Browsing articles tagged with "FOMC Archives - Mischler Financial Group"
Equities Markets Beat ’87 Win Streak: “The Higher The Diving Board…?”
February 2017      Equities Market Commentary   

US Stock Prices Record Best Streak of Daily Gains Since Jan 1987; “The Higher The Diving Board, The Bigger The Splash”?

larry-peruzzi-mischler-equitiies

Larry Peruzzi

US Equities markets are closing out the holiday shorten week at or near all-time highs but valuation concerns are starting to pick up. The S&P 500, relative to its 50-day moving average in terms of standard deviations, has not been this overbought since 2004. The Dow recorded its 10th straight new high–its longest winning streak since January 1987. FOMC February 1 meeting minutes showed that the Fed is comfortable with raising interest rates “fairly soon”.

The Fed will meet again and Fed Funds are pricing in a 38% chance of a rate hike, up from 18% pre meeting minutes. Other Economic releases of note was Wednesday’s existing home sales number rising 3.3% which beat the +1.1% estimate. As we approach the end of the earning season we have seen an improvement in the underlying numbers, but for the most part the markets have been rallying on the expectation of tax reductions and deregulation. Market momentum continues but it seems as though many questions from the pace of rate hikes to tax and regulations specifics

 

Need to be answered if the rally is to continue. The Fed did point out that they are closely watching employment and inflation numbers. So while the policy specifics coming from the White House are unorthodox and at time difficult to decipher, the inflation and employment data are a little easier to track. Next week’s highlights are January durable goods orders and pending home sales on Monday, Second revision to 4Q GDP on Tuesday, January personal income and spending, February ISM data and the Beige Book on Wednesday.

 

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch Feb 24 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group. (more…)

What’s Next: FOMC Rate Decision+ 18 Economic Data Releases
December 2016      Debt Market Commentary   

Quigley’s Corner 12.13.16 -Baked In FOMC Rate Decision+ 18 Major Economic Releases

 

Investment Grade New Issue Re-Cap – FOMC Tomorrow and then We’re Back to Zero for the 2017 IG Primary Markets

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending December 7th     

IG Credit Spreads by Rating & Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

No new issues priced today ahead of tomorrow’s all-important FOMC rate decision in which the Fed will likely announce a rate hike of 0.25%. We have no less than 18 major economic data releases tomorrow which should help us read the tea leaves for table-setting come January. The first month of each year is historically a prolific one. January 2017 will be no different. We could see $130-140b price…….and likely more when factoring in SSA issuance! So welcome and enjoy the holiday reprieve while we have it because we’ll be starting all over again and “back to zero” before you can blink in a couple of weeks.

 

Global Market Recap

 

  • S. Treasuries – Closed mixed & flatter. The 30yr auction was well received.
  • Overseas Bonds – Bonds in Europe were very well big. JGB’s closed mixed.
  • 3mth Libor – Set at the highest yield (0.96344%) since May 2009.
  • Stocks – S&P, Dow and NASDAQ traded at all-time times.
  • Overseas Stocks – Europe rallied (banks) & Asia closed with gains.
  • Economic – U.S. small business optimism at a 2-year high.
  • Overseas Economic – Better data in China & Europe. Germany & U.K. CPI remained low.
  • Currencies – USD stabilized after a poor session yesterday.
  • Commodities – Crude oil unchanged. Gold, copper & silver down. CRB small gain.
  • CDX IG: -0.68 to 67.41
  • CDX HY: -4.59 to 353.11
  • CDX EM: -1.92 to 243.65

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index tightened 1 bp to +132 vs. +133.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.26 vs. 1.27.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +172 vs. +173.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.5b on Monday versus $15.7b on Friday and $14.0b the previous Monday.

 

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

 

IG Corporate New Issuance This Week
12/12-12/16
vs. Current
WTD – $2.75b
December 2016
Forecasts
vs. Current
MTD – $38.955b
Low-End Avg. $4.74b 2.75% $40.87b 95.31%
Midpoint Avg. $6.00b 45.83% $41.52b 93.82%
High-End Avg. $7.26b 37.88% $42.17b 92.38%
The Low $0.1b/”0” 2,750.00% $30b 129.85%
The High $10b 27.5% $60b 64.92%

 

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 five 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.
12/12
AVERAGES
WEEK 12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
New Issue Concessions <1.83> bps 4.26 bps 3.53 bps 4.5 bps 3.62 bps
Oversubscription Rates 2.15x 3.68x 3.38x 2.99x 2.78x
Tenors 6 yrs 9.21 yrs 10.84 yrs 12.14 yrs 11.28 yrs
Tranche Sizes $688mm $760mm $711mm $929mm $1,039mm
Avg. Spd. Compression
IPTs to Launch
<15.75> bps <22.24> bps <17.60> bps <16.07> bps <17.69> bps

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.26 1.26 0
IG27 68.095 67.827 <0.268>
HV27 136.005 135.56 <0.445>
VIX 12.64 12.72 0.08  
S&P 2,256 2,271 15
DOW 19,796 19,911 115  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $2.75 bn WTD: $2.75 bn
MTD: $38.955 bn MTD: $44.905 bn
YTD: $1,283.717 bn YTD: $1,623.651 bn

 

Lipper Report/Fund Flows – Week ending December 7th     

     

  • For the week ended December 7th, Lipper U.S. Fund Flows reported an inflow of $2.583b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.047b) and a net inflow of $2.034bm into High Yield Funds (2016 YTD net inflow of $6.973b).

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Yellen Signals Rate Move: Higher; Will Serve Under Trump
November 2016      Debt Market Commentary   

Quigley’s Corner 11.17.16  Yellen Speak Signals What We Know-Higher Rates

 

Investment Grade New Issue Re-Cap 

Capitol Hill Answers Rep. David Young’s Call for “Veterans Crisis Line”

Global Market Recap

Yellen’s Fed About to Raise Rates; Plans to Remain in Trump Administration

The Economic Outlook

Monetary Policy

IG Primary & Secondary Market Talking Points

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

IG Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Well, last evening I wrote, “We do know that both Abbott Labs and Chevron Phillips Chemical Company LLC wrapped their respective investor calls today so they are both clear to “go” from that perspective in terms of issuance.  In the current environment, I’m not so sure issuers want to print sizeable deals on a Friday or hold back jumbo deals over the weekend.  What’s that mean? Simple. Both could price tomorrow in which case we could see a $20bn or more day tomorrow in our IG dollar DCM.  Stay tuned.”  It is now today and both Abbot Labs and Chevron priced deals today along with a $750mm 2-part 5yr FXD/FRN from Keybank.  So, the re-cap shows 3 IG Corporate issuers pricing 9 tranches between them today totaling $16.55b. As a result, we blew past this week’s syndicate midpoint average forecast of $29.45b by 41%. The MTD total now stands at $58.01b or 63% away from the $92.11b syndicate midpoint average November IG Corporate only estimate.

Of note is that typically jumbo M&A related financings attract heftier bid-to-cover or “oversubscription rates” as they are deals that need to get done. It was well telegraphed that Abbott would be downgraded heading into today’s transaction but the consensus was that investors would expect a nice concession considering Abbott’s four notch downgrade. Book sizes were heard to be just under $36b across all 6-tranches which for a $15.1 “no grow” transaction is only a 2.38x bid-to-cover.  Considering that oversubscription rates over the last four weeks have been 4.26x, 3.32x, 2.61x and 3.05x across all of those respective weekly issuances combined, I have to admit it left me wondering if this is, in part, due to starting a bit on the tight side with IPTs along with year-end, a new incoming Administration in Washington and the uncertainty markets might have therein as well as a looming rate hike.  Of course I am not second guessing the timing and would strongly suggest that healthcare has rallied post-Election Day helping to promote Abbott’s issuance.

Helpful in setting the tone for today’s primary markets was the rash of important economic data (scroll to near page bottom for the Economic Date Releases table. Housing Starts MoM outperformed 25.5% against 10.4% expectations as did Building Permits MOM 0.3% vs. <2.7%>.  Initial Jobless Claims fell 22k to 235k vs. 257k estimates and Continuing Claims shed 53k to 1977k vs. 2030k.  All the other numbers were for the most part spot on.

Capitol Hill Answers Rep. David Young’s Call for “Veterans Crisis Line” –
Bill Passes Unanimously in Senate – Now on President Obama’s Desk

I am elated to report here in the “QC” that yesterday U.S. Republican Rep. David Young’s “No Veterans Crisis Line Call Should Go Unanswered Act” that was already passed in the House by a 357-0 vote was given final and unanimous legislative approval in the Senate and is now on its way to the desk of President Barack Obama to be signed into law.  Prior to last evening’s approval, the bill “hit a wall” in the Senate due to the actions of one senior and retiring member.  Harry Reid’s name comes to mind folks! Iowa Congressman Young introduced the legislation in the U.S. House of Representatives earlier this year and South Dakota Senator John Thune introduced a companion version of the legislation in the U.S. Senate.

This is one immediate example of great changes coming to the Beltway.  The Department of Veterans Affairs would have to ensure that all telephone calls and messages received by the crisis hotline are answered in a timely manner under the bill now on its way to the President.  U.S. Rep. David Young a fervent veteran supporter got behind this cause after a report he found in which more than one-third of calls to a hotline for troubled veterans were not being answered by front-line staffers because of poor work habits and other problems. The hotline’s former director said calls frequently rolled over to back-up centers where workers have less training to deal with veterans’ problems. From the get go the sponsor of the bill, Rep. David Young of Iowa, said “A veteran in need cannot wait for help. Our veterans make tremendous sacrifices in defense of our freedoms and liberties and when a veteran is in crisis, they deserve our full support, no exceptions.”

We all look forward to President Obama signing this bill into law without any delays.

Here’s to good people doing great things for veterans on Capitol Hill and a hearty “QC” congratulations to Rep. Young.

 

Global Market Recap

  • S. Treasuries – struggled as the negatives against USTs continue to pile up.
  • Overseas Bonds – BOJ said enough of the sell-off. Bunds better and Gilts were weaker.
  • Stocks – U.S. were higher at 3:15pm. Europe better and Asia closed mixed.
  • Economic – U.S. economic data was tremendous today.
  • Overseas Economic – U.K. retail sales was strong, EU CPI low and the French Unemployment Rate was weaker.
  • Currencies – The USD started slow but rallied big in NY hours. DXY is at its 2003 high.
  • Commodities – Crude oil, gold  and silver were down.
  • CDX IG: -0.25 to 75.01
  • CDX HY: -3.22 to 413.40
  • CDX EM: +4.35 to 274.25

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

-Tony Farren


Yellen’s Fed About to Raise Rates

 

yellen-speaks-signals-higher-rates-trump-mischlerThis morning Fed Chair Janet Yellen spoke before the Joint Economic Committee at the U.S. Congress.

Here’s what you need to know in her own words:

  • Yellen says, “rate hike could be appropriate relatively soon.”
  • Says, “U.S. economy made more progress toward the Fed’s goals.”
  • FOMC judged rate hike case continued to strengthen.
  • Delaying hikes too long could mean tightening faster.
  • Keeping rates on hold could spur excess risk-taking.
  • Economy to warrant only gradual rate increases.
  • Stance of policy only moderately accommodative.
  • Risk of falling behind curve appears limited.
  • FOMC judged risks to outlook roughly balanced.
  • S. economic growth picked up from subdued pace.
  • Expects economic growth to continue at a “moderate pace.”
  • Stable unemployment gives economy “a bit more” room to run.
  • There appears to be scope for some more labor-market gains.
  • Cites signs that wage growth pace has risen recently.
  • Says inflation to move to 2% as labor market improves.
  • Inflation increased somewhat since earlier this year.
  • Housing fundamentals are favorable for a pickup.
  • Consumer spending is moderate, business investment is soft.

 

…….and here is Yellen’s complete Testimony:

Chair Janet L. Yellen

The Economic Outlook

Before the Joint Economic Committee, U.S. Congress, Washington, D.C.

November 17, 2016

 

Chairman Coats, Ranking Member Maloney, and members of the Committee, I appreciate the opportunity to testify before you today. I will discuss the current economic outlook and monetary policy.

 

The U.S. Economic Outlook

The U.S. economy has made further progress this year toward the Federal Reserve’s dual-mandate objectives of maximum employment and price stability. Job gains averaged 180,000 per month from January through October, a somewhat slower pace than last year but still well above estimates of the pace necessary to absorb new entrants to the labor force. The unemployment rate, which stood at 4.9 percent in October, has held relatively steady since the beginning of the year. The stability of the unemployment rate, combined with above-trend job growth, suggests that the U.S. economy has had a bit more “room to run” than anticipated earlier. This favorable outcome has been reflected in the labor force participation rate, which has been about unchanged this year, on net, despite an underlying downward trend stemming from the aging of the U.S. population. While above-trend growth of the labor force and employment cannot continue indefinitely, there nonetheless appears to be scope for some further improvement in the labor market. The unemployment rate is still a little above the median of Federal Open Market Committee (FOMC) participants’ estimates of its longer-run level, and involuntary part-time employment remains elevated relative to historical norms. Further employment gains may well help support labor force participation as well as wage gains; indeed, there are some signs that the pace of wage growth has stepped up recently. While the improvements in the labor market over the past year have been widespread across racial and ethnic groups, it is troubling that unemployment rates for African Americans and Hispanics remain higher than for the nation overall, and that the annual income of the median African American household and the median Hispanic household is still well below the median income of other U.S. households.

Meanwhile, U.S. economic growth appears to have picked up from its subdued pace earlier this year. After rising at an annual rate of just 1 percent in the first half of this year, inflation-adjusted gross domestic product is estimated to have increased nearly 3 percent in the third quarter. In part, the pickup reflected some rebuilding of inventories and a surge in soybean exports. In addition, consumer spending has continued to post moderate gains, supported by solid growth in real disposable income, upbeat consumer confidence, low borrowing rates, and the ongoing effects of earlier increases in household wealth. By contrast, business investment has remained relatively soft, in part because of the drag on outlays for drilling and mining structures that has resulted from earlier declines in oil prices. Manufacturing output continues to be restrained by the weakness in economic growth abroad and by the appreciation in the U.S. dollar over the past two years. And while new housing construction has been subdued in recent quarters despite rising prices, the underlying fundamentals–including a lean stock of homes for sale, an improving labor market, and the low level of mortgage rates–are favorable for a pickup.

Turning to inflation, overall consumer prices, as measured by the price index for personal consumption expenditures, increased 1-1/4 percent over the 12 months ending in September, a somewhat higher pace than earlier this year but still below the FOMC’s 2 percent objective. Much of this shortfall continues to reflect earlier declines in energy prices and in prices of non-energy imports. Core inflation, which excludes the more volatile energy and food prices and tends to be a better indicator of future overall inflation, has been running closer to 1-3/4 percent.

With regard to the outlook, I expect economic growth to continue at a moderate pace sufficient to generate some further strengthening in labor market conditions and a return of inflation to the Committee’s 2 percent objective over the next couple of years. This judgment reflects my view that monetary policy remains moderately accommodative and that ongoing job gains, along with low oil prices, should continue to support household purchasing power and therefore consumer spending. In addition, global economic growth should firm, supported by accommodative monetary policies abroad. As the labor market strengthens further and the transitory influences holding down inflation fade, I expect inflation to rise to 2 percent.

Monetary Policy

I will turn now to the implications of recent economic developments and the economic outlook for monetary policy. The stance of monetary policy has supported improvement in the labor market this year, along with a return of inflation toward the FOMC’s 2 percent objective. In September, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent and stated that, while the case for an increase in the target range had strengthened, it would, for the time being, wait for further evidence of continued progress toward its objectives.

At our meeting earlier this month, the Committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee’s objectives. This judgment recognized that progress in the labor market has continued and that economic activity has picked up from the modest pace seen in the first half of this year. And inflation, while still below the Committee’s 2 percent objective, has increased somewhat since earlier this year. Furthermore, the Committee judged that near-term risks to the outlook were roughly balanced.

Waiting for further evidence does not reflect a lack of confidence in the economy. Rather, with the unemployment rate remaining steady this year despite above-trend job gains, and with inflation continuing to run below its target, the Committee judged that there was somewhat more room for the labor market to improve on a sustainable basis than the Committee had anticipated at the beginning of the year. Nonetheless, the Committee must remain forward looking in setting monetary policy. Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee’s longer-run policy goals. Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.

The FOMC continues to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability. This assessment is based on the view that the neutral federal funds rate–meaning the rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel–appears to be currently quite low by historical standards. Consistent with this view, growth in aggregate spending has been moderate in recent years despite support from the low level of the federal funds rate and the Federal Reserve’s large holdings of longer-term securities. With the federal funds rate currently only somewhat below estimates of the neutral rate, the stance of monetary policy is likely moderately accommodative, which is appropriate to foster further progress toward the FOMC’s objectives. But because monetary policy is only moderately accommodative, the risk of falling behind the curve in the near future appears limited, and gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years.

Of course, the economic outlook is inherently uncertain, and, as always, the appropriate path for the federal funds rate will change in response to changes to the outlook and associated risks.

Thank you.

The conclusion is clear: No more lower-for-longer; interest rates headed higher.

…………..be ready.

IG Primary & Secondary Market Talking Points

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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…)

Fixated on FOMC; Debt Markets Waiting On Latest Update-Mischler Comment
July 2016      Debt Market Commentary   

Quigley’s Corner 07.26.16: Managers Fixated on FOMC

 

Investment Grade New Issue Re-Cap

Global Market Recap

 IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Credit Spreads (by Rating/Industry)

IG Secondary Market Trading Lab

New Issue Pipeline

Economic Data Releases

Rates Trading Lab

M&A Pipeline

 

We had 5 IG Corporate issuers tap the dollar DCM today pricing 6 tranches between them totaling $5.1b.  Today’s big transaction was Citigroup’s $2.5b 2-part 5-year FXD/FRN that priced with no concession.  In the SSA space, NIB added its expected $1b 5-year boosting the all-in day totals to 6 issuers, 7 tranches and $6.1b.

The IG Corporate-only WTD total is now $12.2b or 63% of this week’s syndicate midpoint average forecast calling for $20.48b.

We expect a quiet Wednesday session ahead of tomorrow’s 2:00pm FOMC Rate Decision Statement only.  As our own rates guru, Tony Farren shared with me today, “I expect the FOMC Statement to lean dovish with a message that the Fed is data dependent with an eye on international developments (Brexit, Europe, Japan, China, etc). My call for the FOMC rate hikes in 2016 is zero to one hike. I think the FOMC wants to get in a least one rate hike this year but to do it, the stars really have to align.  Tomorrow is a Statement only meeting.  We’ll have to wait until the September 20/21st meeting for the next Projections and Press Conference.  Following tomorrow’s FOMC, focus will shift to the BOJ Meeting. The BOJ Statement is released Thursday night.”

 

Global Market Recap

 

  • S. Treasuries – Weak 5yr auction. Closed mixed & little changed but had a solid afternoon rally.
  • 3mth Libor – You guessed it another high yield since May 2009 (0.74300%).
  • Stocks – U.S. stocks are mixed & little changed but staged a solid rally off the lows of the day.
  • Overseas Stocks – Europe closed mixed. China had a solid rally & the Nikkei traded poorly.
  • Economic – U.S. economic data was mixed.
  • Currencies – Strong day for the Yen. The Euro & Pound closed little changed.
  • Commodities – Crude down but closed well above the day’s low price. Bad day for wheat.
  • CDX IG: +1.11 to 74.56
  • CDX HY: +5.84 to 401.32
  • CDX EM: +4.91 to 260.97

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

-Tony Farren

 

IG Primary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate new issues only was 12.2 bps.
  • The spread compression from IPTs to the launch/final pricing across today’s 6 IG new issues – including the split-rated $25 PerpNC5 for Capital One – was 14.125 bps.

 

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

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $12.20b
July 2016 vs. Current
MTD – $80.95b
Low-End Avg. $19.39b 62.92% $90.09b 89.85%
Midpoint Avg. $20.48b 59.57% $91.17b 88.79%
High-End Avg. $21.57b 56.56% $92.26b 87.74%
The Low $10b 122.00% $60b 134.92%
The High $30b 40.67% $125b 64.76%

 

 

Have a great evening!
Ron

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