Browsing articles tagged with "debt market comment Archives - Mischler Financial Group"
Calling All US Corporate Bond Issuers-Are You There?
July 2017      Debt Market Commentary   

Quigley’s Corner 07.07.17 – IG Fixed Income Syndicate Suffers from a Summer Slowdown…Calling All US Corporate Bond Issuers…Are You There?

Wall Street Syndicate desks Face Groundhog Day Dilemma as Investment Grade Corporate Debt Issuers Stand Down..For the Moment..

Investment Grade Corporate Bond New Issue Re-Cap
Today’s IG Primary & Secondary Market Talking Points

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and July

The Best and the Brightest:  Fixed Income Syndicate Forecasts and Sound Bites for Next Week & July

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending July 5th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Upcoming Calendar

Nothing priced today in our IG dollar DCM wrapping up what is the slowest week of 2017. In fact, the primary markets are in the doldrums. Over the past four weeks, issuance represents the #1, #3, #4 and #6-ranked slowest weeks YTD. I think I’d have to go all the way back to the throes of the EU sovereign debt crisis to recall a less active period.  It’s all about the big FIGs that begin releasing their Q2 earnings next Friday, July 14th with Citigroup, J.P. Morgan and Wells Fargo followed by Tuesday, July 14th when BAML and GS are up concluding with MS on Wednesday, the 19th.  Until then there are currently 11 items in the IG new issue pipeline, 10 of which are Yankees.

So, without further ado, please skim thru the uneventful market wraps below prior to reading what the “Best and the Brightest” have to say about next week’s IG Corporate issuance expectations.  The respondents to today’s “QC” survey posted a midpoint average estimate of $18.25b in new IG Corporate supply for next week. The following week we should start to see things pick up a bit.

Let’s now take a look at how this week’s IG Corporate volume numbers stack up against the WTD and MTD syndicate estimates: 

  • The IG Corporate WTD total is 89.29% of this week’s syndicate midpoint average forecast or $5.75b vs. $6.44b.
  • MTD we’ve priced 84.40% of the syndicate forecast for June or $7.25b vs. $84.40b.
  • There are now 11 IG Corporate, Yankee and/or SSA new issues in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index tightened 1 bp to +113 vs. +114.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.07 vs. 1.08.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +155 vs. +156.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.5b on Thursday versus $13.7b on Wednesday and $17.6b the previous Thursday.
  • The 10-DMA stands at $14.5b.

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
Asian Political Tensions
·          N. Korea launches ICBM on July 4th. Continues development, improving accuracy & distance in defiance of G-20 protests; Lack of Chinese mediation; Recent Otto Warmbier death; U.S.  sanctions certain Chinese banks and individuals to influence PROC pressure on NOKO.
ELEVATED
BREXIT Fallout
·          U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. Italian domestic bank bail-out outside EU “rule of law” concern for EU stability.
CAUTION
“U.S. political gridlock”
Escalating war in Syria
·          Trump financial, healthcare, tax and infrastructure reform challenges & consensus GOP support  to pass legislation questioned/Dems lose 4 consecutive special elections despite media bias.

·          U.S. shoots down Syrian SU-22 that bombed SDF backed-forces; Russia warns that it suspended   cooperation & will track down and shoot coalition planes west of Euphrates. Potential for  escalation between the U.S. & Russia is real. Turkey, Iran, Israel loom large in this scenario.

·          U.S. Senate sanctions Iran for missile testing and supporting terrorism; also expands sanctions against Russia in 98-2 vote; Russia in expansion mode; meddling in international elections.

·          GCC Crisis as Saudis, UAB, Egypt, Bahrain & 5 others accuse Qatar of backing terrorism/ Yemen, Mauritius, Maldives, Mauritania and Maldives join in severing diplomatic ties.

·          Italian debt-to-GDP ratio is 133% – world’s 3rd highest. €17bn gov’t. bail out of two Italian banks.

·          Closing in on ISIS has also scattered it across wider MENA region and Europe.

·          Cybercrime, ransomware, viruses & hacking are winning cyber wars. The latest attack hit four continents, law firms, food companies, power grids, pharma & gov’ts (Ukraine & Russia).

·          Central banks shrinking balance sheets/higher volatility in 2H17.

MODERATE ·          China hard landing – rising corporate debt have the OECD and IMF concerned.

·          Venezuela – tumbling oil prices could impact ability to repay debt; civil unrest.

MARGINAL
2018 U.S. Recession
·          Increased chance of 2018 U.S. recession in light of recent very hawkish Fed-speak and sights on one more rate hike in 2017.

 

Syndicate IG Corporate-only Volume Estimates This Week and July

 

IG Corporate New Issuance This Week
7/03-7/07
vs. Current
WTD – $5.75b
July 2017
Forecasts
vs. Current
MTD – $7.25b
Low-End Avg. $5.71b 100.70% $83.87b 8.64%
Midpoint Avg. $6.44b 89.29% $84.40b 8.59%
High-End Avg. $7.17b 80.20% $84.92b 8.54%
The Low $0.0b N/A $70b 10.36%
The High $15b 38.22% $111b 6.53%

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  21 of those participants are among 2017’s YTD top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  22 are in the top 26 of that same table. The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.49% 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. 

My weekly technical data re-cap and question posed to the “Best and the Brightest” yesterday morning and updated to reflect this morning’s levels, was framed as follows: 

Entering this morning’s session, here are this week’s IG new issue volume talking points:  

  • The IG Corporate WTD total fell over 10% shy of this week’s syndicate midpoint average forecast or $5.75b vs. $6.44b.
  • MTD we priced only 8.5% of the syndicate projection for June IG Corporates or $7.25b vs. $84.40b.
  • As of today, the YTD IG Corporate-only volume is $727.307b vs. $722.141b on July 6th, 2016 or 0.71% more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $895.292b vs $932.44b on July 6th, 2016 or 4.15% more than the year ago total.

 Entering this morning’s Thursday session, here are this week’s five key primary market driver averages from the 4 IG Corporate-only deals that priced: 

o   NICS:  2.25 bps

o   Oversubscription Rates: 2.38x

o   Tenors: 12.50 years

o   Tranche Sizes: $1,437mm

o   Spread Compression from IPTs to the Launch: <20.50> bps


Here’s how this week’s performance data compares against last week’s entering this morning’s session: 

  • Average NICs widened 2.49 bps to an average 2.25 bps vs. <0.24> bps across this week’s 4 IG Corporate-only new issues.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased 0.91 x to 2.38x vs. 3.29x. 
  • Average tenors extended 3.07 years to 12.50 years vs. 9.43 years.
  • Tranche sizes blew way out by $910mm to $1,437mm vs.$527mm thanks to this week’s skewed numbers based on only two IG corporate transactions.
  • Spread compression from IPTs to the launch/final pricing of this week’s 4 IG Corporate-only new issues tightened by <3.15> bps to <20.50> vs. <17.35> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +155 vs. +157.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 2 bps to 1.07 vs. 1.09. 
  • Week-on-week, BAML’s IG Master Index tightened 2 bps to +113 vs. +115. 
  • Spreads across the four IG asset classes tightened <2.00> bps to 7.50 bps vs. 9.50 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors also tightened <1.48> bps to 11.63 vs. 13.11 bps also as measured against their post-Crisis lows.
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the scant 5 deals that printed yesterday and this entire week for that matter, all tightened versus NIP for a 100.00% improvement rate.
  • For the week ended July 5th, Lipper U.S. Fund Flows reported an inflow of $2.535b into Corporate Investment Grade Funds (2017 YTD net inflow of $69.194b) and a net outflow of $1.155b from High Yield Funds (2017 YTD net outflow of $7.721b).

Entering today’s Friday session here’s how much we issued this week:

  • IG Corps: $5.75b
  • All-in IG (Corps + SSA): $7.25b 

The G-20 kicked off.  Trump attempted to sound Reagan-esque yesterday in Poland.  The big showdown between Trump and Putin takes place later today.  Our First Lady remains stuck in her Hamburg hotel due to security risks as over 100 German police are injured in rioting by protestors. North Korea brings an ICBM to its take-off pad aboard a Chinese military transport carrier and subsequently successfully launches it.  NOKO’s range missiles can now reach Anchorage Alaska and Honolulu.  An EMP or electromagnetic pulse (explosion from over 8,000 feet in the air) would knock out all power in Seoul and its 10 million people. Accuracy not applicable.  China has done nothing to help the situation.  NFP, this morning, came in 44k above forecasts (222k vs. 178k) yet wage growth missed again. Both the Employment and Underemployment Rates edged up 1/10 and 2/20 of 1% to 4.4% and 8.6% respectively. The CT10-year is currently yielding 2.377% and the 5s/30s differential is +98.9 bps. We posted the slowest week for issuance of the year and the past four weeks of IG dollar issuance rank as #1, #3, #4 and #6 YTD – a terrible run in what I’ve extolled here would be a long…..hot…..summer.  Next Friday Citigroup, J.P. Morgan and Wells Fargo announce Q2 earnings. BAML and GS follow on Tuesday July 18th and Morgan Stanley is on Wednesday July 19th.  They can’t come soon enough to lead a new charge for our IG DCM.

And now it’s time to ask the question, “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

The “Best and the Brightest” in Their Own Words

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

 

 

(more…)

Rate Hike Coming..Beige Book Talking Points-Mischler Debt Market Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.01.17-Rate Hike IS Coming; Fed Beige Book Talking Points

 

Investment Grade New Issue Re-Cap – Dow Breaks 21,000 – Odds of March Rate Hike Rise From 40% to 80% in 3 Sessions!

IG Primary & Secondary Market Talking Points

Global Market Recap

The Federal Reserve Beige Book Talking Points – All You Need to Know

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

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 February 22nd    

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

7 IG Corporate issuers tapped the dollar DCM today pricing 12 tranches between them totaling $9.275b.  The SSA space hosted 2 issuers across 4 tranches including a $5b 3-part from the Sultanate of Oman that pumped up the all-in IG day totals to 9 issuers, 16 tranches and $14.625b. March has certainly started off on the right foot.
The WTD total is now 52% more than this week’s syndicate midpoint average forecast or $38.825b vs. $25.44b.
The all-in (IG Corporate plus SSA WTD volume total is now $51.425b.

Deregulation, cutting corporate taxes, focusing on American manufacturing and jobs while negotiating with America’s interests first and building a strong national defense equates to GROWTH.  Growth will cause rates to rise, rising rates will swell the stock market and bank stocks should get back to a semblance of their true values among many other things.
IG Primary & Secondary Market Talking Points

 

  • Mercury General Corp. upped its 10-year Senior Notes new issue to $375mm from $350mm at the launch and at the tightest side of guidance.
  • Telus Corp. increased its 10-year Senior Notes new issue to $500mm from $350mm at the launch.
  • Brixmor Operating Partnership LP upsized today’s 10-year Senior Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
  • The average spread from IPTs thru the launch/final pricing of today’s 12 IG Corporate-only new issues was <19.00> bps.
  • BAML’s IG Master Index tightened 1 bp to +121 vs. +122.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.15 vs. 1.16 setting yet another new tight since November 3rd, 2014.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $22.7b on Tuesday versus $15.8b on Monday and $17.8b the previous Tuesday.
  • The 10-DMA stands at $20b.

 

Global Market Recap

 

  • U.S. Treasuries – had a very difficult day thanks to the Fed Speak & President Trump.
  • Overseas Bonds – Europe hit hard with USTs and JGB’s also closed in the red.
  • 3mth Libor – Set at the highest yield (1.09278%) since April 2009.
  • Stocks – Big rally for U.S. stocks as S&P, Dow & NASDAQ traded at all-time highs.
  • Overseas Stocks – Very strong day for Europe & the Nikkei. China & HS with small gains.
  • Economic – Full U.S. calendar with some very good & not so good data.
  • Fed’s Beige Book at odds with the very hawkish Fed Speak this week.
  • Overseas Economic – The data in China, Japan & Europe overall was positive.
  • Currencies – Big rally for USD overnight & gave a little back during NY hours.
  • Commodities – CRB, copper & wheat were higher while crude oil & gold were lower.
  • CDX IG: -2.57 to 60.01 (trade at 59.856 the tightest since 2014)
  • CDX HY: -11.47 to 305.44
  • CDX EM: -7.51 to 213.30

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

-Tony Farren

 The Federal Reserve Beige Book Talking Points – All You Need to Know

 

  • Near-term business optimism eased since the last report.
  • Economy grew at a modest to moderate pace through mid-February.
  • Job market is tight amid little price pressure change.
  • There were a few districts that saw a pickup in wage growth.
  • Businesses expect prices to rise modestly in the months ahead.
  • Most Fed regions say prices were up modestly to moderately.
  • Some districts saw widening labor shortages.
  • Employment expanded moderately in most of the country.
  • Staffing firms saw a “brisk business for this time of year”.
  • Energy, home-building and house sales are all growing moderately.
  • Auto sales were up in most districts; tourism mostly stronger.
  • New York Fed prepared the Beige Book from early January to February 17th.

 

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

 

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

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

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

 

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

Global Market Recap

BOE Rate Decision Talking Points

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 26th  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

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

 

Global Market Recap

 

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

CDX spreads mover wider after 3pm

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

-Tony Farren

 

BOE Rate Decision Talking Points

 

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

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

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

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

 

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

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/31
TUES.
11/01
WED.
11/02
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
New Issue Concessions 0.50 bps <2.29> bps 3 bps <0.51> bps 3.31 bps 1.87 bps 4.36 bps
Oversubscription Rates 2.99x 2.90x 2.73x 2.61x 3.05x 3.28x 4.20x
Tenors 8.39 yrs 11.93 yrs 11.30 yrs 7.77 yrs 9.16 yrs 11.51 yrs 12.16 yrs
Tranche Sizes $721mm $379mm $393mm $818mm $1,137mm $640mm $523mm
Avg. Spd. Compression
IPTs to Launch
<14.21> bps <17.71> bps <22.50> bps <17.42> bps      

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Johns Hopkins University Aa3/AA- 3.837% 5/15/2046 500 +135a N/A +123 +123 JEFF/JPM
Principal Finc’l. Group Inc. Baa1/BBB+ 3.10% 11/15/2026 350 +160a +130-135 +130 +130 CITI/CS/HSBC
Principal Finc’l. Group Inc. Baa1/BBB+ 4.30% 11/15/2046 300 +200a +170-175 +170 +170 CITI/CS/HSBC
PSE&G Baa2/BBB 1.60% 11/15/2019 400 +85-90 +70a (+/-2) +68 +68 BARC/JPM/RBC
PSE&G Baa2/BBB 2.00% 11/15/2021 300 +95-100 +80a (+/-2) +78 +78 BARC/JPM/RBC

 

Indexes and New Issue Volume

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

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

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

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

 

Lipper Report/Fund Flows – Week ending October 26th  

     

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

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 31.75 bps wider versus their post-Crisis lows!

 

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

 

IG Credit Spreads by Industry

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

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

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

 

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

IG Primary & Secondary Market Talking Points

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

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

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

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

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

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

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

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

 

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

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

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

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

 

o   NICS:  0.69 bps

o   Oversubscription Rates: 3.23x

o   Tenors:  9.33 years

o   Tranche Sizes: $1,000mm

 

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

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

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

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

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

(Above canvass results of fixed income syndicate desks is available exclusively to recipients of the QC Distribution List) Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.)  (more…)