Browsing articles tagged with "IG Credit Spreads Archives - Mischler Financial Group"
Investment Grade Debt Commentary–Credit Tightening, Investor Appetite Voracious
May 2017      Debt Market Commentary   

Quigley’s Corner 05.12.17 – Credit Tightening, Investor Appetite Voracious

 

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates This Week and May

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

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending May 10th         

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

 

What to do on a no-print Friday in the IG dollar DCM?  Well, how about speaking with the top 24 syndicate desks who underwrite over 80% of all debt issued in our market for starters?  I did just that as is done here in the “QC” each and every Friday.  Next week looks like a very robust one with sizeable upside potential. One syndicate guru noted we could see $40b next week and $150b for the month.  What your corner seer can tell you is that I wrote the following here in the “QC” on Friday April 28th, 2017:

“It’s a weary world folks! However, the good news is that U.S. Corporations are an anomaly. They’re doing just fine and foreign investment into the safe haven of” yieldier” investment grade rated products is immense and growing.  I expect a very robust May of $150-ish of all-in (IG Corporate plus SSA issuance).  Credit is grinding tighter and ……investor appetite is voracious……especially coming off such a noticeably slow April that ended on a high note. So, issuers line up!  Bankers man your stations and syndicate managers get ready because the best story in our world is Corporate America.”

The IG Corporate-only total for May is currently $72.638b and the all-in Corporate plus SSA total is $80.083b.  We have two solid weeks to go in May and if we repeat what we’ve done thus far – along with next week’s upside potential – I do think we hit $150b.  Now wouldn’t that be something…..AGAIN! But why listen to little ‘ole me when all those prestigious professionals manning their respective syndicate desks at the world’s biggest investment banks are patiently waiting for you to run through my recaps and move on to their numbers and thoughts for next week’s IG corporate issuance? They’re all there.  Hurry up and get to it because it’s Friday and people have places to go and people to see.

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 and Head of Fixed Income Syndicate

 

Today’s IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index tightened 1 bp to +118 vs. +119.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.12 versus 1.13.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +161.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.9b on Thursday versus $19.8b on Wednesday and $17b the previous Thursday.
  • The 10-DMA stands at $16.9b.

 

Syndicate IG Corporate-only Volume Estimates This Week and May

 

IG Corporate New Issuance This Week
5/08-5/12
vs. Current
WTD – $33.67b
May 2017
Forecasts
vs. Current
MTD – $72.638b
Low-End Avg. $30.54b 110.25% $122.27b 59.41%
Midpoint Avg. $31.37b 107.33% $123.42b 58.85%
High-End Avg. $32.21b 104.53% $124.56b 58.32%
The Low $25b 134.68% $100b 72.63%
The High $41b 82.12% $150b 48.43%

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  19 of those participants are among 2017’s YTD top 20 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  22 are in the top 25 of that same table. The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.91% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

 As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years! That’s 2014, 2015 and 2016…

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was framed as follows:

 
Here are this week’s IG new issue volume talking points:

 

  • The IG Corporate WTD total is now over 10% above this week’s syndicate midpoint average forecast or $33.67b vs. $31.37b.
  • MTD we’ve priced more than 58% of the syndicate projection for May or $72.63b vs. $123.42b.
  • The all-in MTD total (IG Corporates plus SSA) currently stands at $80.038b.
  • This week we breached the half trillion dollar mark for YTD IG Corporate-only issuance.
  • The YTD IG Corporate only volume is now $515.42b which is 7.22% more than a year ago to date.
  • YTD we priced $687.656b of all-in IG Corporate and SSA issuance which is 2.84% more than last year’s total at this point.

Here are this week’s five key primary market driver averages from the 42 IG Corporate-only deals that priced: 

o   NICS:  <0.20> bps

o   Oversubscription Rates: 2.72x

o   Tenors:  8.66 years

o   Tranche Sizes: $802mm

o   Spread Compression from IPTs to the Launch: <19.51> bps


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

  • Average NICs widened 0.20 bps this week to <0.2). vs. <0.40>.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased 1.07x to 2.72x vs. 3.79x. 
  • Average tenors dramatically contracted by 3.28 years to 8.66 years vs. 11.94 years.
  • Tranche sizes decreased by $16mm to $802mm vs. $818mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 42 IG Corporate-only new issues tightened <1.87> bps to <19.51> bps vs. <17.64> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 1 bp to +161 vs. +162.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 3 bps to 1.12 vs. 1.15. 
  • Week-on-week, BAML’s IG Master Index tightened by 3 bps to +118 vs. +121. 
  • Spreads across the four IG asset classes tightened 3.00 bps to 12.25 vs. 15.25 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors also tightened by 2.53 bps to 16.79 bps vs. 19.32 bps against their post-Crisis lows.
  • For the week ended May 10th, Lipper U.S. Fund Flows reported an inflow of $2.701b into Corporate Investment Grade Funds (2017 YTD net inflow of $51.877b) and a net outflow of $1.725m from High Yield Funds (2017 YTD net outflow of $6.091b).
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 46 deals that printed, 34 tightened versus NIP for a 74.00% improvement rate while 8 widened (17.50%) and 4 were flat (8.50%).

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

  • IG Corps: $33.67b
  • All-in IG (Corps + SSA): $39.42b

 

We’re in the midst of a Trump Slump. Former-FBI Chief Comey was fired by Trump despite the ongoing “From Russia With Love” investigation.  Russian Foreign Minister Lavrov is then invited into the Oval Office the next day while U.S. press is barred from the room. (Who will be sweeping the office for bugs and other devices?) You can’t make this stuff up folks.  There is a 100% chance of a June rate hike. North Korea continues to threaten its sixth nuclear test.  The French election is now behind us, but the new young President of Gaul has his hands full while Le Pen rebuilds, renames and rebrands her National Front Party with an eye on 2022.  The best story going, however, continues to be very strong U.S. corporate earnings as IG credit spreads grind tighter and tighter offering issuers great opportunities to print NOW!
 

The “Best and the Brightest” in Their Own Words

 

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

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Week’s IG Corporate Bond Issuance: Cooling Off Period; April Showers Bring May Flowers
April 2017      Debt Market Commentary   

Quigley’s Corner 04.21.17; This Week: A Cooling-Off for New IG Corporate Bond Issuance; April Showers Bring May Flowers!

 

Investment Grade New Issue Re-Cap – Back-to-Back Blanks for the IG Dollar DCM

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

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for Next Week

Indexes and New Issue Volume

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending April 19th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

What with the French Election this Sunday combined with today being a Friday session there was no new issuance to speak of in the IG dollar DCM. That’s now two consecutive days without IG issuance.  I was out for two Fridays so, today is the first “Best & Brightest” edition since March 31st.  Next week looks to be a relatively subdued one given continued blackouts and the fact that most all the big FIGs have already issued.  As corporates exit and Treasuries rally with yields set to pull down further, all this leads up to what should be a VERY ROBUST May.  The average for next week across the top 24 syndicate desks surveyed is $19.46b.  The high was one desk that thinks we’ll see $30b and the low came from two desks that both said $10-15b or an average of $12.5b. But why let me tell you?  I’m here for them. Please allow me to introduce you to the people who price YOUR deals.  They’re all waiting below with their numbers and thoughts for next week’s IG Corporate issuance.  So, without further ado folks…..let’s get to it!

Please remember to read the bold italicized question I posed to the Best & the Brightest as it contains this week’s complete data download that should be helpful to you.

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  19 of those participants are among 2017’s YTD top 20 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. 22 are in the top 25 in that same table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 82.36% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

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

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was prefaced as follows:

“Good morning and Happy Friday!

First, here are this week’s IG new issue volume talking points:

  • The U.S. six-pack banks posted overall positive earnings. This week five of those for banks – ex-GS who did not yet print – represented 59% of this week’s IG Corporate issuance or $14.75b vs. $25.04b.
  • MTD we’ve priced 63.6% of the syndicate IG Corporate mid-range projection for April or $58.192b vs. $91.50b.
  • The all-in MTD total (IG Corporates plus SSA) now stands at $69.092b.
  • The YTD IG Corporate only volume is now $451.277b.
  • YTD we have officially priced $575.243b in all-in IG Corporate and SSA issuance.

Here are this week’s five key primary market driver averages from the 21 IG Corporate-only deals that priced:

  • NICS:  3.57 bps
  • Oversubscription Rates: 2.00x
  • Tenors:  6.10 years
  • Tranche Sizes: $1,138mm
  • Spread Compression from IPTs to the Launch: <14.73> bps


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

  • Average NICs widened 3.11 bps this week to 3.57 bps vs. 0.46 bps.
  • Over subscription or bid-to-cover rates, the measure of demand, reduced by1.48x to 2.00x vs. 3.48x. 
  • Average tenors shortened by a meaningful 4.04 years to 6.10 years vs. 10.14 years.
  • Tranche sizes increased by $347mm to $1,138mm vs. $791mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 22 IG Corporate-only new issues widened 4.58 bps to <14.73> bps vs. <19.31> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 2 bps to +165 vs. +163.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 2 bps to 1.19 vs. 1.17. 
  • Week-on-week, BAML’s IG Master Index widened by 3 bps to +125 vs. +122. 
  • Spreads across the four IG asset classes widened 2bps to 18.00 bps vs. 16.00 bps as measured against their post-Crisis lows.. 
  • The 19 major industry sectors also widened by 3.53 bps to 23.16 vs. 19.63 also against their post-Crisis lows.
  • For the week ended April 19th, Lipper U.S. Fund Flows reported an inflow of $1.446b into Corporate Investment Grade Funds (2017 YTD net inflow of $43.426b) and a net outflow of $362.223m from High Yield Funds (2017 YTD net outflow of $4.271b).
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 22 deals that printed, 14 tightened versus NIP for a 63.75% improvement rate while 6 widened (27.25%) and 2 were flat (9.00%).

 

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

  • IG Corps: $25.04b
  • All-in IG (Corps + SSA): $25.54b

This Sunday is the first round of the French presidential election.  Congress returns to work on Monday in the continuing saga of Dysfunction Junction to address the debt ceiling, another rumored stab at repealing and replacing Obama Care, and any signs of tax reform. According to a very high end military official, the Korean peninsula has now reached  its most intense point since the Korean War.  Syria, Turkey, Russia loom large and a terror event that took place last evening in Paris, resulting in the death of a police officer in the heart of the city, are some of the major global event risk factors playing out in our inextricably global-linked world economy. 

Please let me know your thoughts and numbers for next week’s IG Corporate new issue volume.  Thank you in advance for your time. 

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

 

Below please find the replies to this week’s QC canvass of fixed income syndicate bookrunners and 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.

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Distilling Yellen Comments; Mischler ROTC Cadet Thought-Leadership Sound Off
December 2016      Debt Market Commentary   

Quigley’s Corner 12.14.16 FOMC  Talking Points; UCLA ROTC Cadet Chamberlain On Leadership

 

Investment Grade New Issue Re-Cap – Fed Raises Rates 0.25bps to a Range of 0.50% to 0.75

Global Market Recap

FOMC Statement Key Talking Points

The FOMC Statement Comparison – December 14th vs. November 2nd

IG Primary & Secondary Market Talking Points

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

“At What Point Do Rising Rates Derail the New Issue Market?”

Mischler’s Favorite Army Cadet On Leadership ; UCLA ROTC Rachel Chamberlain Sounds Off

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

 Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

New Issue Pipeline

M&A Pipeline    

 

As expected issuers stood down today in the face of the session’s all-important FOMC Rate Decision combined with the quiet holiday period we are in.  That’s not to say we don’t see some very limited issuance tomorrow however, before markets truly shut-down for the holidays.

I have a LOT for all of you today. Up top are the New Issue Re-Cap followed by Tony’s Global Market Re-Cap.  Then the fun starts. Trust me it’s good.

First up are today’s FOMC Talking Points or the things you want and need to know. Then we transition into Janet Yellen’s comments titled “In Yellen’s Own Words” as made in the post decision Q&A.  It is in depth and highlights those key points.  In order to present a bit more granularity I have the FOMC statement strikethrough comparison versus last November’s statement.  It’s the best way to illustrate what new language was added in – highlighted in yellow – and what old language was dropped – strikethroughs in red.  It takes time to put that into this format but it’s well worth it for you.

Always saving the best for last, I have a special piece for you all this evening that speaks to Mischler, it’s SDVBE certification and the wonderful story of our CEO’s daughter, Rachel who accepted an Army ROTC scholarship to UCLA.  It’s an essay on “Leadership” written in her own words and I would appreciate it if all you loyal readers give it particular attention that this evening.  It’s very reassuring folks.

 

Global Market Recap

 

  • FOMC Day – I am shocked the FOMC is already drinking the Trump Kool-Aid.
  • S. Treasuries USTs were hammered after the FOMC was more hawkish than expected.
  • Overseas Bonds – Long end led rallies in JGB’s, Bunds, Gilts & EU semi core.
  • 3mth Libor – Set at highest yield (0.97039%) since May 2009.
  • Stocks – U.S. stocks did not react well to the FOMC.
  • Overseas Stocks – Europe closed in the loss column. Nikkei unchanged & China red.
  • Economic – Weaker U.S. data with higher inflation but the FOMC was the story.
  • Currencies – Big rally for the USD after the FOMC.
  • Commodities – headed south after the FOMC.
  • CDX IG: +0.88 to 68.71
  • CDX HY: +4.81 to 360.60
  • CDX EM: -0.99 to 242.65

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

-Tony Farren

 

FOMC Statement Key Talking Points

 

  • Fed raises rates by 25 bps, repeats gradual policy path plan.
  • Increases Federal Funds rate target range to 0.5%-0.75%.
  • Raises Discount Rate to 1.25% from 1.0%.
  • Repeats “risks to the outlook appear roughly balanced.”
  • FOMC’s policy is supporting “some further strengthening” on goals.
  • Says labor markets continued to strengthen, growth moderate.
  • Market-based inflation compensation gauges are up considerably.
  • Repeats survey-based inflation expectations are little changed.
  • Says spending is rising moderately, investment stayed soft.
  • Maintains its balance sheet reinvestment policy.
  • Says FOMC vote was “unanimous.”
  • Officials see three 2017 rate hikes vs. two in September dots.
  • Officials see three 2018 rate hikes, unchanged vs. September dots.
  • The New York FED expects around $2 trillion in Treasuries are available for reverse repurchase operations.

 

In Yellen’s Own Words:

 

fed-awakens-FOMC-mischler-comment

Janet Yellen

 

  • Yellen: “Rate hike is a reflection of confidence in economic progress.”
  • I do not judge that we are behind the curve.
  • Says the FOMC is recognizing the considerable progress of the economy.
  • Changes in fiscal policy could impact the economic outlook.
  • Not trying to provide advice to the new administration.
  • Fed staff have been in touch with the Trump transition team.
  • Some participants included changes in fiscal policy.
  • Declines to say how Fed policy is impacted by fiscal change.
  • Don’t want to speculate until we know more details.
  • Investors anticipate expansionary fiscal policy.
  • Never said that I favor running a high-pressure economy.
  • Fiscal boost not obviously needed for full employment.
  • FOMC judged the course of the U.S. economy to be strong.
  • Policy remains accommodative to a moderate degree.
  • Economic outlook is highly uncertain.
  • Repeats that Fed policy isn’t on a pre-set course.
  • Shift in the dot plot is a “very modest adjustment.”
  • Shift involves changes by only some Fed participants.
  • Expect economy will warrant only gradual rate increases.
  • Fed funds rate is only modestly below neutral rate.
  • Neutral rate is quite low by historic standards.
  • Fed officials see moderate growth over the next few years.
  • Inflation has moved closer to our longer-term goal.
  • Expect overall inflation to rise to 2% over a couple of years.
  • We remain committed to our 2% inflation objective.
  • We will carefully monitor actual/expected inflation progress.
  • Says broader measures of labor slack have moved lower.
  • Expects job conditions will strengthen somewhat further.
  • Tax policy changes could boost productivity and investment.
  • Repeats that the Fed will shrink its balance sheet over time
  • Will take several years to allow its balance sheet to run off.
  • Don’t want to comment on level of stock prices.
  • Must take the debt-to-GDP ratio into account.
  • Important to reduce the regulatory burden on smaller banks.
  • Broad agreement that we should end “too big to fail.”
  • Don’t roll back progress made on making banks safer.
  • I intend to serve out my four-year term.

 

The FOMC Statement Comparison – December 14th vs. November 2nd

 

On Wednesday, November 2nd, the date of the last FOMC I wrote here in the “QC” that the key takeaway was that the Fed WILL raise rates in December “IF” things remain relatively stable over the next 6 weeks.  The major support for that November statement was:

“Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further.”  …………..Remember the Fed’s all-important 2% inflation target! It is pretty clearly laid out for us right there!

Well today, true to the projection, the Fed raised both its upper and lower bound rates 0.25% to 0.75% and 0.50% respectively. The FOMC also noted that it likely sees three rate hikes in 2017 vs. the consensus two.  However, projecting a year’s worth of rate hikes in a year in advance is like forecasting new issue volume for the year. There are simply way too many global event risk factors that can and will influence rate decisions, let alone across the span of one full year.  So, take the three hike statement with a massive grain of salt. We have a new Administration taking over the Beltway on January 20th that certainly leans aggressively on the economic front but the Fed may be playing on the projected success of Trump’s plans to “Make America Great Again.”  Time will tell.

 
Strikethrough Comparison of today’s FOMC Statement

Here it is.  Red crossed out represent deletions and yellow highlights reflect today’s new added language.

Information received since the Federal Open Market Committee met in September November indicates that the labor market has continued to strengthen and growth of that economic activity has picked up from the modest been expanding at a moderate pace seen in the first half of this since mid-year. Job gains have been solid in recent months and the unemployment rate has declined. Household spending has been rising moderately but business fixed investment has remained soft. Inflation has increased somewhat since earlier this year but is still below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation have moved up considerably but remain still are low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

 

Against this backdrop In view of realized and expected labor market conditions and inflation, the Committee decided to maintain raise the target range for the federal funds rate at 1/4 to 1/2 to 3/4 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting some further improvement strengthening in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action were: Esther L. George and Loretta J. Mester, each of whom preferred at this meeting to raise the target range for the federal funds rate to ½ to ¾ percent.

[Implementation Note issued November 2 December 14, 2016]

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s X IG Corporate-only new issues was XX.XX bps.
  • BAML’s IG Master Index tightened 1 bp to +131 vs. +132.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.25 vs. 1.26.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +171 vs. +172.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.3b on Tuesday versus $16.5b on Monday and $20.1b the previous Tuesday.

 

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%

 

“At What Point Do Rising Rates Derail the New Issue Market?”

 

fed-funds-rate-history-image-credit-bob-rich-hedgeye-mischler

image courtesy of Bob Rich, Hedgeye Risk Mgt

 

I was asked that very question from a buy side account late last week.  We had a nice weekend conversation about it.  The account in question pointed out that “Disney has issued 10-year notes at 1.85% and CSX at 2.35%…..municipalities are going to cut down on refinancings and while the 10-year is hovering at key support levels, 5s and 2s are at 5-year highs.   Meanwhile we have a President-elect talking about 3-4% GDP.”

 

Here’s my take –

Rates are at historically low levels and after today they will still remain there.  January is always a robust issuance month and January 2017 will be no different. In fact, including SSA issuance we may likely see $150b-160b next month.  Near term rates, propelled by Trump’s surprise victory, got some smaller issuers off the fence who did not want to contend with the crowd and rush to print in January – which again, is historically busy. Long-term, however, there are growing material problems and global event risk factors in the world.  Some are BIG and some are potentially very BAD.  The EU will likely dismantle and have recently returned to their “kick-the-can” mentality. Following today’s Fed rate hike, the FOMC will immediately return to the snail’s pace of interest rate hikes with the present consensus calling for 2 hikes in 2017 which is a defacto return to “lower-for-longer” in a historical context.  There will be many speed bumps in the road ahead but Trump’s first 200 days will implement change quickly. I personally think we continue to see very robust issuance in 2017.  I do not like and am not a fan of taking annual projections. Next week?  Of course!  Next month?  Also a good reason to project. But for an entire year? I mean who really knows?  There are too many events in the world that can dampen issuance.

Assuming the incoming Administration succeeds in implementing change, markets will reflect that.  We live in an inextricably linked global economy in which what happens in the South China Seas, or in MENA, or in Europe, for example and to name a mere few events, has impact here in the U.S.  European investors and high net worth for example, are beginning to disregard exchange rate risk with the dollar that is closing in on parity with the Euro. That European money has consistently displayed quick flight into better rated dollar-denominated credit products and equities.  To say it is an immense amount of money is an understatement.  The more the EU “kicks-the-can” the more it is postponing the inevitable and the quicker we’ll see that money invested here.  That alone will help keep a lid on rates to a degree…….and that’s just one way of the many ways a return to our nation’s historically low interest rate environment will manifest itself in 2017.

 

If a picture is worth a thousand words well, this best captures the 2017 interest rate environment:

rate-hike-mischler-hedgeye

image courtesy of Bob Rich for Hedgeye

image courtesy of Bob Rich for Hedgeye Risk Management

 

Relax!……..I mean really c’mon folks. Pull yourselves together!

 

 

 

Mischler’s Favorite Army Cadet On Leadership

Rachel Chamberlain is a 2016 graduate of Greenwich High School, and was one of two graduates to accept an Army ROTC scholarship. Rachel is currently pursuing a pre-medical neuroscience major at the University of California, Los Angeles. She was awarded a 3.5 year Army ROTC scholarship. Rachel is an Army cadet in the “Bruin Batallion”.

During her first semester as an Army ROTC cadet, Rachel, like all of her battalion buddies, was asked to write about leadership qualities that she observes and experiences throughout her initial cadet training. I thought it a wonderful value-added piece for you.  It’s insightful while dually addressing Mischler’s commitment to bring you yet another innovative piece on diversity and inclusion.  Not only is Mischler the nation’s oldest Service Disabled Veteran broker dealer but it’s CEO and certified SDV, Dean Chamberlain has a very bright daughter carrying on a wonderful family military tradition. So, I proudly present for your reading pleasure Rachel Chamberlain’s essay on leadership.

 

“Leadership” by Rachel Chamberlain

 

Brisk wind screamed in my ears as they were filled with the sound of panting and sneakers thumping on the ground. I wiped sweat from my forehead with the back of my hand, then moved my arms back into the brisk rhythm of my strides. It was the middle of our 2nd perimeter, and I was hurtling down Hilgard Avenue alongside my two battle buddies. “Halfway done- keep it up guys!” yelled one buddy. We all pushed through the run together, encouraging each other whenever one of us started to fall back. The run was draining, and as the final steep uphill came into sight, all energy and drive left my body- my legs came to a crawling jog and my posture slumped as I tried to make it up the hill. Had I been running on my own, I would have continued my steady tread up the slope. However, my cadet peers knew that I could do better; I was letting myself off easy because I was exhausted but I would ultimately benefit more both mentally and physically if I could dig up the energy for a strong finish. “Rachel, you’ve got this”, “You’re faster than this, come on push it! Almost there.”, “We’ve got this.” I absolutely did not want to “push it” at this moment, but their words triggered a burst of energy in me and we picked it up until we reached Drake Stadium.

“Ultimately, leadership is not about glorious crowning acts. It’s about keeping your team focused on a goal and motivated to do their best to achieve it, especially when the stakes are high and the consequences really matter. It is about laying the groundwork for others’ success, and then standing back and letting them shine.” (an excerpt from Chris Hadfield’s, retired Astronaut, ‘An Astronaut’s Guide to Life on Earth’). Instead of using all their energy to sprint independently to the stadium, my buddies stayed back and made sure that I was doing my “best to achieve” my potential; they displayed leadership the moment that they “stood back” and let me “shine”. The workout wasn’t significantly important, yet the temporary display of selfless leadership indicated the beginning of the fulfillment of cadet responsibility.

UCLA-ROTC-Cadet-Chamberlain

Team Mischler’s Favorite Army Cadet Rachel Chamberlain (front row left) with the rest of “Bruin Battalion”

 

 

rotc-cadet-rachel-chamberlain

Mischler’s Very Own ROTC Cadet Rachel “Private Benjamin” Chamberlain (left)

Now those are some UCLA Bruins who make it easy for this USC Trojan to salute.

Fight On!

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/12
TUES.
12/13
WED.
12/14
AVERAGES
WEEK 12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
New Issue Concessions <1.83> bps N/A N/A 4.26 bps 3.53 bps 4.5 bps 3.62 bps
Oversubscription Rates 2.15x N/A N/A 3.68x 3.38x 2.99x 2.78x
Tenors 6 yrs N/A N/A 9.21 yrs 10.84 yrs 12.14 yrs 11.28 yrs
Tranche Sizes $688mm N/A N/A $760mm $711mm $929mm $1,039mm
Avg. Spd. Compression
IPTs to Launch
<15.75> bps N/A N/A <22.24> bps <17.60> bps <16.07> bps <17.69> bps

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.25 1.25 0
IG27 67.827 69.43 1.603
HV27 136.56 139.86 3.30
VIX 12.72 13.19 0.47
S&P 2,271 2,253 <18>
DOW 19,911 19,792 <119>
 

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).
  • Over the same period, Lipper reported a net inflow of $1.761b into Loan Participation Funds (2016 YTD net inflow of $2.322b).
  • Emerging Market debt funds reported a net outflow of $1.005b (2016 YTD inflow of $4.738b).

 

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 23.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/13 12/12 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 1-Day Change 10-Day Trend PC
low
IG Avg. 131 132 133 133 134 134 135 135 135 136 <1> <5> 106
“AAA” 74 75 75 75 75 75 75 75 75 75 <1> <1> 50
“AA” 81 82 81 82 82 82 82 83 83 84 <1> <3> 63
“A” 105 106 106 106 106 107 107 107 107 108 <1> <3> 81
“BBB” 168 170 170 171 172 172 173 174 174 175 <2> <7> 142
IG vs. HY 289 293 295 305 308 316 323 329 327 331 <4> <42> 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 28.95 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/13 12/12 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 1-Day Change 10-Day Trend PC
low
Automotive 121 121 121 121 121 121 121 122 122 123 0 <2> 67
Banking 122 124 123 124 124 125 125 126 125 125 <2> <3> 98
Basic Industry 169 170 170 172 173 174 175 176 175 177 <1> <8> 143
Cap Goods 99 99 99 99 100 100 100 101 101 102 0 <3> 84
Cons. Prod. 107 108 109 109 109 109 109 110 109 110 <1> <3> 85
Energy 166 168 170 172 173 174 175 177 177 180 <2> <14> 133
Financials 152 153 152 153 154 154 155 155 154 155 <1> <3> 97
Healthcare 117 117 117 117 117 117 118 118 118 119 0 <2> 83
Industrials 133 134 135 135 136 136 137 137 137 139 <1> <6> 109
Insurance 144 145 145 146 146 146 146 147 146 147 <1> <3> 120
Leisure 134 135 135 135 134 134 135 135 135 135 <1> <1> 115
Media 158 159 157 158 158 159 159 160 159 161 <1> <3> 113
Real Estate 143 144 143 143 143 143 144 144 144 144 <1> <1> 112
Retail 112 114 114 115 115 116 116 116 116 117 <2> <5> 92
Services 125 127 127 127 127 128 128 128 128 128 <2> <3> 120
Technology 107 108 108 109 109 110 110 110 110 112 <1> <5> 76
Telecom 161 163 163 163 164 165 165 166 165 166 <2> <5> 122
Transportation 130 131 131 132 133 135 135 135 135 136 <1> <6> 109
Utility 132 133 133 134 135 135 135 136 135 135 <1> <3> 104

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications Dec. 9 —- <0.4%> <0.7%> —-
Retail Sales Advance MoM November 0.3% 0.1% 0.8% 0.6%
Retail Sales Ex Auto MoM November 0.4% 0.2% 0.8% 0.6%
Retail Sales Ex Auto MoM and Gas November 0.4% 0.2% 0.6% 0.5%
Retail Sales Control Group November 0.3% 0.1% 0.8% 0.6%
PPI Final Demand MoM November 0.1% 0.4% 0.0% —-
PPI Ex Food and Energy MoM November 0.2% 0.4% <0.2%> —-
PPI Ex Food, Energy and Trade MoM November 0.2% 0.2% <0.1%> —-
PPI Final Demand YoY November 0.9% 1.3% 0.8% —-
PPI Ex Food and Energy YoY November 1.3% 1.6% 1.2% —-
PPI Ex Food, Energy, Trade NSA YoY November 1.7% 1.8% 1.6% —-
Industrial Production MoM November <0.3%> <0.4%> 0.0% 0.1%
Manufacturing (SIC) Production November <0.2%> <0.1%> 0.2% 0.3%
Capacity Utilization November 75.1% 75.0% 75.3% 75.4%
                   Business Inventories                   October <0.1%> <0.2%> 0.1% 0.0%
FOMC Rate Decision (Upper Bound) Dec. 14 0.75% 0.75% 0.50% —-
FOMC Decision (Lower Bound) Dec. 14 0.50% 0.50% 0.25% —-

 

Rates Trading Lab

 

If you were concerned that the markets were too complacent about the Fed, today proved you right. The Eurodollar curve steepened sharply (edh7/edh8 was 12bp steeper) reflecting the steeper projected path of removal of policy accommodation. I must admit that Yellen’s history of dovishness lulled me as well. But when she said “I believe my predecessor and I called for fiscal stimulus when the unemployment rate was substantially higher than it is now,” the market took it as a sign that the times, they are a changin’. That was pretty hawkish as it implies (to me) that fiscal policy, if/when it is enacted could provide the excess economic stimulus that necessitates a more aggressive Fed. More than a few people out there were looking/hoping for a bounce, but the dots and Yellen got them. Looking forward, I would be looking to put some money to work in the 3yr sector. However, though the 2017 voters (Evans, Kashkari, Harker, Kaplan) are less hawkish than the 2016 group, Yellen still calls the shots and recall that many established doves have crossed into the hawkish camp in the past year. As I say every time I advocate buying the market, it is in the context of a bond bear market. As of today, there is less doubt about that, at least.
-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-182 99-01 98-29+ 95-28+ 96-05
RESISTANCE LEVEL 99-16+ 98-29 98-25+ 95-22 95-21
RESISTANCE LEVEL 99-15 98-26 98-22 95-16 95-00
         
SUPPORT LEVEL 99-12 98-19 98-10 94-28 93-16
SUPPORT LEVEL 99-10 98-14+ 98-05+ 94-18+ 92-27
SUPPORT LEVEL 99-08 98-11 98-00 94-10 92-08

 

Tomorrow’s Calendar

 

  • China Data: Nothing Scheduled
  • Japan Data: Japan Foreign Bond Buying, Nikkei Japan PMI Mfg, Machine Tool Orders
  • Australia: Consumer Inflation Expectation, Employment, RBA FX Transactions
  • EU Data: EU-Markit Eurozone Manufacturing/Services/Composite PMI GE- Markit Manufacturing/Services/Composite U.K. Retail Sales
  • S. Data: Current Account Balance, Empire Manufacturing, CPI, Real Avg Weekly Earnings, Initial Jobless Claims, Philadelphia Fed Business Outlook, Markit U.S. Manufacturing PMI, NAHB Housing Market Index, Total Net TIC Flows
  • Supply: Japan 20yr / Ireland bills / Spain 2021 & 2026 / Romania 2019 / Poland auctions TBD
  • Events: Bank of England Bank Rate
  • Speeches: Nothing Scheduled

(more…)

US Debt Markets Salute 75th Anniversary of Pearl Harbor; Mischler Comments
December 2016      Debt Market Commentary   

Quigley’s Corner 12.07.16 Commemorating 75th Anniversary of Pearl Harbor

 

 75TH Anniversary of Pearl Harbor

Investment Grade Corporate Bond New Issue Re-Cap

Global Market Recap

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

IG Credit Spreads by Rating

IG Credit Spreads by Rating

New Issue Pipeline

M&A Pipeline

Lipper Funds Flow Report

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Everyone should stop to give more than mere pause to remember or recall Pearl Harbor today, not just the nation’s oldest Service Disabled Veteran broker dealer However, it does resonate with us here at team Mischler that much more since we do own the privilege and honor of that bragging right.

It all began on a quiet, peaceful and unassuming Sunday, December 7th, 1941 at 7:55 a.m. when a fleet of 353 Japanese dive bombers, level bombers and fighters bearing the Rising Sun on their wings first appeared above the blue skies over Oahu island.  At 8:06 a.m. four armor-piercing bombs struck the USS Arizona – one penetrating the ship and exploding three decks below the surface. The detonation ignited one hundred tons of black powder in the interior of the vessel. The resulting explosion broke the battleship in half sending a column of fire and red smoke a thousand feet into the air. Within eight minutes of that first bomb strike, the Arizona lay on the floor of Pearl Harbor. 1,177 officers, sailors and marines including 23 sets of brothers, went down with it making the Day that Will Live in Infamy – the worst single disaster in U.S. naval history. About half of the total number of Americans killed that day were on this ship. In total 2,403 Americans including 63 civilians were killed and 1,178 more were wounded.

Today, the wreckage of the USS Arizona leaks about one quart of oil each day.  Veteran survivors call them tears, believing that the USS Arizona will continue to leak until all survivors have joined their shipmates in the watery grave.

 

remember-pearl-harbor-mischler-veteran-owned-broker-dealer
The USS Arizona, December 7th, 1941 8:05 a.m. (0805)

 

On that fateful day, Pearl Harbor became just as pivotal to our American identity as July 4th 1776.  The United States bounced back in double time as all but three of the ships that were damaged or sunk on December 7th were raised, repaired and sailed again. In fact, by the end of World War II our great nation and its honored veterans of the Greatest Generation chased down and completely destroyed every Japanese aircraft carrier used to launch the attack on Pearl Harbor.  That was a priority – a statement to the world.

 

Many do not realize that on that same day, Japanese air forces also attacked Hong Kong, Guam, the Philippine Islands, Wake Island, Midway Island and American ships were torpedoed on the high seas between San Francisco and Hawaii.

The distance of Hawaii from Japan made it very clear that this was a surprise attack.  As Roosevelt expressed in his famous speech, No matter how long it may take us to overcome this premeditated invasion, the American people in their righteous might will win through to absolute victory. I believe I interpret the will of the Congress and of the people when I assert that we will not only defend ourselves to the uttermost, but will make very certain that this form of treachery shall never endanger us again. Hostilities exist. There is no blinking at the fact that that our people, our territory and our interests are in grave danger.  With confidence in our armed forces – with the unbounding determination of our people – we will gain the inevitable triumph – so help us God.”

The man, our military and we as a people kept that promise. It was our entrance into World War II the end of which left our great country the beacon of hope to the rest of the free world forever.

pearl-harbor-anniversary-mischler-veteran-owned-broker-dealer

Cover of The New York Times 75 years ago today.

 

Famous Leadership Quotes Born out of Pearl Harbor onto Victory in World War II

 

“Yesterday, December 7, 1941 – a date that will live in infamy – the United States of America was suddenly and deliberately attacked by naval and air forces of the Empire of Japan.”

-Franklin D. Roosevelt

 

“You ask what is our aim? I can answer in one word: Victory. Victory at all costs. Victory in spite of all terror. Victory however long and hard the road may be. For without victory there is no survival.”

-Winston Churchill

“May God have mercy upon my enemies, because I won’t.”

-George S. Patton           

 

“Soldiers, Sailors and Airmen of the Allied Expeditionary Force! You are about to embark upon a great crusade, toward which we have striven these many months. The eyes of the world are upon you. The hopes and prayers of liberty loving people everywhere march with you.”

-Dwight Eisenhower


75th Anniversary: Pearl Harbor Veteran Remembrance Day

 

It is our responsibility and our duty to remember and pay tribute to our veterans and especially today to those of the Greatest Generation who took part in World War II, the global war that was the most widespread in global history directly involving over 100 million people across 30 nations.  The result – 3% of the world’s population were killed or 80 million people. The collective memory of what happened 75 years ago today is fading as our veterans grow older. To this very day many of those surviving veterans make journeys to Hawaii annually to pay their respects to their fellow sailors and marines and to remember and reflect upon the day that changed their lives forever. The challenge for all of us is to keep their remembrance alive.

 

I’d like to share with you all an e-mail I received from the Senior Funding Manager at one the top 15 U.S. corporations so, it’s one that you all bank.

The person wrote:

Ron,

  • I get a lot of these newsletters/e-mails and most are the same…good, but the same.  Yours is different and I have been reading them (and forwarding parts to family members who may also enjoy your “editorial” pieces).
  • I appreciate having a true veteran-owned firm on my team. My Dad was a Korean vet and my father-in-law actually fought in the Army in Korea.

 

I can’t tell you how much it means to me personally, given the time and effort put into the “QC” each and every day to receive a note like this. However, it means that much more to team Mischler Financial when critically important clients of and relationships with our great nation’s oldest Service Disabled veteran broker dealer take the time to share their own personal veteran stories with us.  It makes all this worthwhile.  Team Mischler and I thank the person in question for sharing that.  You know who you are and it is very much appreciated.

mischler-pearl-harbor-anniversary-veteran-salute

Today’s Ceremony at the USS Arizona Memorial

 

The names of all the sailors who perished aboard the Arizona are inscribed on the wall inside the USS Arizona Memorial.

The names of all of our U.S. Marines who were killed is to the right.

 

The inscription reads:
“To the memory of the gallant men here entombed and their shipmates who gave their lives in action on December 7, 1941 on the U.S.S. Arizona.”

 

  • There were 16,112,566 members of the United States Armed Forces during World War II.
  • There were 291,557 battle deaths.
  • 113,842 other deaths in service (non-theater).
  • …..and 670,846 non-mortal woundings.
  • According to the Department of Veterans Affairs, around 620,000 (3.85%) American veterans from the war are estimated to still be alive as of 2016.
  • During the World War II conflict 464 United States military personnel received the Medal of Honor, 266 of them posthumously.
  • There are currently six living World War II Medal of Honor recipients.
  • The Department of Veterans Affairs estimates that 372 American World War II veterans die every day.

It took all of one day 75 years ago today for the United States of America to become the world’s defender of humanity, democracy, liberty and of all the value systems cherished by free people everywhere. America and Americans turned our national tragedy into the birth of our becoming the leader of the Free World.  The war to end all wars is the very thing that bound our country and our people together.  Decades later Vietnam ripped us apart.  Today with prevailing divides it’s time to learn once again that a nation under duress and divide can come together to realize its full potential.  To once again have the world endear themselves to us knowing we will always do the right thing.  We will always be a beacon of hope and the land of opportunity and dreams.

“America will forever remain the land of the free, only so long as it is the home of the brave.” –Elmer Davis

 

pearl-harbor-survivor-us-military-veterans

Pearl Harbor Survivor of Hickam Field that was bombed and strafed resulting in 139 killed and 303 wounded.

 

Have a great evening and God Bless our Veterans!
Ron Quigley

 

Investment Grade New Issue Re-Cap 

 

Yesterday seemed very slow despite that some issuers tapped.  Today was a similarly slow day although 3 IG Corporate issuers priced 4 tranches between them totaling $2.70b.  The SSA space featured a small $200mm KBN tap of an outstanding FRN due 2020 bringing the all-in IG day total to $2.90b. Many agreed the holiday lull has officially begun to manifest itself in our IG DCM.  Sure there is a bit more to get done -opportunistic issuers, Roper Industries – but for the most part, heavy issuance days may be in hibernation until January.

Our WTD total is now over 93% of this week’s estimates $16.675b vs. $17.87b and the MTD tally is at 76% of forecasts or $31.605b vs. $41.52b.

 

Global Market Recap

 

Today is the 75th Anniversary of Pearl Harbor: God Bless! -TF

 

  • S. Treasuries – USTs, Bunds, Gilts & Peripherals rallied despite a sizable stock rally.
  • Stocks – Global stock rally. S&P’s and Dow at all-time highs. EU banks on fire.
  • Economic – U.S. non-event today. China foreign reserves down. Weak U.K. data.
  • Currencies – USD was weaker vs. 4 of the Big 5.
  • Commodities – CRB, crude oil & copper down while gold & silver (+2.8%) rallied.
  • CDX IG: -1.57 to 67.97
  • CDX HY: -10.80 to 363.0
  • CDX EM: -9.02 to 247.22

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • EPR Properties upsized today’s 10-year Senior Notes new issue to $450mm from $300m at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 4 IG Corporate-only new issues, including today’s KeyCorp Pfd., was <27.19> bps.
  • BAML’s IG Master Index tightened 1 bp to +134 vs. +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +128.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +175.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.1b on Tuesday versus $14.0b on Monday and $18.4b the previous Tuesday.
  • The 10-DMA stands at $16.2b.

 

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

 

IG Corporate New Issuance This Week
12/05-12/09
vs. Current
WTD – $16.675b
December 2016
Forecasts
vs. Current
MTD – $31.605b
Low-End Avg. $16.78b 99.37% $40.87b 77.33%
Midpoint Avg. $17.87b 93.31% $41.52b 76.12%
High-End Avg. $18.96b 87.95% $42.17b 74.95%
The Low $10b 166.75% $30b 105.35%
The High $25b 66.70% $60b 52.67%

 

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

NICs, Bid-to-Covers, Tenors, 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 Tuesday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/05
TUES.
12/06
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
New Issue Concessions <1.05> bps 17.43 bps 3.53 bps 4.5 bps 3.62 bps <3.60> bps
Oversubscription Rates 4.16x 3.43 bps 3.38x 2.99x 2.78x 4.26x
Tenors 15.09 yrs 5.68 bps 10.84 yrs 12.14 yrs 11.28 yrs 13.31 yrs
Tranche Sizes $575mm $1,093m $711mm $929mm $1,039mm $692mm
Avg. Spd. Compression
IPTs to Launch
<19.43> bps <29.32> bps <17.60> bps <16.07> bps <17.69> bps <22.96> bps

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Bank of Montreal Aa3/AA- FRN 12/12/2019 250 3mL+equiv 3mL+equiv 3mL+60 3mL=60 BAML/BMO/CITI/GS/WFS
Bank of Montreal Aa3/AA- 2.10% 12/12/2019 1,250 +high 80s/+87.5a +77a (+/-2) +75 +75 BAML/BMO/CITI/GS/WFS
BNP Paribas BBB-/BBB- 6.75% 3/14/2022 750 7.25%-7.375%
7.3125%a
6.875%a (+/-12.5) 6.75% $100.00 BNPP-sole
EPR Properties Baa2/BBB- 4.75% 12/15/2026 450 +high 200s
+287.5a
+265a (+/-5) +260 +260 CITI/JPM/RBC

           

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Kommunalbanken
(tap) New Total: $1bn
Aaa/AAA FRN 6/16/2020 200 N/A 3mL+27a 3mL+27 3mL+27 BAML/JPM/NATW

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.28 1.28 0
IG27 69.54 68.035 <1.505>
HV27 143.40 138.77 <4.63>
VIX 11.79 12.22 0.43
S&P 2,212 2,241 29
DOW 19,251 19,549 298
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $2.70 bn DAY: $2.90 bn
WTD: $16.675 bn WTD: $16.875 bn
MTD: $31.605 bn MTD: $37.555 bn
YTD: $1,276.367 bn YTD: $1,616.301 bn

 

Lipper Report/Fund Flows – Week ending November 30th    

     

  • For the week ended November 30th, Lipper U.S. Fund Flows reported an outflow of $1.302b from Corporate Investment Grade Funds (2016 YTD net inflow of $41.464b) and a net inflow of $341.7m into High Yield Funds (2016 YTD net inflow of $4.939b).
  • Over the same period, Lipper reported a net inflow of $339.2b into Loan Participation Funds (2016 YTD net inflow of $561.5m).
  • Emerging Market debt funds reported a net outflow of $188.9m (2016 YTD inflow of $5.743b).

 

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 25.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/06 12/05 12/02 12/01 11/30 11/29 11/28 11/25 11/24 11/23 1-Day Change 10-Day Trend PC
low
IG Avg. 134 135 135 135 136 136 136 136 136 136 <1> <2> 106
“AAA” 75 75 75 75 75 75 75 75 75 75 0 0 50
“AA” 82 82 83 83 84 84 83 84 84 84 0 <2> 63
“A” 107 107 107 107 108 108 108 108 108 108 0 <1> 81
“BBB” 172 173 174 174 175 177 177 177 177 177 <1> <5> 142
IG vs. HY 316 323 329 327 331 333 330 328 330 330 <7> <14> 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 31.53 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/06 12/05 12/02 12/01 11/30 11/29 11/28 11/25 11/24 11/23 1-Day Change 10-Day Trend PC
low
Automotive 121 121 122 122 123 123 123 124 124 124 0 <3> 67
Banking 125 125 126 125 125 126 126 126 126 126 0 <1> 98
Basic Industry 174 175 176 175 177 175 175 175 175 175 <1> <1> 143
Cap Goods 100 100 101 101 102 101 101 102 101 101 0 <1> 84
Cons. Prod. 109 109 110 109 110 110 110 111 111 111 0 <2> 85
Energy 174 175 177 177 180 181 180 181 180 180 <1> <6> 133
Financials 154 155 155 154 155 157 157 157 157 157 <1> <3> 97
Healthcare 117 118 118 118 119 118 118 119 119 119 <1> <2> 83
Industrials 136 137 137 137 139 139 139 139 140 140 <1> <4> 109
Insurance 146 146 147 146 147 147 147 147 147 147 0 <1> 120
Leisure 134 135 135 135 135 135 134 135 135 135 <1> <1> 115
Media 159 159 160 159 161 161 160 161 161 161 0 <2> 113
Real Estate 143 144 144 144 144 142 142 143 143 143 <1> 0 112
Retail 116 116 116 116 117 117 117 118 119 119 0 <3> 92
Services 128 128 128 128 128 127 127 128 128 128 0 0 120
Technology 110 110 110 110 112 112 113 113 113 113 0 <3> 76
Telecom 165 165 166 165 166 167 167 168 169 169 0 <4> 122
Transportation 135 135 135 135 136 135 135 136 135 135 0 0 109
Utility 135 135 136 135 135 135 135 136 135 135 0 0 104

 

New Issue Pipeline

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

 

  • The Republic of South Africa (Baa2/BBB-) mandated HSBC, J.P. Morgan and Nedbank to arrange fixed income investor meetings in the U.S., Europe, Middle East and Asia that began on Sunday, November 6th in Dubai.  Meetings took place thru Friday, November 11th.
  • Korea Hydro and Nuclear Power Co. Ltd. (Aa2/AA) mandated BNP Paribas and Citigroup to arrange fixed income investor meetings in the U.S. that began Tuesday, October 18th in New York, continued on the 19th in Boston and wrapped up in Chicago on the 20th.
  • Hyundai Capital Services (Baa1/A-) mandated Citigroup, HSBC and Nomura as joint book runners to arrange investor meetings that began on Monday, October 17th in preparation for a dollar-denominated 144a/REGS new issue.
  • Nacional Financiera SNC (A3/BBB+) mandated Bank of America/Merrill Lynch and HSBC as joint leads to arrange fixed income meetings that took place Wednesday, September 27th thru Thursday the 28th in London, New York, Boston and Los Angeles in preparation for a possible dollar-denominated new issue that could soon follow their conclusion.
  • Banco Inbursa (BBB+/BBB+) mandated Bank of America/Merrill Lynch, Citigroup and Credit Suisse as joint book runners to arrange fixed income investor meetings in the U.S., Mexico and Europe that began on Wednesday, September 7th and continued through the 12th making stops in Mexico, London, Boston, New York and L.A. Fitch recently assigned an expected long-term rating of “BBB+” to Banco Inbursa’s proposed $1.5b 10-year Senior Notes.
  • Industrial Bank of Korea (Aa2/AA-) mandated HSBC and Nomura to arrange fixed income investor meetings in Hong Kong and Singapore that began on Monday, August 22nd in preparation for a 144a/REGS dollar-denominated offering that could soon follow its conclusion.

 

M&A Pipeline – $303.84 Billion in Cumulative Enterprise Value!

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