Browsing articles tagged with "fixed income syndicate Archives - Mischler Financial Group"
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…)

US Corporate Debt New Issuance Market-What’s Next?
February 2017      Debt Market Commentary   

Quigley’s Corner 02.24.17 – Weekend Edition: Corporate Debt New Issuance- What’s Next?

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

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

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 February 22nd    

Investment Grade Credit Spreads by Rating

Investment Grade Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

We missed the midpoint syndicate forecast for IG Corporate volume this week by a lot. In fact, the very low estimate calling for only $19.4b was off by 42% with only $11.125b in new supply.  Next week, however, desks seemed focused on around $25b.

Yellen speaks next Friday, March 3rd and the Employment Report is the following Friday, March 10th. Those are really the only two bits of data that could move the market. Of course that’s notwithstanding any one of myriad global event risk factors playing out i.e. the Dutch election on Wed. 3/15 followed by round one of the French election on Sunday, April 23rd and round 2 on Sunday, May 7th. As we get closer and closer to each, polling will gyrate thru the markets.

Next week has been a huge one in each of the past three years for IG Corporate volume and overall IG issuance including SSA product.

Take a look:

2016 – IG Corps: $50.72b Corps + SSA: $61.22b

2015 – IG Corps: $59.03b Corps + SSA: $65.03b

2014 – IG Corps: $50.29b Corps + SSA: $55.18b

 

Unfortunately no estimate for next week comes close to the $50m mark. The highest estimate is an out layer at $43b. The most dense groupings are focused on around $25b with the midpoint estimate being $25.46b. I am more optimistic for 30b+ in new IG Corporate issuance only because we’ve disappointed on recent weekly issuance projections in 3 of the past 4 weeks, the time is right, tone is formidable, concessions are skimpy, issuers cannot sit around forever, demand is very strong and so, I err to the upside. Overall issuance including SSA could top $40b.

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 20 deals that printed, 17 tightened versus NIP for a 00% improvement rate while 2 widened (10.00%) and 1 were flat (5.00%).
  • For the week ended February 22nd, Lipper U.S. Fund Flows reported an inflow of $2.566b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.906b) and a net inflow of $726.282m into High Yield Funds (2016 YTD net inflow of $1.616b).
  • BAML’s IG Master Index was unchanged at +123.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.17 vs. 118 setting a new tight since November 3rd, 2014.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +164 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $21.2b on Thursday versus $20.8b on Wednesday and $24b the previous Wednesday.
  • The 10-DMA stands at $19.9b.

 

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

 

IG Corporate New Issuance This Week
2/20-2/14
vs. Current
WTD – $11.125b
February 2017
Forecasts
vs. Current
MTD – $61.15b
Low-End Avg. $18.25b 60.96% $90.65b 67.46%
Midpoint Avg. $19.40b 57.35% $91.96b 66.50%
High-End Avg. $20.54b 54.16% $93.26b 65.57%
The Low $15b 74.17% $85b 71.94%
The High $26b 42.79% $120b 50.96%

 

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

 

I am happy to announce that I had 96% response to today’s “Best & Brightest” survey! That means 23 out of 24 desks.  21 of those participants are among 2017’s YTD top 25 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 22 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg league 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 84.38% 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” early this morning was framed as follows:

Getting right to it today, here are this week’s numbers entering today’s morning session:

  • We priced an anemic 57% of this week’s already low syndicate midpoint average forecast or $11.125b vs. $19.40b.
  • Thus far in February we priced 66.50% of the monthly syndicate projection or $61.15b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $303.183b! 
  • Wednesday was the fastest pace ever to reach the $300mm mark for all-in IG Corporate and SSA issuance.

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

  • NICS:  <0.16> bps
  • Oversubscription Rates: 3.26x
  • Tenors:  8.37 years
  • Tranche Sizes: $695mm
  • Spread Compression from IPTs to the Launch: <18.47> bps


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

  • NICs widened 0.70 bps to<0.16> bps vs.  <0.86> bps.
  • Over subscription or bid-to-cover rates, the measure of demand, reduced by 0.50x to 3.26x vs. 3.76x. 
  • Average tenors extended by 0.34 years to 8.37 years vs. 8.03 years.
  • Tranche sizes decreased by $49mm to $695mm vs. $744mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 16 IG Corporate-only new issues tightened fractionally by <0.02> bps to <18.47> bps vs. <18.45> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 1 bp to+164 vs. +165.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +123 vs. +124. 
  • Spreads across the four IG asset classes tightened 0.25 bps to16.50 bps vs. 16.75 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.79 bps to 20.37 vs. 21.16 bps also against their post-Crisis lows.
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 20 deals that printed, 17 tightened versus NIP for a 00% improvement rate while 2 widened (10.00%) and 1 were flat (5.00%).
  • For the week ended February 22nd, Lipper U.S. Fund Flows reported an inflow of $2.566b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.906b) and a net inflow of $726.282m into High Yield Funds (2016 YTD net inflow of $1.616b).

It seems as if syndicate desks have said issuance would increase “the week after next” in each of the last two Friday’s.  Now, however, with Corporate America having posted earnings and with most issuers having exited blackouts, expectations are for a much more robust calendar next week. The two bits of potentially market moving data are: Fed Chair Janet Yellen speaks at the Executive’s Club of Chicago on Friday, March 3rd and the Employment Situation for February is scheduled to be released on Friday, March 10, 2017, at 8:30 a.m. (EST). After that there’s the FOMC meeting on Tuesday and Wednesday March 14th and 15th, which is associated with a Summary of Economic Projections and a press conference by Chair Yellen.  Blackouts then begin shortly thereafter. The point being – this time, next week really should see very strong issuance across all sectors. But why listen to me let’s go back to the same week in time over the past three years. The results are eye-opening:

  • 2016 – IG Corps: $50.72b Corps + SSA: $61.22b
  • 2015 – IG Corps: $59.03b Corps + SSA: $65.03b
  • 2014 – IG Corps: $50.29b Corps + SSA: $55.18b

 We all understand that “past performance is no guarantee of future results” but those are pretty telling statistics right there folks!

The Big Question:  Next Wednesday begins the month of March, so today I ask a two-part question “what are your thoughts and numbers for BOTH next week AND March?

The “Best and the Brightest” in Their Own Words

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

Janet Yellen Valentine’s Day Message; Healthcare M&A Break-Ups
February 2017      Debt Market Commentary   

Quigley’s Corner -Valentine’s Day With Love From Janet Yellen; No Love for Healthcare M&A

 

Investment Grade New Issue Re-Cap

Insure This! – Anthem for Cigna, like Aetna for Humana, is Dead in the Water – $91b in M&A Erased By Two Deals

IG Primary & Secondary Market Talking Points

Global Market Recap

Key Talking Points of Fed Testimony

Three Rates Hikes in 2017? .HIGHLY Improbable or “You Gotta Be Kiddin’ Me!”

Next Up – Greece, Grexit, France & Frexit

Tony’s Take on Today’s Fed Testimony

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

The Boeing Company $300mm 30-year Deal Dashboard

Happy Valentine’s Day to All the Ladies Among My “QC” Readership

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 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

5 IG Corporate issuers priced 9 tranches between them totaling $9.90b.  The SSA space hosted a 2-part 3-year FXD/FRN from JBIC adding $2b to the mix.

The all-in IG day total was 6 issuers, 11 tranches and $11.90b.

 

The WTD IG Corporate total is now $16.60b or 78% of this week’s syndicate midpoint average calling for $21.33b.


Can’t Insure This! – Anthem for Cigna, like Aetna for Humana, is Dead in the Water – $91b in M&A Erased By Two Deals

You’ve read about the Anthem for Cigna merger in my M&A Pipeline near page bottom for months now.  Well, today, Cigna terminated its $54b merger agreement with Aetna following a federal judges rejection.  Let’s trace back the story. Anthem Inc. (Baa2/A) in July 2015, proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal was expected to close sometime during the second half of 2016. The merger would have involved 53mm members and would include $22b in new debt and loans. However, in light of a federal judge’s ruling on Monday, January 23rd that another proposed insurance merger – the $37b deal between Aetna and Humana should not be allowed to consummate due to antitrust issues it remained to be seen if the Anthem/Cigna merger would meet the same fate especially given the former deal size involved $17bn more the former. That two rejected deals have taken $91b out of the M&A pipeline. 

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs thru the launch/final pricing of today’s 9 IG Corporate-only new issues was <15.78> bps.
  • BAML’s IG Master Index tightened 2 bps to +126 vs. +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.20 vs. +121.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +167.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.7b on Monday versus $18.2b on Friday and $15.5b the previous Monday.
  • The 10-DMA stands at $20.2b.

 

Global Market Recap

 

  • Fed Chair Yellen: Hawkish but the markets are not so sure she is that hawkish.
  • U.S Treasuries – Closed in the red on Yellen but closed well off the session low prices.
  • Overseas Bonds – JGB’s mixed & steeper. Europe followed Treasuries down.
  • Stocks – Even a hawkish Yellen cannot keep U.S. stocks down (record highs again).
  • Overseas Stocks – Japan had a poor day. China unchanged. Europe at a 1 year high.
  • Economic – U.S. PPI data m/m was higher but the y/y data was not.
  • Overseas Economic – China inflation higher. Japan IP solid. EU data disappointing.
  • Currencies – USD rallied on the Yellen testimony. DXY Index back over 101.
  • Commodities – Crude oil small gain, gold unchanged, silver better & cooper red.
  • CDX IG: -0.12 to 63.15
  • CDX HY: -0.48 to 317.89
  • CDX EM: -3.18 to 208.93

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

-Tony Farren


Key Talking Points of Fed Testimony

Federal Reserve Chair Janet Yellen testified before the Senate today delivering her Semiannual Monetary Policy Report to Congress.  The big headline statement is when Yellen  said the Committee would like a balance sheet that is substantially smaller and only comprised of Treasuries.  It was the Chair’s most hawkish comment of the day.

Here are the key takeaways:

  • Fed Chair Yellen: Will evaluate progress at “upcoming meetings.”
  • “Too early to know” fiscal policy and its effects on outlook.
  • Fiscal policy should focus on improving long term economic growth.
  • Business sentiment has “noticeably improved” in the past few months.
  • U.S. monetary policy “remains accommodative.”
  • Expects the economy to continue to expand at a moderate pace.
  • Fiscal changes should put accounts on a sustainable trajectory.
  • FOMC expects neutral Fed Funds Rate to rise somewhat over time.
  • Pace of global economic activity should pick up over time.
  • Waiting too long could disrupt financial markets and result in recession.
  • Waiting too long to remove accommodation is “unwise.”
  • Fiscal policy change could affect the economy and is only one factor.
  • Further hikes are appropriate if employment and inflation evolve w/expectations.
  • Yellen repeats that waiting too long to tighten “would be unwise.”
  • Further adjustments are likely needed if the economy is on track.
  • Fed to adjust rate path views as outlook evolves.
  • Says changes in fiscal policy could affect outlook.
  • Too early to know what policies will be put in place.
  • Stresses importance of policies that lift productivity.
  • Rate decisions to be aimed at meeting the Fed’s twin goals.
  • Keeping the Fed balance sheet large supports accommodation.
  • Economy has continued to make progress toward the Fed’s goals.
  • Reassuring market-based inflation compensation has risen.
  • FOMC reaffirms long-run symmetrical inflation goal of 2%.

 

  • Wages have picked up, labor market improvement widespread.
  • Says jobless rate is in line with long-run normal estimates.
  • Business sentiment has improved in the past few months.
  • Recent rise in mortgage rates may restrain housing somewhat.
  • FOMC’s longer run goal is to shrink its balance sheet.
  • We hope asset purchases were unusual intervention.
  • Would anticipate the balance sheet eventually being much smaller.
  • Fed doesn’t want to use its balance sheet as an active policy tool.
  • The FOMC wants to rely on rate changes for policy.
  • Stopping reinvestment to happen in a gradual and orderly way.
  • Wants to wait until normalization is well under way.
  • The FOMC will discuss balance sheet strategy in the coming months.


Three Rates Hikes in 2017? .HIGHLY Improbable

Now let’s first sit back a second and re-evaluate the thought of three rate hikes in 2017.  In each of the last two years the lone annual rate hike came in December.  The chances of a rate hike in March increased from 12% to a resounding 18%. In other words “big deal!”  There is no rate hike coming in March.  Next, next look at Western Civilization.  There are critical elections in the EU with Holland up first on March 15th.  Geert Wilders is ahead in that election. He represents the far-right Party for Freedom or the “PVV”.  He is expected to gain the most seats in that general election.  Among his notable campaign promises – for which there is significant support – is to leave the Euro and the EU as well as close down all the mosques in Holland.  Okay!  You see where this is going?
Next up, France. Marine Le Pen, head of the National Front is ahead of her rival Francois Fillon, the latter bogged down by Penelope-gate, by 2-3%.  As each day goes by Le Pen is getting stronger and stronger as her message resonates with and reflects that of “true” France.  The second round or “run-off” election in May shows Le Pen behind but dramatically closing the gap. She is now trailing 58% to 42% and gaining each day. Just over a week ago the numbers were 73% to 37%. Remember the Trump election.  A voice in France WILL BE HEARD!  Among Le Pen’s promises is to also leave the EU and take back France’s wonderful but rapidly dying culture.

German elections then follow in September with Angela Merkel losing ground to Socialist Party leader and secondary school drop-out Martin Schulz. Polls currently show Merkel barely ahead 33% to 32%.  Germany’s far-right Alternative for Deutschland Party (AfD) is set to win its first parliamentary seats and thus far has captured 10% of the Hinterland’s support……interesting to say the least!

By the time this all plays out Yellen will be into late September not counting adjustment periods and shocks to the system. Oh yes, I haven’t even begun to discuss Greece so, while I’m on that topic let’s do it –

Next Up – GreeceA Global Macro View

Greece never ever went away. Greece was simply outperformed in the media by BREXIT, the U.S. Presidential election, the new Administration and the aforementioned EU elections. Let’s take a look at some of the major problems confronting the Hellenic Republic shall we? Thanks to friend and former colleague Dr. Scott MacDonald, Chief Economist for Smith’s Research and Gradings for his meaningful discourses and today’s piece titled, “Can the EU Stop Yet Another Greek Debt Crisis?” Thanks Doc!

 

  • Greece needs creditors to release a €10.3b tranche from its 2015 bail out agreement to fulfill its debt obligations and avoid default.
  • Given the aforementioned issues playing out in the EU (BREXIT, the various elections, immigrations, sweeping nationalism/populism), Greece is once again the potential linchpin for the future EU.
  • The Greek economy has contracted by 26% since 2009.
  • Unemployment hovers at 20%.
  • Inefficient bureaucracy
  • Massive debt, prevalent tax evasion
  • All this despite three prior bail outs and stringent austerity measures.
  • According to the OECD, Greece’s gross debt-to-GDP-ratio stands at 185.7% of GDP. Only Japan has a worse ration of 240%.
  • Greece posted anemic 0.4% real GDP growth in 2014 after which the country slipped back into recession in 2015 and was flat last year.
  • Concerns of the full impact of BREXIT on the EU and Greece in particular.
  • Risk of another wave of migrants for which Greece serves as a major transit point.
  • Risk from weaker global trade.
  • Germany’s Finance Minister Wolfgang Schauble ruled out debt reduction for Greece with this statement last week, “for that, Greece would have to leave the monetary union.”
  • The Euro Zone’s rescue funds, EFSF and ESM already disbursed €174b to Greece, with more needed! The ESM’s head Klaus Regling said, “we would not have lent this amount if we did not think we would get our money back.”  Tip of the day: If Regling ever returns to the private sector to head a company one day, please remember to never buy its stock = Investing 101.

In conclusion before BREXIT et al, Greece was always threatened with being kicked out of the EU.  Post-BREXIT and in the midst of a much more complicated developing geopolitical landscape, Greece might see the royal boot as a wonderful invitation!

 

Tony’s Take on Today’s Fed Testimony

The Fed and I clearly are not seeing the U.S. and the world in the same light. The Fed owns roughly $414 bln in Treasuries maturing in 2018. Where does the Fed think the Treasury will be able to come up with $414 bln to pay the Fed for their 2018 holdings?  Treasury would have to jack up issuance to pay the Fed back. Raising rates 75 bps per year, shrinking the Fed balance sheet and a sizable increase in UST issuance would be a disaster for Treasury yields and the U.S. economy. Tony Farren

 

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

 

IG Corporate New Issuance This Week
2/13-2/17
vs. Current
WTD – $16.60b
February 2017
Forecasts
vs. Current
MTD – $43.575b
Low-End Avg. $20.71b 80.15% $90.65b 48.07%
Midpoint Avg. $21.33b 77.82% $91.96b 47.38%
High-End Avg. $21.96b 75.59% $93.26b 46.72%
The Low $15b 110.67% $85b 51.26%
The High $26b 63.85% $120b 36.31%

 

The Boeing Company (NYSE:BA) $300mm 30-year Deal Dashboard

 

The Boeing Company today issued a $900mm 3-part 5-, 10- and 30-year transaction.  If I’m writing about that means Mischler was involved.  Today, the nation’s oldest Service Disabled Veteran broker dealer was were invited to serve as an active 0.50% Co-Manager on the longer 30-year tranche.

The direct comparable for today’s new 30-year tranche was the outstanding BA 3.375% due 6/15/2046 that was T+87 pre-announcement nailing NIC as negative <2> bps on today’s new print that priced at T+85.
Here’s a look at today’s Deal Dashboard for The Boeing Company’s $900mm 3-part new issue:

 

BA Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5yr +60a +45a (+/-3) +42 +42 <18> bps <1> 41.5/ <0.5>
10yr +80a +65a (+/-5) +60 +60 <20> bps <2> 59.5. <0.5>
30yr +100-105 +90a (+/-5) +85 +85 <17.5> bps <2> 85/ 0/flat

 

………and here’s a look at today’s re-opening final book sizes and oversubscription rates.

 

BA  Issue – Tranche
Size
Final Book
Size
Bid-to-Cover
Rate
5yr 300 $1.3b 4.33x
10yr 300 $1.55b 5.17x
30yr 300 $2b 6.67x

 

Boeing Company A2/A 2.125% 3/01/2022 300 +60a +45a (+/-3) +42 +42 CITI/DB/SMBC
Boeing Company A2/A 2.80% 3/01/2027 300 +80a +65a (+/-5) +60 +60 CITI/GS/MIZ
Boeing Company A2/A 3.65% 3/01/2047 300 +100-105 +90a (+/-5) +85 +85 CITI/JPM/WFS

 

Final Pricing – Boeing.
BA $300mm 2.125% due 3/01/2022 @ $98.790 to yield 2.381% or T+42  MW+10

BA $300mm 2.80% due 3/01/2027 @ $97.698 to yield 3.068% or T+60  MW+10

BA $300mm 3.65% due 3/01/2047 @ $95.392 to yield 3.912% or T+85  MW+15

 

Happy Valentine’s Day to All the Ladies Among My “QC” Readership

 

To wrap things up, this lovable guy-in-the-corner sends out a Happy Valentine’s Day wish to all the wonderful women among his “QC” distribution list, especially all the great leading ladies from fixed income syndicate land and those in Treasury/Funding from among the many issuers in his DCM universe. I wish you all a spectacular evening.

Remember guys – behind every successful man is a truly awesome woman! That’s just the way it is!

 

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

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/13
AVERAGES
WEEK 2/06
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
New Issue Concessions 0.62 bps <3.44> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps
Oversubscription Rates 3.62x 3.92x 3.12x 3.29x 2.40x 2.85x 2.45x
Tenors 5.82 yrs 12.04 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs
Tranche Sizes $609mm $735mm $1,311 yrs $845mm $1,123mm $927mm $859mm
Avg. Spd. Compression
IPTs to Launch
<16.86> bps <19.60> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> 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
Boeing Company A2/A 2.125% 3/01/2022 300 +60a +45a (+/-3) +42 +42 CITI/DB/SMBC
Boeing Company A2/A 2.80% 3/01/2027 300 +80a +65a (+/-5) +60 +60 CITI/GS/MIZ
Boeing Company A2/A 3.65% 3/01/2047 300 +100-105 +90a (+/-5) +85 +85 CITI/JPM/WFS
J.P. Morgan Chase & Co. A3/A- 4.26% 2/22/2048 2,000 +130a +120-123 +120 +120 JPM-sole
Morgan Stanley A3/A FRN 2/14/2020 3,000 3mL+95a 3mL+80 the # 3mL+80 3mL+80 MS-sole
Novartis Capital Corp. Aa3/AA- 1.80% 2/14/2020 1,000 +50-55 +40-45 +40 +40 BAML/CITI/JPM
Novartis Capital Corp. Aa3/AA- 2.40% 5/17/2022 1,000 +65-70 +55-60 +55 +55 BAML/CITI/JPM
Novartis Capital Corp. Aa3/AA- 3.10% 5/17/2027 1,000 +90-95 +75a (+/-2) +73 +73 BAML/CITI/JPM
PNC Bank NA A2/A+ 2.625% 2/17/2022 1,000 +85a +70a (+/-2) +68 +68 CITI/GS/JPM/PNC

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
JBIC A1/A+ FRN 2/24/2020 500 3mL+equiv 3mL+equiv 3mL+57 3mL+57 BARC/CITI/DAIW/JPM
JBIC A1/A+ 2.25% 2/24/2020 1,500 MS +60a MS +58a MS +57 +80.7 BARC/CITI/DAIW/JPM

 

Indexes and New Issue Volume
*Denotes new tight or new record high.

 

Index Open Current Change  
IG27 63.268 *62.80 <0.468>
HV27 136.89 134.645 <2.245>
VIX 11.08 10.74 <0.34>  
S&P 2,328 *2,337 9
DOW 20,412 *20,504 92  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $9.90 bn DAY: $11.90 bn
WTD: $16.60 bn WTD: $18.60 bn
MTD: $43.575 bn MTD: $55.825 bn
YTD: $215.958 bn YTD: $283.108 bn

 

Lipper Report/Fund Flows – Week ending February 8th    

     

  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).
  • Over the same period, Lipper reported a net inflow of $854.782m into Loan Participation Funds (2016 YTD net inflow of $4.614b).
  • Emerging Market debt funds reported a net inflow of $358.189m (2016 YTD inflow of $502.693m).

IG Credit Spreads by Rating (more…)

Sell-Side FI Syndicate Desks Sound Off: New IG Debt Issuance Forecasts
February 2017      Debt Market Commentary   

Quigley’s Corner 02.03.17– Fixed Income Syndicate Seers Forecast Next Week’s New IG Debt Issuance

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 25th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

It was a very welcome no print Friday today.  It gives me an opportunity on behalf of Team Mischler to thank Microsoft, AT&T and Apple for inviting us to serve this week on their multi-tranche transactions.  Thanks also to the leads who worked with us at HSBC – on Microsoft; Citigroup – on AT&T  and Goldman Sachs on Apple. All greatly appreciated!

But I know why you all checked in this evening – it’s to hear what the soothsayers of syndicate say about next week’s investment grade corporate new issue volume.  They all once again participated in my survey and their numbers and thoughts await you below.  Next week there is a lack of any earth shattering, market moving economic data and although Fed members will be speaking here and there it opens the door for further issuance.  Considering the very strong market tone that we’re going out with today in which 75% of this week’s IG Corporate new issues are tighter to MUCH tighter, I’d have to once again take the upside of forecasts.  But heck, we all know you want to hear from the top 23 under writers so, let’s first re-cap the day and then it’s on to the “Best and the Brightest” that syndicate has to offer. 

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 36 deals that printed, 27 tightened versus NIP for a 75.00% improvement rate while 6 widened (16.75%) and 3 were flat (8.25%).
  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $2.657b into Corporate Investment Grade Funds (2016 YTD net inflow of $12.354b) and a net inflow of $412.595m into High Yield Funds (2016 YTD net inflow of $291.062m).
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.21.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +166 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $22.5b on Thursday versus $21.6b on Wednesday and $21.2b the previous Thursday.
  • The 10-DMA stands at $20.5b.

 

Global Market Recap

  • U.S. Treasuries – Rallied after Employment then sold off hard on Trump regulation talk & Williams.
  • Overseas Bonds – Wild day for JGB’s. Core Europe better & balance struggled.
  • Stocks – Strong rally in the U.S. Europe closed higher & Asia lower.
  • Economic – U.S. Employment Report was mixed while the other data was solid.
  • Overseas Economic – China & Japan data weaker. Europe data was a mixed bag.
  • Currencies – USD traded better overnight than it did during the NY session.
  • Commodities – Crude oil small gain & gold small loss. Copper & natural gas were weak.
  • CDX IG: -1.55 to 63.99
  • CDX HY: -22.66 to 323.55
  • CDX EM: -3.93 to 226.36

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
1/30-2/03
vs. Current
WTD – $44.575b
February 2017
Forecasts
vs. Current
MTD – $12.575b
Low-End Avg. $20.96b 212.67% $90.65b 13.87%
Midpoint Avg. $21.63b 206.08% $91.96b 13.67%
High-End Avg. $22.30b 199.89% $93.26b 12.48%
The Low $10b 445.75% $85b 14.79%
The High $27b 165.09% $120b 10.48%

 

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

 

The investment grade fixed income new issuance forecast question posed to the “Best and the Brightest” FI syndicate desk professionals early this morning was framed as follows:

Well, here’s what we did this week:

  • January 2017 broke the all-time, all-in monthly volume record $227.283b vs. $213.40b (May 2016).
  • WTD, we surpassed the syndicate midpoint average forecast with a 2.12x bid-to-cover rate or $44.575b vs. $21.63b. (206.08%!)
  • February MTD we priced over nearly 14%% of the syndicate forecasts in just two days $12.57b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $242.358b which simply means we are on pace to price $2.644 Trillion in 2017!  HOOOAH. That won’t happen but it’s nice to put things in their proper perspective. 

Here are this week’s five IG Corporate-only key primary market driver averages after the close of yesterday’s:

  • NICS:  <0.87> bps
  • Oversubscription Rates: 3.12x
  • Tenors:  11.60 years
  • Tranche Sizes: $1,311mm
  • Spread Compression from IPTs to the Launch: <19.77> bps


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

  • NICs tightened 2.00 bps to <0.87> bps vs. 1.13 bps.
  • Over subscription or bid-to-cover rates contracted by 0.17x to 31.12x vs. 3.29x. 
  • Average tenors extended dramatically by 4.93 years to 11.60 years vs. 6.67 years.
  • Tranche sizes increased by $466mm to $1,311mm vs. $845mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 28 IG Corporate-only new issues tightened by <1.57> bps to <19.77> vs. <18.20> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 2 bps to +166 vs. +164.
  • Week-on-week, BAML’s IG Master Index widened 2 bps to +128 vs. +126. 
  • Spreads across the four IG asset classes widened 2.00 bps to 21.00 vs. 19.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors widened 1.20 bps to 25.20 vs. 24.00 bps also against their post-Crisis lows.

Corporate America has posted earnings.  Lots of issuers have exited blackouts.  Next week we have a very light calendar insofar as economic data releases are concerned.  Japan’s Abe meets with President Trump but that’s not until a week from Saturday.  There are several Fed members that will be speaking next week but we are in a steady-as-she-goes mode and I strongly suspect a big week next week.    

And now after my work and thoughts I ask you my favorite question of the week gift to you I ask, “what are your numbers and thoughts for next week’s IG Corporate new issue volume.

Thank you very much! -Ron”

 

The “Best and the Brightest” in Their Own Words

 

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

 

*Responses to the QC weekly canvass of the top 23 investment bank fixed income syndicate desks are available only via direct email to distribution list recipients of Quigley’s Corner.

 

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
2/06-2/10
Low-End Avg. $23.74b
Midpoint Avg. $24.72b
High-End Avg. $25.70b
The Low $15b
The High $35b

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

 

Next Week
2/06-2/10
1: 15b
1: 15-20b
2: 20b
3: 20-25b
9: 25b
4: 25-30b
1: 30b
1: 31b
1: 30-35b

 

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 and enjoy the Super Bowl!

Ron Quigley, Managing Director & Head of Fixed Income Syndicate

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/30
TUES.
1/31
WED.
2/01
TH.
2/02
FRI.
2/03
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
New Issue Concessions 7 bps 5.36 bps N/A <2.82> bps N/A <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps N/A
Oversubscription Rates 2.68x 2.89x N/A 3.71x N/A 3.12x 3.29x 2.40x 2.85x 2.45x N/A
Tenors 14.11 yrs 12.37 yrs N/A 9.15 yrs N/A 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs N/A
Tranche Sizes $1,983mm $1,179mm N/A $967mm N/A $1,311 yrs $845mm $1,123mm $927mm $859mm N/A
Avg. Spd. Compression
IPTs to Launch
<17.22> bps <19.54> bps N/A <21.88> bps N/A <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps N/A

 

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 36 deals that printed, 27 tightened versus NIP for a 75.00% improvement rate while 6 widened (16.75%) and 3 were flat (8.25%).

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
Apple Inc. Aa1/AA+ FRN 2/08/2019 500 3mL+equiv 3mL+equiv 3mL+8 3mL+8 3mL+7/5
Apple Inc. Aa1/AA+ 1.55% 2/08/2019 500 +60a +40a (+/-2) +38 +38 34.5/32
Apple Inc. Aa1/AA+ FRN 2/07/2020 500 3mL+equiv 3mL+equiv 3mL+20 3mL+20 3mL+17/15
Apple Inc. Aa1/AA+ 1.90% 2/07/2020 1,000 +65a +50a (+/-5) +45 +45 43/41
Apple Inc. Aa1/AA+ FRN 2/09/2022 1,000 3mL+equiv 3mL+equiv 3mL+50 3mL+50 3mL+45/43
Apple Inc. Aa1/AA+ 2.50% 2/09/2022 1,500 +80a +60a (+/-2) +58 +58 58/56
Apple Inc. Aa1/AA+ 3.00% 2/09/2024 1,750 +100a +80a (+/-5) +75 +75 71/69
Apple Inc. Aa1/AA+ 3.35% 2/09/2027 2,250 +110a +90a (+/-2) +88 +88 83/81
Apple Inc. Aa1/AA+ 4.25% 2/09/2047 1,000 +140a +120a (+/-5) +115 +115 111/109
Johnson Controls Int’l. PLC Baa1/BBB+ 4.50% 2/15/2047 500 +170a +150a (+/-5) +145 +145 139/138
PNC Financial Services A3/NR FRN 8/07/2018 575 N/A N/A N/A 3mL+25 3mL+24/23
Standard Industries Inc. Ba2/BBB- 5.00% 11/15/2026 500 low 5.00%
5.125
N/A N/A +253 254/250
US Bancorp A3/BBB+ 5.30% PerpNC10 1,000 5.625%a 5.35%a (+/-5) 5.30% $100.00 283/278
Province of Ontario Aa2/AA- 2.40% 2/08/2022 2,500 MS +44a MS +42 MS +42 +49.35 46.5/44.5
AT&T Inc. Baa1/A- 3.20% 3/01/2022 1,250 +150a +135a (+/-5) +130 +130 125/123
AT&T Inc. Baa1/A- 3.80% 3/01/2024 750 +175a +160a (+/-5) +155 +155 150/147
AT&T Inc. Baa1/A- 4.25% 3/01/2027 2,000 +195a +185a (+/-5) +180 +180 170/168
AT&T Inc. Baa1/A- 5.25% 3/01/2037 3,000 +235a +225a (+/-5) +220 +220 207/204
AT&T Inc. Baa1/A- 5.45% 3/01/2047 2,000 +250a +245a (+/-5) +240 +240 229/226
AT&T Inc. Baa1/A- 5.70% 3/01/2057 1,000 +275a +270a (+/-5) +265 +265 257/252
Bank of NY Mellon Corp. A1/AA- 2.60% 2/07/2022 1,250 +90a +80a (+/-5) +75 +75 74/72
Bank of NY Mellon Corp. A1/AA- 11NC10 2/07/2028 1,000 +110-115/+112.5a +105a (+/-5) +100 +100 97/93
Commw’th. Bk. of Australia Aa2/NA FRN 8/03/2018 200 N/A N/A N/A 3mL+35 3mL+37/35
National Rural Utilities Coop. A1/A+ 2.95% 2/07/2024 450 +85-90/+87.5a +75-80 +75 +75 73/71
Seagate HDD Cayman Baa3/BBB- 4.25% 3/01/2022 750 +high 200s
+287.5a
+250a (+/-10) +240 +240 248/243
Seagate HDD Cayman Baa3/BBB- 4.75% 3/01/2024 500 +low 300s
+312.5a
+285 (+/-10) +275 +275 280/275
Crown Castle Int’l. Corp. Baa3/BBB- 4.00% 3/01/2027 500 +175-180 +160a (+/-3) +157 +157 157/155
Microsoft Corp. Aaa/AAA 1.85% 2/06/2020 1,500 +60a +45a (+/-5) +40 +40 35/33
Microsoft Corp. Aaa/AAA 2.40% 2/06/2022 1,750 +70a +55a (+/-5) +50 +50 47/46
Microsoft Corp. Aaa/AAA 2.875% 2/06/2024 2,250 +90a +75a (+/-5) +70 +70 59/57
Microsoft Corp. Aaa/AAA 3.30% 2/06/2027 4,000 +100a +90a (+/-5) +85 +85 77/75
Microsoft Corp. Aaa/AAA 4.10% 2/06/2037 2,500 +115a +105a (+/-5) +100 +100 88/87
Microsoft Corp. Aaa/AAA 4.25% 2/06/2047 3,000 +130a +120a (+/-5) +115 +115 106/104
Microsoft Corp. Aaa/AAA 4.50% 2/06/2057 2,000 +155a +145a (+/-5) +140 +140 129/126
USAA Capital Corp. Aa1/AA FRN 2/01/2019 350 3mL+high30s/
+37.5a
3mL+23-25 3mL+23 3mL+23 3mL+23
IFC
(tap) New Total: $750mm
Aaa/AAA FRN 12/15/2021 250 N/A 3mL+13a 3mL+13 3mL+13 3mL+15/14

 

Indexes and New Issue Volume

Please note that the below index levels are as of 4:30pm ET.
*Denotes new tight.

 

Index Open Current Change
IG27 65.548 63.605 <1.943>
HV27 138.23 138.31 0.08
VIX 11.93 10.95 <0.98>
S&P 2,280 2,297 17
DOW 19,884 20,071 187
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $44.575 bn WTD: $47.325 bn
MTD: $12.575 bn MTD: $15.075 bn
YTD: $184.958 bn YTD: $242.358 bn

 

Lipper Report/Fund Flows – Week ending January 25th     

     

  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $2.657b into Corporate Investment Grade Funds (2016 YTD net inflow of $12.354b) and a net inflow of $412.595m into High Yield Funds (2016 YTD net inflow of $291.062m).
  • Over the same period, Lipper reported a net inflow of $991.469m into Loan Participation Funds (2016 YTD net inflow of $4.760b).
  • Emerging Market debt funds reported a net outflow of $21.098m (2016 YTD inflow of $144.504m).

 

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 21.00 bps wider versus their post-Crisis lows. (more…)

MSFT Mega Bond Deal Dashboard- Top 10 Biggest Debt Deals, Ever
January 2017      Debt Market Commentary   

Quigley’s Corner 01.30.17 Microsoft (NASDAQ:MSFT) Mega Bond Deal: To

 

Investment Grade New Issue Re-Cap  – Microsoft Pumps Up Volume with $17b 7-Part That Tied for 9th Largest Issue in History

IG Primary & Secondary Market Talking Points

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

Microsoft’s $17b 7-Part 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 January 25th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry 
New Issue Pipeline

M&A Pipeline

Economic Data Releases

Tomorrow’s Calendar

 

microsoft-mega-bond-deal-mischler

Microsoft pushed up YTD and MTD volume with its mega  $17b 7-part Senior Notes new issue today across 3s, 5s, 7s, 10s, 20s, 30s and 40-year tranches.  As a result, we are within a breath of the all-time highest volume month for all-in (IG Corporates plus SSA) issuance.  The number one ranked month is the $213.40b priced in May 2016.  We are literally a mere $268 million away from breaking thru that number.  The record should come tomorrow.

MTD we’ve already blown past the syndicate desk midpoint average forecast by an amazing 72% or $158.23b vs. $91.96b. As for my call for $160b well, it’s looking pretty smart, if I may be so bold as to say.  As for the WTD syndicate projection, we’ve already priced 82% of the forecast for this week or $17.85b vs. $21.63b.  Pretty incredible stuff right there folks!

Mischler Financial was honored to serve as an active Co-Manager on today’s mega Microsoft deal.  So let’s first run through the recaps and volume tables before I get to the MSFT Deal Dashboard.

 

IG Primary & Secondary Market Talking Points

 

  • Today’s $17b 7-part Microsoft new issue tied for 9th place as the largest issue on record.
  • January 2017 is only $268mm away from becoming the highest volume month in history for all-in (IG Corporate plus SSA) issuance.
  • USAA Capital Corp. upsized its 2yr 144a Senior FRNs due 2/01/2019 new issue to $350mm from $300mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 9 IG Corporate-only new issues was <17.22> bps.
  • BAML’s IG Master Index tightened 1 bp to +126 vs. +127.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +120.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • 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 $21.2b on Thursday versus $23.0b on Wednesday and $23.5b the previous Thursday.
  • The 10-DMA stands at $19.3b.

 

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

 

IG Corporate New Issuance This Week
1/30-2/03
vs. Current
WTD – $17.85b
January 2017
Forecasts
vs. Current
MTD – $158.233b
Low-End Avg. $20.96b 85.16% $90.65b 174.55%
Midpoint Avg. $21.63b 82.52% $91.96b 172.07%
High-End Avg. $22.30b 80.04% $93.26b 169.67%
The Low $10b 178.5% $85b 186.16%
The High $27b 66.11% $120b 131.86%

 

Microsoft’s $17b 7-Part Deal Dashboard

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing of today’s $17b 7-part mega deal that tied for the 9th largest deal in history along with Apple’s April 30th, 2013 new issue and MDT’S deal that priced on 12/01/2014.

Today’s seven tranches posted a cumulative average contraction of <17.14> bps through price evolution or IPTs to the launch and final pricing.

Here’s a look at how it all evolved:

 

MSFT Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading +/-
3yr +60a +45a (+/-5) +40 +40 <20> bps 4 39/ <1>
5yr +70a +55a (+/-5) +50 +50 <20> bps 4 48/ <2>
7yr +90a +75a (+/-5) +70 +70 <20> bps 11 68/ <2>
10yr +100a +90a (+/-5) +85 +85 <15> bps 11 84/ <1>
20yr +115a +105a (+/-5) +100 +100 <15> bps 10 97/ <3>
30yr +130a +120a (+/-5) +115 +115 <15> bps 10 113/ <2>
40yr +155a +145a (+/-5) +140 +140 <15> bps 15 138/ <2>

 

……….and here’s a look at final book sizes and oversubscription rates that amounted to $36.9b for an overall bid-to-cover rate of 2.17x:

 

MSFT Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr 1,500 3,700 2.47x
5yr 1,750 3,400 1.94x
7yr 2,250 5,600 2.49
10yr 4,000 7,700 1.925x
20yr 2,500 5,600 2.24x
30yr 3,000 6,200 2.07x
40yr 2,000 4,700 2.35x

 

 

Diversity & Inclusion- Powered by Microsoft  

Mischler Financial, the nation’s oldest Service Disabled Veteran broker-dealer was honored to once again be a very active part of Microsoft’s contributing Co-Manager Group.  Thanks to Microsoft’s top/down internal inclusion mandate, several diversity firms offered a chance to highlight their distribution capabilities.  Team Mischler thanks all of you at Microsoft and applauds your focus and commitment to strive to create an internal as well as external environment that helps Microsoft capitalize on the diversity of your people and the inclusion of ideas and business solutions to meet the needs of your increasingly global and diverse customer base.  Microsoft truly believes that building the best software means incorporating the talents of its varied workforce into its products and recognizing the needs and priorities of its diverse suppliers, customers and business partner base.  Not only do your products make the world smaller and more accessible to everyone but your corporate governance overlays that technology with an inclusive mandate that eliminates barriers, improves businesses and encourages a healthy spirit of competition among competing broker dealers. Hey, it’s all about setting a great example from the top of the Company across to its employees, vendors and customers.  It starts from the top down and in Microsoft’s case it all begins within the office of CEO and Indian-American, Satya Nadella.  For their meaningful and long standing D&I ambition, and for leading by example, you are all the recipient of this evening’s Mischler five-star salute.  We appreciate the opportunity to serve you today and for affording us the chance to expand our platform by accessing your new issue for our rapidly expanding high quality distribution network.  So, thank you all very much.

Thanks also to all of our high quality global accounts who cumulatively contributed a total of 143 individual orders and a total of $439 million across today’s 7-part Senior transaction.  We’re happy when you are happy and by giving us this great opportunity today those accounts have elevated their trust and respect for what we work hard to do here each every day at Mischler Financial.

 

Microsoft Final Pricing

MSFT $1.5bn 1.85% due 2/6/20 @ $99.933 to yield 1.873% or T+40. MW+10.

MSFT $1.75bn 2.40% due 2/6/22 @ $99.785 to yield 2.446% or T+50. MW+10.

MSFT $2.25bn 2.875% due 2/6/24 @ $99.272 to yield 2.991% or T+70. MW+12.5.

MSFT $4bn 3.30% due 2/6/27 @ $99.645 to yield 3.342% or T+85. MW+15.

MSFT $2.5bn 4.10%due 2/6/37 @ $99.783 to yield 4.116% or T+100. MW+15.

MSFT $3bn 4.25% due 2/6/47 @ $99.731 to yield 4.266% or T+115. MW+20.

MSFT $2bn 4.50% due 2/6/57 @ $99.705 to yield 4.516% or T+140. MW+25.

 

 

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

 

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 six week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/23
TUES.
1/24
WED.
1/25
Th.
1/26
FRI.
1/27
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
AVERAGES
WEEK 12/19
New Issue Concessions 0.94 bps 0.58 bps 0.33 bps 6 bps N./A 1.13b bps 3.42 bps 0.85 bps 2.25 bps N/A N/A
Oversubscription Rates 2.60x 2.88x 4.82x 1.89x N/A 3.29x 2.40x 2.85x 2.45x N/A N/A
Tenors 8.54 yrs 5.75 yrs 6.11 yrs 9 yrs N/A 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs N/A N/A
Tranche Sizes $1,006mm $581mm $883mm $1,000mm N/A $845mm $1,123mm $927mm $859mm N/A N/A
Avg. Spd. Compression
IPTs to Launch
<15.61> yrs <18.12> bps <23> bps <8.5> bps N/A <18.20> bps <14.69> bps <18.77> bps <15.27> bps N/A N/A

 

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
Crown Castle Int’l. Corp. Baa3/BBB- 4.00% 3/01/2027 500 +175-180 +160a (+/-3) +157 +157
Microsoft Corp. Aaa/AAA 1.85% 2/06/2020 1,500 +60a +45a (+/-5) +40 +40
Microsoft Corp. Aaa/AAA 2.40% 2/06/2022 1,750 +70a +55a (+/-5) +50 +50
Microsoft Corp. Aaa/AAA 2.875% 2/06/2024 2,250 +90a +75a (+/-5) +70 +70
Microsoft Corp. Aaa/AAA 3.30% 2/06/2027 4,000 +100a +90a (+/-5) +85 +85
Microsoft Corp. Aaa/AAA 4.10% 2/06/2037 2,500 +115a +105a (+/-5) +100 +100
Microsoft Corp. Aaa/AAA 4.25% 2/06/2047 3,000 +130a +120a (+/-5) +115 +115
Microsoft Corp. Aaa/AAA 4.50% 2/06/2057 2,000 +155a +145a (+/-5) +140 +140
USAA Capital Corp. Aa1/AA FRN 2/01/2019 350 3mL+high30s/
+37.5a
3mL+23-25 3mL+23 3mL+23

 

 

Indexes and New Issue Volume
*Denotes new tight.

 

Index Open Current Change
IG27 64.157 65.788 1.631
HV27 135.835 137.765 1.93
VIX *10.58 11.88 1.30
S&P 2,294 2,280 <14>
DOW 20,093 19,971 <122>
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $17.85 bn DAY: $18.10 bn
WTD: $17.85 bn WTD: $18.10 bn
MTD: $158.233 bn MTD: $213.133 bn
YTD: $158.233 bn YTD: $213.133 bn

 

Lipper Report/Fund Flows – Week ending January 25th     

     

  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $1.589b into Corporate Investment Grade Funds (2016 YTD net inflow of $9.697b) and a net outflow of $532.417m from High Yield Funds (2016 YTD net outflow of $121.533m).
  • Over the same period, Lipper reported a net inflow of $1.024b into Loan Participation Funds (2016 YTD net inflow of $3.769b).
  • Emerging Market debt funds reported a net outflow of $149.265m (2016 YTD inflow of $165.602m).

 

IG Credit Spreads by Rating (more…)

Rate Rise Realities; No More “Lower for Longer”-Mischler Debt Market Comment
November 2016      Debt Market Commentary   

Quigley’s Corner 11.15.16-Trump and Rate Rise Realities; No More “Lower for Longer”

 

Below is the opening extract from Quigley’s Corner aka “QC” Tuesday November 15, 2016 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC observations are one of three distinctive research content pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. Any political views expressed are those of the author only.

Investment Grade Corporate Debt New Issue Re-Cap :

Rates Are Going Up in December Folks! Dalio, Montag and…Quigley?!

Chronology of a Politician and a Great Veteran Story

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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 9th   

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

 

4 IG Corporate issuers priced 7 tranches between them totaling $4.95b with one $500mm assist from the SSA space thanks to EDC’s new 4-year, bringing the all-in IG day totals to 5 issuers, 8 tranches at $5.45b.  We’ve now priced 53.82% of this week’s syndicate midpoint average forecast or $15.85b vs. $29.45b.

rate-rise-realities-mischler-debt-marketInflation is Coming Back and Rates Are Going Up in December Folks! Dalio, Montag and..Quigley!?!?

You hear that sound?  That’s the sound of banks revving up their engines.  Not only did I write about the post-Election rally yesterday, but I also got specific about previous Washington dysfunction, over regulation and higher rates and inflation.”  Today Tom Montag, COO of Bank of America Corp chimed in with similar promise of the new incoming President-elect Trump’s first term saying, there is a “sense of optimism” that “the government will work better together to supply the foundation of growth that we as a bank can optimize.”  He continued, “We have a lot of regulations, so it’s probably healthy to take a breath.”

Bridgewater Chief Ray Dalio said today, “There is a good chance that we are at one of those major reversals that last a decade.  We believe that we will have a profound President-led ideological shift that is of a magnitude, and in more ways than one, analogous to Ronald Reagan’s shift to the right. Of course, all analogies are also different, so I should be clearer. Donald Trump is moving forcefully to policies that put stimulation of traditional domestic manufacturing above all else, that are far more pro-business and that are far more protectionist.”

IG CDX tightened 1.5 bps, HV reeled in 4.8, the VIC compressed 1.11 while the DOW reached another all-time high closing up 55 to 18,923 with the S&P up 16 and Nasdaq up 57.

And now, continuing on where I left off yesterday in the “QC” – President-elect Donald Trump will unleash inflation and rates WILL go up! The populist/Republican platform is so expansionary he will single handedly create inflation.  If you are or were a detractor, forget it. That was politics folks. Get ready to dive deep into reality.  The Fed will raise money on net interest margins and create inflation.  The Fed has no choice.  How’s that from one of the first and most vocal prognosticators of “lower-for-longer” after all these years?  It will hurt overseas as a result, but that was then and this is now!  The U.S.A. cannot worry as much about impacts overseas when we have a US-focused agenda designed to improve operating efficiency.  A hike in December will roil Europe, but it will not be done to hurt Europe. Rather, it’s going to happen to take care of our nation.  The ramifications will be plenty and they will most assuredly crack the fragile Euro egg wide open.  Fret not, however, as the risk reward for IG fixed income will remain healthy.  Although investors are switching into equities, foreign and specifically European investors will find a substantially improved risk/reward upside to investing in U.S. IG credit markets.  More yield, less risk than staying investing in the EU with so much discord.  So strap yourselves in because long-term interest rates are about to go up and the inflationary spending spree is about to take place.  Good bye to the low rates that have been hitting bank earnings and revenues.  A healthier banking system is the foundation for a healthier economy.

How Congressman David Young Led the Way for Veteran Change

Well, here we are on November 15th, 2016 one week detached from our historic November 8th national elections and 2 years and 5 months away from David Young’s first Congressional district win (R-IA).  He has wasted no time getting things done having arrived on the scene in Washington in a big way by working hard and producing results.  To capture part of the sweeping positive changes about to take place in our country, there is more to report on David Young. My favorite Iowans spent the last week picking up all their big barn signs, etcetera around their 16 county district. Now, David Young, can go back to the Beltway and continue to fight for good change. One of his many passions is his No Veterans Crisis Line Call Should Go Unanswered Act (H.R. 5392) bill that passed in the House 357-0.  Re-read that folks.  That’s right…..357-0!  Now, perhaps his bill can get thru the Senate and onto Obama’s desk.  (It should be known and WILL be now known here in the “QC” that none other than Harry Reid stopped it prior to the election).  Reid can’t retire soon enough!

Congressman Young’s legislation seeks to provide necessary responsiveness and performance improvements to the Veterans Crisis Line, which is the confidential, toll free hotline for veterans seeking suicide prevention and crisis resources help from U.S. Department of Veterans Affairs (VA) responders.

As Congressman Young said, “Our veterans, who have made such significant sacrifices on behalf of our nation and in defense of our freedoms, deserve quality mental health care resources which are accessible and responsive. There is absolutely no excuse for a veteran to contact the Veterans Crisis Line and not get the help they are seeking. Our veterans deserve better, which is why I have put forth this important bipartisan legislation to make critical fixes to the Veterans Crisis Line – fixes it clearly needs. I thank my colleagues for working with me to advance this bill and put our veterans first.”

 

Chronology of How Young’s Veteran Bill Happened in the House

 

  • September 21, 2016 – Congressman Young’s No Veterans Crisis Line Call Should Go Unanswered Act was approved in a markup by the full U.S. House Veterans Affairs Committee.
  • September 14, 2016 – Congressman Young urges his colleagues to support the No Veterans Crisis Line Call Should Go Unanswered Act on the floor of the U.S. House of Representatives.
  • September 8, 2016 – South Dakota Senator John Thune introduces companion legislation to Congressman Young’s No Veterans Crisis Line Call Should Go Unanswered Act.
  • September 1, 2016 – Congressman Young sends a letter to VA Secretary McDonald highlighting continued problems with the Veterans Crisis Line.
  • June 28, 2016 – Congressman Young reacts to a Government Accountability Office (GAO) report finding approximately 30 percent of text messages sent as tests to the Veterans Crisis Line went unanswered.
  • June 23, 2016 – Congressman Young testifies before the U.S. House Veterans Affairs Committee on the importance of the legislation.
  • June 7, 2016 – Congressman Young introduces the No Veterans Crisis Line Call Should Go Unanswered Act in response to concerns voiced by Iowa veterans about unanswered calls, emails or other communications, and failed attempts to receive help from the Veterans Crisis Line.

Congratulations to Iowa’s David Young for fighting for our nations veterans and for being such a part of great changes taking place in the United States. David is the recipient of this evening’s Mischler five-star salute from all of us here at team Mischler.  He is the first recipient that has nothing to do with a bond deal.  It’s all about his work for our veterans.
Global Market Recap

 

  • U.S. Treasuries – USTs mixed with more red and flatter. JGB’s sold off. Europe big rally.
  • Stocks – NASDAQ leads U.S. stocks higher. Europe  and Asia closed mixed.
  • Economic – U.S. retail sales were stronger than expected and had upward revisions to the last.
  • Overseas Economic – U.K. CPI lower than expected/last. German data a touch softer.
  • Currencies – USD was under pressure overnight but rallied during NY hours to lose higher.
  • Commodities – Big rally in crude oil drives the CRB higher.
  • CDX IG: -2.91 to 74.60
  • CDX HY: -17.60 to 413.31
  • CDX EM: -14.97 to 267.30

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Plains All American Pipeline LP upsized today’s 10-year Senior Notes new issue to $750mm from $500mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues that displayed price evolution was 21.57 bps.
  • BAML’s IG Master Index was unchanged at +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.30.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +181 vs. +182.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Monday versus $19.8b Thursday and $14.1b the previous Monday.
  • The 10-DMA stands at $16.9b.

 

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

 

IG Corporate New Issuance This Week
11/14-11/18
vs. Current
WTD – $15.85b
November 2016 vs. Current
MTD – $32.311b
Low-End Avg. $28.32b 55.97% $90.70b 35.62%
Midpoint Avg. $29.45b 53.82% $92.11b 35.08%
High-End Avg. $30.59b 51.81% $93.52b 34.55%
The Low $20b 79.25% $71b 45.51%
The High $40b 39.62% $110b 29.37%

 

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 Monday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/14
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
New Issue Concessions 2.85 bps <3.60> bps <0.87> bps <0.51> bps 3.31 bps
Oversubscription Rates 2.38x 4.26x 3.32x 2.61x 3.05x
Tenors 11.05 yrs 13.31 yrs 11.33 yrs 7.77 yrs 9.16 yrs
Tranche Sizes $991mm $692mm $491mm $818mm $1,137mm
Avg. Spd. Compression
IPTs to Launch
<14.5> 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
21st Century Fox America Baa1/BBB+ 3.375% 11/15/2026 450 +140a +120a (+/-3) +117 +117 JPM-sole
21st Century Fox America Baa1/BBB+ 4.75% 11/15/2046 400 +200a +180a (+/-3) +177 +177 JPM-sole
Plains All American Pipeline Baa3/BBB 4.50% 12/15/2026 750 +mid 200s/+250a +230-235 +230 +230 BAML/BNPP/JPM/WFS
Simon Property Group LP A2/A 2.35% 1/30/2022 550 +95-100 +80a (+/-5) +75 +75 BAML/CITI/GS/USB
Simon Property Group LP A2/A 3.25% 11/30/2026 750 +120-125 +110a (+/-5) +105 +105 BAML/CITI/GS/USB
Simon Property Group LP A2/A 4.25% 11/30/2046 550 +145-150 +135a (+/-5) +130 +130 BAML/CITI/GS/USB
Westpac Banking Corp. A3/A+ 4.322% 11/23/2031 1,500 +237.5 +215a (+/-5) +210 +210 BAML/CITI/JPM/MS

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
EDC Aaa/AAA FRN 11/23/2020 500 3mL+13a 3mL+13a 3mL+13 3mL+13 BNPP/BARC/DB

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.30 0  
IG27 75.503 73.988 <1.515>
HV27 166.425 161.645 <4.78>
VIX 14.48 13.37 <1.11>  
S&P 2,164 2,180 16
DOW 18,868 18,923 55  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $4.95 bn DAY: $5.45 bn
WTD: $15.85 bn WTD: $16.35 bn
MTD: $32.311 bn MTD: $32.811 bn
YTD: $1,201.092 bn YTD: $1,531.476 bn

 

Lipper Report/Fund Flows – Week ending November 9th   

     

  • For the week ended November 9th, Lipper U.S. Fund Flows reported an inflow of $675.4m into Corporate Investment Grade Funds (2016 YTD net inflow of $40.967b) and a net outflow of $668.6m from High Yield Funds (2016 YTD net inflow of $6.285b).
  • Over the same period, Lipper reported a net outflow of $45.4m from Loan Participation Funds (2016 YTD net outflow of $1.563b).
  • Emerging Market debt funds reported a net inflow of $345.7m (2016 YTD inflow of $7.522b).

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 26.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/14 11/11 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 1-Day Change 10-Day Trend PC
low
IG Avg. 136 136 136 137 139 140 141 141 140 139 0 <3> 106
“AAA” 75 76 76 80 82 82 83 83 83 82 <1> <7> 50
“AA” 82 83 83 85 85 86 87 87 87 86 <1> <4> 63
“A” 107 107 107 109 110 111 112 112 112 111 0 <4> 81
“BBB” 178 177 177 178 180 181 183 182 181 180 +1 <2> 142
IG vs. HY 375 361 361 357 359 361 379 374 375 366 +14 +9 228

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 33.42 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 11/14 11/11 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 1-Day Change 10-Day Trend PC
low
Automotive 119 119 119 121 121 122 122 120 122 121 0 <2> 67
Banking 124 124 124 127 128  129 130 130 130 129 0 <5> 98
Basic Industry 178 176 176 177 179 180 182 181 181 180 +2 <2> 143
Cap Goods 101 102 102 103 105 105 107 106 106 105 <1> <4> 84
Cons. Prod. 108 108 108 109 110 111 112 112 112 111 0 <3> 85
Energy 182 179 179 179 180 182 184 183 183 180 +3 +2 133
Financials 161 161 161 162 163 164 167 166 165 164 0 <3> 97
Healthcare 117 118 118 121 124 124 126 124 123 122 <1> <5> 83
Industrials 139 138 138 140 141 142 144 143 143 141 +1 <2> 109
Insurance 147 148 148 150 152 153 154 154 153 153 <1> <6> 120
Leisure 136 138 138 139 138 138 139 138 138 138 <2> <2> 115
Media 160 161 161 163 164 165 167 166 165 164 <1> <4> 113
Real Estate 144 146 146 147 145 146 146 146 146 146 <2> <2> 112
Retail 117 118 118 121 122 122 123 123 122 121 <1> <4> 92
Services 129 129 130 130 130 130 130 130 130 129 0 0 120
Technology 113 112 112 115 117 118 120 120 120 119 +1 <6> 76
Telecom 167 165 165 168 170 171 173 172 172 170 +2 <3> 122
Transportation 138 137 136 137 138 139 140 140 139 138 +1 0 109
Utility 137 137 137 137 138 138 139 139 138 138 0 <1> 104

 

New Issue Pipeline

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

US Election + FOMC Angst = Gold Rally; Mischler Debt Market Comment
November 2016      Debt Market Commentary   

Quigley’s Corner 11.01.16 : US Election + FOMC Angst = Gold Rally

 

Investment Grade Corporate Bond New Issue Re-Cap  – U.S. Election and Fed Anxiety Send Gold and Sfr Up

Global Market Recap

IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for This Week

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

 

November kicked off today with 6 IG Corporate issuers pricing 7 tranches between them totaling $2.65b.  We are two days into the week and yet we’ve only priced $6.975b or 27% of the weekly syndicate forecast of $25.13b.  Election jitters and tomorrow’s FOMC Rate Decision sent the DOW down 105 points and the S&P off 15.  It’s probably a good thing that tomorrow’s Fed meeting is not followed by a summary of economic projections and a press conference by Chair Yellen.  When gold and the Swiss franc rise it means investors are uneasy, skittish and edgy about something.  In our inextricably linked new world economy, replete with myriad global event risk factors, today’s catalyst has everything to do with the U.S. Presidential election.  The VIX pushed out 1.5.  CDX HV gapped out 7.15. Gold was up $16 and the Swiss franc gained 1.36% on the USD.……..In financial terms, that spells …“A-N-X-I-E-T-Y”

 

Global Market Recap

 

  • U.S. Treasuries – USTs closed with a gain & had a very impressive rally from the low prices.
  • Overseas Bonds – JGB’s had small gains. Bonds in Europe traded poorly.
  • Stocks – Down day for stocks in the U.S. & Europe while Asia rallied.
  • Economic – U.S. data had more good than bad. China PMI data was very strong.
  • Currencies – USD lost ground vs. 4 of the Big 5 & the DXY Index was hit hard.
  • Commodities – Crude oil small loss, natural gas down and gold & silver were bid.
  • CDX IG: +0.812 to 79.52
  • CDX HY: +8.04 to 430.71
  • CDX EM: +5.62 to 247.84

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Kimco Realty Corp. upsized today’s 2-part 7s/30s Senior Notes new issue to $750mm from $600mm at the launch and at the tightest side of guidance on both tranches.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 17.71 bps.
  • BAML’s IG Master Index widened 1 bp to +138 vs. +137.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +132.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +183 vs. +182.  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 Monday versus $14.3b Friday and $14b the previous Monday.
  • The 10-DMA stands at $16.7b.

 

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

 

IG Corporate New Issuance This Week
10/31-11/04
vs. Current
WTD – $6.975b
October 2016 vs. Current
MTD – $6.975b
November 2016
Low-End Avg. $24.26b 28.75% $87.83b 7.94% $90.70b
Midpoint Avg. $25.13b 27.76% $88.59b 7.87% $92.11b
High-End Avg. $26.00b 26.83% $89.35b 7.81% $93.52b
The Low $15b 46.50% $75b 9.30% $71b
The High $35b 19.93% $125b 5.58% $110b

 

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 Monday’s session followed by the averages over the prior four weeks:

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

 

New Issues Priced

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

(more…)

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

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

 

Investment Grade New Issue Re-Cap 

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

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

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

In Janet’s Words

IG Primary & Secondary Market Talking Points

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

Investment Grade Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

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

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

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

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

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

 

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

 

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

o   Job market continued to strengthen and economy picked up.

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

o   Market-based measures of inflation remain low.

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

o   Business fixed investments has remained soft.

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

o   Maintains its reinvestment policy.

 

In Janet’s Words

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

o   “Economic growth appears to have picked up.”

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

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

o   “Unemployment measures show more people seeking jobs.”

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

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

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

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

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

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

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

o   “Seeing evidence economy is expanding more strongly.”

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

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

o   “Zero lower bound is a concern.”

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

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

o   “Monetary policy is somewhat accommodative.”

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

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

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

o   “Soundness of banking system has improved substantially.”

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

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

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

 

Global Market Recap

 

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

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

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

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

o   Stocks – Strong session for U.S.

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

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

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

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

o   CDX IG: -3.25 to 78.44

o   CDX HY: -18.52 to 391.26

o   CDX EM: -12.30 to 230.74

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

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

 

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

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

Quigley’s Corner 09.15.16 Fed Not Raising Rates

 

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

 Global Market Recap

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

IG Primary & Secondary Market Talking Points

Fixed Income Syndicate IG Corporate-only Volume Estimates for September

New Issues Priced

Lipper Report/Fund Flows

IG Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

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

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

Global Market Recap

 

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

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

-Tony Farren

 

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

 

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

 

IG Primary & Secondary Market Talking Points

 

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

(more…)

Record Setting Week Investment Grade Debt Issuance-Again!
September 2016      Debt Market Commentary   

Quigley’s Corner 09.09.16 Another Record Setting Week for Investment Grade Issuance

 

Investment Grade New Issue Re-Cap – One and Done to Cap Off Record Setting Week

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

Lipper Report/Fund Flows – Week ending September 7th

New Issue Volume

Economic Data Releases

Rates Trading Lab- The Pain Trade(s)

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

Asia Development Bank printed its well telegraphed $500mm tap of its 5yr FRNs due 9/16/2021 and that was all she wrote to close a record setting number of deals in this holiday-shortened week.  I’ll keep it short and sweet readers.  This week hosted 40 IG Corporate issuers across 73 tranches.  Including SSA issuance, the IG dollar DCM featured 46 issuers and 79 tranches.  Both are records for any three consecutive sessions in history.  So, you’re probably wondering what’s ahead for next week?  Well, I could scribe a long ditty for you but everything is already here.  Today is Friday and you know what that means – I contacted the top 23 syndicate desks to get their thoughts and numbers for next week.  I happen to think we’ll print $50b but that’s just me.  Scroll down and read what the “Best and the Brightest” have to say about the week ahead. It’s all here.  Remember, if you fail to prepare, you’re prepared to fail.  What’s more it’s free from me to you.

Before I do, however, and knowing what it’s like to sit in the syndicate pit – the nerve center of our debt capital markets –  how about a resounding round of applause – no make it a standing “O” – for all the syndicate desks out there who accomplished such a tremendous feat this week.   Yeah you know it, I am actually standing up on my trading floor clapping my hands for all of them. You really have no idea what busy means until you run a syndicate desk. A lot less people are working a LOT harder on syndicate desks setting new records along the way.  I hope those sitting in their ivory towers remember that at the end of the year.

Global Market Recap

 

o   U.S. Treasuries – Back-to-back terrible days for global bond markets led by the long end.

o   Stocks – U.S. stocks were hit hard (3pm). Europe traded poorly. Asia closed mixed.

o   Economic – Fed Speak mixed in the U.S. Weaker data in Germany & France.

o   Currencies – Big day for the USD outperforming all of the Big 5.

o   Commodities – Very bad day in commodity land.

o   CDX IG: +3.66 to 75.31

o   CDX HY: +16.42 to 404.18

o   CDX EM: +11.28 to 243.95

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points
[icegram campaigns=”5396″]
 

o   Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 79 deals that printed, 48 tightened versus NIP for a 60.75% improvement rate while only 15 widened (19.00%) and 16 were trading flat (20.25%).

  • For the week ended September 7th, Lipper U.S. Fund Flows reported an inflow of $2.804b into Corporate Investment Grade Funds (2016 YTD net inflow of $32.901b) and a net inflow of $610.273m from High Yield Funds (2016 YTD net inflow of $10.160b).
  • BAML’s IG Master Index was unchanged at +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research was also unchanged at +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15b on Thursday versus $16.5b Wednesday and $12.8b the previous Thursday.

 

Syndicate IG Corporate-only Volume Estimates for September

 

IG Corporate New Issuance September 2016 vs. Current
MTD – $52.46b
Low-End Avg. $115.45b 45.44%
Midpoint Avg. $116.02b 45.22%
High-End Avg. $116.59b 45.00%
The Low $80b 65.58%
The High $150b 34.97%

 

Syndicate IG Corporate-only Volume Estimates for Next Week

 

IG Corporate New Issuance Next Week
9/12-9/16
Low-End Avg. $35.83b
Midpoint Avg. $36.91b
High-End Avg. $38.00b
The Low $30b
The High $46b

 

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

 

Next Week
2: 30b
2: 30-35b
4: 35b
8: 35-40b
1: 38b
5: 40b
1: 46b

 

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

 

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  21 of those participants are among 2016’s top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  Today’s cumulative underwriting percentage of the participating desks was 81.07% which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

 

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted. The question posed to the “Best and the Brightest” early this morning was premised on the following:

“We set a new all-time activity record for number of issues and tranches in three consecutive days from (Mon-Thurs.) having featured 40 IG Corporate issuers and 73 tranches between them.  This week’s final all-in tally of $52.76b ranks as the 7th highest volume week in history for IG Corporate plus SSA issuance.  This week also finishes as the 4th highest volume week of the year for all-in IG issuance. 

Treasuries are getting slammed this morning on consensus that global Central Bank’s apprehension as to the benefits of further easing.  I personally think USTs should be moving in the opposite direction.  Yesterday ECB President Draghi called on EU governments to intercede to do more.  Here’s what we know – while he began speaking a total of 11 issuers announced 20 tranches between them totaling $12.41b.  Net, net – who cares what he thinks?  The market’s response was clear -we have a lot lined up for next week and the rest of this month so, let’s get to it. This after setting an all-time issuance records for August IG Corporate-only issuance with $114.325b priced and for all-in IG Corps plus SSA issuance with $136.575b priced.  


This week we priced $59.06b of all-in IG Corporate and SSA issuance. IG Corps were $52.46b.  In only three active days of September we priced 45% of the syndicate midpoint average forecast for IG Corporates for the entire month or $116.02b.


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

 

o   NICS:  1.30 bps

o   Oversubscription Rates: 3.23x

o   Tenors:  9.42 years

o   Tranche Sizes: $719mm

For the week ended September 1st, Lipper U.S. Fund Flows reported an inflow of $2.804b into Corporate Investment Grade Funds (2016 YTD net inflow of $32.901b) and a net inflow of $610.273m from High Yield Funds (2016 YTD net inflow of $10.160b). 

Week-on-week, BAML’s IG Master Index is 1 bp wider or +140 vs. last Friday’s +139 close.  Spreads across the four IG asset classes since I left for block leave on August 19th tightened 3 bps to 30.25 vs. 33.25. Looking at the 19 major industry sectors, spreads tightened 4.32 bps to an average 36.63 versus 40.95 bps off their post-Crisis lows also since August 19th. 

Finally, what are YOUR thoughts and number for next week’s IG new issue volume? 

 Many thanks in advance and best wishes for a great weekend! –Ron”

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

(This section available exclusively to QC distribution list recipients)

 

            

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 XX deals that printed, 48 tightened versus NIP for a 60.75% improvement rate while only 15 widened (19.00%) and 16 were trading flat (20.25%).

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
Bemis Company Inc. Baa2/BBB 3.10% 9/16/2026 300 +175a +155a (+/-5) +150 +150 145/143
BMW US Capital LLC A2/A+ FRN 9/13/2019 250 3mL+equiv 3mL+equiv 3mL+41 3mL+41 3mL+41/40
BMW US Capital LLC A2/A+ 1.45% 9/13/2019 500 +70a +65a (+/-5) +60 +60 59/57
BMW US Capital LLC A2/A+ 1.85% 9/15/2021 750 +80a +75a (+/-5) +70 +70 70/68
BMW US Capital LLC A2/A+ 2.25% 9/15/2023 750 +95a +90a (+/-5) +85 +85 84/82
BOC Aviation Ltd. BBB+/A- 2.375% 9/15/2021 500 +165a +135-140 +135 +135 130/128
Capital One NA /
McLean, VA
Baa1/A- FRN 9/13/2019 300 3mL+equiv 3mL+equiv 3mL+76.5 3mL+76.5 3mL+74/72
Capital One NA /
McLean, VA
Baa1/A- 1.85% 9/13/2019 1,250 +110a +95-100 +95 +95 94/92
Capital One NA /
McLean, VA
Baa1/A- 2.25% 9/13/2021 1,000 +120-125 +110-115 +110 +110 109/107
Cox Communications Inc. Baa2/BBB 3.35% 9/15/2026 1,000 +low 200s
(212.50)
+187.5 (+/-12.5) +175 +175 170/168
Entergy Mississippi, Inc. A3/A 4.90% 50NC5 260 N/A 4.95%a 4.90% $25 FMBs $24.98/95
GATX Corporation Baa2/BBB 3.25% 9/15/2026 350 +187.5 +175a (+/3) +172 +172 169/166
Met Life Global Funding I Aa3/AA- FRN 9/14/2018 350 3mL+equiv 3mL+equiv 3mL+34 3mL+34 3mL+34/32
Met Life Global Funding I Aa3/AA- 1.35% 9/14/2018 550 +70a +60 the # +60 +60 60/58
Met Life Global Funding I Aa3/AA- 1.55% 9/13/2019 350 +75-80 +70 the # +70 +70 70/67
Met Life Global Funding I Aa3/AA- 1.95% 9/15/2021 750 +90a +80 the # +80 +80 80/77
Southern Co. Gas Corp. Baa1/A- 2.45% 10/01/2023 350 +135a +105a (+/-5) +100 +100 96/94
Southern Co. Gas. Corp. Baa1/A- 3.95% 10/01/2046 550 +185-190 +170a (+/-5) +165 +165 160/157
Toronto Dominion Bank A2/A- 3.625% 15NC10 1,500 REV. IPTS +225a
+237.5a
+210 (+/-5) +205 +205 197/194
Woodside Finance Ltd. Baa1/BBB+ 3.70% 9/15/2026 800 REV IPTs: +237.5a
+237.50-250
+215a (+/-5) +210 +210 207/203
Associated Banc-Corp. Baa3/BB 5.375% PerpNC5 100 N/A 5.50%a 5.375% $25 Pfd $25.30/.25
California Institute of Technology (px’d 9/07) Aa2/AA- 4.283% 9/01/2116 150 +210a vs OLB N/A N/A +205 +202/
Dr. Pepper Snapple Group Baa1/BBB+ 2.55% 9/15/2026 400 +125a +110a (+/-5) +105 +105 102/99
Mizuho Financial Group A1/A- FRN 9/13/2021 1,250 3mL+equiv 3mL+equiv 3mL+114 3mL+114 3mL+113/111
Mizuho Financial Group A1/A- 2.273% 9/13/2021 1,000 +135a +120a (+/-5) +115 +115 118/116
Mizuho Financial Group A1/A- 2.839% 9/13/2026 1,000 +150a +135a (+/-5) +130 +130 127/125
Nationwide Bldg. Society Baa1/A- 4.00% 9/14/2026 1,250 +275a +255a (+/-5) +250 +250 240/235
New York Life Glbl. Fdg. Aaa/AA+ 1.25% 9/14/2021 750 + low 70s
+72.5
+65a (+/-3) +62 +62 62/60
Nissan Motor Acceptance A3/A- FRN 9/13/2019 500 3mL+equiv 3mL +equiv 3mL+52 3mL+52 3mL+53/51
Nissan Motor Acceptance A3/A- 1.55% 9/13/2019 500 +95-100 +73a (+/-3) +70 +70 71/68
Nissan Motor Acceptance A3/A- 1.90% 9/14/2021 500 +105-110 +85a (+/-3) +82 +82 82/80
Nonghyup Bank A1/A+ 1.875% 9/12/2021 500 +100a N/A N/A +85 83/82
Protective Life Glbl. Fdg. A2/AA- 1.555% 9/13/2019 350 +85a +72a (+/-2) +70 +70 70/68
Protective Life Glbl. Fdg. A2/AA- 1.999% 9/14/2021 300 +high 90s
+97.5
+90a (+/-2) +88 +88 88/86
PSE&G Co. Aa3/A 2.25% 9/15/2026 425 + low 90s
+92.5
+75-80 +75 +75 72/70
Royal Bank of Scotland Group plc BBB-/BBB+ 3.875% 9/12/2023 2,650 +275a +255a (+/-5) +250 +250 247/246
Shell International Finance Aa2/A FRN 9/12/2019 500 3mL+equiv 3mL+equiv 3mL+35 3mL+35 3mL+34/31
Shell International Finance Aa2/A 1.375% 9/12/2019 1,000 +70a +55a (+/-2) +53 +53 55/53
Shell International Finance Aa2/A 1.80% 9/12/2021 1,000 +85a +75a (+/-5) +70 +70 70/68
Shell International Finance Aa2/A 2.50% 9/12/2026 1,000 +125a +110a (+/-2) +108 +108 106/104
Shell International Finance Aa2/A 3.75% 9/12/2046 1,250 +175a +160a (+/-5) +155 +155 154/151
TJX Companies Inc. A2/A+ 2.25% 9/15/2026 1,000 +87.5 +80a (+/-2) +80 +80 78/76
Valero Energy Corp. Baa2/BBB 3.40% 9/15/2026 1,250 +200a +190 the # +190 +190 189/186
W.P. Carey Inc. Baa2/BBB 4.25% 10/01/2026 350 +300a +280a (+/-5) +275 +275 260/255
Dexia Credit Local Aa3/AA 1.875% 9/15/2021 1,250 MS +79a MS +80a MS +79 +80.45 77/75
Export Dev. Bank of Canada Aaa/AAA 1.00% 9/13/2019 1,000 MS +3a RG: MS +2a
MS +3a
MS +1 +19.35 18/16.5
IADB Aaa/AAA 1.25% 9/14/2021 2,100 MS +23a MS +23a MS +22 +23.1 21.5/19.5
Instituto de Credito Oficial Baa2/BBB+ 1.625% 9/14/2018 500 MS +70a MS +65-70 MS +65 +90.1 83/80
Kommuninvest Aaa/AAA 1.125% 9/17/2019 1,250 MS +15a MS +14a MS +14 +32.05 31/29
Asian Development Bank
(tap) New total: $1,000mm
Aaa/AAA FRN 6/16/2021 3mL+19a 3mL+19a N/A 3mL+19 3mL+19 3mL+19/17
American Honda Finance A1/A+ FRN 9/09/2021 250 3mL+equiv 3mL+equiv 3mL+61 3mL+61 3mL+59/57
American Honda Finance A1/A+ 1.70% 9/09/2021 1,000 +75-80 +65a (+/-2) +63 +63 63/61
American Honda Finance A1/A+ 2.30% 9/09/2026 500 +100a +80 the # +80 +80 76/74
BNZ International Fdg. Ltd. Aa3/AA- FRN 9/14/2021 250 3mL+equiv 3mL+equiv 3mL+98 3mL+98 3mL+94/93
BNZ International Fdg. Ltd. Aa3/AA- 2.10% 9/14/2021 600 +120a +105a (+/-5) +100 +100 100/98
Cabot Corp. Baa2/BBB 3.40% 9/15/2026 250 +low 200s
+212.5
+190a (+/-2.5) +187.5 +187.5 174/172
Duke Energy Florida A1/A 3.40% 10/01/2046 600 +130a +120 the # +120 +120 119/117
Home Depot A2/A 2.125% 9/15/2026 1,000 +90a +75a (+/-5) +70 +70 71/69
Home Depot A2/A 3.50% 9/15/2056 1,000 +160-165 +140a (+/-5) +135 +135 132/129
John Deere Capital Corp. A2/A FRN 10/09/2019 250 3mL+equiv 3mL+equiv 3mL+28.5 3mL+28.5 3mL+28/27
John Deere Capital Corp. A2/A 1.25% 10/09/2019 500 +60a +50a (+/-3) +47 +47 49/47
KeyCorp Baa3/BB+ 5.00% PerpNC10 525 5.125%a 5.00%a (+/-10) 5.00% 3mL+360.6 3mL+342/337
Korea Development Bank Aa2/AA 1.375% 9/12/2019 500 +low 70s
+72.5
+60a (+/-2.5) +57.5 +57.5 54/52
Korea Development Bank Aa2/AA 2.00% 9/12/2026 500 +low 70s
+72.5
+55-60 +55 +55 56/54
Magellan Midstream Part. Baa1/BBB+ 4.25% 9/15/2046 500 +235-240 +215a (+/-5) +210 +210 200/197
Mitsubishi UFJ Finc’l. Grp. A1/A FRN 9/13/2021 1,000 3mL+equiv 3mL+equiv 3mL+106 3mL+106 3mL+104/
Mitsubishi UFJ Finc’l. Grp. A1/A 2.19% 9/13/2021 1,500 +120-125 +110a (+/-2) +108 +108 111/108
Mitsubishi UFJ Finc’l. Grp.
(Green Bond)
A1/A 2.527% 9/13/2023 500 +130a +115-120 +115 +115 110/108
Mitsubishi UFJ Finc’l. Grp. A1/A 2.757% 9/13/2026 1,000 +135a +125a (+/-2) +123 +123 124/122
Pricoa Global Funding I AA-/A+ 1.45% 9/13/2019 350 +75-80 +60-63 +60 +60 59/58
SEB Aa3/AA- FRN 9/13/2019 500 3mL+equiv 3mL+equiv 3mL+57 3mL+57 3mL+57/55
SEB Aa3/AA- 1.50% 9/13/2019 1,000 +low 80s
+82.5
+75 the # +75 +75 74/72
SEB Aa3/AA- 1.875% 9/13/2021 1,000 +low 90s
+92.5
+85 the # +85 +85 84/82
Siemens AG A1/A+ FRN 9/13/2019 350 3mL+equiv 3mL+equiv 3mL+32 3mL+32 3mL+32/30
Siemens AG A1/A+ 1.30% 9/13/2019 1,100 +60a +50a (+/-5) +50 +50 52/50
Siemens AG A1/A+ 1.70% 9/15/2021 1,100 +70-75 +60a (+/-5) +60 +60 61/59
Siemens AG A1/A+ 2.00% 9/15/2023 750 +80a +70a (+/-5) +70 +70 71/69
Siemens AG A1/A+ 2.35% 10/15/2026 1,700 +90-95 +85a (+/-5) +85 +85 87/85
Siemens AG A1/A+ 3.30% 9/15/2046 1,000 +120a +110a (+/-5) +110 +110 112/110

 

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.

Ron Quigley, Managing Director

NICs, Bid-to-Covers, Tenors and Sizes

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/05
TUES.
9/06
WED.
9/07
TH.
9/08
FRI.
9/09
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 8/29
AVERAGES
WEEK 8/22
AVERAGES
WEEK 8/15
New Issue Concessions Labor Day 2.00 bps 0.55 bps 1.06 bps N/A 1.30 bps 5.47 bps 1.86 bps <4.18> bps
Oversubscription Rates Labor Day 3.20x 2.99x 3.53x N/A 3.23x 2.18x 3.73x 4.40x
Tenors Labor Day 9.59 yrs 11.33 yrs 6.90 yrs N/A 9.42 yrs 4.47 yrs 8.94 yrs 11.43 yrs
Tranche Sizes Labor Day $727mm $791mm $621mm N/A $719mm $820mm $661mm $697mm

 

 

Lipper Report/Fund Flows – Week ending September 7th

     

  • For the week ended September 1st, Lipper U.S. Fund Flows reported an inflow of $2.804b into Corporate Investment Grade Funds (2016 YTD net inflow of $32.901b) and a net inflow of $610.273m from High Yield Funds (2016 YTD net inflow of $10.160b).
  • Over the same period, Lipper reported a net inflow of $318.421m from Loan Participation Funds (2016 YTD net outflow of $4.426b).
  • Emerging Market debt funds reported a net inflow of $51.481mm (2016 YTD inflow of $5.724b).

 

 

New Issue Volume

 

Index Open Current Change
IG26 71.652 76.072 4.42
HV26 164.025 169.835 5.81
VIX 12.51 17.50 4.99
S&P 2,181 2,127 <54>
DOW 18,479 18,085 <394>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $0.00 bn DAY: $0.50 bn
WTD: $52.46 bn WTD: $59.06 bn
MTD: $52.46 bn MTD: $59.06 bn
YTD: $977.978 bn YTD: $1,240.365 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Wholesale Inventories MoM July 0.1% 0.0% 0.0% —-
Wholesale Trade Sales MoM July 0.2% <0.4%> 1.9% 1.7%

 

Rates Trading Lab: The Pain Trade

 

There is a lot of pain out there. Why, you may ask, do we have a steepening curve in the face of hawkish Fed-speak? I say it is partly because the shedding of duration trumps anything that may happen on the curve. As I have said time and again, any change in either the nature or pace of monetary stimulus will first lead to a shedding of duration. After all, it would be difficult to justify adding duration in the face of either a tighter Fed or a less dovish ECB or BOJ. I’m not saying that more restrictive monetary policy will not flatten the curve. Brainard’s speech looms as a potential harbinger of a move sooner rather than later given her traditionally dovish stance. But I do know we have a lot of supply and at least some central bank rhetoric coupled with market concerns over the efficacy of continuing current monetary policy dogma. Add unwinds of risk parity trades in a very illiquid market and you have a lot of longs all heading for the exits at the same time. I will be out of the office until next Friday attending a conference. Have a nice weekend.                                                                              -Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-19 99-27 99-18 99-05+ 98-14+
RESISTANCE LEVEL 99-18 99-23+ 99-11+ 98-28 97-27+
RESISTANCE LEVEL 99-166 99-196 99-07 98-20 97-13+
         
SUPPORT LEVEL 99-152 99-16 99-02 98-12 96-28
SUPPORT LEVEL 99-136 99-142 98-28 98-06 96-15
SUPPORT LEVEL 99-126 99-11+ 98-23+ 98-00+ 95-22

 

Tomorrow’s Calendar

 

o   China Data: Nothing Scheduled

o   Japan Data: Machine Orders, PPI, Machine Tool Orders

o   Australia: Manpower Survey

o   EU Data: GE-Germany Fourth Quarter Manpower Employment Outlook

o   U.S. Data: Nothing Scheduled

o   Supply: U.S. 3y and 10y Note

o   Events: BoE buys 3y-7y Gilts

o   Speeches: Lockhart, Kashkari, Brainard (more…)

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