Browsing articles tagged with "minority broker-dealer Archives - Page 12 of 14 - Mischler Financial Group"
US GDP-Big Miss; Rates: Lower For Longer; Mischler Weekend Update
July 2016      Debt Market Commentary   

Quigley’s Corner 07.29.16- U.S. GDP: A Big Miss; Rates: Lower for Longer

 

Investment Grade Corporate Debt New Issue Re-Cap – U.S. Misses GDP Big Time.  You Know What That Means..

Global Market Recap

IG Primary Market Talking Points

Lipper Fund Flows

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

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

Decades’ Worth of August IG Corporate and SSA Issuance-“Knowing the Past for the Future”

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Market Trade Lab

Economic Data Releases

Rates Trading Lab-“Buy Dips; Rinse. Repeat. Rinse. Repeat.”

New Issue Pipeline

M&A Pipeline

 

TGIF folks!  It was a no print Friday readers and it’s been a whale of a week for Team Mischler. We‘d just like to thank Apple (NASDAQ:AAPL), Verizon (NYSE:VZ) and Goldman Sachs (NYSE:GS) once again for working with us this week.  I’d also like to thank the MFG institutional accounts that were responsive to our capital market initiatives this week.  You all know who you are.  None of this would be possible without you.  Trusting, believing; loyal and faithful.  That says it all and with great appreciation for helping pull our program together, we thank you.
lower-for-longer-interest-rates-mischler-
As for next week negative rates in Europe and Japan, Abe announced doubling down on ETF purchases, sorely disappointing the market that knows there is a HUGE stimulus package hovering around Japan. Fear persists in the EU and the world’s engine – the U.S. of A.  missed GDP big time this morning by more than 50% or 1.20% vs. 2.50%! The Mantra became louder today. It’s ….LOWER-for-LONGER. USTs rallied as a result. CT10 is 1.45%. Issuers are blasting out of black-outs and will be ready, willing and able to blow out deals heading into what will be a nice first half of August issuance as we head to a traditionally slow second half of the month.

Look for $25-30b to price next week in IG Corporate-land and $78b in August.  But what the heck, why listen to the guy-in-the-corner when I bring you the top syndicate desks each and every Friday to share their own thoughts and numbers with you.  Stop by Tony’s Global Recap first for a snapshot of today’s global market news (hey there it is right below) and then scroll to the “Best and the Brightest.”  They all checked into the “QC” this morning and afternoon and they are all ready to share their thoughts.  So, read all about it. 

Global Market Recap

 

  • S. Treasuries – Strong session for USTs led by the belly on the weak GDP release.
  • 3mth Libor – Set at highest since May 2009 (0.75910%).
  • Stocks – U.S. stocks mixed (3:30pm). S&P traded at all-time high & NASDAQ YTD high.
  • Overseas Stocks – Bank stocks led Europe higher. Nikkei improved & Shanghai lost.
  • Economic – U.S. GDP laid another egg. Data weak in Japan & Europe.
  • Currencies – Terrible day for the USD. Lost ground vs. all of the Big 5.
  • Yen – Rallied over 3 handles and traded with 5 handles (-3.25 to 102.02).
  • Commodities – Good day for commodities with the weaker USD. Crude higher.
  • CDX IG: -1.22 to 73.08
  • CDX HY: -3.67 to 400.48
  • CDX EM: -5.95 to 259.66

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

-Tony Farren

 

IG Primary Market Talking Points

 

  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).

 

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

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $28.00b
July 2016 vs. Current
MTD – $96.75b
Low-End Avg. $19.39b 144.40% $90.09b 107.39%
Midpoint Avg. $20.48b 136.72% $91.17b 106.12%
High-End Avg. $21.57b 129.81% $92.26b 104.87%
The Low $10b 280.00% $60b 161.25%
The High $30b 93.33% $125b 77.40%

 

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

 

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  21 of those participants are among 2016’s top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  Today’s cumulative underwriting percentage of the participating desks was 80.99% 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 fixed income 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’re 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 was:

“Good morning!  Question:  The BoJ eased its policy by doubling its ETF purchases amidst its negative rate environment; oil is flirting with below $40 per barrel and this morning, U.S. GDP grew……at a dismal 1.20% less than half the 2.5% expectations.  Europe continues to be in a shambles and well,  what’s it all mean?  LOWER-for-LONGER is remains the market mantra!  We’re entering August on Monday and it’s typically one of the slowest months of the year.  Let’s take a look at what we accomplished this week in our IG rated Corporate primary market:


This week we priced $33.94b of all-in IG Corporate and SSA issuance. IG Corps were $28.00b which eclipsed this week’s syndicate midpoint average forecast of $20.48b by 36.72%.

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

 

  • NICS:  1.23 bps
  • Oversubscription Rates: 3.63x
  • Tenors:  13.45 years
  • Tranche Sizes: $875mm

 

Week-on-week demand for IG corporate credit primary paper was off last week but remained strong posting an average bid-to-cover rate of 3.63x vs. 3.42x. Average NICs compressed by 2.72 bps to an average 1.23 bps versus last week’s 3.95 bps.  Average tranche sizes decreased to $875mm versus $1.482b last week.  Average tenors increased to 13.95 years versus last week’s 7.95 years.  For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).

Week-on-week, BAML’s IG Master Index is 2 bps wider or +149 vs. last Friday’s +147 close.  Spreads across the four IG asset classes widened 1.25 bps to 36.00 vs. 34.75. Looking at the 19 major industry sectors, spreads widened 0.47 bps to an average 45.21 bps off their post-Crisis lows versus 44.74 bps versus last Friday’s close.

               

Lastly, after all that, my two-part question is what are your thoughts and numbers for both next week’s and August’s IG Corporate issuance?  Thoughtful comments are always helpful and much appreciated especially by the issuers who YOU cover and who read this!

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

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

 

(more…)

AAPL 7bil Debt Deal Sweetened By Diversity; Mischler Comment
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07.28.16 – An AAPL A Day…

 

Investment Grade New Issue Re-Cap

Apple Inc. Inks $7b 5-part

Tim Cook Talks About Commitment to D&I
Global Market Recap

IG Primary Market Talking Points

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab-All Eyes on Tokyo

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

It was an active day that finally put to rest all the rumors and chatter of an Apple multi-tranche new issue.  The Cupertino, California-based multinational technology company (NASDAQ:AAPL) priced a $7b 5-part that anchored today’s total of 6 IG Corporate issuers, 10 tranches and $9.625b in new supply.  As a result, the WTD IG Corporate-only volume of $28.00b eclipsed the syndicate midpoint average estimate of $20.48b by 37%.  SSA added one $1b deal bringing the all-in IG day totals to 7 issuers, 11 tranches and $10.625b.  The July MTD all-in IG Corporate only issuance total officially surpassed syndicate estimates for this month by 6% or $96.75b vs. $91.17b.

As for the IC Corporate plus SSA MTD total, we’re at a strong $127.987b.

and now onward we go to THE Deal-of-the-Day!

 

Apple of My Eye – Apple Inks $7b 5-part

All issuers are important to us here at Mischler Financial, the nation’s oldest Service Disabled Veteran broker-dealer.  However, it is really an accomplishment to secure repeat business.  Additionally to secure repeat business from the world’s largest publicly-held company as measured by market capitalization means that much more.  Today Mischler, whose Capital Markets team is on a roll, was honored to have been selected as an active diversity Co-Manager on today’s Apple Inc. $7.00b 5-part 3-year FXD/FRN, 5s, 10s and 30-year Senior Notes new issuance.

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing.  The five tranches posted a cumulative average contraction of 18 bps from start to finish. Here’s a look at how it all evolved:

 

AAPL Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
3yr FRN 3mL+equiv 3mL+equiv 3mL+14 3mL+14 <18> bps +1 N/A N/A
3yr FXD +50a +32-35 +32 +32 <18> bps +1 32/30 flat
5yr +70a +50-53 +50 +50 <20> bps <1> 50/49 flat
10yr +115a +100a (+/-2) +98 +98 <17> bps +3 98/96 flat
30yr +180a +165a (+/-2) +163 +163 <17> bps +2 162/160 <1>

 

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

 

AAPL Issue Tranche Size Books Sizes
At-the-Top
Final Book
Size
Bid-to-Cover
Rate
3yr FRN $350mm $900mm $700mm 2x
3yr FXD $1.15b $2.9b $2.4b 2.09x
5yr $1.25b $4.6b $4.3b 3.44x
10yr $2.25b $6.8b $6.5b 2.89x
30yr $2.0b $7.6b $7.2b 3.6x

 

  • In terms of relative value leads looked at the outstanding AAPL 4.65% due2/23/2046 that was T+161 pegging concession as negative 2 bps on today’s new 30-year that priced at T+163.
  • For 10-year far value, the AAPL 3.25% due 2/23/2026 was T+92 (G+95) pre-announcement versus today’s final 10-year pricing at T+98 landing NIC at 3 bps.
  • The 5-year comps used was the AAPL 2.25% due 2/23/2021 seen T+45 bid or G+51 inferring a negative 1 bp NIC on today’s 5yr pricing at T+50.
  • Finally the 3-year looked at the AAPL 1.70% due 2/22/2019 that was T+27 (G+31) or a 1bp NIC versus today’s new T+32 3-year pricing.

 

Proceeds of today’s offering will be used for general corporate purposes, including repurchases of Apple Inc. common stock and payment of dividends under its program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions, and repayment of debt, according to regulatory filings.

 

Apple Inc. Final Pricing Details

 

AAPL $350m FRNs due 8/02/19 @ $100.00 or 3mL+14

AAPL $1.15bn 1.10% due 8/2/19 @ $99.90 to yield 1.134% or T+32 MW T+10

AAPL $1.25bn 1.55% due 8/4/21 @  $99.861 to yield 1.579% or T+50 MW T+10

AAPL $2.25bn 2.45% due 8/4/26 @ $99.727 to yield 2.481% or T+98 MW T+15

AAPL $2bn 3.85% due 8/4/46 @ $99.735 to yield 3.865% or T+163 MW T+25

 

From the Top Down – Apple Inc.’s Tim Cook Talks About the Company’s Commitment to D&I

With a market cap of $560 billion that’s just too steep even for the guy-in-the-corner to take on in telling the great Diversity and Inclusion story at the world’s most valuable company.  So, instead, I turn to the head chef himself, none other than Tim Cook, CEO of Apple Inc.  It cuts to the heart of what I mean when I consistently write here in the “QC” that “D&I starts from the top down!”  What better company to illustrate that in practice for all of Mischler’s issuer relationships to read than with the world’s largest company.  And “Yes” I own an iPhone and an iPad……my wife owns an iPhone……2 to be exact…….my daughter owns an iTouch and an iPad.  So, we are loyal customers and fans alike.  Stock?  Of course there is also Apple stock in the Quigley family portfolio.  Take it away Tim:

A message from Tim Cook…AAPL-debt-issuance-mischler

Apple has always been different; a different kind of company with a different view of the world. It’s a special place where we have the opportunity to create the best products on earth — products that change lives and help shape the future. It’s a privilege we hold dear.

Diversity is critical to innovation and it is essential to Apple’s future. We aspire to do more than just make our company as diverse as the talent available to hire. We must address the broad underlying challenges, offer new opportunities, and create a future generation of employees as diverse as the world around us. We also aspire to make a difference beyond Apple.

This means fostering diversity not just at Apple but throughout our entire ecosystem, from the customers we welcome in our stores to the suppliers and developers we work with. We are committed to fostering and advancing inclusion and diversity across Apple and all the communities we’re a part of. As one example, we’re proud that our spending on women- and minority-owned businesses exceeded $650 million last year.

We want every person who joins our team, every customer visiting our stores or calling for support to feel welcome. We believe in equality for everyone, regardless of race, age, gender, gender identity, ethnicity, religion, or sexual orientation. That applies throughout our company, around the world with no exceptions.

Last year we reported the demographics of our employees for the first time externally, although we have long prioritized diversity. We promised to improve those numbers and we’re happy to report that we have made progress. In the past year we hired over 11,000 women globally, which is 65 percent more than in the previous year. In the United States, we hired more than 2,200 Black employees — a 50 percent increase over last year — and 2,700 Hispanic employees, a 66 percent increase. In total, this represents the largest group of employees we’ve ever hired from underrepresented groups in a single year. Additionally, in the first 6 months of this year, nearly 50 percent of the people we’ve hired in the United States are women, Black, Hispanic, or Native American.

As you can see, we’re working hard to expand our recruiting efforts so we continue hiring talented people from groups that are currently underrepresented in our industry. We’re supporting education with programs like the Thurgood Marshall College Fund to help students at historically black colleges and universities find opportunities in technology. ConnectED is bringing our technology to some of the most economically disadvantaged schools and communities in the United States, so more people have the opportunity to pursue their dreams. We’re also hosting hundreds of students at our annual developer conference, and we’re setting up new programs to help students learn to code.

We are proud of the progress we’ve made, and our commitment to diversity is unwavering. But we know there is a lot more work to be done.

Some people will read this and see our progress. Others will recognize how much farther we have to go. We see both. And more important than these statistics, we see tens of thousands of Apple employees all over the world, speaking dozens of languages, working together. We celebrate their differences and the many benefits we and our customers enjoy as a result.

Tim Cook

CEO, Apple Inc.

Deals that Open Doors for Diverse Financial Firms

 

Included among Apple’s Diversity Network Associations is Apple Veterans Association.  Apple launched its Supplier Diversity Program in 1988, and it’s been growing and thriving ever since. Through the program, the Company works with a variety of organizations to identify new suppliers whose values match their own. And in just the last year, Apple spent over $3 billion with more than 6000 small and diverse suppliers.  Those suppliers extend to the financial services industry. What transpired on today’s new 5-part Apple transaction was an inflection point for Team Mischler, the nation’s oldest Service Disabled Veteran broker dealer.  We were able to introduce nearly three dozen new accounts to Apple’s investor profile.  We were rewarded with allocations that touched virtually every single account.  That, in turn, creates investor confidence as well as credibility for our broker-dealer.  We take what we do seriously and we strive to be the best with each opportunity that we are given.

Apple works with many of the world’s leading financial institutions, but Apple also wants strong ideas and points of view that can only come from small, diverse firms. The Company feels it lends a broader financial picture and makes the corporation more informed by relying on these firms for some of its most crucial transactions. Today, Mischler Financial Group, Inc. (Service Disabled Veteran-owned); Lebenthal & Co., LLC (woman-owned); and Loop Capital Markets LLC and The Williams Capital Group, L.P. (both African American–owned) were active co-managers on Apple’s $7 billion bond offering.

There are many people to thank for today’s stellar opportunity to serve Apple Inc. First and foremost is Team Apple Inc. Treasury/Funding and that means Mike, Matt and Eric.  As a result, Team Apple is the recipient of Mischler Financial’s Official 5-Star Salute!

As for the joint lead that was appointed by the issuer to liaise with today’s diversity banking group, it was déjà vu all over again folks.  Goldman Sachs once again handled the D&I component of today’s transaction.  Suffice it to say I will hold back on the “kudos”, “good work”, “plaudits”, “hats off” etc, lest someone at Goldman aggressively starts pursuing me to head all public relations for the House of Gold!!  (Haha!) Suffice it to say, congrats and thank you’s to Jonny Fine, Gaurav Mathur, Tony Shan, Dan Miree, Matt Jackson and Salina Lee who I worked with today, via e-mail, phone, Bloomberg and chats.  As the saying goes “Make new friends, but keep the old; those are silver but these are gold.” Thank you Team GS!

Global Market Recap

 

  • S. Treasuries – Mixed & little changed. JGB’s closed mixed & the long end in Europe bid.
  • 3mth Libor – Set at highest yield since May 2009 (0.75650%).
  • Stocks – U.S. stocks mixed. Europe led down by bank stocks. Nikkei struggled.
  • Economic – U.S. data a bit weaker but not a factor.
  • Overseas Economic – Europe data better with higher German CPI.
  • Economic Tomorrow – Big calendars in Japan, Europe & the U.S.
  • Currencies – USD mixed vs. the Big 5 with the DXY Index weaker.
  • Commodities – Crude down while natural gas, gold, silver & copper closed higher.
  • CDX IG: +0.36 to 73.81
  • CDX HY: +4.86 to 401.99
  • CDX EM: +5.44 to 266.42

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

-Tony Farren

 

IG Primary Market Talking Points

 

  • Canadian National Railway Co. upsized its 30-year Senior Notes new issue today to $650mm vs. $500mm at the launch and at the tightest side of guidance.
  • Split-rated Eagle Materials Inc. increased today’s 10-year Senior Notes new issue to $350mm vs. $300mm at a tighter launch and after having skipped guidance.
  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 9 IG Corporate new issues only was 20.06 bps.

 

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

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $28.00b
July 2016 vs. Current
MTD – $96.75b
Low-End Avg. $19.39b 144.40% $90.09b 107.39%
Midpoint Avg. $20.48b 136.72% $91.17b 106.12%
High-End Avg. $21.57b 129.81% $92.26b 104.87%
The Low $10b 280.00% $60b 161.25%
The High $30b 93.33% $125b 77.40%

 

 

Have a great evening!
Ron

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

Better Matters For Verizon Corporate Debt Issuance; Mischler Commentary
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07.27.16-Better Matters (NYSE:VZ)

 

Investment Grade Corporate Debt New Issue Re-Cap

“Better Matters!”  New Lowest 6 “BBB”-Rated IG Corporate Coupon in History

Verizon Communications Inc’s. Commitment to D&I and Our Nation’s Veterans

Global Market Recap

New Issues Priced

Lipper Report/Fund Flows

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Market Trade Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

I have been waiting a long time for an issuer, any issuer for that matter, to price a new issue the day of an FOMC Rate Decision.  The street has been unreasonably overcautious for no reason at all in avoiding treatment of FOMC Rate days as potential print days.  The Fed isn’t doing anything anytime soon and what’s more, when you take the highly dysfunctional Fed-speak out of the picture it’s a no brainer to “go” on those days.  Today’s Fed meeting has no press conference to follow it and no Q&A with Yellen.  So, congratulations to Verizon Communications Inc. Treasury/Funding and its leads for announcing and pricing today’s blockbuster 5-part 3yr FXD/FRN, 5s, 10s and 30-year new issue. That right there is an example of issuer and DCM confidence and leadership.

Today’s IG Corporate tally was 1 issuer, 5 tranches and a total of $6.15b.  SSA took advantage pricing 3 taps and a new $3b 3-year from the Kingdom of Belgium bringing the all-in IG day totals to 5 issuers, 9 tranches and $10.09b.  WTD, we’ve now priced 90% of this week’s IG Corporate syndicate midpoint average forecast or $18.375b vs. $20.48b.

Mischler was named an active Co-Manager on today’s Verizon transaction so without further ado let’s get to the deal drill down and diversity and inclusion piece:
“Better Matters!” – Verizon’s Smart and Daring Dip into the DCM on FOMC Rate Decision Day Pays Off Big Time!

 better-matters-verizon-mischler

Today’s lone IG Corporate new issue from Verizon Communications Inc. owned the proverbial leaderboard today announcing a $6.15b five-part 3yr FXD/FRN, 5s, 10s and 30-year Senior Note transaction.  Each tranche was defined as benchmark sized early on.  Looking at the below price evolution across the five issuances, the average spread compression from IPTs to the launch/final pricing was a strong 22.00 bps. Strong demand saw the final cumulative order books close at $29.4b or 4.78x oversubscribed.  Voracious investor appetite for better rated IG corporate credits for more yield and safety drove the spread compression today.

 

VZ Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
3yr FRN 3mL+equiv 3mL+equiv 3mL+37 3mL+37 <20> bps <1> 3mL+36/35 <1>
3yr FXD +75a +60a (+/-5) +55 +55 <20> bps 0 54/53 <1>
5yr +95a +80a (+/-5) +75 +75 <20> bps 0 74/72 <1>
10yr +140a +120a (+/-5) +115 +115 <25> bps <2> 114/112 <1>
30yr +215a +195a (+/-5) +190 +190 <25> bps <2> 189/187 <1>

 

…..and here’s a look at final book sizes and oversubscription rates:

 

VZ Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr FRN $400 $800mm 2x
3yr FXD $1,000 $4.1b 4.1x
5yr $1,000 $6b 6x
10yr $2,250 $9.5b 4.22x
30yr $1,500 $9b 6x

 

In terms of relative value I looked at the outstanding VZ 4.862% due 8/21/2046 that was T+192 pegging concession as negative 2 bps on today’s new 30-year that priced at T+190.
For the 10-year the VZ 3.50% due 11/01/2024 was T+97 pre-announcement or G+107.  Adding 10 bps for the 8s/10s curve gets you to T+117 versus today’s new 10-year pricing at T+115 comes to yet another negative 2 bp concession.
The 5-year comps I used were the VZ 3.45% due 2021 that was T+65 (G+69) and the VZ 3.00% due 11/01/2021 T+84 (G+81). Those two are 8 months apart, so taking an average of G+69 and G+81 is G+75 landing you at a July fair value.  Hence, the 5yr VZ priced flat or without a concession.
Lastly the three-year looked to the VZ 2.55% due 6/17/2019 T+54 bid (G+54) for a 1bp NIC versus today’s new T+55 3-year pricing.

Conclusion, Verizon’s finance and treasury teams should be very happy with how things went on this FOMC Rate Decision day.  Janet Yellen and Company, eat your heart out! The world doesn’t stand still anymore on Rate Day.

Proceeds from today’s transaction will be used for general corporate purposes, including to repay at maturity on September 15, 2016, $2.25 billion aggregate principal amount of its floating rate notes due 2016, plus accrued interest on the notes.

 

Verizon Final Pricing Details

VZ $400mm FRNs due 8/15/2019 @ $100.00 or 3mL+37
VZ $1,000b 1.375% due 8/15/2019 @ $99.991 to yield 1.378% or T+55 MW+10

VZ $1,000b 1.75% due 8/15/2021 @ $99.564 to yield 1.841% or T+75 MW+15

VZ $2,250b 2.625% due 8/15/2026 @$99.745 to yield 2.654% or T+115 MW+20

VZ $1,500b 4.125% due 8/15/2046 @$99.947 to yield 4.128% or T+190 MW+30

 

Verizon Communications Inc’s. Commitment to D&I and Our Nation’s Veterans

 

Verizon is committed to fostering an inclusive environment. They care about diversity in both its employees and its suppliers. Diversity and inclusion is how Verizon achieves success. By celebrating diversity across all spectrums, including but not limited to race, national origin, religion, gender, sexual orientation, gender identity, disability, veteran/military status, and age, Team Verizon is a stronger company and culture that takes pride in its talented and diverse team of people who focus on its customers, every day. Their combined intelligence, spirit and creativity make Verizon a great place to work, learn and grow. But Verizon’s commitment to our nation’s veterans – those who are prepared to make the ultimate sacrifice so that we can all do the things that we do – is something that sets Verizon apart with Team Mischler, the nation’s oldest Service Disabled Veteran broker-dealer.

 

Just let these facts speak for themselves:

  • Verizon employs nearly 13,000 veterans
  • The Military Times Best for Vets: Employers 2015 rankings voted Verizon as the Number 1 company in the United States for veterans.
  • Verizon is ranked as a top military spouse-friendly company by Military Spouse magazine
  • Verizon was named one of U.S. Veteran Magazine’s “Top Veteran-Friendly Companies.”

With a clear focus on and concerted effort toward a smooth transition for our veterans from the military to civilian life, Verizon offers career services to veterans and their spouses.  VZ provides mentoring programs, hosts career fairs and extends discounts to veterans and their families.  The Company also offers benefits like its Enhanced Military Leave program and flexibility during deployments and relocations. But Verizon does so much more.  It offers guidance on constructing a military background into a civilian resume on its website through helpful advice.  It includes a Q&A that helps match a veteran’s military role with corresponding civilian functions and offers counsel on how to convert a military experience into civilian responsibilities.
Verizon gets it!  They do not hire veterans because it’s the right thing to do rather they do it because veteran leadership and skill sets make it a better company.  Evan Guzman, Verizon’s head of military programs said “there is rarely a position within the military that we can’t find a place for within Verizon.  85% of military jobs have a direct civilian counterpart at Verizon.” Heck, Verizon’s military recruitment team boasts seven full-time dedicated employees!  I think you are beginning to get the picture that Verizon is yet another great story not only about making bold and wise leading funding decisions in our Debt Capital Markets like today but they are also leading a corporate charge in America to welcome our nation’s heroes when they come back home.  Yet another great story about Corporate America that should be told to Main Street.  The more people know, the more they’ll have confidence in the free market enterprise system.  Kudos to team Verizon!

It’s one thing to be on a Verizon transaction but quite another to extoll just how significantly their veteran give-back initiatives permeate their corporate DNA.  So, please indulge me as I’d like to call out those seven fully dedicated employees who work to give our veterans a firm footing upon homecoming:

 

  • Evan Guzman, Head of Military Programs & Veteran Affairs
  • Tommy Jones, Program Manager Veteran Recruitment & Operations
  • Rodney Greenwood, Military Recruiter – Central Region
  • Nick Relacion, Military Recruiter – Eastern Region
  • Joseph Rocha – Military Recruiter – Western Region
  • Brittney Becker – Team Coordinator
  • Monica Orecchio – Military Spouse Recruiter.

There you see that! Telling the story AND introducing the people.  It’s not just about subscribers and quality cable services rather it’s a corporate culture with a focus on social responsibility.
In conclusion, there’s no better way to end this piece than to employ Verizon’s corporate slogan – “Better Matters!”

 
New Lowest 6 “BBB”-Rated IG Corporate Coupon in History!

Verizon’s 10-year tranche set a new record as the all-time lowest 6 “BBB”-rated coupon in DCM history!  That’s right the 10-yr 2.625% coupon now sits atop the all-time lowest 10-year coupons in that category.  Formerly both the Republic of Colombia and Brazil were tied at 2.625% BUT they are both sovereign credits NOT IG Corporates.  Federal Express, Dr. Pepper, Ameren Corp. and PPG Industries were officially bounced down one notch in a four-way tie for second at 2.70%. It was our immense pleasure to relay that news to Verizon which couldn’t have happened with a request for a call.

Shout outs along with Mischler’s five-star salute go to each of Verizon Treasury team leaders. We appreciate that you selected Mischler Financial Group from among the diversity firms you have to choose from and to provide us the opportunity to prove our capabilities.
Thanks also to the “Golden Boys” at GS Syndicate who we liaised with on today’s 5-part book builds.  That begins with the maestro himself Mr. Jonny Fine. What else is there left to say about the guy who heads Syndicate, is a Managing Director and Goldman Partner as well as a voting member of Goldman’s all-important Finance Committee.  Oh, he also guides the diversity mandate at team Goldman.  Goldman’s mandate is piloted by Fine for execution and he consistently does that through his stellar team beginning with his newest hire, the polished pro, John Sales, who was brought on board the Golden crew from Barclays Syndicate.

 

And, a first time and very personal shout out from the guy-in-the-corner to our new veteran hire Jonathan Herrick.  He’s been with us now for two months and I have to say each and every day I am grateful to see how this military veteran seizes the opportunity to focus, learn and deliver each and every day.  He’s been a great addition to our special operations unit here as our desk analyst and take it from me folks, he knows what work ethic means.  After three tours fighting for us in the danger, dust and dirt of Afghanistan, Jon Herrick has wasted no time becoming a stalwart member of Mischler’s capital markets crew.

 

Global Market Recap

 

  • FOMC Statement: A little give & take but the bottom line is the FOMC is on hold.
  • S. Treasuries – Strong session for USTs led by the 5yr.
  • Overseas Bonds – Gilts, Bunds & JGB’s (not the 30yr) rallied.
  • 3mth Libor – Set at highest yield since May 2009 (0.75150%).
  • Stocks – NASDAQ rallied and the Dow and S&P were little changed.
  • Overseas Stocks – Europe & Japan rallied while Chinese stocks had a poor day.
  • Economic – U.S. data was slightly weaker but the focus was on the FOMC Statement.
  • Currencies – USD better vs. the Yen, CAC & AUD but lost ground vs. Euro & Pound.
  • USD – Closed mixed vs. the Big 5 but did lose ground after the FOMC Statement.
  • Commodities – CRB, crude oil (low since April) & copper down while gold & silver rallied.
  • CDX IG: -0.84 to 73.74
  • CDX HY: -1.55 to 400.00
  • CDX EM: -1.29 to 259.84

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

-Tony Farren

 

IG Primary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate new issues only was 22.00 bps.

 

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

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $18.375b
July 2016 vs. Current
MTD – $87.125b
Low-End Avg. $19.39b 94.77% $90.09b 96.71%
Midpoint Avg. $20.48b 89.72% $91.17b 95.56%
High-End Avg. $21.57b 85.19% $92.26b 94.43%
The Low $10b 183.75% $60b 145.21%
The High $30b 61.25% $125b 69.70%

 

 

Have a great evening!
Ron

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

NICs, Bid-to-Covers, Tenors and Sizes

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
7/25
TUES.
7/26
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
AVERAGES
WEEK 7/04
AVERAGES
WEEK 6/27
New Issue Concessions 2.89 bps 0.90 bps 3.95 bps 0.82 bps 0.73 bps 10.67 bps
Oversubscription Rates 3.57x 2.61x 3.42x 4.73x 3.82x 4.05x
Tenors 10.90 yrs 24.67 yrs 7.95 yrs 9.58 yrs 9.72 yrs 10.87 yrs
Tranche Sizes $710mm $850mm $1,482mm $887mm $770mm $1,229mm

 

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.

Please note that OM Asset Management plc tapped it’s 10-year for an additional $25mm yesterday, July 26th.  It is included below for informational purposes only.  The volume tables near page bottom have been updated to reflect it.  Thanks! -RQ

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Verizon Comm. Inc. Baa1/A- FRN 8/15/2019 400 3mL+equiv 3mL+equiv 3mL+37 3mL+37 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 1.375% 8/15/2019 1,000 +75a +60a (+/-5) +55 +55 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 1.75% 8/15/2021 1,000 +95a +80a (+/-5) +75 +75 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 2.625% 8/15/2026 2,250 +140a +120a (+/-5) +115 +115 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 4.125% 8/15/2046 1,500 +215a +195a (+/-5) +190 +190 BAML/DB/GS/MIZ(a) +2(p)
OM Asset Management plc
(tap) on 7/26
New total: $275mm
Baa2/BBB- 4.80% 7/27/2026 25 N/A N/A N/A T+325 BAML/CITI/RBC/WFS

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
IFC (tap)
New total: $2,000mm
Aaa/AAA FRN 12/15/2020 190 3mL+13a N/A N/A 3mL+13 BARC/HSBC
NWB (tap)
New total: $1,250mm
Aaa/AAA 1.50% 4/16/2018 500 MS+10a MS+10a N/A +29.6 BAML/DB/TD
Rentenbank (tap)
New total: $850mm
Aaa/AAA FRN 1/12/2022 250 N/A N/A 3mL+27 3mL+27 NOM/RABO/RBC
The Kingdom of Belgium Aa3/AA 1.125% 8/03/2019 3,000 MS+16a MS+15a MS+15 33.8 BARC/CITI/SCOT

 

Lipper Report/Fund Flows – Week ending July 20th     

 

  • For the week ended July 20th, Lipper U.S. Fund Flows reported an inflow of $894.421m into Corporate Investment Grade Funds (2016 YTD net inflow of $19.323b) and a net inflow of $321.724m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.872b).
  • Over the same period, Lipper reported a net inflow of $68.984m from Loan Participation Funds (2016 YTD net outflow of $5.373b).
  • Emerging Market debt funds reported a net inflow of $918.406m (2016 YTD inflow of $2.335b).

 

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 34.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 7/26 7/25 7/22 7/21 7/20 7/19 7/18 7/15 7/14 7/13 1-Day Change 10-Day Trend PC
low
IG Avg. 147 146 147 148 148 148 149 149 150 152 +1 <5> 106
“AAA” 80 79 80 80 79 80 79 79 80 80 +1 0 50
“AA” 85 85 84 85 85 86 86 86 86 88 0 <3> 63
“A” 115 115 115 116 116 117 117 117 118 120 0 <5> 81
“BBB” 193 192 193 194 194 195 196 196 197 200 +1 <7> 142
IG vs. HY 398 393 392 393 392 397 395 393 394 406 +5 <8> 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 43.79 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 7/26 7/25 7/22 7/21 7/20 7/19 7/18 7/15 7/14 7/13 1-Day Change 10-Day Trend PC
low
Automotive 118 118 120 121 122 122 122 123 124 126 0 <8> 67
Banking 137 137 139 140 140 141 140 140 141 143 0 <6> 98
Basic Industry 196 195 195 196 197 198 198 199 202 204 +1 <8> 143
Cap Goods 107 107 107 107 107 108 108 109 109 111 0 <4> 84
Cons. Prod. 110 110 110 110 110 110 110 110 111 112 0 <2> 85
Energy 201 198 197 198 198 199 201 201 203 207 +3 <6> 133
Financials 172 174 176 177 177 178 179 180 181 184 <2> <12> 97
Healthcare 117 116 116 117 117 118 119 119 121 122 +1 <5> 83
Industrials 148 147 147 148 148 149 149 150 151 153 +1 <5> 109
Insurance 172 172 173 174 174 175 175 176 177 179 0 <7> 120
Leisure 152 153 153 154 153 154 154 155 155 156 <1> <4> 115
Media 171 170 170 172 173 173 173 174 174 176 +1 <5> 113
Real Estate 162 162 163 164 164 164 165 166 166 167 0 <5> 112
Retail 118 117 117 118 118 118 119 119 120 121 +1 <3> 92
Services 142 143 144 144 144 145 146 146 146 147 <1> <5> 120
Technology 131 131 131 131 131 132 131 131 132 134 0 <3> 76
Telecom 169 168 167 168 169 169 168 168 168 169 +1 0 122
Transportation 144 144 145 145 145 146 146 147 148 149 0 <5> 109
Utility 147 147 147 148 148 149 149 149 150 151 0 <4> 104

 

IG Secondary Trading Lab

 

  • BAML’s IG Master Index widened 1 bp to +147 versus +146.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 2 bps to +196 versus +194.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.8b on Tuesday versus $14.7b Monday and $18.0b the previous Tuesday.
  • The 10-DMA stands at $15.8b.
  • The top three most actively traded IG-rated issues were led by ABIBB 3.65% due 2/01/2026 with client sales twice that of purchases.
  • WFC 2.10% due 7/26/2021 finished second with client and affiliate flows representing 90% of the volume.
  • COF 3.75% due 7/28/2026 placed third with client sales four-times purchases.

 

New Issue Pipeline

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

 

  • Adani Transmission Limited (Baa3/BBB-) mandated Barclays, DBS Bank and Standard Chartered Bank as Joint Global Coordinators and those same three banks as well as Emirates NBD Capital, MUFG, Nomura and Societe Generale CIB as joint book runners and leads for its upcoming dollar-denominated 144a/REGS 10-year Senior Secured Notes new issue.
  • The Government of Trinidad & Tobago (Baa3/A-) mandated Deutsche Bank and First Citizens Bank to arrange fixed income investor meetings that kicked off Monday, July 25th in preparation for a dollar-denominated 144a/REGS offering that could soon follow their conclusion.  The meetings took place in L.A. and London on the 25th, New York and London on Tuesday the 26th and wrapped up in New York and Boston on the 27th.
  • Empresa Nacional de Petroleo or “ENAP” (Baa3/BBB-), the state-owned Chilean hydrocarbon company mandated Citigroup and J.P. Morgan to arrange fixed income investor meetings in the U.S., Chile and Europe that began on Monday, July 25th in preparation for a 10-year dollar-denominated 144a/REGS Senior Unsecured Notes new issue that could soon follow its conclusion.
  • The Export Bank of India (Baa3/BBB-) mandated Bank of America/Merrill Lynch, Barclays, Citigroup, J.P. Morgan and Standard Chartered Bank as joint leads and book runners to arrange fixed income investor meetings in the U.S., Asia and Europe that began on Thursday, July 21st in preparation for a 144a/REGS Senior Notes new issue that could soon follow its conclusion.
  • Woori Bank (A2/A-) hired Bank of America/Merrill Lynch, Citigroup, Commerzbank, Credit Agricole CIB, HSBC and Nomura to arrange fixed income investor meetings in the U.S., Europe and Asia that began on Monday, July 11th and continued thru Wednesday, July 20th.  Last May, Woori set up a $7b GMTN program.
  • National Grid plc (Baa1/A-) asked J.P. Morgan to arrange fixed income investor meetings that took place on Wednesday, June 1st making stops in Boston, New York and concluded on June 3rd in New Jersey and Philadelphia.  The Company’s Group and U.S. Treasurers were in attendance.

 

M&A Pipeline – $212.62 Billion in Cumulative Enterprise Value!

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

 

  • Zimmer Biomet (Baa3/BBB) completed its offer to purchase all outstanding shares of LDR stock on Wednesday, July 13th.  Zimmer announced on June 7th that it agreed to purchase medical device maker LDR Holding Corp. for $37 per share in cash for a total transaction value of $1b. Zimmer expects to maintain its IG rating and to issue $750mm in Senior Unsecured Notes in order to repay the credit facility. Goldman Sachs is acting as advisor to Zimmer Biomet.
  • ITC Holdings Corp. announced on Thursday, June 23rd that its shareholders approved the purchase by Fortis Inc. (A-/S&P). Fortis Inc. (A-/S&P) announced on Tuesday, February 9th that it would acquire ITC Holdings for $11.3b in a cash and stock transaction.  The terms stipulate that ITC shareholders will receive $22.57 in cash and .7520 Fortis shares per ITC share. Fortis will also assume approx. $4.4bn of consolidated ITC indebtedness. The cash portion of the deal will be financed through the issuance of about $2bn of Fortis debt and the sale of up to 19.9% of ITC to one or more infrastructure-focused minority investors. Fortis expects to maintain a solid IG credit rating. Fortis expects to raise $2bn of new debt to fund the deal that is expected to close sometime in late 2016.
  • This past February, Algonquin Power & Utilities Corp. (NR/BBB) announced it will acquire The Empire District Electric Company (N/A) in a $3.4b CAD or $2.4b USD equivalent all cash transaction and today, Thursday, June 16th, Empire’s shareholders overwhelmingly voted in support of the merger to the tune of 95%.  Regulatory approvals are the next step before finalizing the sale expected sometime in Q1 2017. The merger assumes $900mm in USD debt.
  • Microsoft (Aaa/AAA) and LinkedIn Corp. (BB+/NR) announced on June 13th that they have entered into a definitive agreement in which MSFT will purchase LKND for $196 per share for a total transaction valued at $26.2b.  The deal is expected to close sometime in 2016 and pending LinkedIn shareholder approval.
  • Symantec (Baa3/BBB-) announced on June 13th that it entered into an agreement to purchase Blue Coat (Caa2/CCC) for $4.56b in cash. The deal will close sometime in Q3 2016.  Both company boards approved the deal. The transaction will be funded with available cash and $2.8b of new debt. J.P. Morgan is the lead adviser to Symantec.  Bank of America/Merrill Lynch, Barclays and Wells Fargo are also advisers.
  • Shire PLC announced in January 2016 that it will acquire Baxalta Inc. (Baa2/BBB) for approximately $32.2 billion in cash and stock.  Shire secured an $18b bank facility to finance the cash portion and will refinance it in debt. The deal creates the single largest maker of rare disease drugs in the world. This deal could come at any time.
  • Air Liquide SA (NR/A+) announced it has completed the acquisition of Airgas Inc. (Baa2/BBB).  Air Liquide announced on November 17th that it would acquire Airgas Inc. (Baa2/BBB) for $13.4b in which Airgas will be a wholly-owned subsidiary of its new parent. The transaction will be financed bridge loans that are expected to be refinanced through equity, Euro cash and euro as well as dollar-denominated debt issuance.  The deal involves $12b of a bridge facility thru Barclays and BNP Paribas.  The bridge will be refinanced post-closing through a combination U.S. dollar-denominated and Euro bond issuances.
  • Exelon Corp. (Baa2/BBB-) debt financing plans remaining for 2016 include, $750 million at Baltimore Gas & Electric (A3/A-) ($300 million maturing on October 1) and $450 million at PECO Energy (Aa3/A-) ($300 million maturing on October 15).
  • On Friday, April 29th the Alere Inc. (Caa1/CCC+) Board of Directors rejected a request by Abbott Labs (A2/A+) to terminate their merger agreement in return for around $40mm for transaction expenses. Abbott cited concerns about various Alere representations in their merger agreement including a delayed 2015 Form 10-K filing as well as government investigations. Abbott Labs (A2/A+) had announced on Monday, February Baa1/BBB+1st, that it would acquire Alere Inc. (Caa1/CCC+) for $5.8b in which “ABT” would pay $56 per share of ”ALR.”  The deal was to be financed with debt.  ABT expects a strong IG rating despite the new debt. The deal is subject to “ALR” shareholder as well as regulatory approvals.
  • Abbott Labs (A2/A+) announced on Thursday, April 28th that it will buy St. Jude’s Medical Inc. (Baa2/A-) in a cash-stock deal valued at $25b to reinforce the medical devices maker’s stake in cardiovascular care. Abbott will fund the cash portion of the transaction with new medium- and long-term debt. Bank of America/Merrill Lynch and Evercore are acting as advisors to Abbott. The deal is expected to close by Q4 2016.
  • Sherwin Williams (A2/A-) announced on Monday, March 21st that it will purchase Valspar Corp. (Baa2/BBB) for $9.3b or $113 per share.  The acquisition will help Sherwin-Williams gain access to big-box retailers like Lowe’s where Velspar has access. It will also provide overseas expansion opportunities.  Sherwin Williams will finance the merger with available cash, existing credit facilities and new debt.  The deal should close sometime before the end of Q1 2017.
  • TE Connectivity (A-/A-) announced it will buy medical device maker Creganna Medical for $895mm in cash.  The deal will be funded with available cash and debt.
  • Dominion Resources Inc. “D” (Baa2/BBB+) announced on Monday, February 1st, that it will acquire Questar Corporation “STR” (A-/S&P) for $4.4b in cash.  “D” agreed to pay “STR” shareholders $25 per share and assume its debt. The deal will be funded with equity, convertibles and debt and is expected to close by the end of 2016. RBC and Mizuho are providing financing and acting as financial advisors to Dominion.  The deal is subject to shareholder and regulatory approvals.
  • This morning in Charlotte, shareholders of Piedmont Natural Gas (A2/A) voted to approve the Company’s acquisition by Duke Energy (A3/BBB+).  66.8% of voting shares supported the acquisition.  In late October Duke Energy, (A3/BBB+) the nation’s largest utility announced that it will buy Piedmont Natural Gas (A2/A) for $4.9b in cash.  Both companies are partners in the $5b Atlantic Coast Pipeline.  The purchase, pending regulatory approval, will add one million new rate payers to Duke Energy’s customer base.  The deal is expected to close as early as July.
  • UPS (Aa3/A+) announced in July 2015 that it entered into a definitive purchase agreement to acquire Coyote Logistics, a technology-driven, non-asset based truckload freight brokerage company for $1.8b from Warburg Pincus.  The transaction will be financed with available cash resources and through existing and new debt arrangements and is expected to close within 30 days.
  • Anthem Inc. (Baa2/A) in July 2015, proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal is expected to close sometime during the second half of 2016. The merger would involve 53mm members and will include $22b in new debt and loans.
  • Amphenol Corporation (Baa1/BBB+) announced on June 29th 2015 that it made a binding offer to acquire 100% of FCI Asia Pte. Ltd. for $1.275b. Funding will be made thru cash and debt and is expected to close by the end of 2015.

 

New Issue Volume

 

Index Open Current Change
IG26 74.577 73.45 <1.127>
HV26 192.545 194.975 2.43
VIX 13.05 12.83 <0.22>
S&P 2,169 2,166 <3>
DOW 18,473 18,472 <1>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $6.15 bn DAY: $10.09 bn
WTD: $18.375 bn WTD: $23.315 bn
MTD: $87.125 bn MTD: $116.362 bn
YTD: $801.566 bn YTD: $1,034.102 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications July 22 —- <11.2%> <1.3%> —-
Durable Goods Orders June <1.4%> <4.0%> <2.3%> <2.8%>
Durables Ex Transportation June 0.3% <0.5%> <0.3%> <0.4%>
Cap Goods Orders Nondef Ex Air June 0.2% 0.2% <0.4%> <0.5%>
Cap Goods Ship Nondef Ex Air June 0.4% <0.4%> <0.5%> —-
Pending Home Sales MoM June 1.2% 0.2% <3.7%> —-
Pending Home Sales NSA YoY June 3.0% 0.3% 2.4% —-
FOMC Rate Decision (Upper Bound) July 27 0.50% 0.50% 0.50% —-
FOMC Rate Decision (Lower Bound) July 27 0.25% 0.25% 0.25% —-

 

Rates Trading Lab

 

Market’s tone was turned positive post-FOMC. Though the statement was interpreted with more of a hawkish bias, the fact remains that the Fed needs to see all ducks in a line before pulling the next trigger. Foreign markets were better bid all day and we were lagging, so bond bulls are in charge at the moment. Still some hurdles for them and the market, however. 7yr auction tomorrow will be at levels that are currently 8bp richer than the 5yr note that tailed. BOJ looms as well. Nevertheless, I think it will be hard to see higher yields so long as Bunds are bid as they are. Demand for fixed income remains voracious. Today’s $6.15bbn Verizon deal (Mischler was a co-manager) was announced with 3yr IPT of +75, 5yr +95, 10yr +140 and 30yr +215. It priced at 3yr+55, 5yr +75, 10yr+115 and 30yr +190 and was very well oversubscribed. 5y/30y found support at 110bp and I would trade the 110-120bp range we have seen over the past 2 weeks.

-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-30+ 100-13+ 100-217 101-22+ 108-06+
RESISTANCE LEVEL 99-282 100-10 100-14+ 101-17 107-13
RESISTANCE LEVEL 99-26+ 100-07 100-10+ 101-07+ 106-20+
         
SUPPORT LEVEL 99-23+ 100-02 100-04 100-29 105-15+
SUPPORT LEVEL 99-216 99-296 99-30 100-23 104-16+
SUPPORT LEVEL 99-19+ 99-26+ 99-26+ 100-14 104-01+

 

Tomorrow’s Calendar

 

  • China Data: Nothing Scheduled
  • Japan Data: Japan Foreign Bond Buying
  • Australia: Import/Export
  • EU Data: EU-Jul BCI/Conf GE-Jul CPI/Unem
  • S. Data: Claims, Cons Comf.Jun Trade
  • Supply: Italy 5, 7,10y, U.S. 7y
  • Events: Nothing scheduled
  • Speeches: Couere

(more…)

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

Quigley’s Corner 07.26.16: Managers Fixated on FOMC

 

Investment Grade New Issue Re-Cap

Global Market Recap

 IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Credit Spreads (by Rating/Industry)

IG Secondary Market Trading Lab

New Issue Pipeline

Economic Data Releases

Rates Trading Lab

M&A Pipeline

 

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

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

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

 

Global Market Recap

 

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

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

-Tony Farren

 

IG Primary Market Talking Points

 

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

 

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

 

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

 

 

Have a great evening!
Ron

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

Mischler Muni Market Update Week of 07-25-16
July 2016      Debt Market Commentary, Muni Market   

Mischler Muni Market Update for the week commencing 07.25.16 provides public finance investment managers and municipal bond market participants a snapshot of last week’s muni bond activity, including credit spreads, and a look at selected pending municipal finance offerings for this week’s pending issuance.

The negotiated market is led by $972.6 million for Presence Health Network issued by Illinois Finance Authority.  The competitive market is led by $213.0 million of Special Obligation Bonds for MiamiDade County, Florida on Tuesday.

 

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

mischler-muni-market-update-072516

 

A Day To Discover Discover Bank Debt Offering; Mischler Comments
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07-21-16  Discover Bank Debt Offering


Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points

Uncovering Discover Bank’s 10yr Fair Value  

New Issues Priced

Lipper Report/Fund Flows

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Trading Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 


It was a relatively quiet day in the IG primary market place with only 2 issuers pricing 3 tranches between them totaling $2b and with no all-in volume assist from the SSA space. With tomorrow’s being a Friday session, it looks as if we might fall about 12% short of this week’s syndicate midpoint average volume forecast. As of today, we’ve priced $30.40b vs. $34.70b.  This evening, stay tuned for Mischler’s deal-of-the day –  the story of Discover Bank’s new 10-year.

Global Market Recap

 

  • ECB Meeting & Draghi were the featured story today (below).
  • S. Treasuries – Big time comeback for USTs from the morning low prints.
  • 3mth Libor – Set at highest yield (0.71450%) since 5/20/09.
  • Stocks – Down day for the U.S. Europe closed mixed. Asia closed higher.
  • Economic  U.S. had more good data than bad. U.K. retail sales were weaker.
  • Currencies – Yen rallied 1 handle vs. the USD. USD tiny gains vs. the Euro & Pound.
  • Commodities – Poor day for crude oil and an up day for gold & silver.
  • CDX IG: +0.35 to 70.56
  • CDX HY: +2.22 to 389.87
  • CDX EM: -1.30 to 254.36

Swap Spreads: Had a very difficult day for a host of reasons (below)

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

-Tony Farren

 

IG Primary Market Talking Points

 

  • For the week ended July 20th, Lipper U.S. Fund Flows reported an inflow of $894.421m into Corporate Investment Grade Funds (2016 YTD net inflow of $19.323b) and a net inflow of $321.724m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.872b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 3 IG Corporate new issues only was 22.50 bps.

 

Discovering the Uncovering of Discover Bank’s 10yr Fair Value  
Discover Bank is the nation’s third largest credit card brand with approximately 50 million cardholders.  This past Tuesday, July 19th Discover Bank’s parent company, Discover Financial (NYSE: DFS beat Q2 2016 earnings delivering $1.47 EPS or $0.05 more than consensus estimates of $1.42.  Discover’s $2.2b in revenues was $400mm more than $1.8b forecasts. That’s a great start to pricing a new issue for a market defined by ravenous investor appetite.

 

Discover Bank wasted no time capitalizing on its strong earnings by hitting the market this morning for the first time since it’s $1b 3-year Global Notes that priced on August 10th of 2015.  The relatively infrequent issuer rated Baa3/BBB/BBB+ and “stable” on all counts, announced and priced a new $1b 10-year 3(a)(2) Senior Bank Notes new issue due July 27, 2026 through joint leads Bank of America/Merrill Lynch, Citigroup (who served as B&D), Deutsche Bank and Royal Bank of Canada.  Rule 3(a)(2) makes the issue exempt from SEC registration.  Proceeds were earmarked for general corporate purposes.  But if it’s in the “QC” it’s because the issuer gave us a role today and that role was a very nice one – Mischler Financial served as an active 2.00% Co-Manager and so without further ado, let’s get to the deal drill-down.

Initial price thoughts were released in the +215-220 range before guidance tightened to +195a with “area” defined as (+/-5 bps) after which it launched and priced at the tightest side of guidance or T+190. That’s a resounding <27.5> bps of spread compression from IPTs to the launch.

 

The comp for today’s relative value study looked to the outstanding DFS 4.25% due 3/13/2026 that was T+198 bid pre-announcement this morning or G+199. That $400mm deal originally priced on March 10th, 2014.  That pegged fair value on today’s new 10-year that priced at T+190 at negative< 9 bps>! Still another way to approach fair value was to look at the DFS 3.75% due 3/04/2025 (Holdco) that was T+205 (G+214).  One can make a case that the Opco/Holdco differential is worth 15 bps so fair value would again get you to around +199 and again nailing NIC thru this approach as negative <9> bps.  Translation……..”Congratulations to Discover Treasury Funding and the group of joints leads BAML, CITI, DB and RBC!”
Today’s order book finished at $4.4b or 4.4x-times oversubscribed.

At the break, paper was framed in a 188/186 market or 2 bps tighter on the bid.

 

Discover Bank Final Pricing
DFS $1bn 3.45% due 7/27/2016 @ $99..891 to yield 3.463% or T+190
Thank yous as well as Mischler’s five-star salute go out to Team Discover’s Tim Schmidt, who it seems I’ve been working with for all my years in the diversity space, Al Agra, Krsitopher Mclachlan and Kevin Sweeney.  To no one’s surprise, a hats off to Team Citigroup Syndicate’s Peter Aherne, Jim Hennessy who ran the book and Alisha Mingo.  Additionally a kind nod to an all-around good guy at RBC Syndicate – Paul Lynch.  Thanks to each of you for the data exchanges, relative value discussions and Citigroup for working with me on orders once again today.

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

 

IG Corporate New Issuance This Week
7/18-7/22
vs. Current
WTD – $30.40b
July 2016 vs. Current
MTD – $69.50b
Low-End Avg. $33.68b 90.26% $90.09b 77.15%
Midpoint Avg. $34.70b 87.61% $91.17b 76.23%
High-End Avg. $35.73b 85.08% $92.26b 75.33%
The Low $25b 121.60% $60b 115.83%
The High $41b 74.15% $125b 55.60%

 

Have a great evening!
Ron

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

NICs, Bid-to-Covers, Tenors and Sizes (more…)

Memorial Day Pledge by Mischler Provides High Yield Return for VetEdChallenge
June 2016      Company News, Giving Back, News and Information   

2016 Memorial Day Pledge by Mischler Financial Group Provides High Yield Return for VetEdChallenge Crowdfund Campaign

Mischler-Veterans-Education-Challenge

(from left) Avis and Bruce Richards, Founders of VetEdChallenge, MFG Analyst Jonathon Herrick, Mischler Financial CEO Dean Chamberlain

Stamford, CT— June 22, 2016 —Memorial Day and Veterans Day are the two US Holidays dedicated to honoring those who have served within the US military and those who have made the ultimate sacrifice while defending our country. At Mischler Financial Group, a debt market specialist and the securities industry’s oldest broker-dealer owned and operated by Service-Disabled Veterans, these two national holidays represent more than just a time for remembrance, they are a call to arms and the inspiration for month-long missions during which the firm and its squad of military veterans-now-financial industry veterans go beyond the call of duty. During the months of May and November, the firm allocates a portion of the months’ entire commission revenue to carefully-vetted programs dedicated to helping US military veterans and their families.

On May 1, Mischler made its annual Memorial Day Month pledge to Veterans Education Challenge, aka @VetEdChallenge, the crowdfund campaign launched on Veterans Day 2015 and committed to providing veteran educational scholarships with a preference to Pell-eligible undergraduate and graduate students. This week, Mischler CEO Dean Chamberlain and Mischler Financial Group founder Walt Mischler, both graduates of the US Military Academy at West Point, and both certified SDVs who have since risen to the top ranks of the financial industry, announced that the firm has delivered a check in the amount of $22,000 to the Veterans Education Challenge campaign. The first $1million raised before Veterans Day 2016 will be matched by philanthropists Bruce and Avis Richards. Mr. Richards is a co-founder of Marathon Asset Management, the $13bil AUM fund specializing in global credit and fixed income.

CEO Dean Chamberlain

CEO Dean Chamberlain

Stated Dean Chamberlain, “We evaluate philanthropies similar to the way top investment managers analyze financial market opportunities; the goal is to achieve the highest risk adjusted returns when compared to alternatives.” Added Chamberlain, “Until we’re proven wrong, we believe that investing in the education of disciplined and determined veteran students provides the greatest return on capital for those students, their families, the enterprises they go to work for and the communities in which they live.”

Contributions to Veterans Education Challenge will go towards veteran scholarship awards that go beyond the provisions of the GI Bill and will be based on financial need with a priority and preference to Pell-eligible undergraduate and graduate students. Veterans will be eligible to renew awards based on financial need and standing with their universities.

About Mischler Financial Group Inc.

Established in 1994, Mischler Financial Group, Inc. (“Mischler”) was the first FINRA minority broker-dealer member to be designated as a Service-Disabled-Veteran-Owned Business Enterprise (SDVOB). The firm is now widely-recognized by Fortune corporate treasurers and leading investment managers for “punching above its weight class” while serving as a boutique investment bank and conflict-free institutional brokerage. Mischler is unique among its peers for its capital markets capabilities as well as the firm’s year-round advocacy and support of veteran-centric causes. Mischler maintains offices in 8 major cities and is staffed by more than 50 securities industry veterans whose expertise extends across virtually all primary and secondary debt and equity capital market silos. In addition to traditional DCM and ECM services and secondary market best execution, Mischler administers corporate share repurchase programs for leading Fortune companies, cash management for government entities and corporations, and asset management programs for liquid and alternative investment strategies.

#                             #                             #

 

For additional information:

Dean Chamberlain, Chief Executive Officer

(T) 203.276.6646

Email: dchamberlain@mischlerfinancial.com

 

 

To Honor Memorial Day, Mischler Pledges Profits to VetEdChallenge
May 2016      Company News, Giving Back, News and Information   

vetedchallenge-crowdrise-mischlerNewport Beach, CA & Stamford, CT, May 12, 2016–Mischler Financial Group (“MFG”), the financial industry’s oldest minority investment bank and institutional brokerage owned and operated by Service-Disabled Veterans, announced today that in recognition of the upcoming Memorial Day celebration, the firm has pledged a percentage of its entire May profits to Veterans Education Challenge, (“VetEdChallenge”) a donation-based crowdfund campaign. The philanthropic initiative is dedicated to providing need-based college scholarships to ex-military students pursuing higher education so they can get better access to a broad range of career development opportunities.

Veterans Education Challenge was established in November 2015 by investment management industry veteran Bruce Richards and his wife Avis. Mr. Richards is personally matching the first $1million in donations made to the “VetEdChallenge” campaign via crowdfund platform “Crowdrise.” He  is co-founder, CEO and managing partner of Marathon Asset Management, the $12.5 billion investment firm specializing in global credit and fixed income markets.

“This Memorial Day Month we’ve embraced a more contemporary approach to paying it forward via the VetEdChallenge program”, said Mischler Financial Group CEO Dean Chamberlain, a graduate of the U.S. Military Academy at West Point who himself earned his MBA via a work-scholarship program at Northwestern University’s Kellogg School of Management. “Our annual, entire month of May pledge in honor of Memorial Day, as well as our annual Veteran’s Day Month pledge has typically focused on traditional, best-in-class philanthropies and we believe the VetEdCballenge is an ideal vehicle to directly impact the future of returning veterans, as higher education can provide a material lift in the course of pursuing opportunities.”

Added Chamberlain, “Because we are always mentoring returning veterans, we know first-hand about the challenges these men and women face as they assimilate back into the mainstream and find themselves working multiple jobs to put aside funds for educational degrees beyond their pre-military academic background. We’re proud to partner with Bruce Richards and be affiliated with his truly thought-leading program. We encourage our institutional clients to help us support this initiative via our trading desk(s) and/or directly via the Veterans Education Challenge crowdfund program.

Other philanthropic organizations that Mischler Financial Group supports are displayed on the firm’s website via this link.

About Mischler Financial Group

Mischler Financial Group is headquartered in Newport Beach, California with regional offices in major cities throughout the United States. MFG is a federally-certified minority broker-dealer and a Service-Disabled Veterans Business Enterprise (SDVBE). We provide capital markets services across primary debt and equity markets, secondary market agency-only execution within the global equities and fixed income markets and asset management for liquid and alternative investment strategies. Clients of the firm include leading institutional investment managers, Fortune corporate and municipal treasurers, public plan sponsors, endowments, and foundations. The firm’s website is located at http://www.mischlerfinancial.com

#          #          #

Super Mario Day-ECB To Buy IG Corporate Debt
March 2016      Debt Market Commentary   

Quigley’s Corner 03.10.16 Super Mario Day

 

Investment Grade New Issue Re-Cap

Super Mario Day! You Gotta Be Kiddin’ Me, Right?…No, its Wrong!

Global Market Recap

IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows – Week of March 10th

IG Secondary Trading Lab

Investment Grade Credit Spreads (by Industry/Rating)

Economic Data Releases

Rates Trading Lab

New Issue Pipeline

M&A Pipeline

 

It was a subdued day today for the IG dollar primary markets as eager anticipation surrounded ECB President Mario Draghi’s latest and greatest tool kit inventions and implementations. No multi-tranche transaction would price in the face of the predictably unpredictable ECB today.  More on that in a bit.  3 IG Corporate issuers printed 5 tranches between them totaling $2.7b assisted by the SSA’s lone Republic of Panama’s $1b 12-year bringing the all-in IG day total to 4 issuers, 6 tranches and $3.7b.

 

Super Mario Day! You Gotta Be Kiddin’ Me, Right?……….Wrong!

 super-mario-mischler-debt-market

 

Now before you think I’ve gone completely nuts, you need to read this.  It’s from the Mario Day website.  You know, the REAL Super Mario, as opposed to the impostor at the ECB. It reads, “In recognition of everyone’s favorite pizza-loving Nintendo character, today, Thursday, March 10th is “Mario Day.”  I kid you not.  It continues, “..with plenty of ideas, games and activities to choose from, such as fancy dress parties and mushroom stomping competitions, you can be sure to make “Mario Day” a day to remember.”  I repeat, this is NOT a joke.

 

“Back it up!  No wait…Get a Bigger Truck……..Draghi’s Doing the Driving!”

 

….However, I was thinking that perhaps in a frenzy of jealousy/envy the other Super Mario…. you know, this guy:
mario-draghi-mischler-debt-market

…I might have taken it all a bit too personally.  For today was all about the ECB’s Mario Draghi.  Here’s a nice sound bite from friend, former BNP Paribas colleague and Bloomberg’s First Word European Primary Market Strategist, Paul Cohen, who nicely sums up today’s Euro IG primary markets, “There were no syndicated primary deals in Europe today as the market awaited the ECB’s latest rates decision. It’s the first day without a deal since February 9th and ends 8 consecutive business days of non-financial corporate issuance.” As someone quipped post this morning’s ECB conference, “I think it’s time to back the truck up, or maybe even get a bigger truck.  Mr. Draghi is doing the driving.” And boy, did he do some driving today. Let’s take a look:

 

My Take on the EU?  Did Someone Say, “Nightmare?” E-Break?

 

The ECB cut its three key interest rates and will buy investment-grade euro-denominated corporate bonds. The ECB’s main refi rate was lowered by 5 bps to 0%, its marginal lending rate was also cut by 5 bps to 0.25%; its deposit rate was cut by 10 bps to -0.4%. The ECB also said it will increase the pace of its monthly asset purchases by €20b to €80b from €60b starting in April, and will add investment-grade euro denominated bonds issued by non-bank corporations to the list of eligible assets.  The ECB CANNOT buy richer yields than the ECB’s deposit rate.  So, by moving their deposit rate to -0.4% from -0.3% and by increasing their monthly purchases to €80b from €60b it necessitates that they start to buy corporates.  Hence, the announcement of their new Euro-denominated corporate bond purchase tool.

It’s as if Draghi tore a page out Mario Day festivities because his ECB announcement certainly provided plenty of ideas, games and activities to choose from.  There were no fancy dress parties nor were there any mushroom stomping competitions but Draghi’s “tool kit” was introduced “on-the-fly” not after a long trial and error period as in R&D. What he unveiled to the world has never been done before…….for good reason – it’s a desperate move to salvage the unsalvageable. As you all know here, the EU is facing a terrible aging population dilemma, an immigration issue resulting in border controls and national demarcation lines being re-introduced, spreading Nationalism and a terrorist concern that resulted in today’s French travel advisory warning on the British government’s website:

“There is a high threat from terrorism. Due to ongoing threats to France by Islamist terrorist groups, and recent French military intervention against Daesh (formerly referred to as ISIL), the French government has warned the public to be especially vigilant and has reinforced its security measures.”

 

As one longtime trusted market relationship wrote to me this afternoon, “first off, I didn’t think there was that much “non-bank” corporate debt in the euro-universe! The Committee will decide if the asset (possibly a Financial, but not a BANK?) is eligible for purchase. I foresee corporate bond spreads tightening, but by how much and will they go negative?” Now, it seems however, that the ECB is a player in the market and companies are directing their fixed payments to them. In other words, they are being paid to hold specific companies’ debt — of their choosing. This comment sounds rather like “Sure, I’ll take that off your hands — for a price.” The role of the ECB seems even more questionably large – call it “outsized”  in that they’re setting rates, regulating banks (SSM) and now playing the market?

 

That’s not that far off folks.  Living for the moment is never a good plan.  Let’s think, however, about the likely resultant paths for the EU.  There is NO sign of inflation in the EU.  There are signs of DEFLATION.  History shows that the “D” word is a country killer and a war creator.  Draghi gets to be Super Mario for another day and rates/currencies traders who make a living moment by moment, have more movement to capitalize on but, in the end, this means the EU is more of a disaster than everyone thought.  (I am an exception as I’ve always maintained that it’s full speed ahead for them straight into a brick wall).  It’s desperation time.  As European banks suffer, today’s news should come as yet another major alarm as to just how bad the situation is over there.  Negative rates mean that the problem will persist perhaps forever.  Yes, I did say “forever.”  EU leadership began at the onset of the Financial Crisis playing “kick-the-can” with good old fashioned procrastination and government and bureaucratic delay tactics until that game became an embarrassment.  Now it’s a whole new ball-game.  They are changing many more rules of engagement to postpone the inevitable. It will end badly…..really badly.  The Schengen Agreement has already fallen to the wayside and that’s one the EU’s two legs that it stands on. The other leg being the single currency itself. EU problems are profoundly foundational.  They need to raise the house and re-do their foundation and then reset the broken home.  It’s THAT bad.  I still maintain that the EU crumbles into two-parts a Northern Euro and a Southern Euro.  Been saying that for over five years.

It’s a proverbial E-Break.

So, where’s that leave us?  Well, despite the comedic caucuses taking place in this election year, the Unites States of America is the world’s finest tuned engine.  It’s the best story and most stable of the myriad global event risk factors out there.  As for our IG primary markets, it’s very clear. Perhaps, clearer than ever before.  Your eyes should be focused on the 1.93% CT10 yield.  Digest the fact that across the 4 major IG asset classes spreads have tightened 22.25 bps in 3 ½ weeks since February 12th. Low UST rates plus tightening spreads equals one thing readers [treasurers, bankers and syndicate managers] and simply put: PRINT NOW.

 

Global Market Recap

 

ECB Meeting/Draghi: ECB pulls out all stops & what was Draghi thinking?

USTs – Treasuries continue to struggle but strong 30yr auction helped the back end.

Stocks – U.S. small losses heading into the close.

Overseas Stocks – Poor day in Europe. Nikkei rallied & China closed down.

Economic – Claims data continues to impress but today belonged to the ECB/Draghi.

Currencies – Big day for Euro & bad day for DXY Index with wide trading ranges.

Commodities – Crude oil down and gold up.

CDX IG: -4.68 to 91.53

CDX HY: -15.97 to 462.32

CDX EM: -3.47 to 333.40

 

IG Primary Market Talking Points

 

KKR & Co. LP upsized today’s $25 par PerpNC5 to $300mm from $150mm.

For the week ended March 10th, Lipper U.S. Fund Flows reported an inflow of $2.176b from corporate investment grade funds (2016 YTD net outflow of $3.961b) and a net inflow of $1.796b from high yield funds (2016 YTD net inflow of $4.403b).

The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate-only new issues and one IG-rated Preferred was 25.90 bps.

 

Syndicate IG Corporate-only Volume Estimates for March

 

IG Corporate New Issuance March 2016 vs. Current
MTD – $61.12b
Low-End Avg. $115.59b 52.88%
Midpoint Avg. $116.13b 52.63%
High-End Avg. $116.67b 52.39%
The Low $100b 61.12%
The High $150b 40.75%

 

Have a great evening!

Ron Quigley

 

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…)

Debt Capital Markets: The Day For Duke
March 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 03.08.16 A Salute to Women; Voracious Demand For Duke Energy Carolinas


Definition of “Female” FE = Iron + Male = Iron Man! Happy 8th Annual International Women’s Day

Investment Grade Corporate Debt New Issue Re-Cap

Duke Energy Carolinas Lights Up Mischler

IG Primary Market Talking Points – New Issue Concessions (NICs) Go Negative

New Issues Priced

Lipper Report/Fund Flows

Economic Data Reports

Rates Trading Lab

New Issue Pipeline

Investment Grade Credit Spreads (by Industry/Rating)

M&A Pipeline

 

Fact: Women are half of the world’s population, they work two-thirds of the world’s working hours, receiving 10% of the world’s income and they own less than 1% of the world’s property.  Staggering isn’t it?  Today is the 8th annual International Women’s Day.  Let those numbers sink in.  Think about that and the women in your lives and the influences they have on you and the stability they bring to your life. They are rocks of stability, reliability, they are beauty, they are life. Congratulations to all the women out there breaking down barriers by ignoring all limits.  Dick Van Dyke once said, “women will never be as successful as men, because they have no wives to advise them.” An interesting point! Also congratulations to all the firms out there in Corporate America continually moving the needle forward for women’s equality in the work force.

Investment Grade New Issue Re-Cap

It was another primary market bombardment.  Yesterday marked the first day in a long time that average NICs turned negative overall.  Bid-to-cover rates have been rising from 3x to the high 3s all week and we’re seeing more and more of previously shelved announcements hit the tapes in this perfect environment for strong issuance.  Today was led by Berkshire Hathaway’s 7-part $9b offering with proceeds used to refinance a $10b bank loan that was used to finance a portion of BRK’s acquisition of Precision Castparts Corp. and for other purposes.

The final tally on today’s avalanche of IG Corporate issuance was 8 separate issuing entities, 15 tranches and a total of $14.375b.  SSA also had a prolific day adding 5 issuers, 5 tranches and $7.3b to the mix bringing the all-in IG day total to 13 issuers, 20 tranches and a resounding $21.675b.  We are now over 47% of the way to the syndicate midpoint average forecasts for the entire month of March or $54.82b vs. $116.13b.  The MTD IG Corporate plus SSA total is: $76.37b.

 

Duke Energy Carolinas Lights Up Mischler

Now let’s get down and dirty with the story and relative study…………………….

As you can see from the below table, spread compression from IPTs to the launch was dramatic.  Both the 7- and 20-yr tranches tightened 20.5 bps with the two also pricing at the tightest side of guidance.  The preliminary sounders on size was that Duke would definitely be printing two “index eligible” transactions (a minimum $250mm each) at the low end by that they definitely had the flexibility to grow with an intention on equally splitting the two tranches…..and so it was. Today’s 7s/30s each grew to $500mm on very strong demand for perhaps the highest quality utility on the planet.

 

Duke Energy Carolinas LLC Aa2/AA- 2.50% 3/15/2023 500 +105-110 +90a (+/-3) +87 +87 BNPP/CITI/RBC/TD/UBS
Duke Energy Carolinas LLC Aa2/AA- 3.875% 3/15/2046 500 +145-150 +130a (+/-3) +127 +127 BNPP/CITI/RBC/TD/UBS

 

I prefer straight-line comparables if they’re available and with the size of Duke (NYSE:DUK) and their outstanding issuances they were indeed available. It was a simple relative value study that all began with the Duke Carolinas “DUK” 3.75% due 6/01/2045.  These Secured Global Bonds were T+125 bid pre-announcement inferring a small 2 bps NIC on today’s new 30-year that priced at T+127.  By applying the 40 bp adjustment for the standard 7s/30s utility curve gets you to fair value of T+85 versus today’s 7yr final pricing of T+87 also a 2bp NIC.

Demand was voracious for Duke.  The 7yr finished with a $1.8b final order book or 3.6-times oversubscribed while the 30s ended at $1.9b for a 3.8x bid-to-cover rate.

The new 7s went out framed in an 86/84 market round lots per side and 2bps better bid. The 30s were 126/124.

That right there folks is a great story of a very well-priced deal and at the perfect time. So, kudos once again to Team Duke Treasury/Funding.  They sure do know power and energy at Duke, but they equally know numbers and timing.

Thanks again to all the accounts that participated.  We appreciate the expediency with which you were able to do your credit work today and get your orders in. Thanks also to Peter Aherne’s top notch syndicate team with shout outs to Mr. Kevin O’Sullivan and of course the dynamic duo I simply refer to as “Alitza Mingonado!” Otherwise known as Alisha Mingo and Maritza Maldonado. You gals are the best and I wish you and all the fine ladies at Team Citi who help move the needle every day for Diversity & Inclusion a very happy International Women’s Day!   Fight On!

IG Primary Market Talking Points – Some Strong Optics from Today’s Deals.

Discovery Communications LLC (NASDAQ:DISCA) upsized today’s new 10-year Senior Notes to $500mm from $450mm at the launch and at the tightest side of guidance.

The average spread compression from IPTs thru the launch/final pricing of today’s 15 IG Corporate-only new issues and one IG-rated Preferred was 20.67 bps.

 

Syndicate IG Corporate-only Volume Estimates for March

 

IG Corporate New Issuance March 2016 vs. Current
MTD – $54.82b
Low-End Avg. $115.59b 47.43%
Midpoint Avg. $116.13b 47.21%
High-End Avg. $116.67b 46.99%
The Low $100b 54.82%
The High $150b 36.55%

 

And now I’m off to spend the rest of this chaotic day with my two favorite ladies on International Women’s Day…wife and daughter! Enjoy folks!

 

Have a great evening!

Ron Quigley

 

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…)

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