Browsing articles tagged with "baml Archives - Mischler Financial Group"
FIG Funding 5.0- Mother Merrill Launches a MOAB (Mother of All Bonds)
April 2017      Debt Market Commentary   

Quigley’s Corner 04.19.17 – Mother Merrill Launches A Mother of All Bonds aka MOAB

 MOAB-BAML-Mother-of-all-Bonds

 

 

Investment Grade New Issue Re-Cap – BAML Launches a $6.75b MOAB (“A “Mother-Of-All-Bonds”)

IG Primary & Secondary Market Talking Points

Global Market Recap

Syndicate IG Corporate-only Volume Estimates April

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending April 12th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

Both Bank of America/Merrill Lynch and Morgan Stanley issued today, wasting no time to capitalize on their recent strong earnings.  BAML launched and priced a proverbial MOAB of a deal – a $6.75b 4-tranche Global Senior Notes transaction comprised of a 6nc5 FRN, 6nc5 fixed-to-float, an 11nc10 f-t-f and a 21nc20 f-t-f.  Morgan Stanley printed a $1.75b 7nc6 FRN.  That represents the fourth and fifth of the U.S. six-pack banks leaving Goldman Sachs as the one that hasn’t yet issued.  Yesterday, Goldman missed analysts estimates as a result of its currency and commodity businesses.  However, it should be noted that GS doubled its YoY profits which points to the impact lofty estimates can have.  Goldman’s investment banking business revenues rose 16% thanks to its debt underwriting strength.

 

4 Corporate issuers tapped the IG dollar DCM today pricing 8 tranches between them totaling $12b.  The SSA space was inactive.

 

  • MTD we have now priced over 63% of the IG Corporate mid-range syndicate projection for April or $58.192b vs. $91.50b.

 

IG Primary & Secondary Market Talking Points

 

  • Basin Electric Power Cooperative upsized today’s 144a/REGS 30-year FMBs to $500mm from $300mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 8 IG Corporate-only (ex-Preferred) new issues was <13.72> bps.
  • BAML’s IG Master Index widened 1 bp to +125 vs. +124.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.19 vs. 1.18.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.5b on Tuesday versus $9.6b on Monday and $16.0b the previous Tuesday.
  • The 10-DMA stands at $14.0b.

 

Global Market Recap

 

  • U.S. Treasuries – closed down. Pressured by Japan selling and weak Bunds & Gilts.
  • Overseas Bonds – JGB’s were mixed & flatter. Bunds & Gilts were hit hard.
  • Stocks – U.S. stocks started the day bid but rolled over. Mixed heading into the close.
  • Overseas Stocks – Nikkei tiny gain. China red. Europe improved except the U.K.
  • Economic – Fed’s Beige Book: Modest or moderate is all you need to know.
  • Overseas Economic –  EU CPI YoY was unchanged (overall & core).
  • Currencies – Good day for the USD outperforming all of the Big 5.
  • Commodities – Very poor performance by crude oil & gold was also a loser today.
  • CDX IG: -0.03 to 68.77
  • CDX HY: +0.28 to 349.61
  • CDX EM: -0.88 to 211.87

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

-Tony Farren

 

Syndicate IG Corporate-only Volume Estimates April

 

IG Corporate New Issuance April 2017
Forecasts
vs. Current
MTD – $58.192b
Low-End Avg. $90.25b 64.48%
Midpoint Avg. $91.50b 63.60%
High-End Avg. $92.75b 62.74%
The Low $65b 89.53%
The High $111b 52.43%

 

 

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.  (more…)

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

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

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Bank of America $2 11NC10 Deal Dashboard

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 16th   

IG Credit Spreads (by Rating/Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

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

Global Market Recap

 

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

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

Bank of America $2 11NC10 Deal Dashboard

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/14
TUES.
11/15
WED.
11/16
TH.
11/17
FRI.
11/18
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
New Issue Concessions 2.85 bps 2.79 bps 3.45 bps 5.33 bps N/A 3.62 bps <3.60> bps <0.87> bps <0.51> bps
Oversubscription Rates 2.38x 3.23x 3.01x 2.66x N/A 2.78x 4.26x 3.32x 2.61x
Tenors 11.05 yrs 10.74 yrs 9.57 yrs 10.56 yrs N/A 11.28 yrs 13.31 yrs 11.33 yrs 7.77 yrs
Tranche Sizes $991mm $707mm $704mm $1,839mm N/A $1,039mm $692mm $491mm $818mm
Avg. Spd. Compression
IPTs to Launch
<14.5> bps <21.57> bps <18.35> bps <17.11> bps N/A <17.69> bps <22.96> bps <17.87> yrs <17.42> bps

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Bank of America Baa3/A- 4.183% 11/25/2027 2,000 +205a +190a (+/-5) +185 +185 BAML-sole
BP Capital Markets PLC A2/A- 3.216% 11/28/2023 1,200 +120-125 +115a (+/-5) +110 +110 BAML/CITI/BNPP/CS/GS
MUFG
BP Capital Markets PLC A2/A- 3.723% 11/28/2028 800 +145-150 +145a (+/-5) +140 +140 BAML/CITI/BNPP/CS/GS
MUFG
Capital One Finc’l. Corp. Baa3/BB 6.00% PerpNC5 500 RG: 6-6.125%
6.125%a
N/A 6.00% $25 Pfd MS(phys)BAML/JPM/UBS
WFS
Enbridge Inc Baa2/BBB+ 4.25% 12/01/2026 750 +225a +205a (+/-5) +200 +200 BARC/DB/MIZ/MUFG
Enbridge Inc. Baa2/BBB+ 5.50% 12/01/2046 750 +275a +255a (+/-5) +250 +250 BARTC/DB/MIZ/MUFG
New York St. Electric & Gas A3/A- 3.25% 12/01/2026 500 +110a N/A +100 +100 BAML/MIZ/MUFG/RBC

Indexes and New Issue Volume

 

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

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

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

 

Lipper Report/Fund Flows – Week ending November 16th   

     

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

 

IG Credit Spreads by Rating (more…)

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

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

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

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

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Potential Election Day Trade Volatility

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

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

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 2nd  

Investment Grade Corporate Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

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

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

Investment Grade New Issue Re-Cap

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

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

Global Market Recap

 

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

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

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

 

Note About Potential Election Day Trade Volatility

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

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

 

For example, from one Primary Dealer wrote:

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

 

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

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

 

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

 

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

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2016’s top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  The participating desks represent 80.93% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

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

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

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

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

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


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

 

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

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

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

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

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

……and here are their formidable responses:

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

 

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

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

 

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

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

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

 

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

 

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

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 23 deals that printed, 11 tightened versus NIP for a 48.00% improvement rate while only 8 widened (35.00%) 4 were trading flat (17.00%).

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

 

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

 

Indexes and New Issue Volume

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

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

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

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

 

Lipper Report/Fund Flows – Week ending November 2nd  

     

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

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 32.00 bps wider versus their post-Crisis lows!

 

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

 

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 37.42 bps wider versus their post-Crisis lows!

                                    

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

 

Economic Data Releases

 

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

  (more…)

MSFT Leads USD 23.4bil Blockbuster Bond Issuance Day; Mischler Comment
August 2016      Debt Market Commentary, Recent Deals, Recent Deals   

Quigley’s Corner 08.01.16 Blockbuster Corporate Bond Issuance Day; MSFT Sets Standard for Diversity & Inclusion

 

Investment Grade New Issue Re-Cap –Blockbuster Bond Day; $23.4bil  via 7 IG Issuers; 14 Tranches

IG Corporate Primary Market :Microsoft (NASDAQ:MSFT); Synchrony Financial (NYSE:SYF)

Global Market Recap

IG Primary Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

Well, at 7:25pm this evening, my second job started.  You know the one where I extoll the virtues of investment grade corporate bond issuance, a Company’s D&I mandate, the famous “QC” shout-outs and the all-important relative studies of today’s new issues that Mischler Financial participated in.  But first what else is there say I mean – “what a whale of a day!”  IG Corporate primary markets were on FIYA-AHHHHH today!  Literally En Fuego!  7 IG issues priced a total of 14 transactions totaling $23.40b.  Now let’s put that into the proper perspective.  You all read last Friday’s “Best and Brightest” edition. In it THE top syndicate desks offered their thoughts on this week’s IG Corporate new issue volume as well as their forecasts for supply total for all of August.  Before any new month begins I always walk you into a section titled “Knowing the Past for the Future” in which I look at historical IG Corporate and SSA issuance over a decade for any given new month.  Here’s what the numbers look like for August:

Across the past ten years, all-in dollar-denominated IG Corporate plus SSA August new bond issuance averaged $63.53b.

 

  • Over the past five years, all-in IG August new issuance averaged $61.17b.
  • Over the past three years, all-in IG August issuance has averaged $60.79b.
  • The past three years of August saw IG Corporate only issuance average $49.46b.
  • August SSA issuance has averaged $11.33b across the last three years.

 

……..and here’s the August chart I put together:

August
(Year)
All-in IG Issuance (bn) IG Corps
only (bn)
SSA
only (bn)
2015 59.80 49.75 10.05
2014 55.47 46.55 8.92
2013 67.09 52.07 15.02
2012 63.76 57.46 6.30
2011 59.74 47.06 12.68
2010 84.84 69.82 15.02
2009 59.61 50.25 9.36
2008 36.63 23.65 12.98
2007 90.36 71.56 18.80
2006 57.97 51.72 6.25

 

It’s helpful and what’s more, we’re a numbers loving society. We like knowing “the best of this” and “the best of that” and “the top 10 of anything” for that matter. Today the $23.40b in new IG Corporate-only supply that priced represents 47.31% of the past 3-year average for August…………and it’s only August 1st!

This week the syndicate midpoint average forecast for IG Corporate issuance is $26.22b.  We priced 89% of that today alone.  What’s more, the estimate for overall August new IG supply is $61.13b!  We priced over 38% of THAT today! Mischler was there again this time featured in active roles for both Microsoft’s mega $19.75b 7-part 3s/5s/7s/10s/20s/30s and 40-year new issue as well as for Synchrony Financial’s new $500mm 10-year.

 

Some talking points first:

  • Today’s $23.40b volume makes it the 5th busiest day of the year.
  • Microsoft’s $19.75b 7-part ranks as the 5th largest U.S. issue of all-time.
  • Today’s MSFT new issue represents 2.37% of all 2016 YTD issuance!
  • The session’s $23.40b ranks just outside of the top 10 busiest days of all-time.


Okay ready or not, let’s get to it:

msft-corporate-debt-mischlerMicrosoft Corp. (NASDAQ:MSFT) takes great pride in its own products, and advances to improve the quality of people’s lives through innovative products and it does all it can to help foster a workplace and corporate culture reflective of the world’s changing demographics.  It’s called Diversity and Inclusion at MSFT and it starts from the top down from inside the office of Microsoft’s Indian-born American CEO, Satya Nadella.  Today the internal D&I mandate at the world’s third largest company by market capitalization at $434b. was passed over to the Treasury/Funding team at Microsoft.  Our liaison guided us through an important deal for our Debt Capital Markets.  You see, it wasn’t only about the immense size and multi-tranches of today’s new issue rather it reflected Microsoft’s commitment to our diverse world.  There were a total of 13 diversity firms on today’s transactions.  Along with Mischler Financial, the nation’s oldest Service Disabled Veteran broker dealer were a dozen other diverse financial services companies whose certifications ranged from, African-American, Hispanic-American, Woman-owned and Veteran-owned firms. It may just be one of the most diverse landmark investment grade rated corporate deals ever executed.

But that should come as no surprise. It reflects Microsoft’s work with myriad diverse employee networks rooted in its 100,000 employee workforce.  Here is a list of 42 diverse Microsoft networks that the Company features among its unique socially responsible corporate family:
Africans, Arabs, Attention Deficit Disorder Network, Bangladeshi, Blacks, Boomers, Brazilians, Chinese, Dads, Egyptians, Ex-Yugoslavians, Filipinos, French, Friends of Japanese, Hellenes, Hong Kong Employees, Deaf and Hard of Hearing Employees, Indians, Israelis, Koreans, Malaysians, Microsoft Adoption, Asian Professional Society, Microsoft Nepali, Military Reservists, Moms at Microsoft, Native Americans, New Zealanders, Pakistanis, Persians, Portuguese, Romanians, Russian-speaking employees, Singaporeans, Taiwanese, Thais, Turks, Ukrainians, U.S. Military Veterans, Vietnamese, Visually Impaired Persons and Working Parents at Microsoft.

Are you getting this?  In the financial services industry “deal day” means distribution, banking, coverage, relative value, oversubscription rates, book builds, etcetera, but it means so much more when diversity firms such as Mischler can prove to be a meaningful part of diversity at work.  Just witness our account base that introduced over 140 new orders and  over $500mil book to Microsoft.

Diversity and inclusion are critical underpinnings to the evolving culture at Microsoft and powerful bridges to the marketplace. They can be determining factors in whether or not talented people go to work for them and whether people buy their products.  Microsoft works to increase the pipeline of diverse talent, increase retention and match talent to job opportunities – and it is in its industry’s interest to be transparent about the current state and get on with the solutions. Along with its corporate peers, MSFT continues working together to land thoughtful, enduring and practical diversity and inclusion initiatives that transform its workforce, its suppliers and its vendors for the benefit of the industry, its employees and its customers.

As Microsoft transforms its business and culture, the value proposition for diversity and inclusion within Microsoft is increasingly clear — diversity and inclusion will yield better products and solutions for our customers, and better experiences for its employees.  Diversity gains will not be sustained unless everyone does their part to encourage new and different perspectives, solutions and innovative ideas to surface.  Being inclusive is not something that is simply done, rather it stands for who we are and what a Company is. It’s about transforming culture.

To that end, this past fiscal year, Microsoft put more focus and thought into advancing its diversity and inclusion agenda within the company. Microsoft developed and rolled out key priorities, which have now been woven into the Global Diversity & Inclusion Strategy and approved by its Board of Directors. The new strategy has four specific areas of focus:

  • Transform the Culture
  • Empower Our People
  • Expand our Talent Pipeline
  • Delight our Customers

 

Microsoft’s Deal Mechanics

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing of today’s mega deal.  The five tranches posted a cumulative average contraction of 20 bps from start to finish.

Here’s a look at how it all evolved:

 

MSFT Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
3yr +55a +40a (+/-5) +35 +35 <20> bps <4> 33/31 <2>
5yr +70a +55a (+/-5) +50 +50 <20> bps <4> 49/47 <1>
7yr +90a +75a (+/-5) +70 +70 <20> bps +3 69/67 <1>
10yr +110a +95a (+/-5) +90 +90 <20> bps +5 88/86 <2>
20yr +140a +125a (+/-5) +120 +120 <20> bps +1.5 119/117 <1>
30yr +165a +150a (+/-5) +145 +145 <20> bps +3 143/141 <2>
40yr +200a +185a (+/-5) +180 +180 <20> bps +5 179/177 <2>

 

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

 

AAPL Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr 2,500 5,200b 2.08
5yr 2,750 6,700b 2.44x
7yr 1,500 4,860b 3.24x
10yr 4,000 11,060b 2.76
20yr 2,250 5,960b 2.65x
30yr 4,500 11,000b 2.44x
40yr 2,250 6,140b 2.73x
Total Book 19.75 50.92b 2.58x

 

Microsoft (Aaa/AAA) and LinkedIn Corp. (BB+/NR) announced on June 13th that they entered into a definitive agreement in which MSFT will purchase LKND for $196 per share for a total transaction valued at $26.2b.  Today’s deal will use proceeds for the LinkedIn acquisition and for general corporate purposes.

 

  • In terms of relative value leads pointed to the outstanding MSFT 4.00% due 2/12/2055 that was T+175 pegging 40-year NIC as 5 bps against today’s new 40-year T+180 pricing.
  • The 30-year comparable was the MSFT 4.45% due 11/03/2045 that was T+142 versus today’s new 30-year final pricing at T+145 or 3 bps concession.
  • Fair value for today’s new 20-year that printed at T+120 was the MSFT 4.20% due 11/03/2035 carrying a T+104 bid this morning but also featuring a more dramatic 20s/30s curve conveyed as between 15-20 bps let’s split the difference and call it 17.5 bps so, T+121.5 fair value for a 1.5 bps NIC vs T+120 pricing.
  • For a 10-year study there was the outstanding MSFT 3.125% due 11/03/2025 seen G+85 bid pre-announcement nailing concession as a nickel or 5 bps against the T+90 final print.
  • New MSFT 7s turned to the 2.65% of 11/03/2022 G+67 for a 3 bps NIC vs. T+70.
  • 5-year MSFT comped between the MSFT 2.375% due 2/12/2022 (G+64) and the MSFT 2.00% due 11/03/2020 that was G+44.  The average between the two is G+54 pointing to a negative 4 bps NIC on the new 5-year final T+50 spread level.
  • 3yr. NIC was also negative 4 bps.

 

Microsoft Final Pricing

MSFT $2.5bn 1.10% due 8/8/19 @ $99.897 to yield 1.135% or T+35 MW+7.5

MSFT $2.75bn 1.55% due 8/8/21 @ $99.895 to yield 1.572% or T+50. MW+10

MSFT $1.5bn 2.00% due 8/8/23 @ $99.701 to yield 2.046% or T+70. MW+12.5

MSFT $4bn 2.40% due 8/8/26 @ $99.814 to yield 2.421% or T+90. MW+15

MSFT $2.25bn 3.45% due 8/8/36 @ $99.613 to yield 3.477% or T+120. MW+20

MSFT $4.5bn 3.70% due 8/8/46 @ $99.515 to yield 3.727% or T+145. MW+25

MSFT $2.25bn 3.95% due 8/8/56 @ $97.505 to yield 4.077% or T+180. MW+30

 

Who to thank?

Thank you to Microsoft Corp. Treasury/Funding and particularly Joel Combs for maximizing the business impact of global diversity and inclusion to empower people, and to transform culture and business. You are the recipient of this evening’s Mischler five-star salute.  We all thank you.

Genesis of the Five-Point Star
Yesteryear’s “bond Gods” Seth Waugh and Jimmy Quigley introduced the concept of our financial services first ever “mini-me” full service broker-dealer  back in 1993 with the advent of African-American-owned Utendahl Capital Partners L.P.  From that one firm in the early 1990s, we have witnessed a mushrooming of diversity firms who have subsequently learned through the school of hard knocks how to build into more formidable and sustainable broker dealers with a firm eye on maintaining and growing firm capital, leveraging their opportunities to make a concerted effort to create a value-added distribution proposition with formidable capital markets coverage from senior seasoned talent.  Add to that the diversity overlay with lasting certifications and give-back components and wrap it all up with great back office synergies that don’t fail the customer or the client after the deal is priced.  That is the five-point star we embrace here at Team Mischler.  Seth Waugh is back in our industry as of April 25th earlier this year as a non-executive chairman of Alex, Brown, a division of Raymond James, once it closes the acquisition of the U.S. Private Client Services unit of Deutsche Bank Wealth management expected sometime next month.  Seth was formerly CEO of Deutsche Bank Americas.  As for the other Mr. Quigley, he travels the world spreading the good news of BAML to the world outside the U.S. as that bank’s most senior international relationship manager and Executive Vice Chairman.  Together those two characters personified all that was good about Wall Street PRIOR to the financial crisis and those black box products that no one ever understood and that wound up blowing up the world resulting in the new restrictive regulatory environment.  It wasn’t on their watch though.  They were two revolutionary thinkers who changed the face of Wall Street by imagining, creating and promoting diversity in the financial services industry.  Think about that and those 12 diversity firms on today’s Microsoft deal.  It’s a mandate for the way our inextricably global-linked world economy works.  It did have a beginning folks and those two guys were front and center at its genesis.

Today that spirit continues to shine and was personified by joint lead and B&D Bank of America/Merrill Lynch Origination and Syndicate.  Again from the top down from the offices of Andrew Karp, Managing Director and Head of Americas Investment Grade Capital Markets to Dan Mead,  M.D. and Head of IG Debt Syndicate and the team of Maureen O’Connor, Kevin Barthelmes, Greg Baker and Andrew Kurz.  We appreciate the access, the two-way info and data exchanges, and for rewarding our distribution network with paper today. By holding us to your high standards, you challenge us to live up to our promise of formidable middle market placement opportunities, for the issuers we serve.  That kind of example and reward for our performance motivates us to deliver as we did today – an order book of over $500mm across 140 total individual orders.

See that folks!  I had to start back to Seth and Jimmy because that’s where this space all began.  It began with two forward thinking well-liked good guys and their call to social responsibility.  It is on us today to constantly improve upon this wonderful mandate; to give back as we were given and to continue the long American legacy of diversity.  Thank you BAML Syndicate!

 

Staying in Sync with Synchrony Financial

Mischler was also a 2% active Co-Manager on today’s new 10-year for Synchrony Financial.  “SYF” contracted a nickel or 5 bps from IPTs in the +230 “area” before launching and pricing at +225.  The final order book today was $870mm or 1.74-times oversubscribed.  Paper was issue bid or T+225 at the end of the day.  For comps we looked to the outstanding SYF 4.50% due 7/23/2025 that was T+212 (G+218) pegging concession as 7 bps versus on today’s 10-year Senior Notes new issue that priced at T+225.

Thank you to Chris Coffey, Director of Long-Term Funding, Corporate Treasury at Synchrony Financial.  Chris as many of you know is also one of the legends who helped steer the DCM’s most prolific D&I mandate for years at GECC.  Ahhh, all the legends in this evening’s “QC.”  Thanks Chris!   

BAML served as joint lead and B&D of SYF so, I have most of the same group of people in Syndicate and Origination to thank.  Andrew Karp, Dan Mead, Greg Baker and Andrew Kurz but this time I also add  “The Dragon” himself Mr. Rob Kasel who gets a special shout-out as he ran the book at the big house!  Thanks everyone. 

Synchrony Final Pricing 

SYF $500mm 3.70% due 8/04/2026 @ $99.619 to yield 3.746% or T+225 MW+35

               

Global Market Recap

 

o   U.S. Treasuries – Down day for USTs, JGB’s, Gilts & Bunds.

o   3mth Libor was unchanged at highest yield since May 2009 (0.75910%).

o   Stocks – U.S. mixed, Europe down, Nikkei higher & China red.

o   Economic – U.S. data was a touch weaker than expected.

o   Overseas Economic – Global data mixed tilted to down side.

o   Currencies – USD outperformed all of the Big 5.

o   Commodities – Bad day for commodities as crude oil enters a bear market.

o   CDX IG: +3.16 to 75.19

o   CDX HY: +16.33 to 411.04

o   CDX EM: +3.74 to 263.41

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 14 IG Corporate new issues only was 15.84 bps.

 

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

 

IG Corporate New Issuance This Week
8/01-8/05
vs. Current
WTD – $23.40b
August 2016 vs. Current
MTD – $23.40b
Low-End Avg. $25.13b 93.12% $60.48b 38.69%
Midpoint Avg. $26.22b 89.24% $61.13b 38.28%
High-End Avg. $27.30b 85.71% $61.78b 37.88%
The Low $15b 156.00% $45b 52.00%
The High $45b 52.00% $75b 31.20%

 

It’s 12:25a.m.  I’ll be back at the Corner later this morning!

 

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.

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.
7/25
TUES.
7/26
WED.
7/27
TH.
7/28
FRI.
7/29
AVERAGES
WEEK 7/25
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
AVERAGES
WEEK 7/04
New Issue Concessions 2.89 bps 0.90 bps <0.4> bps 0.5 bps N/A 1.23 bps 3.95 bps 0.82 bps 0.73 bps
Oversubscription Rates 3.57x 2.61x 4.464x 3.70x N/A 3.63x 3.42x 4.73x 3.82x
Tenors 10.90 yrs 24.67 yrs 10.20 yrs 11.40 yrs N/A 13.45 yrs 7.95 yrs 9.58 yrs 9.72 yrs
Tranche Sizes $710mm $850mm $1,230mm $963mm N/A $875mm $1,482mm $887mm $770mm

 

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
Consumer’s Energy Co. A1/A+ 3.25% 8/15/2046 450 +120a +110a (+/-5) +105 +105 BAML/CITI/MIZ/MUFG/SCOT
+3 (p)
Microsoft Corp. Aaa/AAA 1.10% 8/08/2019 2,500 +55a +40a (+/-5) +35 +35 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 1.55% 8/08/2021 2,750 +70a +55a (+/-5) +50 +50 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 2.00% 8/08/2023 1,500 +90a +75a (+/-5) +70 +70 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 2.40% 8/08/2026 4,000 +110a +95a (+/-5) +90 +90 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 3.45% 8/08/2036 2,250 +140a +125a (+/-5) +120 +120 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 3.70% 8/08/2046 4,500 +165a +150a (+/-5) +145 +145 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 3.95% 8/08/2056 2,250 +200a +185a (+/-5) +180 +180 BAML/JPM/WFS (a) +4 (p)
Northern Trust Corporation Baa1/BBB+ 4.60% PerpNC10 500 4.75%a N/A 4.60% $100.00 BAML/BARC/GS/MS
Santander UK Group Hldgs. Baa1/A 2.875% 8/05/2021 1,500 very low 200s
(+206.25)
+190a (+/-5) +185 +185 BNPP/BARC/GS/MS/SANT
Synchrony Financial BBB-/BBB- 3.70% 8/04/2026 500 +230a +225a (+/-5) +225 +225 BAML/MIZ/MUFG
Tanger Properties Baa1/BBB+ 3.125% 9/01/2026 250 +187.5a +170a (+/-2) +168 +168 BAML/WFS
Union Pacific Corporation A3/A 3.35% 8/15/2046 300 +120-125 +112a (+/-2) +112 +112 BAML/BARC/JPM
Union Pacific Corporation
(tap) New total: $650mm
A3/A 2.75% 3/01/2026 150 +75-80 +77a (+/-2) +77 +77 BAML/BARC/JPM

 

Lipper Report/Fund Flows – Week ending July 27th     

 

  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).
  • Over the same period, Lipper reported a net outflow of $15.422m from Loan Participation Funds (2016 YTD net outflow of $5.389b).
  • Emerging Market debt funds reported a net inflow of $1.382b (2016 YTD inflow of $3.717b).

IG Secondary Trading Lab

 

o   BAML’s IG Master Index widened 1 bp to +150 versus +149.  +106 represents the post-Crisis low dating back to July 2007.

o   Standard & Poor’s Global Fixed Income Research widened 6 bps to +202 versus +196.  The +140 reached on July 30th 2014 represents the post-Crisis low.

o   Investment grade corporate bond trading posted a final Trace count of $13.9b on Friday versus $14.5b Thursday and $11.5b the previous Friday.

 

New Issue Volume

 

Index Open Current Change
IG26 72.025 75.231 3.206
HV26 200.50 202.90 2.40
VIX 11.87 12.44 0.57
S&P 2,173 2,170 <3>
DOW 18,432 18,404 <28>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $23.40 bn DAY: $23.40 bn
WTD: $23.40 bn WTD: $23.40 bn
MTD: $23.40 bn MTD: $23.40 bn
YTD: $834.591 bn YTD: $1,068.127 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Markit US Manufacturing PMI July 52.9 52.9 52.9 —-
Construction Spending MoM June 0.5% <0.6%> <0.8%> <0.1%>
ISM Manufacturing July 53.0 52.6 53.2 —-
ISM Prices Paid July 61.0 55.0 60.5 —-
ISM New Orders July —- 56.9 57.0 —-

 

Rates Trading Lab

 

It was a relatively static Treasury session.  Tomorrow’s another day.

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 100-046 100-24 100-02+ 102-01+ 107-22
RESISTANCE LEVEL 100-032 100-209 99-29 101-26 107-01
RESISTANCE LEVEL 100-00 100-26+ 99-24+ 101-19+ 106-09+
         
SUPPORT LEVEL 99-282 100-09 99-10 100-31+ 105-09+
SUPPORT LEVEL 99-26+ 100-07 99-05 100-25 104-13+
SUPPORT LEVEL 99-246 100-042 98-30 100-15 104-06

 

Tomorrow’s Calendar

 

o   China Data: Nothing Scheduled

o   Japan Data: Monetary Base, Consumer Confidence Index

o   Australia: Trade Balance, Building Approvals MoM

o   EU Data: EU-Jun PPI, U.K.-Jul Const PMI

o   U.S. Data: Jun PI/PS/PCE, Jul NY ISM, Aug IBD-TIPP, Jul Vehicles

o   Supply: U.K. 6y (£2.5bn)

o   Events: ECB 7d, RBA, U.K. ILTR

o   Speeches: Kaplan (more…)