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Corporate Bond Day Belongs to Comcast & Verizon – Mischler DCM Comment
August 2017      Debt Market Commentary   

Quigley’s Corner 08.01.17- Investment Grade Corporate Bond Day Belongs to Comcast & Verizon 

Below is the opening extract from Quigley’s Corner aka “QC”  Tuesday, Aug 1 2017  edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”the QC is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646

 

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and August

Comcast Corporation’s $2.5bn 2-part 10.5- and 30-year Deal Dashboard

Comcast Corporation’s Commitment to Honoring the Military, Veterans and Their Families

  • The Comcast Corp. Promise
  • Comcast’s Military and Veteran Affairs Office
  • Q&A with Carol Eggert, SVP, Military and Veteran Affairs for Comcast Cable Brigadier General (Retired), U.S. Army

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

New Issues Priced (Comcast, Verizon Communications, Celgene Corp, Kimco Realty, Ryder System, Axis Bank)

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending July 26th              

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Investment Grade New Issue Re-Cap

 

Today’s IG Corporate dollar DCM finished with 7 issuers pricing 9 tranches between them totaling $8.40b.  The SSA space boosted the total adding 3 issuers across 4 tranches for $2.75b and thereby bringing the all-in IG day total to 10 issuers, 13 tranches and $11.15b.   But, today was all about Comcast Corporation (NASDAQ:CMCSA) and their $2.50b two-part 10.5- and 30-year.  Comcast is consistently acknowledged by Military Friendly as a Top Military Friendly Employer. Since 2012, the cable giant has been recognized for its commitment to increasing opportunities for the Military Community. This year Comcast is happy to highlight its recognition as the #1 Military Spouse Friendly Employer and the #4-ranked Military Friendly Employer in the nation.

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

  • The IG Corporate WTD total is 60.93% of this week’s syndicate midpoint average forecast or $15.386b vs. $25.25b.
  • MTD we’ve priced 10.62% of the syndicate forecast for July or $8.40b vs. $79.10b.
  • There are now 5 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • The Asian Development Bank upsized today’s 5-year Global Green Bond tranche of its 2-part 5s/10s new issue to $750mm from $500mm at the launch.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 6 IG Corporate-only new issues, was <15.33> bps.
  • The average spreads across 1 of the 19 major industry sectors set a new post-Crisis low while 3 of the 19 tied their post-Crisis lows. That’s 21.05% of the sectors.
  • BAML’s IG Master Index widened 1 bp to +109 vs. +108.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.02 vs. 1.03.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +151.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.7b on Monday versus $14.3b on Friday and $13.3b the previous Monday.
  • The 10-DMA stands at $17.4b.

 

Global Market Recap

 

  • U.S. Treasuries – Started under pressure but turned it around with the 30yr leading the rally.
  • Overseas Bonds – JGB’s mixed & little changed. Strong rally in Europe.
  • Stocks – Dow (all-time high) leading U.S. stocks higher into the close.
  • Overseas Stocks – Global stock rally.
  • Economic – U.S. data was weak or weaker than last with tame inflation.
  • Overseas Economic – China better. Japan weaker. Europe solid-to-strong.
  • Currencies – USD was better bid vs. 3 of the Big 5 & unchanged vs. the other 2.
  • Commodities – Crude oil reached its high since May & then sold off hard.
  • CDX IG: -0.84 to 56.38
  • CDX HY: -1.89 to 318.54
  • CDX EM: +0.24 to 190.25

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
Asian Political Tensions
N. Korea launches ICBM on 7/28. Jong-Un claims Hwasong-14 missile can reach any location on the U.S. continent. UN projects worst famine in NOKO in 17 yrs; last one killed 2mm (8% of population).  Fear that NOKO may use nuclear intel/systems as barter for food w/”suspect” nations. U.S. has already sanctioned certain Chinese banks to pressure the PRC to use more influence over NOKO which has obviously failed. Tensions are mounting.
ELEVATED
BREXIT Fallout
U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. France pressing for $115b equivalent.
Venezuela – civil unrest as Maduro dictatorship claims bogus election outcome favors unlimited powers and a new constitutional assembly in elections that U.S. and key LATAM nations will not acknowledge. Caracas named most dangerous city in the world with highest murder rate. VZ gov’t stopped publishing crime stats a decade ago. Dictatorship in our Western Hemisphere. U.S. Tsy. freezes Maduro family assets.
CAUTION
“U.S. political gridlock”
Trump financial, healthcare, tax and infrastructure reform challenges & consensus GOP support to pass legislation questioned; Mueller expanding FBI probe into Trump. White House cleans house; New Chief of Staff.

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

·         GCC Crisis as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base, severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.

·         Italian debt-to-GDP ratio is 133% – world’s 3rd highest.

·         Despite destroying the Caliphate, ISIS will be scattered across a wider MENA region and Europe.

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

·         Central banks shrinking balance sheets/higher volatility in 2H17; ECB dovishness; low rates persist.

·         Renewed tensions along the India-Pakistan cease fire line dividing Indian-controlled Kashmir.

MODERATE ·         China hard landing – rising corporate debt have the OECD and IMF concerned.
MARGINAL
2018 U.S. Recession
·         Increased chance of 2018 U.S. recession in light of recent very hawkish Fed-speak?; “Maybe” one more rate hike in 2017; lack of inflation and $4.5 trillion balance sheet unwind are concerns.

 

Syndicate IG Corporate-only Volume Estimates This Week and August

 

IG Corporate New Issuance This Week
7/31-8/04
vs. Current
WTD – $15.386b
August 2017 vs. Current
MTD – $8.40b
Low-End Avg. $24.21b 63.55% $78.37b 10.72%
Midpoint Avg. $25.25b 60.93% $79.10b 10.62%
High-End Avg. $26.29b 20.49% $79.83b 10.52%
The Low $15b 102.57% $60b 14.00%
The High $35b 43.96% $100b 8.40%

 

Comcast Corporation’s $2.5bn 2-part 10.5- and 30-year Deal Dashboard

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Calling All US Corporate Bond Issuers-Are You There?
July 2017      Debt Market Commentary   

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

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

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

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and July

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

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending July 5th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Upcoming Calendar

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

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

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

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

Today’s IG Primary & Secondary Market Talking Points

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

 

The “QC” Geopolitical Risk Monitor

 

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

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

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

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

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

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

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

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

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

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

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

 

Syndicate IG Corporate-only Volume Estimates This Week and July

 

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

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  21 of those participants are among 2017’s YTD top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  22 are in the top 26 of that same table. The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.49% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

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

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

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

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

o   NICS:  2.25 bps

o   Oversubscription Rates: 2.38x

o   Tenors: 12.50 years

o   Tranche Sizes: $1,437mm

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


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

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

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

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

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

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

The “Best and the Brightest” in Their Own Words

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

 

 

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Mischler Debt Market Comment Independence Day 2017 Special Edition
July 2017      Debt Market Commentary   

Quigley’s Corner Independence Day 2017 Special Edition-Investment Grade Debt Market Insight 

 

Fourth of July Special Edition- Mischler Debt Market Commentary

Americans Don’t Understand What It Means to Serve–by Nick Palmisciano

A Salute to Mischler’s Debt Capital Markets/Investment Banking Team | Military Veterans (SDV)

Independence Day Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates This Week and July

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 June 28th              

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Independence Day Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

mischler-independence-day-dcm-comment 

 

 

 

I have written here over and over that the United States is the best story out of a lot of otherwise bad stories throughout our inextricably global-linked world economy.  Make no mistake about it, however, we are the best and the greatest nation on the face of the earth.  We should all take pause to recall that tomorrow as we take in the scents of our barbecues, the tastes of our beers and the fun in the sun of Independence Day.  The United States IS the engine that the world looks to when there are wildfires all around as there are now.  At the foot of Mt. Rushmore are bronze plaques featuring prominent quotes from each of the four Presidents whose faces are carved into granite.  My favorite is that of Theodore “Teddy” Roosevelt.

“We, here in America, hold in our hands the hopes of the worlds, the fate of the coming years; and shame and disgrace will be ours if in our eyes the light of high resolve is dimmed, if we trail in the dust the golden hopes of men.”

We have an early close today ahead of the Fourth of July.  We celebrate it once annually but we should all appreciate it 365 days a year.  As we labor in freedom, and breath freedom – the oxygen for our souls – let’s all remember the words of Elmer Davis who said, “the United States of America will forever remain the land of the free so long as it is the home of the brave.” The following very prescient letter came to me on July 3rd of 2013, It is a moving tribute to those who serve our great nation, past, present and future.  Please take a moment to read it.

 

Americans Don’t Understand What It Means to Serve by Nick Palmisciano

 

Nic Palmisciano spent six years as an infantry officer in the United States Army.  He will tell you that he’ll never hold a more important job in his lifetime than platoon leader.  He wrote this letter:

I remember the day I found out I got into West Point. My mom actually showed up in the hallway of my high school and waited for me to get out of class. She was bawling her eyes out and apologizing that she had opened up my admission letter. She wasn’t crying because it had been her dream for me to go there. She was crying because she knew how hard I’d worked to get in, how much I wanted to attend, and how much I wanted to be an infantry officer. I was going to get that opportunity.

That same day, two of my teachers took me aside and essentially told me the following: Nick, you’re a smart guy. You don’t have to join the military. You should go to college, instead.

I could easily write a tome defending West Point and the military as I did that day, explaining that USMA is an elite institution, that separate from that it is actually statistically much harder to enlist in the military than it is to get admitted to college, that serving the nation is a challenge that all able-bodied men should at least consider for a host of reasons, but I won’t.  What I will say is that when a 16-year-old kid is being told that attending West Point is going to be bad for his future then there is a dangerous disconnect in America , and entirely too many Americans have no idea what kind of burdens our military is bearing.

-In World War II, 11.2% of the nation served in its four years.

-In Vietnam, 4.3% served in its 12 years.

-Since 2001, only 0.45% of our population has served in the Global War on Terror.

These are unbelievable statistics.

Over time, fewer and fewer people have shouldered more and more of the burden and it is only getting worse.

Our troops were sent to war in Iraq by a Congress consisting of 10% veterans with only one person having a child in the military. Taxes did not increase to pay for the war.  War bonds were not sold.   Gas was not regulated. In fact, the average citizen was asked to sacrifice nothing, and has sacrificed nothing unless he has chosen to out of the goodness of his heart.  The only people who have sacrificed are the veterans and their families. The volunteers. The people who swore an oath to defend this nation.

You stand there, deployment after deployment and fight on. You’ve lost relationships, spent years of your lives in extreme conditions, years apart from kids you’ll never get back, and beaten your body in a way that even professional athletes don’t understand.

Then you come home to a nation that doesn’t understand.

They don’t understand suffering.

They don’t understand sacrifice.

They don’t understand why we fight for them.

They don’t understand that bad people exist.

They look at you like you’re a machine – like something is wrong with you. You are the misguided one — not them. When you get out, you sit in the college classrooms with political science teachers who discount your opinions on Iraq and Afghanistan because YOU WERE THERE and can’t understand the macro issues they gathered from books because of your bias. You watch TV shows where every vet has PTSD and the violent strain at that. Your Congress is debating your benefits, your retirement, and your pay, while they ask you to do more. But the amazing thing about you is that you all know this. You know your country will never pay back what you’ve given up. You know that the populace at large will never truly understand or appreciate what you have done for them. Hell, you know that in some circles, you will be thought of as less than normal for having worn the uniform. But you do it anyway.   You do what the greatest men and women of this country have done since 1775 – YOU SERVED!  Just that decision alone makes you part of an elite group.

As Winston Churchill said of World War II veterans: “Never in the field of human conflict has so much been owed by so many to so few.”

I’d like to thank the veterans who served our nation and who are an integral part of the family here at Mischler Financial Group, Inc.  Thanks in particular go out to Walt Mischler, our Founder and Chairman as well as Dean Chamberlain, CEO, who blessed this small efficient special operations fighting unit known as Mischler Financial with their Service Disabled Veteran certifications that I can safely say is the most formidable in our space.  Never have I met two more honorable, trustworthy and loyal men in this business.

A Salute to Mischler’s Debt Capital Markets Team ; Military Veterans | Wall Street Veterans

66% of our fixed income investment banking team are Service Disabled Veterans or Veterans. 

 

  • Walter Mischler, Founder and Chairman, SDV
  • Dean Chamberlain, CEO, Partner, SDV
  • Richard Tilghman, Managing Director, Public Finance
  • Jason Klinghoffer, CFA
  • Jonathan Herrick, DCM Analyst

mischler independence day 2017 debt market comment

Wishing you and your families a fabulous and safe Fourth of July!

God Bless America!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate


Investment Grade New Issue Re-Cap

As expected, more than 50% of market participants took off SIFMA’s early close Monday ahead of tomorrow’s Independence Day holiday and to no one’s surprise nothing priced in our IG dollar DCM and as a result, volume is 0.00% across the boards for the WTD and MTD totals.

 

  • The IG Corporate WTD total is 0.00% of this week’s syndicate midpoint average forecast or $0.00b vs. $6.44b.
  • MTD we’ve priced 0.00% of the syndicate forecast for June or $0.00b vs. $84.40b.
  • There are now 9 IG Corporate, Yankee and/or SSA new issues in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index was unchanged at +115.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.09.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +157.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.6b on Friday versus $17.6b on Thursday and $11.8b the previous Friday.
  • The 10-DMA stands at $16.0b.

 

Global Market Recap

 

  • S. Treasuries – Strong ISM manufacturing sent USTs reeling on the heels of hawkish Central Banks.
  • Overseas Bonds – JGB’s mostly red. EU core & semi core mixed. Peripherals bid.
  • 3mth Libor – Set at highest yield (1.30072%) since March 2009.
  • Stocks – DOW rallied (all-time high) & NASDAQ sold off.
  • Overseas Stocks – Asia had small gains while Europe had a very good day.
  • Economic – ISM manufacturing printed at high since Aug 2014.
  • Overseas Economic – China, Japan & Europe (not U.K.) with positive data.
  • Currencies – USD bounced back from a bad week last week in style.
  • Commodities – The CRB, crude oil & wheat rallies continued. Metals were hit.
  • CDX IG: -0.10 to 60.42
  • CDX HY: -2.69 to 336.19
  • CDX EM: -0.60 to 201.84

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

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

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

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

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

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

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

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

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

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

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

MARGINAL
2018 U.S. Recession
·    Increased chance of 2018 U.S. recession in light of recent very hawkish Fed-speak and sights

on one more rate hike in 2017.

 

Syndicate IG Corporate-only Volume Estimates This Week and July

 

IG Corporate New Issuance This Week
7/03-7/07
vs. Current
WTD – $0.00b
July 2017
Forecasts
vs. Current
MTD – $0.00b
Low-End Avg. $5.71b 0.00% $83.87b 0.00%
Midpoint Avg. $6.44b 0.00% $84.40b 0.00%
High-End Avg. $7.17b 0.00% $84.92b 0.00%
The Low $0b 0.00% $70b 0.00%
The High $15b 0.00% $111b 0.00%

 

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…)

Corporate Bond Issuers Close Books on Record Quarter; What’s Next for IG DCM?
March 2017      Debt Market Commentary   

Quigley’s Corner 03.31.17   QC’s Q1 Investment Grade Corporate Debt DCM Look-Back and Look Ahead

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

Syndicate IG Corporate-only Volume Estimates for Next Week and April

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

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

New Issues Priced

This Week’s IG New Issues and Where They’re Trading – Great Market Tone!

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 29th

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Month end? Quarter end?  Lots of Global economic data? You know what that means. It was a signed, sealed and delivered no-print Friday today.  That’s always welcome as it gave me a head start on today’s more involved syndicate survey.  Forecasts today are for next week’s primary market supply as well as for the month of April.  I also have a snapshot of a decade’s worth of April IG supply across three categories: all-in (Corps + SSA), Corporate as well as just SSA volumes.  I call the section “Knowing the Past for the Future.” It will help put the Best and Brightest’s thoughts and numbers into a historical perspective for you.  You should take a look at that table.

To quickly re-cap their thoughts, all 24 syndicate desks responded to my “QC” survey  The midpoint average for next week’s IG Corporate only supply is $21.40b characterized by tight voting groups with 18 of the 24 participants projecting within $20 to $25b with a low of $12b and a high of $31b.  As for April, the average was $91.50b.  Voting brackets were all over the place ranging from a low of $65b to a high of $111b. But don’t just take my word for it.  All 24 syndicate operatives contributed responses with their numbers so, scroll down below and read their meaningful thoughts.

I hope you enjoy your read and that it helps you prepare for the week and month ahead.  Thanks again to the stellar 24 participating syndicate desks who are always there for me and for YOU each and every Friday edition of the “QC”.

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index was unchanged at +122.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.17.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +163 vs. +164.  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 Thursday versus $20.7b on Wednesday and $17.8b the previous Thursday.
  • The 10-DMA stands at $17.3b.

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $22.15b
March 2017
Forecasts
vs. Current
MTD – $129.998b
Low-End Avg. $25.25b 87.72% $113.79b 114.24%
Midpoint Avg. $26.50b 83.58% $114.31b 113.72%
High-End Avg. $27.75b 79.82% $114.83b 113.21%
The Low $15b 147.67% $80b 162.50%
The High $31b 71.45% $140b 92.86

 

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

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!  23 of those participants are among 2017’s YTD top 26 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 83.65% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.

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

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

 

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

  • We fell 17% shy of this week’s syndicate midpoint average forecast or $22.15b vs. $26.50b.
  • MTD we’ve priced 13% more than the IG Corporate mid-range projection for all of March or $129.998b vs. $114.31b.
  • The all-in MTD total (IG Corporates plus SSA) now stands at $166.158b. March, 2017 has officially broken into 8th place as the highest volume month for all-in issuance (IG Corporates plus SSA).
  • The YTD IG Corporate only volume is now $393.085b. It is the highest IG Corporate-only quarterly volume total in history.
  • YTD we have officially priced $506.151b in all-in IG Corporate and SSA issuance also ranking it #1 as the highest quarterly volume total ever.

Here are this week’s five key primary market driver averages from the 38 IG Corporate-only deals that priced:

  • NICS:  0.46 bps
  • Oversubscription Rates: 3.48x
  • Tenors:  10.14 years
  • Tranche Sizes: $791mm
  • Spread Compression from IPTs to the Launch: <19.31> bps


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

  • Average NICs tightened 1.29 bps this week to 0.46 bps vs. 1.75 bps.
  • Over subscription or bid-to-cover rates, the measure of demand, increased 0.58x to 3.48x vs. 2.90x.. 
  • Average tenors shortened by a meaningful 1.41 years to 10.14 years vs. 11.55 years.
  • Tranche sizes upsized by $99mm to $791mm vs. $692mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 38 IG Corporate-only new issues tightened 3.87 bps to <19.31> bps vs. <15.44>.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +163 vs. +165 week on week,
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.17 vs. 1.18 last Friday. 
  • Week-on-week, BAML’s IG Master Index tightened by 1 bp to +122 vs. +123. 
  • Spreads across the four IG asset classes tightened by 0.75 bps to 16.00 bps vs. 16.75 as measured against their post-Crisis lows. 
  • The 19 major industry sectors also tightened by 0.74 bps to 19.63 vs. 20.37 also against their post-Crisis lows.
  • For the week ended March 29th, Lipper U.S. Fund Flows reported an inflow of $3.966b into Corporate Investment Grade Funds (2017 YTD net inflow of $39.089b) and a net outflow of $248.465m from High Yield Funds (2017 YTD net outflow of $5.937b).
  • Taking a look at the secondary trading performance of this week’s 38 IG and 3 SSA new issues, of the 41 deals that printed, 32 tightened versus NIP for a 78.00% improvement rate while 4 widened (9.75%) and 5 were flat (12.25%).

The numbers are in.  Entering today’s Friday’s session here’s how much we issued this week:

  • IG Corps: $22.15b
  • All-in IG (Corps + SSA): $25.90b

Is this week’s overwhelmingly hawkish Fed-speak justified? Or, is Fed leadership talking up yields?  The GOP seemed to have recovered from the health care fiasco.  Monday saw 10 issuers stand down, but the market quickly recouped lost ground with issuers printing the rest of the week.  Today marks month-end but more importantly quarter end. The Easter break is approaching all before we re-enter black-outs.

And now the all-important “two-part” question (and answer(s) posed to the fixed income market’s top Syndicate desks, along with my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

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

(more…)

Corporate Debt Issuance Slows Due to DC Swamp Sewage Stalemate
March 2017      Debt Market Commentary   

Quigley’s Corner 03.27.17 -Corporate Debt Issuance Slows Due to DC Swamp Sewage Stalemates

 

Investment Grade Corporate Debt New Issue Re-Cap – IG Primary Markets Bogged Down by the Swamp

CT10 Year Yield Going Lower

IG Primary & Secondary Market Talking Points

Global Market Recap

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 22nd       

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Well it was a rare, highly inactive Monday for IG primary markets today. Only one well-telegraphed new issue priced that had been in the pipeline for KEB Hana Bank in the form of a $500mm 3-year FRN. I heard that as many as 10 issuers stood down today following Go/No Go calls.  So, what gives?

On Friday, I placed at the top of my edition, a comment from a widely respected Head of Syndicate.  It was an interesting comment in that it expressed an against-the-grain opinion that Friday’s healthcare bill issue might actually be good for the market in that it pulls forward focus and attention on the all-important and market impactful tax reform bill.  As we were getting ready to close shop on Friday my CEO asked me, “so do you think it’ll be busy next week?  I said, “I hate to go against 24 of the top syndicate desks, but I fear we could see a zero day on Monday and a slower week in store. A health care bill failure will send a horrible message to the market.” I added, “I hope I’m wrong and that we see lots of issuance, but I think I’m right.”  That’s how Friday ended as I left for the weekend.

First, let’s revisit my Friday syndicate voting brackets for this week’s IG new issue volume forecasts:

Next Week
3/27-3/31
1: 20b
1: 15-30b
2: 20-25b
8: 25b
6: 25-30b
5: 30b
1: 31b

 

Out of 24 desks surveyed, 19 of them, or 79%, were in a tight band of $25-$30b.  That is always a great sign.  It means a lot of joint leads verified that similar or consensus volume is expected. The comments were characterized by lots of smaller deals with the absence of any mega transaction. But, I cannot see how issuance gets done if the health care bill is pulled or doesn’t pass. Well it got pulled later on Friday as we now all know. The issue is that republicans made a mistake in prioritizing health care as the first item on their agenda. They did so because it was perceived internally as a “no brainer.” Their plan was to save a trillion dollars to justify a massive tax reform plan.  Guess what?  When it got pulled the message sent to Wall Street was that consensus will continue to be an issue within the GOP.  That’s a MAJOR problem. The historic election is now over. People no longer want to hear the same campaign rhetoric, rather they want action, as the power to legislate has been voted on and given to Trump and the GOP.  The first test was a failure. In fact, it is a massive failure.  So, the market will not be kind to an Administration that has now experienced it’s “Dysfunction Junction” wake-up call. (I refuse to call it Capitol Hill or The Beltway anymore). It’s all about action now. Failure to get a consensus on tax reform WILL lose House and Senate seats in the next elections. That would be a political disgrace after the 7 long years they had amongst themselves to one day ratify a revamped bill. That day came and went last Friday.

The result? ………..The CT10-year is going back to 2.00% to 2.10% or lower.  Here’s the challenge –  with as many as 10 Go/No Go calls this morning that wound up with issuers standing down, we risk building a congested pipeline.  That leads to creating additional congestion, sloppy deals, more concession and bankers could look bad advising clients to go now rather than wait for another 25-35 bps rally in yields. Let the market come to the issuer. The latter are in the driver’s seat.  The market is waiting for a sign of optimism. That optimism will come when positive sounders on SUBSTANTIALas in “historic” – tax reform emanates from the White House and Dysfunction Junction. When that happens, equities will rally, yields will climb quickly and we’ll be back to where the GOP wants to be. For now, the Republican Party IS part of the Swamp that desperately needs draining.  It’s a harsh but well-deserved wake-up call to get their act together.  Seven years to fix Obama Care and they come up holding nothing but a yanked deal.  Unbelievable folks!  When that happens in business people get fired fast! Trump needs to run things like a corporation and Dysfunction Junction needs a hard case of tough love. This is not what was voted for on election day. It’s all about well……….waste management………now.

 

CT10 Year Yield Going Lower

rates-going-down-mischler-debt-market

Sorry if I sound like a broken record, but I published this next piece 12 days in advance of the recent FOMC Rate Decision on Friday, March 3rd and re-printed it the day of Janet Yellen’s Press Conference on Wednesday, March 15th.  Here it is yet again:

………..I had an interesting and revealing conversation with a Chairman of a six-pack bank (That’s either BAML, CITI, GS, JPM, MS or WFS folks!) who shared thoughts on a potential March interest rate hike that the market has already built in.  I thought it would be helpful and informative to you all.  Here’s what that person said,

“Everyone is thinking a rate hike is coming in March but, the FED needs to be somewhat worried about the yield curve.  When they raised rates in December 2015 the 10yr Treasury rallied 70 bps in yield, thus crushing banks’ net interest margin or “NIM” and, having the effect of dampening growth.  When they raised rates this past December 2016, that did not happen…..instead all rates moved up a bit.  But when Yellen talked about March being a “live meeting’’, the UST 10 year went from 2.56% to 2.31%……The Fed needs to talk a good game to dampen the “animal spirits” that have elevated equity markets but, I really don’t think the Fed wants to raise rates and see the 10 year Treasury move to 2.25%. As a result, it’s a very close call…..I err on the side of thinking that the rate hike comes in June.  But, it’s  close.  If the Fed is committed to 2 to 3 hikes this year and they feel the markets are fully prepared for a March hike…they may just take advantage of that window.”

Today the CT10-year closed at 2.379% and has tightened 24.8 bps versus 2.627% on March 13th the Monday before the Fed raised rates. It’s going tighter. Issuers be patient!

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 1 IG Corporate-only new issues was <17.50> bps.
  • BAML’s IG Master Index was unchanged at +123.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.18.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +164 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $13.8b on Friday versus $17.8b on Thursday and $15.2b the previous Friday.
  • The 10-DMA stands at $17.4b.

 

Global Market Recap

 

  • U.S. Treasuries – Closed with gains except the 2yr but closed near the low prices of day.
  • Overseas Bonds – JGB’s better except the 30yr. Bunds red & Gilts green.
  • Stocks – U.S. stocks mixed heading into the close. Nice comeback in the afternoon.
  • Overseas Stocks – The Nikkei led Asia lower. Europe had more red than green.
  • Economic – Dallas Fed manufacturing was weaker than expected/last.
  • Overseas Economic – Positive IFO releases in Germany.
  • Currencies – The USD had a poor day vs. the Euro, Pound & Yen.
  • Commodities – Crude down, gold up & a 2% gain for silver.
  • CDX IG: +0.83 to 67.84
  • CDX HY: +29.80 to 354.58
  • CDX EM: +1.72 to 213.92

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $0.50b
March 2017
Forecasts
vs. Current
MTD – $108.348b
Low-End Avg. $25.25b 1.98% $113.79b 95.22%
Midpoint Avg. $26.50b 1.89% $114.31b 94.78%
High-End Avg. $27.75b 1.80% $114.83b 94.36%
The Low $15b 3.33% $80b 135.43%
The High $31b 1.61% $140b 77.39%

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

 

 

Have a great evening!
Ron Quigley

 

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

(more…)

Draghi Says Euro is Irrevocable-Mischler Debt Market Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.09.17 –Draghi Says Euro is Irrevocable

 

Investment Grade New Issue Re-Cap

Buy-Side Feedback—“Its Amazing!”

IG Primary & Secondary Market Talking Points

Global Market Recap

ECB President Mario Draghi’s Declares “The Euro is here to stay!” and “The Euro is irrevocable!” 

Draghi’s ECB Key Talking Points

ECB Forecasts

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 March 8th      

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

6 IG Corporate issuers tapped the dollar DCM today pricing 9 tranches between them totaling $5.25b.  The SSA space featured 2 issuers and 2 tranches totaling $1.30b for an all-in IG day total of 8 issuers, 11 tranches and $6.55b.
The WTD total is now 34% more than this week’s syndicate midpoint average forecast or $44.50b vs. $33.15b. MTD, we’ve now priced 50% of the IG Corporate mid-range projection for all of March or $58.025b vs. $114.31b.

Note: In last Friday’s “QC” Best and Brightest edition I wrote at the top, “Personally one should err to the upside in markets like this wherein new issue volume forecasts are concerned.  I’ll start by saying I have a strong feeling we see another $50b week of all-in IG Corporate and SSA new issuance next week.  IG Corporates alone could easily eclipse the $40b mark.  However, that’s my take on things. Across the 24 syndicate desks that I surveyed today, next week’s IG Corporate-only midpoint average estimate calls for $33.15b to price characterized by MANY new issuers.”

The WTD tally for IG Corporate new issuance thru today is $44.50b and all-in IG Corporate and SSA issuance is $52.80b ……not too shabby eh?

Buy-Side Feedback

Late this afternoon a buy-side account pointed out the following, “It’s amazing Ron! I was looking at your “QC” from last Friday and recall how staggered I was that almost 90% of last weeks’ new issues tightened versus pricing spread levels especially considering the negative concession environment.  I don’t think I’ve ever seen that before.  But this week is an entirely different story. In fact, it’s completely the opposite.  I’ll bet that a new record number of this week’s new issues widened out vs. their pricing levels given yields.  I haven’t seen more apathy in the market than this week in a VERY long time.”

We’ll see tomorrow folks when I check  the secondary trading levels of this week’s


IG Primary & Secondary Market Talking Points

 

  • Host Hotels & Resorts LP bumped up its 7yr Senior Notes new issue to $400mm from $350m at the launch and at the tightest side of guidance.
  • Neuberger and Berman upped today’s 144a/REGS 10yr Senior Notes new issue to $300mm from $250mm at the launch. The deal skipped guidance.
  • The Asian Development Bank increased today’s 4yr FRN new issue to $1b from $750mm at the launch.
  • Swedish Export Credit Corp. upsized today’s tap of its FRNs due 10/04/2018 to $300mm from $250mm at the launch.
  • The average spread from IPTs thru the launch/final pricing of today’s 8 IG Corporate-only new issues, that displayed price evolution, was <25.06> bps.
  • BAML’s IG Master Index was unchanged at +119.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 2 bps to 1.14 vs. 1.12.
  • 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 $20.2b on Wednesday versus $20.9b on Tuesday and $21.6b the previous Wednesday.
  • The 10-DMA stands at $20.4b.

 

Global Market Recap

 

  • U.S. Treasuries – Terrible price action. Supply, Draghi and healthcare the main culprits.
  • Overseas Bonds – Europe sold off on Draghi’s political correctness.. JGB’s red except 30yr.
  • 3mth Libor – Set at 1.11956% the highest since April 2009.
  • Stocks – Basically unchanged with 40 minutes left in the session.
  • Overseas Stocks – Japan up, China & Hang Seng down & Europe more green than red.
  • Economic – Claims higher from low since 1973. Import prices YoY high since 2012.
  • Overseas Economic – China inflation data mixed & credit down. Ireland GDP was strong.
  • Currencies – U.S. weaker vs. Euro & Pound but stronger vs. the Yen, CAD & AUD.
  • Commodities – CRB, crude oil, gold, copper, silver, etc., all got hit.
  • CDX IG: +0.85 to 64.75
  • CDX HY: +4.14 to 333.37 (wider by 26.15 bps this week)
  • CDX EM: +4.48 to 221.56

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

-Tony Farren

 

ECB President Mario Draghi’s Declares “The Euro is here to stay!” and “The Euro is irrevocable!” 

mischler-draghi-euro-irrevocable 

 

Today the ECB left the Euro Zone’s  main refinancing rate unchanged at 0%, the marginal lending facility unchanged at 0.25% and the deposit facility rate also unchanged at <0.4%>.  Asset purchases remained €80b a month until the end of March after which they will be reduced by 25% to €60b per month from April thru December. Currency traders, however, reacted to the hawkish news that the ECB dropped its pledge to use “all available instruments” to achieve its mandate, and is now less worried about deflation. On the one hand, ECB President Mario Draghi talked up the prospects for the Euro Zone economy while saying there is no longer a deflation risk however, he also warned that there are “downside risks” that could derail the recovery. Clearly the ECB monetary chief has a firm eye on upcoming elections, particularly in France. Draghi sighted domestic risks are now more contained but subsequently took several minutes explaining how elections actually make everything uncertain. Among notable moments in his speech, he ducked the question: Could the ECB raise interest rates before it has ended its QE program?“  That was interesting, as he previously insisted that the rate would not rise until the asset-purchase program concludes.  The takeaway is that risks surrounding the euro area growth outlook have become less pronounced, but remain tilted to the downside and relate predominantly to global factors.

Draghi’s ECB Key Talking Points

 

  • ECB leaves the main refinancing rate unchanged at 0.00%.
  • Leaves the marginal lending facility unchanged at 0.25%.
  • Leaves the deposit facility rate unchanged at -0.4%.
  • Keeps asset purchases at €80b a month until the end of March.
  • Says asset purchases will be €60b a month from April to December – a 25% reduction.
  • Reiterates that rates will stay at present or lower levels for an extended period of time.
  • Net purchases will be made alongside reinvestments.
  • QE can be increased in size and/or duration if the outlook worsens.
  • Draghi sees rates at present or a lower level well past the end of QE.
  • QE will run until the ECB sees a sustained inflation pick-up.
  • Sees no convincing upward trend in underlying inflation.
  • Inflation is likely to remain close to 2% in the coming months.
  • Core inflation set to rise gradually over the medium-term.
  • ECB measures preserve favorable conditions needed.
  • Sentiment indicators point to a pick-up in momentum.
  • Inflation increased due to energy effects.
  • Underlying inflation pressures remain subdued.
  • The ECB will look through transient inflation changes.
  • A very substantial degree of accommodation is needed.
  • Draghi omits pledge to use “all instruments” within the mandate.
  • Says economic risks are less pronounced, yet still to the downside.
  • Risks relate predominantly to global factors.
  • Survey results increase confidence in the recovery
  • Survey results suggest the recovery may broaden.
  • Rising employment bolsters private consumption.
  • Signs of a somewhat stronger global recovery.
  • Euro-area growth was damped by a sluggish reform pace.

 

ECB Forecasts

  • 2017 GDP growth at 1.8% vs 1.7%
  • 2018 GDP growth at 1.7% vs 1.6%
  • 2019 GDP growth at 1.6% vs 1.6%
  • 2017 inflation at 1.7% vs 1.3%
  • 2018 inflation at 1.6% vs 1.5%
  • 2019 inflation at 1.7% vs 1.7%

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

 

IG Corporate New Issuance This Week
3/06-3/10
vs. Current
WTD – $44.50b
March 2017
Forecasts
vs. Current
MTD – $58.025b
Low-End Avg. $31.79b 139.98% $113.79b 50.99%
Midpoint Avg. $33.15b 134.24% $114.31b 50.76%
High-End Avg. $34.50b 128.99% $114.83b 50.53%
The Low $25b 178.00% $80b 72.53%
The High $45b 98.89% $140b 41.45%

 

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 and Head of Fixed Income Syndicate

 

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

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

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

 

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

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 22nd    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

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

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

 

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

 

Global Market Recap

 

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

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

-Tony Farren

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

 

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

 

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

 

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

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

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

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

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

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

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 22nd    

Investment Grade Credit Spreads by Rating

Investment Grade Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

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

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

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

Take a look:

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

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

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

 

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

IG Primary & Secondary Market Talking Points

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

 

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

 

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

 

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

 

I am happy to announce that I had 96% response to today’s “Best & Brightest” survey! That means 23 out of 24 desks.  21 of those participants are among 2017’s YTD top 25 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 22 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 84.38% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments.  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

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

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

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

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

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


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

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

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

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

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

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

The “Best and the Brightest” in Their Own Words

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

Munching on Mnuchin Musings; Mischler Debt Market Comment
February 2017      Debt Market Commentary   

Quigley’s Corner 02.23.17- Munching on Mnuchin Musings

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

Global Market Recap

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

Treasury Secretary Steve Mnuchin Speaks on Squawk

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 15th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Danske Bank A/S was the lone corporate issuer to tap the IG dollar DCM today pricing 3 tranches totaling $1.75b.  The SSA space woke up featuring one well-telegraphed NWB 5-year that was $1b, bringing the all-in IG day totals to 2 issuers, 4 tranches and $2.75b.
We priced an anemic 57% of this week’s already low syndicate midpoint average forecast or $11.125b vs. $19.40b.
CDX IG and HV closed today’s session at new tights and the S&P and Dow closed at new all-time highs.

Upcoming potential market moving events:

  • Fed Chair Janet Yellen speaks at the Executive’s Club of Chicago on Friday, March 3rd.
  • The Employment Situation for February is scheduled to be released on Friday, March 10, 2017, at 8:30 a.m. (EST).

 

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs thru the launch/final pricing of today’s 3 IG Corporate-only new issues was <11> bps.
  • BAML’s IG Master Index tightened 1 bp to +123 vs. +124.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.18 vs. 119 matching its tight since November 3rd, 2014.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.8b on Wednesday versus $17.8b on Tuesday and $24.6b the previous Wednesday.
  • The 10-DMA stands at $20.0b.

 

Global Market Recap

 

  • U.S. Treasuries – rallied into the $28 bn 7yr auction & then the market stood still.
  • Overseas Bonds – 30yr JGB rallied 5 bps. Strong session for France & Belgium.
  • Stocks – Dow heading for its 10th winning session in a row.
  • Overseas Stocks – Asia with small losses. Europe closed mostly red.
  • Economic – Jobless claims 4-week moving average at lowest level since 1973.
  • Overseas Economic – China data better & Japan weaker. Good data in Germany & U.K.
  • Currencies – USD was weaker vs. all of the Big 5.
  • Commodities – Good day for crude oil, gold & silver and very bad day for copper.
  • CDX IG: -0.75 to 61.83
  • CDX HY: -1.53 to 314.93
  • CDX EM: -8.77 to 213.16

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

-Tony Farren

 

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

 

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

 

Treasury Secretary Steve Mnuchin Speaks on Squawk Box

US Treasury Secretary Steve Mnuchin offered his views this morning while appearing with Becky Quick of CNBC in his first interview since becoming the 77th U.S. Secretary of State. He spoke on various topics ranging from policy and regulation to immigration tax and growth.  Here are the key takeaways.  Thank you to one of our own Treasury gurus, Mr. Tony Farren, for the summary..

  • Most important thing for growth is tax plan.
  • We’re mostly focused on middle-class tax cut.
  • We believe in dynamic scoring for tax plan.
  • High-income tax cuts should be offset.
  • Could be late 2018 to get to 3% growth.
  • We’re looking closely at border adjustment tax.
  • Some issues with border adjustment tax.
  • Tax reform to be significant.
  • Tax reform goal is by August Congress recess.
  • Not ready to announced a longer-term U.S. Bond.
  • Should seriously look at longer-term bond issues (50- and 100-year).
  • Have had terrific talks with China so far.
  • Not making judgments on China FX.
  • Treasury has a process for reviewing FX policies.
  • We will probably have low rates for a long period.
  • Administration’s growth projections are likely higher versus Congress.
  • 3% GDP growth is very achievable.
  • Regulatory relief is also important boost to growth.
  • We’re looking at significant economic changes.
  • We’re reaching out to businesses.
  • Need to ensure banks put liquidity to work.
  • USD, stocks reflecting confidence in U.S. economy.
  • Not focused on day-to-day market moves.
  • Looking forward to regular meetings with Yellen
  • Looking forward to G-20 talks in March.
  • Has his team looking at EXIM Bank loan expansion.
  • He’s committed to housing finance reform.
  • We need bipartisan solution so that GSEs are not left as is.

 

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

 

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

Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest
February 2017      Debt Market Commentary   

Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

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 February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

Economic Data Releases

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Tomorrow’s Calendar

It was another no-print Friday today and a welcome one at that.  I am happy to announce that one additional syndicate desk earned its way into the “Best and the Brightest” so, my survey now includes 24 desks. They are the ones you want and need to hear from. They are very patiently lined up and waiting below with their numbers and thoughts for next week’s IG dollar DCM supply. So, kick back, relax, have a cup of coffee, knock back a beer or enjoy glass of wine or perhaps just sit by the fireplace and read what you need to know.  Let’s recap things first and on with the show!

 

IG Primary & Secondary Market Talking Points

 

  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 26 deals that printed, 14 tightened versus NIP for a 00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +121 vs. 1.22.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +167.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.4b on Thursday versus $22.1b on Wednesday and $22.5b the previous Thursday.
  • The 10-DMA stands at $20.3b.

 

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

 

IG Corporate New Issuance This Week
2/06-2/10
vs. Current
WTD – $14.70b
February 2017
Forecasts
vs. Current
MTD – $27.275b
Low-End Avg. $23.74b 61.92% $90.65b 30.09%
Midpoint Avg. $24.72b 59.47% $91.96b 29.66%
High-End Avg. $25.70b 57.20% $93.26b 29.25%
The Low $15b 98.00% $85b 32.09%
The High $35b 42.00% $120b 22.73%

 

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

 

I am happy to announce that I’ve added a new top syndicate desk to the “QC’s” “Best & Brightest” survey!  As they are in the top 25 they are a most welcome addition.  Once again, the “QC” received unanimous responses from the 24 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2017’s YTD top 25 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 21 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 86.61% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

 

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

 

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

 

The question posed to the “Best and the Brightest” early this morning framed with the following:
Here are this week’s numbers:

  • WTD, we missed this week’s IG Corporate syndicate midpoint average forecast by over 40% having priced only $14.70b vs. $24.72b.
  • Thus far in February we priced 30% of the monthly syndicate projection or $27.275b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $268.558b! 

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

  • NICS:  <3.44> bps
  • Oversubscription Rates: 3.92x
  • Tenors:  12.04 years
  • Tranche Sizes: $735mm
  • Spread Compression from IPTs to the Launch: <19.60> bps


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

 

  • NICs tightened 2.57 bps to <3.44> bps vs. <0.87> bps.
  • Over subscription or bid-to-cover rates increased by 0.80x to 3.92x vs. 3.12x.. 
  • Average tenors extended by 0.44 years to 12.04 years vs. 11.60 years.
  • Tranche sizes declined dramatically by $576mm to $735mm vs. $1,311mm, the result of last week’s hefty jumbo deal tranche sizes from MSFT, AT&T and AAPL.
  • Spread compression from IPTs to the launch/final pricing of this week’s 20 IG Corporate-only new issues widened ever so slightly by <0.17> bps to <19.60> vs. <19.77> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 1 bp to +167 vs. +166.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +128 vs. +127. 
  • Spreads across the four IG asset classes tightened 0.50 bps to 20.50 vs. 21.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.46 bps to 24.74 vs. 25.20 bps also against their post-Crisis lows.
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).

 

Corporate America has posted earnings.  Most issuers have exited blackouts.  Thursday’s storm may have hampered a bit of issuance this week and next week is expected to be sizeable. Chair Yellen testifies before the U.S. Senate Banking Panel on Tuesday the 14th. This represents Yellen’s first appearance since raising rates last month. All eyes and ears will be tuned into that especially since the January FOMC meeting was not followed by a Press Conference. Meanwhile Japan’s Prime Minister Abe arrives today for his first official summit with President Trump through the weekend.    

My approach to the “Quig” Pro Quo is to give something first and then ask.  So, it’s now time for the question, – “what are your thoughts and numbers for next week’s IG Corporate new issue volume?” 

Thank you very much and a have a great weekend! -Ron”

 

The “Best and the Brightest” in Their Own Words*

 

*Responses the QC Best & Brightest are available exclusively to QC email subscribers

 

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
2/13-2/17
Low-End Avg. $20.71b
Midpoint Avg. $21.33b
High-End Avg. $21.96b
The Low $15b
The High $26b

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

 

Next Week
2/13-2/17
1: 15b
2: 15-20b
10: 20b
1: 21b
4: 20-25b
5: 25b
1: 26b

 

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

Have a great weekend!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/06
TUES.
2/07
WED.
2/08
TH.
2/09
FRI.
2/10
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
New Issue Concessions <3.62> bps <7.5> bps 5.25 bps N/A N/A <3.44> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps
Oversubscription Rates 4.25x 4.56x 2.18x 7.33 N/A 3.92x 3.12x 3.29x 2.40x 2.85x 2.45x
Tenors 12.83 yrs 16.65 yrs 6.40 yrs 10 yrs N/A 12.04 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs
Tranche Sizes $744mm $850mm $690mm $300mm N/A $735mm $1,311 yrs $845mm $1,123mm $927mm $859mm
Avg. Spd. Compression
IPTs to Launch
<19.17> bps <25.40> bps <11.5> bps <35> bps N/A <19.60> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps

 

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

 

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 26 deals that printed, 14 tightened versus NIP for a 54.00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).

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

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
H.B. Fuller Co. Baa3/BBB 4.00% 2/15/2027 300 +200a +170a (+/-5) +165 +165 156/153
ADB Aaa/AAA 2.00% 2/16/2022 3,750 MS +19a MS +19a MS +18 +26.95 25/24
BP Capital Markets PLC A2/A- FRN 8/14/2018 500 N/A 3mL+40a (+/-5) 3mL+35 3mL+35 3mL+29.5/26.5
BP Capital Markets PLC
(tap) New Total: $1.75b
A2/A- 2.315% 2/13/2020 500 +85a +70a (+/-5) +65 +65 63/60
BP Capital Markets PLC A2/A- 3.224% 4/14/2024 1,000 +120a +115a (+/-5) +110 +110 108/105
BP Capital Markets PLC A2/A- 3.588% 4/14/2027 850 +130a +125 the # +125 +125 121/118
CMS Energy Corp. Baa2/BBB 3.45% 8/15/2027 350 +125-130 +115a (+/-5) +110 +110 111/109
BNG Aaa/AAA 1.50% 2/15/2019 2,250 MS +13a MS +13a MS +13 +44.25 44/42
Citigroup Inc.
(tap) New Total: $1.75b
Baa3/A- 4.75% 5/18/2046 750 +185a +175a (+/-2) +173 +173 176/173
Fondo Mivivienda S.A.
(tap) New Total: $650mm
BBB+/BBB+ 3.50% 1/31/2023 150 +180a +175a (+/-5) +170 +170 170/167
MPLX LP Baa3/BBB- 4.125% 3/01/2027 1,250 very high 100s +193.75a +180a (+/-5) +175 +175 175/171
MPLX LP Baa3/BBB- 5.20% 3/01/2047 1,000 +50 bps curve
243.75
+225a (+/-5) +220 +220 215/212
Symantec Corp. Baa3/BB+ 5.00% 8NC3 1,100 +mid to hi 5.00%
or 5.625%a
5.25-5.30%
or 5.375%a
5.00% +271 277/272
Dexia Capital Local Aa3/AA- FRN 2/15/2019 500 3mL+50 N/A N/A 3mL+50 3mL+50/47
EIB Aaa/AAA 1.75% 5/15/2020 3,000 MS +14a MS +14a MS +12 +42.5 41/40
KfW Aaa/AAA 1.25% 9/13/2018 1,000 MS <4>a MS <4>a MS <4> +17.45 17.6/17.4
TVA Aaa/AAA 2.875% 2/01/2027 1,000 +low 50s / +52.5a +50a (+/-2) +48 +48 48/46
Discover Financial Services BBB-/BBB+` 4.10% 2/09/2027 1,000 +190a +175a (+/-5) +170 +170 171/167
Estee Lauder Cos. Inc. A2/A+ 1.80% 2/07/2020 500 +55-60 +45a (+/-5) +40 +40 38/36
Estee Lauder Cos. Inc. A2/A+ 3.15% 3/15/2027 500 +90-95 +80 (+/-5) +75 +75 77/74
Estee Lauder Cos. Inc. A2/A+ 4.15% 3/15/2047 500 +125-130 +115a (+/-5) +110 +110 113/111
First Republic Bank Baa1/BBB+ 4.625% 2/13/2047 400 +high 100s
+187.5a
RG: +170a (+/-5)
+175a (+/-5)
+165 +165 164/160
GATX Corp. Baa2/BBB 3.85% 3/30/2027 300 +170a +150a (+/-3) +147 +147 149/146
IHS Markit Ltd. BB+/BBB 4.75% 2/15/2025 500 5.00% 4.75%a 4.75% +244 219/217
Vale Overseas Ltd.
(tap) New Total: $2bn
BBB-/BBB 6.25% 8/10/2026 1,000 5.45%a 5.20-5.25% 5.20% +278.3 269/265
Wells Fargo & Co. A2/AA- FRN 2/11/2022 2,000 3mL+95-100 3mL+93 the # 3mL+93 3mL+93 3mL+89/86

 

Indexes and New Issue Volume

Index levels are as of 12:00 noon ET.
*Denotes new record high

Index Open Current Change  
IG27 64.712 65.024 0.312
HV27 138.575 137.87 <0.705>
VIX 10.88 10.72 <0.16>  
S&P 2,307 *2,313 6
DOW 20,172 *20,242 70  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $14.40 bn WTD: $22.15 bn
MTD: $26.975 bn MTD: $37.225 bn
YTD: $199.358 bn YTD: $264.508 bn

 

Lipper Report/Fund Flows – Week ending February 8th    

     

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

 

IG Credit Spreads by Rating

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 20.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
IG Avg. 128 128 128 127 127 128 128 128 126 126 0 +2 106
“AAA” 75 76 75 75 74 75 76 77 75 71 <1> +4 50
“AA” 79 80 79 79 79 80 80 79 78 78 <1> +1 63
“A” 103 104 103 103 103 104 104 104 103 103 <1> 0 81
“BBB” 161 162 161 161 160 161 161 161 159 160 <1> +1 142
IG vs. HY 265 270 265 264 259 265 267 272 270 267 <5> <2> 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 24.74 bps wider versus their post-Crisis lows!

 

INDUSTRY 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
Automotive 112 112 112 112 113 115 116 117 116 117 0 <5> 67
Banking 119 120 119 119 118 120 121 121 119 120 <1> <1> 98
Basic Industry 155 157 156 156 155 156 156 157 156 156 <2> <1> 143
Cap Goods 94 95 95 95 95 95 95 95 95 95 <1> <1> 84
Cons. Prod. 106 106 106 105 105 105 106 106 105 105 0 +1 85
Energy 157 159 157 157 156 157 157 157 154 154 <2> +3 133
Financials 139 141 141 142 141 143 144 144 142 143 <2> <4> 97
Healthcare 115 115 114 114 113 114 114 114 112 112 0 +3 83
Industrials 130 130 129 129 129 129 130 129 128 128 0 +2 109
Insurance 138 139 139 139 138 139 139 139 138 139 <1> <1> 120
Leisure 127 128 127 128 128 129 129 128 129 129 <1> <2> 115
Media 156 157 156 156 155 156 156 155 154 153 <1> +3 113
Real Estate 140 141 141 141 140 141 141 141 139 140 <1> 0 112
Retail 115 115 115 114 114 115 115 114 112 112 0 +3 92
Services 123 123 123 123 123 123 123 122 121 121 0 +2 120
Technology 104 105 104 104 103 105 105 105 103 101 <1> +3 76
Telecom 168 168 166 166 165 165 166 164 161 161 0 +7 122
Transportation 127 128 128 128 127 128 129 128 126 126 <1> +1 109
Utility 127 128 128 128 127 127 127 127 126 127 <1> 0 104

                                  

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Import Price Index MoM January 0.3% 0.4% 0.4% 0.5%
Import Price Index ex Petroleum MoM January —- 0.0% <0.2%> <0.1%>
Import Price Index YoY January 3.4% 3.7% 1.8% 2.0%
U. of Michigan Sentiment February 98.0 95.7 98.5 —-
U. of Michigan Current Conditions February —- 111.2 111.3 —-
U. of Michigan Expectations February —- 85.7 90.3 —-
U. of Michigan 1 Year Inflation February —- 2.8% 2.6% —-
U. of Michigan 5-10 Year Inflation February —- 2.5% 2.6% —-
Monthly Budget Statement (2:00pm ET) January $45.0b —- <$27.5b> —-

 

*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones

 

New Issue Pipeline (more…)

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