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

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

 

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates This Week and May

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

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending May 10th         

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

 

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

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

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

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

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

Today’s IG Primary & Secondary Market Talking Points

 

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

 

Syndicate IG Corporate-only Volume Estimates This Week and May

 

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

 

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

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

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

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

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

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

 

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

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

o   NICS:  <0.20> bps

o   Oversubscription Rates: 2.72x

o   Tenors:  8.66 years

o   Tranche Sizes: $802mm

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


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

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

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

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

 

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

The “Best and the Brightest” in Their Own Words

 

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

(more…)

IG Corporate Debt: PepsiCo-Good AND Better For You; Mischler Comment
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.03.16- PepsiCo: Good and Better For You

 

Investment Grade New Issue Re-Cap – New Records, Negative Rates and a Blockbuster from Pepsi

Global Market Recap

IG Primary & Secondary Market Talking Points

The PepsiCo Inc. $4.5b 6-part Deal Dashboard

A Look at Socially-Responsible PepsiCo Inc.: Good and Better For You.

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 28th

IG Credit Spreads (by Rating & Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

In the limited time I had today to thumb through a very interesting Q3 report from friends and financial news reporters John Balassi and Michael Gambale of Thomson Reuters fame, the multi-billion dollar multinational mass media and information firm, I was taken by a couple talking points about Global New Issuance that you should find noteworthy:

o   Global Debt Capital Markets activity is up 27% to $5.5 trillion through Q3.

o   Q3 U.S. Investment Grade Corporate Debt is 9%

o   Global High Yield is down 21%

o   Government and Agency offerings rose 76%

o   Emerging Markets Debt is down 23%

o   Overall Debt Underwriting fees declined 9%

However, what’s more incredible is that we are witnessing an unprecedented surge in bonds the world over that are guaranteed to lose investors’ money if held to maturity given their negative yields.  In an article written by Bloomberg Editorial’s Phil Kuntz, the total face value of negative yielding corporate and sovereign debt in the “Bloomberg Barclays Global Aggregate Index of investment grade bonds jumped to $11.6 trillion as of September 30th, up 6.1% from the prior month……….less than one seventh of the world’s negative yielding debt is owed by businesses. Finance companies issued……almost 80% ….totaling $1.3 trillion!” The number includes debt one year and out.  Corporations account for 15% of the world’s negative debt while 85% is derived from governments.  That’s not good news folks.

This pie chart displays the drama in those numbers:

mischler corporate debt comment

 

So, what’s this got to with new issuance?  Everything because the place investors go to fill their portfolios is the safe haven of better rated IG corporate debt right here is our U.S. dollar-denominated primary markets.  In what continues to be a historically low rate environment, corporations have a wonderful window of opportunity before them to secure favorable funding for M&A, expansions, lower refi levels, you name.  What’s more, investors are attracted to the relative safe haven of these credits that do, in fact offer the best balance in our world in better managing risk exposure while securing a decent return, comparatively speaking.

 

That’s our segue into this evening’s IG DCM that owned the new issues leaderboards as 3 corporate issuers priced 11 tranches between them totaling $7.15b.  But the biggest deal of the day belonged to PepsiCo’s (NYSE:PEP) $4.5b 6-part Senior Notes transaction comprised of 3- and 5-year FXD/FRNs, 10s and 30s.  It also happens to be the Deal-of-the-Day as Mischler Financial, our nation’s oldest Service Disabled veteran broker dealer was more than honored to be named an active 1.00% Co-Manager and was showcased as one of two diversity co’s on today’s deal.  So, I invite you to join me in the relative value story of this deal and PepsiCo’s Diversity & Inclusion initiatives.

But first, here’s the global re-cap and a look at all today’s primary market talking points and issuance!

 

Global Market Recap

 

o   U.S. Treasuries – Better than expected ISM manufacturing hits the front end.

o   Stocks – U.S. stocks red (3:30pm). FTSE, Nikkei & HS rallied. Europe mostly red.

o   Economic – ISM manufacturing moved back over 50. Good news for hawks on the FOMC.

o   Currencies – USD outperformed the Euro, Pound & Yen. Pound had a very bad day.

o   Commodities – Crude oil closed higher while gold, copper, silver & wheat lost.

o   CDX IG: +0.50 to 75.63

o   CDX HY: +2.30 to 403.45

o   CDX EM: -0.65 to 233.06

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 11 IG Corporate-only new issues was 18.18 bps.
  • BAML’s IG Master Index was unchanged at +143.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.3b on Friday versus $15.8b Thursday and $13.3b the previous Thursday.
  • The 10-DMA stands at $16.2b.

 

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

 

IG Corporate New Issuance This Week
10/03-10/07
vs. Current
WTD – $7.15b
October 2016 vs. Current
MTD – $7.15b
Low-End Avg. $17.35b 41.21% $87.83b 8.14%
Midpoint Avg. $18.54b 38.57% $88.59b 8.07%
High-End Avg. $19.74b 36.22% $89.35b 8.00%
The Low $15b 47.67% $75b 9.53%
The High $26b 27.50% $125b 5.72%

 

The PepsiCo Inc. $4.5b 6-part Deal Dashboard

 

PEPSI Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
Comparable Bid
Pre-Announcement
NICs
(bps)
Trading at
the Break
+/-
(bps)
3yr FXD +55-60 +50a (+/-5) +45 +45 <12.5> PEP 1.50% ’19 T+35 (G+42)
Curve adjusted = flat
0 44/43 <1>
3yr FRN 3mL+equiv 3mL+equiv 3mL+27 3mL+27 <12.5> PEP 1.50% ’19 T+35 (G+42)
Curve adjusted = flat
0 3mL+26/24 <1>
5yr FXD +65-70 +60a (+/-5) +55 +55 <12.5> PEP 3.00% ’21 T+54 (G+55) 0 54/53 <1>
5yr FRN 3mL+equiv 3mL+equiv 3mL+53 3mL+53 <12.5> PEP 3.00% ’21 T+54 (G+55) 0 3mL+52/51 <1>
10yr +90-95 +80a (+/-5) +75 +75 <17.5> PEP 2.85% ’26 (T+67/G+71) +4 74/73 <1>
30yr +130-135 +120a (+/-5) +115 +115 <17.5> PEP 4.45% ’46 (T+112) +3 114/ <1>

 

………and here’s a look at final book sizes and over-subscription rates:

 

ETR Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr FXD 250mm 450m 1.8x
3yr FRN 750mm 1,950m 2.6x
5yr FXD 250mm 600mm 2.4x
5yr FRN 750mm 2,200m 2.93x
10yr 1,000m 3,250m 3.25x
30yr 1,500m 4mm 2.67x

 

Thank You’s Galore

 

Let’s see if you’ve been reading the “QC” with a simple test question – “Where does D&I start in corporate America?”  Correct good job!  The answer is it starts from the top down.  At PepsiCo, the world’s second largest food and beverage business that means India-born and naturalized American Chairperson and Chief Executive Officer Indra Nooyi.  It is from her office that Pepsi’s D&I initiative is carried, embraced and filtered through what is among the best-in-class Diversity and Inclusion mandates that we saw in action today, as evidenced by Mischler’s opportunity to demonstrate our capital markets capabilities and to work with PepsiCo’s Treasury/Funding Department.

Mischler sends off its five-star salute this evening to all of you with thanks not only for the privilege to be involved in your transaction, but for the active roll you enabled and supported us to participate with.  As a 1.00% active Co-Manager we were able to introduce nearly one quarter of a billion dollars in volume and 80 individual orders to Pepsi’s six-part order books.  By allocating Team Mischler we then see return business from our middle markets distribution network that executes Corporate, Agency, ABS/MBS, Rates and Municipal business among others.  The sustainable growth trajectory we are on, in turn, helps fund our “giving back and pay forward set asides”  so that we can apply our shared ethos to give back to our Veteran community.  This is a circular process, and it’s how we grow our business while giving back to veteran and service disabled veteran organizations – the root of our diversity certification.  So, thank you all at Team Pepsi from all of us here at Team Mischler for being great stewards for D&I and Veteran causes.

PepsiCo Inc debtA Look at Socially Responsible PepsiCo Inc.: Good and Better For You

But let me tell you a bit more about Pepsi D&I leadership roles. Pepsi’s Supplier Diversity mandate began over 30 years ago at the company and its annual spend is approximately $1.3 billion!  Also, internally, PepsiCo recognizes individuals within the company who are active supporters of diversity and inclusion in the workplace.  Two such honors are the Harvey C. Russell Inclusion Award to honor employees for their outstanding achievements in diversity and inclusion.  Most recently, 76 associates from Pepsi’s Global business were awarded.  Additionally, Pepsi offers the Global Steve Reinemund Diversity and Inclusion Leadership Award recognizing senior Pepsi staff members who model exemplary leadership and a commitment to diversity and inclusion.

Which brings me to PepsiCo’s incredible commitment to hire U.S. military veterans, an initiative that earned it a top 25 ranking for the second consecutive year in the G.I. Jobs ranking of Top 100 Military Friendly Employers in 2013.  Pepsi is the lone food and beverage company in the top 50 companies in that category.  Also in 2013, Pepsi’s online jobs clearinghouse named, Bright.com, secured the top ranking for Pepsi among Fortune 50 companies in “most veterans hired” as a percentage of its workforce.  How awesome is that folks?  For four consecutive years Pepsi’s recycling program provided $1.5million to support Entrepreneurship Bootcamp for Veterans or “EBV” that helps veterans build their own businesses to pursue their dreams. Those are just some of the ways Pepsi is giving back.

They gave the nation’s oldest SDVBE a chance again today to prove our muster and so, it’s our job and expectation to deliver the goods and in addition to extol the virtues and tell the stories of what Pepsi does to make this world a better, more socially responsible place; Pepsi is Good and Better For You!

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

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

…..and here’s another look at last week’s day-by-day re-cap of key primary market driver averages for IG Corporates only followed by the prior four week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/26
TUES.
9/27
WED.
9/28
TH.
9/29
FRI.
9.30
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
AVERAGES
WEEK 9/12
AVERAGES
WEEK 9/05
New Issue Concessions 2.50 bps N/A 5.69 bps 0 bps/flat N/A 2.71 bps 0.69 bps 4.66 bps 1.30 bps
Oversubscription Rates 3.71x N/.A 2.66x 4.12x N/A 3.52x 3.23x 3.47x 3.23x
Tenors 13.12 yrs 30 yrs 7.71 yrs 7.29 yrs N/A 10.51 yrs 9.36 yrs 11.28 yrs 9.42 yrs
Tranche Sizes $509mm $150mm $862mm $681mm N/A $646mm $964mm $710mm $719mm

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
General Motors Finc’l. Co. BBB-/BBB- FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+127 3mL+127 BAML/BNPP/CITI/LLOY/MIZ
General Motors Finc’l. Co. BBB-/BBB- 2.35% 10/04/2019 750 +155a +145 the # +145 +145 BAML/BNPP/CITI/LLOY/MIZ
General Motors Finc’l. Co. BBB-/BBB- 4.00% 10/06/2026 750 +260a +245a (+/-5) +240 +240 BAML/BNPP/CITI/LLOY/MIZ
PepsiCo. Inc. A1/A FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+27 3mL+27 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 1.35% 10/04/2019 750 +55-60 +50a (+/-5) +45 +45 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A FRN 10/06/2021 250 3mL+equiv 3mL+equiv 3mL+53 3mL+53 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 1.70% 10/06/2021 750 +65-70 +60a (+/-5) +55 +55 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 2.375% 10/06/2026 1,000 +90-95 +80a (+/-5) +75 +75 BAML/CITI/GS/MIZ
PepsiCo. Inc. A1/A 3.45% 10/06/2046 1,500 +130-135 +120a (+/-5) +115 +115 BAML/CITI/GS/MIZ
Xylem Inc. Baa2/BBB 3.25% 11/01/2026 500 +200a +170a (+/-5) +165 +165 CITI/WFS(a) JPM (p)
Xylem Inc. Baa2/BBB 4.375% 11/01/2046 400 +250a +215a (+/-5) +210 +210 CITI/WFS(a) JPM (p)

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.38 1.38 0
IG27 75.132 75.232 0.10
HV27 176.145 175.005 <1.14>
VIX 13.29 13.57 0.28
S&P 2,168 2,161 <7>
DOW 18,308 18,253 <55>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $7.15 bn DAY: $7.15 bn
WTD: $7.15 bn WTD: $7.15 bn
MTD: $7.15 bn MTD: $7.15 bn
YTD: $1,081.886 bn YTD: $1,366.37 bn

 

Lipper Report/Fund Flows – Week ending September 28th

     

  • For the week ended September 28th, Lipper U.S. Fund Flows reported an inflow of $2.334b into Corporate Investment Grade Funds (2016 YTD net inflow of $37.925b) and a net inflow of $2.011b into High Yield Funds (2016 YTD net inflow of $9.444b).
  • Over the same period, Lipper reported a net inflow of $480.7m into Loan Participation Funds (2016 YTD net outflow of $3.319b).
  • Emerging Market debt funds reported a net inflow of $209.7m (2016 YTD inflow of $6.549b).

 

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 33.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 9/30 9/29 9/28 9/27 9/26 9/23 9/22 9/21 9/20 9/19 1-Day Change 10-Day Trend PC
low
IG Avg. 143 143 143 143 142 141 141 142 142 142 0 +1 106
“AAA” 84 84 84 84 83 82 82 83 83 83 0 +1 50
“AA” 87 87 87 86 86 85 85 86 85 85 0 +2 63
“A” 113 114 114 114 113 112 112 113 113 113 <1> 0 81
“BBB” 185 185 185 185 184 183 183 185 184 185 0 0 142
IG vs. HY 354 366 371 375 374 369 368 380 382 383 <12> <29> 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 38.95 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 9/30 9/29 9/28 9/27 9/26 9/23 9/22 9/21 9/20 9/19 1-Day Change 10-Day Trend PC
low
Automotive 122 121 121 121 119 119 119 121 120 120 +1 +2 67
Banking 133 136 134 134 131 131 131 133 132 133 <3> 0 98
Basic Industry 186 187 187 187 187 186 186 188 189 189 <1> <3> 143
Cap Goods 106 107 105 106 105 104 104 104 104 104 <1> +2 84
Cons. Prod. 111 111 111 112 110 110 110 111 111 111 0 0 85
Energy 191 191 192 193 193 191 191 192 192 192 0 <1> 133
Financials 169 167 167 167 166 165 165 167 167 167 +2 +2 97
Healthcare 120 119 119 119 118 118 118 119 118 118 +1 +2 83
Industrials 144 144 144 145 143 143 143 144 144 144 0 0 109
Insurance 162 163 163 163 163 162 162 163 162 163 <1> <1> 120
Leisure 140 141 140 141 141 141 142 142 142 142 <1> <2> 115
Media 165 164 165 165 164 164 164 166 165 165 +1 0 113
Real Estate 153 151 151 151 151 151 151 151 151 150 +2 +3 112
Retail 119 119 119 119 118 118 119 120 119 120 0 <1> 92
Services 133 136 135 135 134 134 135 135 135 135 <3> <2> 120
Technology 121 124 124 124 123 123 123 124 124 124 <3> <3> 76
Telecom 163 165 165 165 162 162 162 164 164 164 <2> <1> 122
Transportation 141 138 138 139 139 138 139 139 139 139 +3 +2 109
Utility 141 142 141 141 140 140 140 141 140 141 <1> 0 104

  (more…)

Corporate Debt Market: 3M Day for Innovation; Mischler Comments
September 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 09.14.16 A Day for Innovation Courtesy of 3M

 

Investment Grade New Issue Re-Cap

Global Market Recap

Deal Dashboard and Drill-Down for The 3M Company’s 3-pPart 5s/10s/30s New Issue

IG Primary & Secondary Market Talking Points

New Issues Priced

New Issue Volume

Lipper Report/Fund Flows – Week ending September 7th

Investment Grade Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

8 IG Corporate issuers printed 12 tranches between them totaling $7.1b with a lone SSA assist from AFDB’s expected $1b 3-year bringing the overall IG day totals to 9 issuers, 13 tranches and $8.1b.

We have now priced 82% of the syndicate midpoint average forecast for this week or $30.295b vs. $36.91b and 71% of the monthly estimates or $82.755b vs. $116.02b.

 

Global Market Recap

 

  • U.S. Treasuries – USTs put in a strong performance led by the 3yr.
  • Overseas Bonds – JGB’s mixed with steeper curve (big move). Europe rallied.
  • Stocks – U.S. stocks mixed at 3:30pm but heading south into the close.
  • Overseas Stocks – Europe closed mostly red. Asia did close red.
  • Economic – U.S. import price index as expected.
  • Overseas Economic – China good, Japan mixed, EU weak IP & U.K. solid employment.
  • Currencies – The USD underperformed 4 of the Big 5.
  • Commodities – Crude oil’s struggles continued. Copper had a very good day.
  • CDX IG: +0.11 to 77.04
  • CDX HY: +1.05 to 416.75
  • CDX EM: +5.80 to 260.25

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

-Tony Farren

 

Deal Dashboard and Drill-Down for The 3M Company’s 3-pPart 5s/10s/30s New Issue

 

 3M Corp-new-debt-issuance

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
3M 5yr +55-60 +45a (+/-2) +43 +43 <14.5> +1.5 42/ <1>
3M 10yr +80-85 +70a (+/-2) +68 +68 <14.5> +3 67/ <1>
3M 30yr +105-110 +95a (+/-2) +93 +93 <14.5> +4 92/ <1>

 

Mischler Financial was privileged and honored to be selected to serve as an 0.50% active Co-Manager for The 3M Company (NYSE:MMM) today on what represents our inaugural transaction with the American multinational conglomerate corporation based in Maplewood, Minnesota.

For the 3M 5-year relative value study I looked at the outstanding MMM 2.00% due 8/07/2020 that was T+20 (G+36) and the 3M 2.00% due 6/26/2022 T+60 (G+47).

The average of those two G-spreads is 41.5 inferring a 1.5 bp NIC on today’s new 3-year. 

Looking at the 10-year, the MMM 3.00% due 8/07/2025 was seen T+49 (G+55) bid before today deal hit the tapes, pegging NIC as 13 bps versus today’s T+68 final pricing However, relative value, as we know, is part art and part science.  Looking at indirect comps away we looked at:

  • CL 3.25% due 03/15/24 T+31 (G+46) + 10 bps for the 8s/10s curve adjustment gets you to G+56.
  • Kimberly-Clark (A2/A) “KMB” 2.75% due 2/15/2026 were T+69 bid (G+72).
  • Unilever “UNANA” 2.00% due 7/28/2026  67 G+67.

The average of those three G-spreads is G+65 implying a much narrower and likely 3 bps new issue concession on today’s new 3M 10-year.

 

The 30-year looked to the “MMM” 3.875% due 6/15/2044 that was T+89 bid inferring a 4 bps NIC on today’s new T+93 30yr pricing.  What’s more, today’s new MMM 30-year priced at the tightest 30-yr spread of 2016 tying with the KMB 3.20% due 7/30/2046 and the Trustees of Dartmouth 3.474% due 6/01/2046 both of which printed at T+93.  So, congratulations to 3M’s Treasury/Funding team and today’s joint leads on securing this 2016 record.

Price evolution tightened an impressive 14.5 bps from IPTs across each tranche on what seemed a moderate volume day for issuance in relation to recent days.
All three tranches closed the session 1 bp tighter on the bid side.

 

………and here’s a look at final book sizes and the oversubscription rate:

 

MMM Tranche Tranche Size Final Book
Size
Bid-to-Cover
Rate
MMM 5yr 600 $1.7b 2.83x
MMM 10yr 650 $2.3b 3.54x
MMM 30yr 500 $1.4b 2.8x

 

Diversity & Inclusion Story

 

3M is committed to providing small and diverse suppliers equal access to business opportunities. For 3M purposes, a diverse supplier is any supplier who qualifies for one or more of the following classifications: Minority-owned business, Women-owned business, Small Business (including Small Disadvantaged, HUBZone, Woman, and Veteran/Service Disabled Veteran).  Mischler Financial Group, Inc., the nation’s oldest Service Disabled Veteran broker dealer is proud to have been offered an active role today to introduce new high quality incremental/tertiary tier II and III accounts to its investor profile. These opportunities are critically important for us to grow our platform in a meaningful and sustainable way by granting our middle markets accounts access to the IG primary credit markets who then return to trade corporate secondaries, USTs, Municipals, ABS, MBS, agencies and equities with our expanding platform.

Let me tell you what 3M has done on the D&I front –  in 2014 alone, 3M spent $1.5 billion dollars with small businesses, representing 27% of its total U.S. domestic spend. 3M purchased $200 million dollars with diverse suppliers, which represents 3.6% of total U.S. domestic spend.  The Company continues to reassess elements of its approach, working across the industry, as well as the financial services industry, to glean best practices. So, it is quite apparent that 3M remains committed to supporting small business and diverse suppliers and their positive impact on the economic viability of communities while reflecting 3M’s diverse customer base.

For the world’s largest manufacturer of adhesives, I can safely say that when 3M implements a D&I program, it will stick to it!

Where does this wonderful mandate originate?  As I always say, social responsibility starts from the top down in any company both large and small.  At 3M it is mandated from the desk of 3M Chairman, President and Chief Executive Officer Inge G. Thulin. As a fellow Swede maybe he’d find it nice to know that we here at Mischler recently hired a fellow Swede named Jonathan Herrick who as a U.S. Marine served three tours overseas, two in Afghanistan and one in Iraq.  We are committed to our mandate and happy to relay our Swedish/American connection story here in the “QC” but the mandate doesn’t stop there!

……….. 3M’s SVP and CFO Nicholas C. Gangestad embraces it and makes sure it’s in the corporate DNA of his Treasury/Funding team, and that means Matt Ginter, Treasurer, VP, Investor Relations; Sarah Grauze, Assistant Treasurer; Jon Kirchoff, Debt Capital Markets Manager and Jen Haase, Capital Markets.  Thank you all for your thoughtful inclusion of Team Mischler and the opportunity to demonstrate our capital markets capabilities.


Although we are very familiar with the impressive group of joint leads today (BAML, Citigroup, MS and Goldman Sachs), we were asked to liaise with Team Citigroup Origination and Syndicate on today’s transaction.  It goes without saying that Team Citigroup is a formidable and well experienced group  wherein Diversity and Inclusion initiatives are concerned.  It’s always a pleasure working with Peter Aherne’s Origination A-Team of Patrice Altongy and Morgan Forester and Syndicate’s Kevin O’Sullivan and Alisha Mingo! It’s tough to find a better and more experienced crew for these types of diversity transactions than that one.  We appreciate all you do for D&I stewardship in the financial services industry as a whole; for what you do for D&I on your own internal transactions as well as the important role D&I initiatives play in your corporate pitches.  You remain a historic game changer for the platform in our IG dollar DCM and in many respects we feel we’re part of your team as a result.  So, thank you all very much!

 

IG Primary & Secondary Market Talking Points

 

  • Telus Corp. upsized today’s 10-year Senior Notes new issue to $600mm from $500mm at the launch and at the tightest side of guidance.
  • Ares Capital Corp. increased its 5-year Senior Notes new issue to $600mm from $300mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 12 IG Corporate-only new issues was 23.17 bps.
  • BAML’s IG Master Index was unchanged at +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +191 versus +191.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.8b on Tuesday versus $12.6b Monday and $12.6b the previous Tuesday.
  • The 10-DMA stands at $13.9b.

 

Syndicate IG Corporate-only Volume Estimates for September

 

IG Corporate New Issuance This Week
9/12-9/16
vs. Current
WTD – $30.295b
September 2016 vs. Current
MTD – $82.755b
Low-End Avg. $35.83b 84.55% $115.45b 71.68%
Midpoint Avg. $36.91b 82.08% $116.02b 71.33%
High-End Avg. $38.00b 79.72% $116.59b 70.98%
The Low $30b 100.98% $80b 103.44%
The High $46b 65.86% $150b 55.17%

 

 

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

Ron Quigley, Managing Director and Head of Fixed Income Syndicate (more…)