20 countries has generally fallen apart.”  I could continue the geopolitical list to include tensions in the South China Seas that are about to increase with the U.S. and India agreeing to a joint strategic operation in that very area; MENA dislocation; the fear of spreading Nationalism and increased terror level threats throughout the world and particularly Europe.  The EU one step closer to approving suspension of the Schengen Agreement by mandating enforced borders for a period of at least two years, slow-growth China and its myriad repercussions not to mention  a U.S. election year and the all-important global central bank monetary policies.

The point is clear – the climate for issuance is just not there.  Having said that as we try to uncover new clearing levels we look back at AT&T’s $6b 4-part that came on Friday, January 29th and well, to be quite frank, the issuer and leads look like geniuses given that spreads have only widened an average 7.5 bps across those four tranches.  Now we don’t have the benefit of tomorrow’s newspaper today but certain issuers (FIGs in particular) will require revised IPTs to get done in hear if they should decide to go at all.  One reassuring sign was today’s Mitsubishi UFJ Financial Group, Inc. (NYSE:MTU) (A1/A) announcement that it mandated Morgan Stanley and MUFG to arrange investor calls in the U.S., Europe and Asia slated to begin on Monday, February 15th in preparation for a dollar-denominated Senior Unsecured Holdco Notes transaction.  A global call was also scheduled to take place on Friday, February 12th from 11am ET to noon.  Joint active leads/books are MS and MUFG with J.P. Morgan serving in a passive role. MUFG filed to offer Fixed and FRN Senior Notes. So there is obviously business to get done but it’s a question of timing.

In readjusting starting IPTs in preparation for a would be FIG transaction, for example, it’s important to secure clearing levels palatable for the issuer that simultaneously offer an appropriate concession to investors in order to secure and hold together anchor orders.  As risk increases investors ask for more in return to participate. The flip side of that equation is that new IG Corporate product has become scarce, already trailing last year’s IG supply at this point in the new year by over 13%.  Issuers leading the charge will provide highly desired product to sell into voracious appetite for some of the safer haven corporate names offering much more attractive yields than current USTs.  The CT10 for example is yielding 1.68% as of 4:15pm ET today.  So, will the global money managers still be there?  Of course they will but at what spread levels will they hold together or will new supply, when it eventually comes suffice?

The strong recommendation these past couple of weeks seems to have been to keep a focused eye on spread levels, market conditions and have as many market calls as issuers, syndicate desks and bankers require.  Rather than get a one-day bounce before declaring “risk on” the new norm has been to wait for a couple to a few days of stability before announcing that “neutral” to “positive” or rather “stable” market tone has returned to warrant further issuance. The key word here being “sustainability.”

In the span of two-and-a-half weeks the UST 10-year shed 37 bps moving from yielding 2.05% to 1.68%.  With rate locks having taken place at 2.00% the potential for investment banks to suffer two-sided losses (new issue spreads gapping wider post pricing in a volatile market combined with subsequent wider Treasury levels that might just be sitting at a false artificial levels today, the environment is not exactly palatable for those pricing deals.  As for the energy complex and FIGs with that exposure, WTI crude has now officially seen five consecutive losing sessions closing down 2.11% to $27.35 per barrel.

So, it’s more than wise to look for back-to-back days of at least stable markets.  Stable could mean “neutral” or “flat” to “improved.”  The volatility that’s defined 2016 YTD so far has been so extreme that syndicate desks need to be confident that the window is, in fact, open for issuers to get deals done in the right environment and with a high quality book.  They are as sensitive to new deals holding together as issuers are and they want what’s the best for Companies involved.  Today’s Baa3/BBB- rated 30NC5 $25 par Notes transaction for Senior Housing was underwater with a $24.45 bid despite being upsized given good demand. Every deal in here will be watched by all market participants and will have an impact on deciding when the timing is right.

Considering that Fed Chair Janet Yellen has presented her Semiannual Monetary Policy Report to the Congress’ Committee on Financial Services throughout today and continues on Thursday before the Senate’s Committee on Banking, Housing and Urban Affairs, there is a lot of room for more volatility given Fed speak and House/Senate Q&A.  Although this Friday is not technically an early close for markets and though we have seen more prints on Friday’s YTD than not, market participants will assuredly be leaving desks a bit earlier given the upcoming long President’s Day weekend.  Which beckons “is it wise to carry new positions into a long weekend given the global backdrop?”


But have hope, there’s lots of business to eventually get done.  64.6% of the S&P 500 has reported earnings since January 4th, and the proportion of earnings beats to misses stands at 3.2: 1, while the proportion of revenue beats to misses is about even at 1: 1. Growth remains lackluster when compared to the same period a year ago.


Overall Market Re-Cap


USTs – Another volatile day. Closed mixed/flatter curve. Rallying after close.

Stocks – U.S. heading into close mixed (poor close). EU rallied & Nikkei sold off.

Economic – Today was all about Janet Yellen.

Currencies – The Yen cannot be stopped. The BOJ has to be in shock.

Commodities – Crude oil, gold, copper & silver all red.

CDX IG: +0.65 to 120.20

CDX HY: +0.80 to 571.98

CDX EM: +10.86 to 402.30

Swap spreads were tighter for the 2nd session in a row.


Yellen’s Headlines re: Testimony Before the House





























Yellen Takeaway

Fed Chair Yellen was the focal point today and I have to say she did a masterful job all things considered. Yellen admitted the environment has taken a turn for the worse since the FOMC raised rates in December for the first time in 9 years. She stated financial conditions have become less supportive and also added that it’s too early to measure the impact of recent YTD global events on the economy (China, Europe, economic data, etc). Yellen had a message for the folks in the four rate hike camp this year (100 bps) and those that priced out any rate hikes this year. The message was clearly that four rate hikes are not happening in 2016 but to take all rate hikes off the table in the first week in February is a mistake. The Fed will hike rates if the economy and markets give them the opportunity.

-Tony Farren


IG Primary Market Talking Points – One Deal Day


Today’s lone IG-rated new issue, Senior Housing Properties Trust increased its new 30NC5 $25 par Notes offering to $250mm from $100mm.  Morgan Stanley had the physical books.

The average spread compression across today’s 1 IG Corporate-only new issues was 6.3125 bps from IPTs to the launch.


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


IG Corporate New Issuance Next Week
vs. Current
WTD – $0.25b
February 2016 vs. Current
MTD – $6.275b
Low-End Avg. $15.29b 1.64% $90.9375b $6.90b
Midpoint Avg. $16.70b 1.50% $92.1875b $6.81b
High-End Avg. $18.12b 1.38% $93.4375b $6.72b
The Low $5b 5.00% $60b $10.46b
The High $25b 1.00% $110b $5.70b



Have a great evening!

Ron Quigley


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


NICs, Bid-to-Covers, Tenors and Sizes


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


Week 1/25
Week 1/18
Week 1/11
New Issue Concessions N/A N/A N/A 7.45 bps 21.77 bps 14.25 bps 12.66 bps
Oversubscription Rates N/A N/A N/A 3.01x 2.71x 1.96x 2.39x
Tenors N/A N/A N/A 8.19 yrs 7.43 yrs 5.33 yrs 7.41 yrs
Tranche Sizes N/A N/A N/A $548mm $940mm $1,235mm $1,901mm


New Issues Priced

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

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



Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Senior Housing Prop. Trust Baa3/BBB- 6.25% 30NC5 250 6.25-6.375%a N/A 6.25% $25 MS (phys) + 5


Lipper Report/Fund Flows


For the week ended February 3rd, Lipper U.S. Fund Flows reported an outflow of $1.451bn from corporate investment grade funds (2016 YTD net outflow of $4.947bn) and a net outflow of $40.897m from high yield funds (2016 YTD net outflow of $4.116bn).

Over the same period, Lipper reported an outflow of $405m from loan participation funds (2016 YTD net outflow of $2.894bn).

Emerging Market debt funds reported a net outflow of $414m (2016 YTD outflow of $1.682bn).


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 84.50 bps wider versus their post-Crisis lows!


ASSET CLASS 2/10 2/09 2/08 2/05 2/04 2/03 2/02 2/01 1/29 1/28 1-Day Change 10-Day Trend PC
IG Avg. 215 213 209 208 208 206 202 202 202 201 +2 +14 106
“AAA” 96 96 95 96 96 96 93 93 92 91 0 +5 50
“AA” 121 119 116 116 115 114 111 111 114 113 +2 +7 63
“A” 161 159 155 154 154 152 149 149 147 146 +2 +15 81
“BBB” 296 292 287 287 286 284 280 279 280 278 +4 +18 142
IG vs. HY 647 638 601 595 595 592 577 575 572 574 +9 +73 228


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 108 bps wider versus their post-Crisis lows!


INDUSTRY 2/10 2/09 2/08 2/05 2/04 2/03 2/02 2/01 1/29 1/28 1-Day Change 10-Day Trend PC
Automotive 187 183 177 177 176 175 173 170 170 170 +4 +17 67
Banking 179 173 166 164 162 160 156 156 154 153 +6 +26 98
Basic Industry 409 408 402 407 412 411 406 405 405 405 +1 +4 143
Cap Goods 139 139 136 135 134 133 131 138 138 138 0 +1 84
Cons. Prod. 150 150 147 147 148 147 146 146 143 142 0 +8 85
Energy 391 387 380 380 381 377 366 368 368 367 +4 +24 133
Financials 220 215 211 210 207 204 201 197 197 196 +5 +24 97
Healthcare 153 152 150 150 149 148 146 145 145 145 +1 +8 83
Industrials 233 231 227 227 228 226 222 221 224 222 +2 +11 109
Insurance 205 201 198 197 195 193 189 189 189 188 +4 +17 120
Leisure 203 202 198 196 195 193 194 193 193 192 +1 +11 115
Media 244 241 238 237 236 233 231 229 229 227 +3 +17 113
Real Estate 194 192 188 188 186 185 184 183 183 182 +2 +12 112
Retail 165 164 161 162 162 160 159 158 158 158 +1 +7 92
Services 178 178 176 176 175 174 174 173 173 172 0 +6 120
Technology 166 165 161 162 161 160 157 155 155 153 +1 +13 76
Telecom 234 233 228 228 229 227 225 222 222 218 +1 +16 122
Transportation 200 200 198 197 196 195 193 191 191 190 0 +10 109
Utility 184 182 182 182 181 180 178 178 178 176 +2 +8 104


IG Secondary Trading Lab


BAML’s IG Master Index widened 2 bps to +215 versus +213.  +106 represents the post-Crisis low dating back to July 2007.

Standard & Poor’s Global Fixed Income Research widened 2 bps to +257 versus +255.  The +140 reached on July 30th 2014 represents the post-Crisis low.

Investment grade corporate bond trading posted a final Trace count of $16.2b on Tuesday versus $11b Monday and $19.1b the previous Tuesday.

The 10-DMA stands at $17b.

The top three most actively traded IG-rated issues were led by ABIBB 3.65% due 2/01/2026 that saw client flows account for 65% of the volume and with client buying 1.8-times selling.

ABIBB 4.90% due 2/01/2046 finished second with client and affiliate flows representing for 97% of the volume.

ABIBB 4.70% due 2/01/2036 placed third displaying 93% client flows.


New Issue Pipeline

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


Rentenbank (Aaa/AAA) announced it will issue a new 144a/REGS 5-year FRN due 2/19/2021 thru joint leads Bank of America/Merrill Lynch, Citigroup, Deutsche Bank and Toronto Dominion.  The issue is guaranteed by the Federal Republic of Germany. The deal is expected to price sometime during tomorrow’s session with IOIs being taken with IPTs in the 3mL+35 “area.”

Mitsubishi UFJ Financial Group, Inc. (A1/A) mandated Morgan Stanley and MUFG to arrange investor calls in the U.S., Europe and Asia slated to begin on Monday, February 15th in preparation for a dollar-denominated Senior Unsecured Holdco Notes transaction.  A global call will also take place on Friday, February 12th from 11am ET to noon.  Joint active leads/books are MS and MUFG with J.P. Morgan serving in a passive role. MUFG filed to offer Fixed and FRN Senior Notes today, Wednesday, February 10th.

United Mexican States (A3/BBB+) on Monday, February 8th filed a $10b shelf registration covering debt securities and warrants.

On Thursday, February 4th, Electronic Arts, which S&P assigned a “BBB-“ rating to today, asked Bank of America/Merrill Lynch to coordinate investor calls beginning tomorrow, Friday, February 5th and continuing on Monday, February 8th from 10am to 5pm ET on both days.

Molson Coors Brewing Company (Baa2/BBB), expects to issue up to $6.8b in new debt to help fund its $12b acquisition of Miller beer brands from AB InBev an SEC filing shows. On Tuesday, January 26th , Molson Coors filed an S-3ASR automatic mixed shelf registration covering debt securities, Class “B” common stock, depositary shares, warrants and units to be used for general corporate purposes including debt refis, acquisitions, working capital, CAPEX and repurchases of redemptions. Molson Coors announced last year that will acquire SAB Miller’s interest in MillerCoors for $12b contingent upon AB Inbev’s purchase of SABMiller.  The deal is expected to close some time during the second half of 2016.

Berkshire Hathaway Inc./Finance Corp. (Aa2/AA) filed an S-3ASR debt securities shelf registration on Tuesday, January 26th with proceeds flagged for general corporate purposes.

Corporacion Andina de Fomento or “CAF” (Aa3/AA-), the Latin American Development Bank, mandated Bank of America/Merrill Lynch, Citigroup, Deutsche Bank and HSBC to arrange global investor calls scheduled that began today, Thursday, January 28th in preparation for a dollar-denominated global offering that could soon follow their conclusion.

NASDAQ (Baa3/BBB-) filed an S-3ASR mixed securities shelf registration covering debt securities, preferred stock, common stock, warrants, depositary shares, purchase contracts and units with proceeds flagged for general corporate purposes, capital expenditures and working capital.

Banque Ouest Africaine de Développement or “BOAD” (Baa1/BBB) mandated BNP Paribas, Deutsche Bank, J.P. Morgan and Standard Bank to arrange fixed income investor meetings scheduled that began on Monday, January 18th in preparation for a dollar-denominated benchmark 144A/REGS S/3( c )(7) Senior Unsecured transaction that could soon follow its conclusion.  “BOAD”  is the West African Development Bank.

The State of Israel (A1/A+) filed a 424B5 registration statement under which it may offer up to $7b of debt securities and subsequently asked Barclays, Citigroup and Goldman Sachs to arrange U.S. fixed income investor meetings that began on January 12th.

The Republic of Turkey (Baa3/BBB-) filed an S-B shelf registration covering over $4.9b of debt securities.  Turkey has issued in January in 12 of the past 13 years.

CIBC Funding, L.P. guaranteed by CIBC and rated (Aa3/AA-) asked Citigroup, CIBC Capital Markets, BNP Paribas and Wells Fargo held fixed income investor calls that wrapped up on Monday, December 7th in preparation for a dollar-denominated 144a/RegS 3( c )(7) transaction that could soon follow.

Split-rated Yapi ve Kredi Bankasi A.S. (Baa3/BB+) mandated Bank of America/Merrill Lynch, Citigroup, Mistubishi UFJ Securities Inc. and Unicredit as joint leads and books to arrange investor meetings that began on Tuesday, December 1st in the U.S., Europe and Asia in conjunction with a 144A/RegS Basel III compliant Tier 2 dollar-denominated offering expected to price sometime in early 2016.

Romania (Baa3/BBB-) asked HSBC, RBI, SG and Unicredit to arrange credit update meetings with U.S. investors across four cities that concluded in New York on Thursday, December 10th.

Kia Motors Corporation (Baa1/A-) road showed with fixed income investors thru meetings arranged by Citigroup and J.P. Morgan that began on Monday, November 16th.

PT Pertamina (Persero) (Baa3/BB+/BBB-) mandated BNP Paribas, Deutsche Bank and J.P. Morgan to arrange fixed income investor meetings took place in on Monday, September 28th  in London and that made subsequent stops in New York and Boston before concluding October 2nd in L.A.


M&A Pipeline – $657.785 Billion in Cumulative Enterprise Value!

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


Fortis Inc. (A-/S&P) announced on Tuesday, February 9th that it will acquire ITC Holdings for $11.3b in a cash and stock transaction.  The terms stipulate that ITC shareholders will receive $22.57 in cash and .7520 Fortis shares per ITC share. Fortis will also assume approx. $4.4bn of consolidated ITC indebtedness. The cash portion of the deal will be financed through the issuance of about $2bn of Fortis debt and the sale of up to 19.9% of ITC to one or more infrastructure-focused minority investors. Fortis expects to maintain a solid IG credit rating.

On a consolidated basis, Southern Company (Baa1/A-) plans to raise $10.35b of debt in the capital markets this year, including the refinancing of nearly $2b of long-term debt maturities. This would account for more than 20% of an anticipated $47b of new corporate bond supply from U.S. investment grade electric utilities. Within that plan, the parent holding company would issue $8b to finance its acquisition of AGL Resources (BBB+/BBB+); this would be the largest single corporate bond issuance by a U.S. investment grade electric utility, surpassing the $6.7 billion issued by Pacific Gas & Electric in March 2004 as it prepared to complete its Chapter 11 restructuring. Southern Power (Baa1/BBB+) will be the next largest issuer, with $1,200 million budgeted for 2016, primarily to finance its growth plans.

Exelon Corp. (Baa2/BBB-) Debt financing plans for 2016 include $950 million at Commonwealth Edison (A2/A-) ($665 million maturing in 3Q16), $750 million at Baltimore Gas & Electric (A3/A-) ($300 million maturing on October 1) and $450 million at PECO Energy (Aa3/A-) ($300 million maturing on October 15). Exelon Corporation will either issue some debt to effectively replace the acquisition-related debt it redeemed in late 2015, or redeem its new 2025, 2035 and 2045 maturities, depending on whether or not it closes its $6.8b acquisition of Pepco Holdings (Baa3/BBB+). The only remaining required approval is that of the District of Columba Public Service Commission, which stated in its order of October 28, 2015 that it expected to issue its decision on or before March 4, 2016.

TE Connectivity (A-/A-) announced it will buy medical device maker Creganna Medical for $895mm in cash.  The deal will be funded with available cash and debt.

Stryker Corp. (A3/A+) announced on Monday, February 1st, that it will acquire Sage Products, LLC in an all cash transaction totaling $2.775b that will be funded with cash and new debt.

Dominion Resources Inc. “D” (Baa2/BBB+) announced on Monday, February 1st, that it will acquire Questar Corporation “STR” (A-/S&P) for $4.4b in cash.  “D” agreed to pay “STR” shareholders $25 per share and assume its debt. The deal will be funded with equity, convertibles and debt and is expected to close by the end of 2016. RBC and Mizuho are providing financing and acting as financial advisors to Dominion.  The deal is subject to shareholder and regulatory approvals.

Abbott Labs (A2/A+) announced on Monday, February 1st, it will acquire Alere Inc. (Caa1/CCC+) for $5.8b in which “ABT” will pay $56 per share of ”ALR.”  The deal will be financed with debt.  ABT expects a strong IG rating despite the new debt. The deal is subject to “ALR” shareholder as well as regulatory approvals.

Newell Rubbermaid “NWL” (Baa3/BBB-/BBB+) and Jarden Corporation “JAH” announced on December 14th, 2015 that it entered in to an agreement to combine the two companies in a cash and stock transaction valued at $15.4b. The transaction will be funded with cash, equity, and debt issued to JAH shareholders. NWL entered into a commitment letter with Goldman Sachs to provide a $10.5bn bridge facility. In an S-4 filing NWL will refinance $4.5bn of outstanding Jarden debt and will assume $632 million of outstanding Jarden debt, with up to approximately $10.2bn of new debt expected to be incurred in the form of up to approximately $8.7bn of newly issued Newell Rubbermaid debt securities, a $1.5bn term loan facility and available balance sheet cash and the net cash proceeds from Newell’s sale of its Décor business. Goldman Sachs is acting as advisor to NWL. The deal is expected to close in Q2 2016 and is subject approvals.

Total Systems Services, Inc. “TSS” (Baa3/BBB-) entered into a definitive agreement with Vista Equity Partners to acquire TransFirst, a vista portfolio company, in an all-cash transaction valued at $2.35bn. In terms of financing TSS management noted that the deal will be funded with fully committed debt financing. On a pro forma basis at closing the combined entity will have approx. $3.8bn of debt and pro forma leverage of 3.9x. The transaction is expected to close sometime in Q2 2016 and is subject to regulatory approvals. Moody’s affirmed TSS’s Senior Unsecured “Baa3” rating and “stable” outlook.

Molson Coors (Baa2/BBB-) expects to issue up to $6.8b in new debt to help fund its $12b acquisition of Miller beer brands from AB InBev an SEC filing shows. The transaction will be financed thru cash, debt and new equity.  The deal is expected to close some time during the second half of 2016.

Lockheed Martin (Baa1/BBB+) announced it will combine its information systems/global solutions entity with Leidos (Ba1/BBB-)in a deal valued at roughly $5b.  Leidos will keep its existing $1.1b debt and expects to incur $2.5b of additional debt as part of the transaction.  The deal is expected to close sometime in the second half of 2016.

Johnson Controls (Baa2/BBB+) announced it will acquire Tyco International (A3/A-) for $16.5b and with the merged entity operating in Ireland to save on taxes.  Tyco secured a $4b bank facility to fund the cash consideration inferring additional long-term dated M&A  ahead according to S&P. The deal is slated to close by the end of 2016. The new entity will be called Johnson Controls plc. Tyco has entered a commitment letter with Citigroup Global Markets to provide as much as a $4b term loan as well as a $4b 364-day year Senior Unsecured bridge loan facility.

This morning in Charlotte, shareholders of Piedmont Natural Gas (A2/A) voted to approve the Company’s acquisition by Duke Energy (A3/BBB+).  66.8% of voting shares supported the acquisition.  In late October Duke Energy, (A3/BBB+) the nation’s largest utility announced that it will buy Piedmont Natural Gas (A2/A) for $4.9b in cash.  Both companies are partners in the $5b Atlantic Coast Pipeline.  The purchase, pending regulatory approval, will add one million new rate payers to Duke Energy’s customer base.  The deal is expected to close toward the end of 2016.

Shire PLC announced this morning that it will acquire Baxalta Inc. (Baa2/BBB) for approximately $32.2 billion in cash and stock.  Shire secured an $18b bank facility to finance the cash portion and will refinance it in debt. The deal creates the single largest maker of rare disease drugs in the world.

Dow Chemical and DuPont Co. (A3/A-) announced a merger of epic proportions worth $130b that brings together among the largest and most prestigious chemical and agricultural companies.  The plan is to merge followed by a split into three businesses focused on agriculture, material sciences and a specialty brand focused on nutrition/electronics. The two companies are among the nation’s oldest with DuPont founded in 1802 and Dow in 1897.

Air Liquide SA (NR/A+) announced on November 17th that it will acquire Airgas Inc. (Baa2/BBB) for $13.4b in which Airgas will be a wholly-owned subsidiary of its new parent. The transaction will be financed bridge loans that are expected to be refinanced through equity, Euro cash and euro as well as dollar-denominated debt issuance.

Avago Technologies (Ba2/BB+) is expected to buy Broadcom (A2/A-) for $37b. The transaction is scheduled to close by the end of Q1 2016. Avago will fund the $17b cash consideration with cash on hand and $9b in new, fully-committed debt financing from a consortium of banks.

Pfizer (A1/AA) and it’s Irish counterpart Allergan (Bbaa3/BBB-) announced on Monday, November 24th a $160 billion behemoth health care services merger making it the largest M&A deal ever.  Pfizer’s U.S. headquarters looks to move across the pond to relocate to the emerald island (did someone say tax haven?) making it the world’s number one pharmaceutical company.  Most of the M&A transaction will be in cash with a debt portion heard to be in a range of $6-12b.  Post today’s close, ratings agencies have said the merger may involve a buyback of as much as $80-85b.

Michael Dell’s privately held Dell Inc., (Ba3/BB+), announced an up to $67b cash and stock deal to acquire EMC Corp. (A1/A).

BB&T (A2/A-) announced in August that it will acquire National Penn Bancshares for $1.8b in cash and stock ($550mm in cash and 31.6mm BB&T shares). The deal is expected to close mid-2016.

Black Hills Corp. (Baa1/BBB) announced in July an acquisition of SourceGas Holdings LLC (Baa2/BBB-) for $1.89b in a deal that will include approximately $500mm in new debt. Expected to close sometime in the first half of 2016.

UPS (Aa3/A+) announced it has entered into a definitive purchase agreement to acquire Coyote Logistics, a technology-driven, non-asset based truckload freight brokerage company for $1.8b from Warburg Pincus.  The transaction will be financed with available cash resources and through existing and new debt arrangements and is expected to close within 30 days.

Israel’s Teva Pharmaceutical (A3/A-) announced plans in July to purchase Dublin-based Allergan’s Pharma (Baa3/BBB-) business for $40.5b.  $33.75b in cash will be financed through a combination of new equity, debt and cash on hand. Teva entered into a $33.bridge facility commitment including $27b debt and $6.75b equity.  Timing is expected sometime in Q1 2016.

Aetna Inc. (Baa1/A) announced in July that it will buy Humana Inc. (Baa3/BBB+) for about $37 billion in cash and stock making it the largest insurance M&A deal in history.

Anthem Inc. (Baa2/A) proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal is expected to close sometime during the second half of 2016. The merger would involve 53mm members and will include $22b in new debt and loans.

Amphenol Corporation (Baa1/BBB+) announced on June 29th that it made a binding offer to acquire 100% of FCI Asia Pte. Ltd. for $1.275b. Funding will be made thru cash and debt and is expected to close by the end of 2015.


New Issue Volume


Index Open Current Change  
IG25 119.554 121.563 2.009
HV25 371.845 368.815 <3.03>
VIX 26.54 26.29 <0.25>  
S&P 1,852 1,851 <1>
DOW 16,014 15,914 <100>  



IG Corporates




Total IG (+ SSA)

DAY: $0.25 bn DAY: $0.25 bn
WTD: $0.25 bn WTD: $0.45 bn
MTD: $6.275 bn MTD: $14.359 bn
YTD: $133.259 bn YTD: $184.483 bn


Economic Data Releases


MBA Mortgage Applications Feb. 5 —- 9.3% <2.6%> —-
Monthly Budget Statement January $50.0b $55.2b <$17.5b> —-


Rates Trading Lab


Tokyo Holiday Tonight: Cash Markets Will Not Open Until 2am. Andy will be on the desk from 1:30am(est).

It seems possible that market is setting itself for some sort of correction, but it also seems to be suffering from “seller’s exhaustion” as the path of least resistance, at least in the long end, is lower rates. As I said this afternoon, there are some very valid arguments for the rate complex to take a breather here, but I think it’s equally important to remember that auctions are liquidity events and in the current poor trading environment, liquidity is at a premium (no matter what the NY Fed theorizes). It’s hard to quantify, but it’s important to remember, that many buyers here are buying not because they want to, but because they have to. As for the curve, the flattening we have seen was not all that surprising given the term structure in place. Steepening trades make sense when you can collect enough carry to justify the forwards in a tightening environment. When the positive carry is not there, you really have to make a case for an easier Fed to justify a steeper curve so in that context, I think the move in the curve makes more sense.

-Jim Levenson


UST Resistance/Support Table


CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-27 101-16 102-12 105-16+ 111-30
RESISTANCE LEVEL 99-256 101-11 102-08 105-09+ 111-08
RESISTANCE LEVEL 99-24 101-08+ 102-06 105-05+ 110-22
SUPPORT LEVEL 99-226 101-02+ 101-31 104-25 110-01
SUPPORT LEVEL 99-21 101-00+ 101-22+ 104-15 109-18
SUPPORT LEVEL 99-19+ 100-29+ 101-17+ 104-08 108-31+


Tomorrow’s Calendar


China Data: Nothing Scheduled

Japan Data: Nothing Scheduled

Australia: Consumer Inflation Expectation

EU Data: U.K.-Jan RICS

S. Data: Claims, Cons Comf

Supply: Italy 2, 6, 14y, Irish 10y, U.K. 29y, U.S. 30y

Events: Riksbank, Eurogroup

Speeches: Yellen, Cunliffe, Bailey, Stevens, Liikanen (more…)