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MetLife-Navigating Life Together; Global Funding Dashboard
December 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 12.12.16 – MetLife Global Funding Deal Dashboard

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

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

MetLife Global Funding Deal Dashboard

MetLife’s Veteran Inclusive Partnership

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending December 7th     

IG Credit Spreads by Rating & Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Tomorrow’s Calendar

 

 

Our IG DCM is certainly winding down the year. Today there were only 2 issuers that priced 4 tranches between them totaling $2.75b or over 45% of this week’s syndicate midpoint average forecast calling for $6.00b.  However that’s not to say there is nothing to write about because there is.  MetLife’s portion of today’s calendar was 73% in the form of their $2b 3-part 2yr FXD/FRN and 10yr FXD tranche.  Mischler Financial was honored and privileged to be invited to serve as an active 2.00% underwriter on MetLife’s 10yr tranche.  You know what that means?  Today’s MetLife 10-year Note transaction IS today’s “QC” Deal-of-the-Day.  Let’s get to the recaps, talking points and volume tables first followed by the MetLife Deal Dashboard, Drill Down and a surprising story about advertising and MetLife’s new rebranding.

 

Global Market Recap

 

  • S. Treasuries – Closed mixed & little changed but had a big comeback during NY hours.
  • Overseas Bonds – 30yr JGB lost 9 bps. Core & semi core EU red. Peripherals mixed.
  • 3mth Libor – Set at highest yield since May 2009 (0.95872%).
  • Stocks – S&P & NASDAQ red at 3:45pm while the Dow is green.
  • Overseas stocks – Europe more red than green. Nikkei rallied. China hit hard.
  • Economic – U.S. calendar not a factor today but will be later in the week.
  • Currencies – Poor day for the USD losing ground vs. all of the Big 5.
  • Commodities – Crude oil rallied (non-OPEC cuts) but closed $2 off of its high print.
  • CDX IG: +1.21 to 68.10
  • CDX HY: +2.65 to 358.23
  • CDX EM: -3.80 to 245.56

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Enbridge Inc. upsized today’s 60NC10 fixed-to-floating rate Junior Subordinated Notes Hybrid new issue to $750mm from $500mm at the launch.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 4 IG Corporate-only new issues was <15.75> bps.
  • BAML’s IG Master Index was unchanged at +133.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.27.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +173 vs. +174.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.7b on Friday versus $16.1b on Thursday and $25.0b the previous Friday.

 

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

 

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

 

 

 

MetLife Global Funding I $1b 10yr FXD 144a/REGS FA-backed Notes Deal Dashboard

For the MetLife relative value study I looked at the outstanding MET 1.95% Secured Notes due 9/15/2021 that were T+80 pre-announcement. Applying a 20-25 bps (call it 22.5 bps) for the 5s/10s credit curve gets you to T+102.50 inferring a negative or <5.5> bps NIC vs. today’s final T+97 spread level.

Another approach to fair value would be to look at the outstanding MET Global Senior Unsecured 3.60% due 11/13/2025 that were T+90 (G+99) before today’s MET new issue hit the tapes.  The new MET 10-year Holdco was T+105-110 (call it T+107.5). FA-backed paper is also better rated and typically trades inside Holdco paper.  So call fair value from this angle T+100-105 or T+102.5 also pegging NIC on today’s new T+97 10year as negative <5.5> bps.

 

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
MET +115a +100a (+/-3) +97 +97 <18> bps <5.5> 95/94 <2>

 

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

 

MET  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
MET $1b $2.5b 2.50x

 

Final Pricing – MET $1b 3.45% 10yr due 12/18/2026 @ $99.933 to yield 3.458% or T+97

 

The Guy-in-the-Corner Bids Adieu to Y&Rs Long Ago “Snoopy” Campaign and Welcomes in MetLife’s New Green and Blue.

metlife-debt-market-mischler

Given my 4+ years as a film producer at Young & Rubicam Advertising – my first job after graduating from USC’s School of Cinematic Arts – how happy I am to tell you the story about MetLife’s huge re-branding campaign that will roll out throughout 2017.  It all begins with a new logo and tagline which is “MetLife. Navigating life together.” The logo is a simple letter “M” (see above) that brings together the MetLife brand’s classic blue and new green that is reflective of the company’s partnership with its customers.  It also means farewell to the 31 long and sweet years that MetLife had enjoyed employing Charles Schulz’s Peanuts characters in their branding campaigns.

The reason for the change is simple – MetLife was looking to transform its brand to convey that it is a Company actively engaged in ongoing, frequent partnerships around navigating and solving life’s challenges.  MetLife is transforming its brand as it is becoming more focused on the types of customers it serves and the brand to reflect that.  Given the underlying motivation and strategy of its re-branding campaign I am very proud to say that Mischler is happy to share “blue and green” today with MetLife.  We appreciate our partnership with MetLife and those who we liaised with on today’s 10-year FA-backed 10-year new issue.

Life IS change.  We are constantly reminded of that fact.  I fondly recall producing test commercials for MetLife way back during my earlier career at Y&R from 1983 thru 1987. It was a long and wonderful campaign that served its purpose well through the years but all good things give way to improvements and such is MetLife’s new roll-out.  Good bye Snoopy and hello Blue and Green!

P.S. Don’t worry about Snoopy. He’ll enjoying a wonderful retirement with his pal Charlie Brown.

 

MetLife’s Veteran Inclusive Partnership

MetLife is a diverse employer.  How do we know? Simple. Everything at a Company starts from the top down folks.  So, what does MetLife Chairman, CEO and Chief Executive Officer, Steven A. Kandarian think about Diversity and Inclusion?
“………A diverse workforce and a culture of inclusion are essential to the way MetLife does business and how we treat our employees.  We are committed to diversity and inclusion at MetLife, and strive to be known as an inclusive global company that attracts, develops and retains the best talent.  A workforce that reflects our customer base is essential to our continued success.”

Global Chief Diversity and Inclusion Officer, Elizabeth Nieto continued, “as a global company, our goal is to honor the cultures, backgrounds, unique experiences and perspectives that our employees, customers and suppliers bring to enhance the “fabric of a world class company”…..that is MetLife.”

The company ensures fairness in vetting and evaluating its diversity vendors and partners.  It leverages the best practices of The National Veteran Business Development Council, Women President’s Educational organization and the National Minority Supplier Development Council among others to institute a meaningful evaluation process to identify, qualify and partner with its well-vetted partnerships with diverse companies such as Mischler Financial Group, Inc.

Additionally, MetLife recognizes that hiring veterans is not just the right thing to do, but it is also the right thing for its global business.  Veterans after all, leave the military with discipline, an ability to lead and passion for service commensurate with MetLife’s own core values.  That’s the reason MetLife fosters a company culture honoring the wealth of experiences, traits and skills of those who have served or continue to serve their country.  As a result, MetLife is regularly recognized on GI Job’s Military Friendly Employers list.

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

Have a great evening!
Ron Quigley

 

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

 

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

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

 

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
Enbridge Inc. Ba1/BBB- 6.00% 60NC10 750 6.25%a 6.00% the # 6.00% $100.00 BAML/HSBC/JPM
MetLife Global Funding Aa3/AA- FRN 12/19/2018 500 3mL+equiv 3mL+equiv 3mL+43 3mL+43 DB/CITI/USB/WFS
MetLife Global Funding Aa3/AA- 1.75% 12/19/2018 500 +75a +65 the # +65 +65 DB/CITI/USB/WFS
MetLife Global Funding Aa3/AA- 3.45% 12/18/2026 1,000 +115a +100a (+/-3) +97 +97 DB/BARC/JPM/MS

           

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.27 1.27 0
IG27 66.89 68.095 1.205
HV27 137.825 136.006 <1.819>
VIX 11.75 12.64 0.89  
S&P 2,259 2,256 <3>
DOW 19,756 19,796 40  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

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

 

Lipper Report/Fund Flows – Week ending December 7th     

     

  • For the week ended December 7th, Lipper U.S. Fund Flows reported an inflow of $2.583b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.047b) and a net inflow of $2.034bm into High Yield Funds (2016 YTD net inflow of $6.973b).
  • Over the same period, Lipper reported a net inflow of $1.761b into Loan Participation Funds (2016 YTD net inflow of $2.322b).
  • Emerging Market debt funds reported a net outflow of $1.005b (2016 YTD inflow of $4.738b).

 

IG Credit Spreads by Rating

The 10-day IG spread performance vs. the T10 across the ratings spectrum and how IG compared versus high yield:

Spreads across the four IG asset classes are an average 24.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 11/29 11/28 1-Day Change 10-Day Trend PC
low
IG Avg. 133 133 134 134 135 135 135 136 136 136 0 <3> 106
“AAA” 75 75 75 75 75 75 75 75 75 75 0 0 50
“AA” 81 82 82 82 82 83 83 84 84 83 <1> <2> 63
“A” 106 106 106 107 107 107 107 108 108 108 0 <2> 81
“BBB” 170 171 172 172 173 174 174 175 177 177 <1> <7> 142
IG vs. HY 295 305 308 316 323 329 327 331 333 330 <10> <35> 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 30.00 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 11/29 11/28 1-Day Change 10-Day Trend PC
low
Automotive 121 121 121 121 121 122 122 123 123 123 0 <2> 67
Banking 123 124 124 125 125 126 125 125 126 126 <1> <3> 98
Basic Industry 170 172 173 174 175 176 175 177 175 175 <2> <5> 143
Cap Goods 99 99 100 100 100 101 101 102 101 101 0 <2> 84
Cons. Prod. 109 109 109 109 109 110 109 110 110 110 0 <1> 85
Energy 170 172 173 174 175 177 177 180 181 180 <2> <10> 133
Financials 152 153 154 154 155 155 154 155 157 157 <1> <5> 97
Healthcare 117 117 117 117 118 118 118 119 118 118 0 <1> 83
Industrials 135 135 136 136 137 137 137 139 139 139 0 <4> 109
Insurance 145 146 146 146 146 147 146 147 147 147 <1> <2> 120
Leisure 135 135 134 134 135 135 135 135 135 134 0 +1 115
Media 157 158 158 159 159 160 159 161 161 160 <1> <3> 113
Real Estate 143 143 143 143 144 144 144 144 142 142 0 +1 112
Retail 114 115 115 116 116 116 116 117 117 117 <1> <3> 92
Services 127 127 127 128 128 128 128 128 127 127 0 0 120
Technology 108 109 109 110 110 110 110 112 112 113 <1> <5> 76
Telecom 163 163 164 165 165 166 165 166 167 167 0 <4> 122
Transportation 131 132 133 135 135 135 135 136 135 135 <1> <4> 109
Utility 133 134 135 135 135 136 135 135 135 135 <1> <2> 104

 

New Issue Pipeline (more…)

Equity Market View Via Peruzzi’s Perch:Trump Tweets; Back to Active Management
December 2016      Equities Market Commentary   

Peruzzi’s Perch Dec 09 2016 : Equity Market View Dominated by Trump Tweets Aimed at Companies; Back to Active Management to Capture Alpha

larry-peruzzi-mischler-equitiies

Larry Peruzzi

We close out a remarkable week in which markets flirted with new highs daily. Wednesday was the 75th anniversary of the Pearl Harbor attacks. That event prompted Japanese Field Marshal Isoroku Yamamoto to say “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve”. A fitting quote that could also ring true for the current state of global equity markets. The Trump victory and growing sentiment that market friendly policies are forthcoming have U.S indices hitting new all-time highs daily.

Volatility, as measured by the VIX index, is near the lowest levels of the year. We are seeing shorts being squeezed as investors are putting idle cash to work, albeit mostly by means of passive investing. The month of December has historically been the best performing month for the S&P 500. Since 1950 the S&P 500 averages a gain of 1.7% in December. This year we are firmly ahead of average with the S&P gaining 2.2% through the first 6 trading days. Normally we start to see some investors taking gains in December but with Trump’s pledge to reduce capital gain taxes, investors are holding off on selling. This will help add more fuel to the market, which in turn has pushed more sideliners into the market.

Since the Wednesday after the U.S election 392 of the S&P 500 names (505 companies) are trading higher.  Economic releases this week were mostly backwards looking, with the exception of Friday’s Michigan sentiment reading, which saw an uptick in both current conditions and expectations. Thursday the ECB announced that the stimulus package will be extended at a reduced rate of 60 billion Euros per month, but it will be extended for another 9 months. This was greeted positively by European markets.  South Korean President was ousted on Friday as South Korea joined the growing list of countries (U.K, Brazil, Italy, New Zealand, and Kuwait) whose leaders have stepped down this year.  Also Coca Cola CEO announced he is stepping down on May 1, 2017.

Looking ahead to next week, we have a quiet start to the Economic releases, but then we pick up the pace on Wednesday when the Federal Reserve is expected raise rates for the first time in a year. The thought of rising rates was a market mover earlier in the year, but the current momentum makes Wednesday Fed announcement largely a formality. The only way it will move markets is if it is a smaller or large hike than the currently priced in 25 bps.  The announcement’s wording should garner some interest.

Also making rate decisions next week will be: Bank of England, Switzerland, Mexico, Chile, Peru, Indonesia and South Korea. Other stats due next week are November retail sales and PPI data on Wednesday, Current account balance, November CPI data and jobless claims on Thursday. The week closes out with November Housing Starts and Building permits on Friday.

With crude oil back over $51 (up 13.6% since 11/29) a barrel at 2016 highs commodity traders will be watching the OPEC outlook discussion on Tuesday and inventory numbers on Tuesday and Wednesday. Gold start the week at its lowest levels since February and the 10 year Treasury yield at its highest level since July 2015. Look for the allocation trade to continue, but somewhat ease next week.

Oracle and Adobe Systems are the highlights of a handful of firms reporting on Thursday. We expect markets and market strategy to return toward a more active managed approach from our current passive approach. With the current rally pushing idle cash into the market, the next step is the search for alpha. So, starting to pay attention and analysis of fourth quarter earnings next month will be a good first step. The course of action next week seems to be: Put cash to work, watch President-elect Trump’s tweets and comments for policy resolve, see what the Fed has to say on Wednesday, mail out those Christmas Cards and get ready to roll up your active management sleeves in January.

Godspeed John Glenn

 

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472

Larry Peruzzi is a 20 yr global trading markets veteran and brings to Mischler a unique background. His career experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters (more…)

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

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

 

 75TH Anniversary of Pearl Harbor

Investment Grade Corporate Bond New Issue Re-Cap

Global Market Recap

IG Primary & Secondary Market Talking Points

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

New Issues Priced

Indexes and New Issue Volume

IG Credit Spreads by Rating

IG Credit Spreads by Rating

New Issue Pipeline

M&A Pipeline

Lipper Funds Flow Report

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

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

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

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

 

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

 

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

 

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

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

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

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

Cover of The New York Times 75 years ago today.

 

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

 

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

-Franklin D. Roosevelt

 

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

-Winston Churchill

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

-George S. Patton           

 

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

-Dwight Eisenhower


75th Anniversary: Pearl Harbor Veteran Remembrance Day

 

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

 

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

The person wrote:

Ron,

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

 

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

mischler-pearl-harbor-anniversary-veteran-salute

Today’s Ceremony at the USS Arizona Memorial

 

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

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

 

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

 

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

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

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

 

pearl-harbor-survivor-us-military-veterans

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

 

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

 

Investment Grade New Issue Re-Cap 

 

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

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

 

Global Market Recap

 

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

 

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

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

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

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

 

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

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

 

New Issues Priced

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

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

 

IG

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

           

SSA

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

 

Indexes and New Issue Volume

 

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

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

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

 

Lipper Report/Fund Flows – Week ending November 30th    

     

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

 

IG Credit Spreads by Rating

The 10-day IG spread performance vs. the T10 across the ratings spectrum and how IG compared versus high yield:

Spreads across the four IG asset classes are an average 25.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/06 12/05 12/02 12/01 11/30 11/29 11/28 11/25 11/24 11/23 1-Day Change 10-Day Trend PC
low
IG Avg. 134 135 135 135 136 136 136 136 136 136 <1> <2> 106
“AAA” 75 75 75 75 75 75 75 75 75 75 0 0 50
“AA” 82 82 83 83 84 84 83 84 84 84 0 <2> 63
“A” 107 107 107 107 108 108 108 108 108 108 0 <1> 81
“BBB” 172 173 174 174 175 177 177 177 177 177 <1> <5> 142
IG vs. HY 316 323 329 327 331 333 330 328 330 330 <7> <14> 228

 

IG Credit Spreads by Industry

…….and a snapshot of the major investment grade sector credit spreads for the past ten sessions:

Spreads across the major industry sectors are an average 31.53 bps wider versus their post-Crisis lows!

                                    

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

 

New Issue Pipeline

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

 

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

 

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

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

Debt Market Driver: Ford Goes Further; EU is Fractured-Mischler Global Macro Lens
December 2016      Debt Market Commentary   

Quigley’s Corner 12.05.16 – Ford Goes Further; Italexit, Global Macro Comment


Investment Grade Corporate Debt New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

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

Ford Motor Co. (NYSE:F) : 2-part $2.8b 10s/30s Deal Dashboard

Diversity & Inclusion Going Further with Ford; A Veteran’s Vehicle Company

Global Macro Commentary: Italexit, Austria and The Fractured European Union

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 30th    

Investment Grade Credit Spreads (by Rating & Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar     

 

 

7 IG Corporate issuers tapped our IG dollar DCM pricing a total of 11 tranches between them totaling $6.325b.  SSA was shut out today.  Our December MTD total now stands at $21.255b or over 51% of the syndicate midpoint average forecast of $41.52b.

The Deal-of-the-Day always belongs to those that Mischler is involved in and today’s highlighted new issue belongs to Ford Motor Company.  First let’s check in with Tony for our Global Market Recap, Primary and Secondary market talking points, the WTD and MTD volume tables and then we’ll all “Go Further” reading about today’s $2.8bn two-part 10s/30s new issue that was……… “Built Ford Tough!”

 

Global Market Recap

 

  • U.S. Treasuries – closed mixed & little changed (JGB’s also). EU bonds hit hard.
  • 3mth Libor – Set at the highest yield since May 2009 (0.94806%).
  • Stocks – NASDAQ leads U.S. stocks higher & the Dow traded at its all-time high.
  • Overseas Stocks – Rally in Europe. Sell off in Europe.
  • Economic – ISM non-manufacturing was the strongest since October 2015.
  • Overseas Economic – Full calendars in Japan & Europe with more good than bad.
  • Currencies – USD beaten up by Euro, basically unchanged vs. Pound & better vs. Yen.
  • Commodities – Crude oil red, CRB higher & big gains for natural gas & copper.
  • CDX IG: -0.79 to 72.14
  • CDX HY: -5.62 to 383.38
  • CDX EM: -5.48 to 264.82

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • KeyCorp upsized today’s $25 par PerpNC10, Series “E” FXD/FRN to $500mm from $250mm.
  • National Retail Properties Inc. increased its 10-year Senior Notes new issue to $350mm from $300mm at the launch and at the tightest side of guidance.
  • Southern Company boosted its 40NC5 $1000 par FXD/FRN Junior Subordinated Notes new issue today to $550mm from $400mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 11 IG Corporate-only new issues, including today’s KeyCorp Pfd., was <19.43> bps.
    Not counting the preferred, spread compression across the 10 IG Corporate new issues was <21.125> bps.
  • BAML’s IG Master Index was unchanged at +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +129 vs. +128.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +176 vs. +175.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $25.0b on Friday versus $23.3b on Thursday and $1.6b the previous Friday.

 

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

 

IG Corporate New Issuance This Week
12/05-12/09
vs. Current
WTD – $6.325b
December 2016
Forecasts
vs. Current
MTD – $21.255b
Low-End Avg. $16.78b 37.69% $40.87b 52.01%
Midpoint Avg. $17.87b 35.39% $41.52b 51.19%
High-End Avg. $18.96b 33.36% $42.17b 50.40%
The Low $10b 63.25% $30b 70.85%
The High $25b 25.3% $60b 35.42%

Ford Motor Company two-part $2.8b 10s/30s Deal Dashboard

 

The Ford comps used for today’s 10-year relative value study was the outstanding Ford Motor Credit Co. LLC 4.389% due 1/08/2026 that was G+190 pre-announcement pegging NIC on the new 10-year that priced at T+195 as 5 bps.

 

For 30-year fair value, I looked to the Ford Motor Company 4.75% due 1/15/2043 that was T+213 nailing concession on today’s new 30-year tranche that final priced at T+220 as 7 bps.

 

Ford Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
10yr FXD +215a +200a (+/-5) +195 +195 <20> bps +5 192/190 <3>
30yr FXD +240a +225a (+/-5) +220 +220 <20> bps +7 220/218 0/flat

 

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

 

Ford  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
10yr FXD $1.5bn $5.2bn 3.47x
30yr FXD $1.3bn $3.7bn 2.85x

 

Final Pricing – Ford Motor Company
F $1,500mm 4.346% due 12/08/2026 @ $100.00 to yield 4.346% or T+195

F $1,300mm 5.291% due 12/08/2046 @ $100.00 to yield 5.291% or T+220

 

ford-debt-issuance-mischler-diversity-inclusion

Diversity & Inclusion Going Further with Ford Motor Company

 

William Clay Ford put it best when he said, “Change is upon us. We are reinventing this company in ways that will make it incredibly relevant for the next 50 years.”  Ford’s leadership from William Clay Ford and Mark Fields permeates the entire organization from the inner chambers of its leadership structure directly into the offices of  Treasury/Funding and Global Capital Markets team.
Not only is Ford Motor Company committed to strategic shifts to expand into an auto and mobility company, it has always been all-in when it comes to diversity and inclusion.  Mischler Financial’s certification as the nation’s oldest Service Disabled Veteran broker dealer, is proud to highlight Ford’s myriad achievements as the only automaker named to the World’s Most Ethical Company list by Ethisphere Institute.  That’s a recognition that Ford has been honored with for seven consecutive years!  Ford embraces diversity and inclusion which is central to its Company and its over 199,000 global employees.  Ford understands that backgrounds, opinions, experiences and perspectives of a diverse workforce make it a much stronger business while fostering a collaborative work environment.  Those very people drive Ford’s innovations. In terms of full year 2015, Ford’s work force included 26% women in middle management jobs or above in which 18% were managers.  29% of Ford’s U.S. hourly and salaried workforce were members of minority groups and 22% were female.  2 of Ford’s 15-member Board of Directors are women and 2 are minorities.  Of its 44 Corporate Officers, 6 are women and 8 are minorities.

 

Ford and Veteran Causes

In terms of its commitment to our nation’s veterans, Ford expanded mobility options for disabled Military veterans with vehicle donations across the U.S. They’ve added 8 more vehicles to the DAV Transportation Network, making a total of 207 vehicles contributed to the DAV fleet over the past 20 years. Ford continues to invest in DAV scholarships and Winter Sports Clinic helping veterans and their families transition to new careers and Ford and the DAV have enjoyed a 94-year relationship that dates back to the time Henry Ford provided Model T Fords as transportation to our DAV members making it one of, if not, the longest running D&I mandate in our nation.  Ford vehicles assisted 716,000 military veterans reach their medical appointments in 2015.  Ford also awarded $1.2 million in scholarships to young men and women who generously volunteer their time to help disabled veterans in their communities.   Ford’s corporate cultural and internal D&I mandate was long ago embraced by Henry Ford himself so, it’s in their corporate DNA. Beginning in 1919 the Founder and Chairman himself mandated the hiring of disabled veterans returning home from World War I.  Today Ford employs more than 6,000 veterans and hundreds of active military personnel, reservists and guardsmen.

Ford has the hardware to back up the great things that management oversees internally for D&I:

  • Best Companies for Diversity – Black Enterprise
  • Best of the Best: Top Diversity Employer –Hispanic Network
  • Employer of the Year – CAREERS & the disAbled Magazine
  • Top Diversity Employer – Professional Woman’s Magazine
  • Top 50 Employers  – Minority Engineer
  • America’s Top 50 Organizations for Multicultural Business Opportunities – DiversityBusiness Magazine.

Global Macro: Italexit; Austria and Sweeping Populism

The dollar initially rose to a 20-month high against the Euro before reversing back to close at 1.076 as Italian’s voted “NO” in the eagerly anticipated referendum vote that would have changed Italy’s constitution making it easier for Prime Minister Matteo Renzi to institute change in a country now on its 65th government in 71 years post-World War II.  You heard that call voiced aggressively here in the “QC” a while ago! More importantly it speaks to the surge of populism sweeping both the EU and the U.S. following BREXIT and Donald Trump’s Presidential victory. The “NO” vote and Renzi’s promise to resign as a result, means likely early elections next year in Italy that could very well see the emergence of the 5-Star Movement ascending to power. That party headed by Italian comedian, actor, blogger and political activist Beppe Grippo, was extremely vocal in support of a “NO” vote.  The people listened and populism is spreading.  The 5-Star Movement is equally as powerful as Renzi’s Democratic Party but the former is vehemently opposed to EU membership. Renzi attempted to speed up the slow bureaucracy that is known as “Italian politics.” The current complex governing system was installed to prevent another Mussolini from rising through the ranks. The problem is it prevents deep divides in Italian government which there always are, and as a result, they’ve had 65 post WWII governments.  5-Star’s leader Beppe Grillo wants a referendum vote just like the BREXIT vote.  So the forces are now in motion to make that possibility becoming a reality.  The 60% vs. 40% crushing outcome tells us all we need to know about how serious to take the news.

italexit-mischler-global-macro

As for Italian banks, retail customers hold a quarter of a trillion Euro in Italian bank debt – listen up – that’s the highest share of household wealth invested in the developed world according to Consob, the public authority responsible for regulating the Italian financial markets.  With 17% of total bank debt deemed “bad” in a nation pressured by debt equal to 133% of GDP,  well, the picture is pretty frightening folks.  All this in our inextricably-linked global economy.

In a geopolitical call that was also a close – but one that I got wrong in projecting, as well as being equally important news, Austria’s Nationalist candidate Norbert Hofer conceded defeat to rival and center-left candidate Alexander Van der Bellen by a 53.34% to 46.7% margin in a re-run of the contested May election in which Van der Bellen won by just over 0.5%.  Hofer’s party contested those results that were rescheduled for yesterday.  Hofer would have been the first Nationalist head of state in Europe post World War II. More telling is that Austria’s Nationalist Freedom party was founded in 1956 by Anton Reinthaller – a name that probably means nothing to you, but you should know that he was a Nazi and an SS officer during WWII.  It’s amazing what re-branding can do for a political party over decades, but a fact is a fact and so it’s included here. Europe’s political, cultural and economic situation is analogous to  a highly active volcano.  It is fluid, it is changing and re-shaping itself before our very eyes.

Austria is also a nation virtually divided between political sympathies.  Despite Hofer’s relatively narrow defeat, what is much more telling and not much different in outcome is that for the first time in its 40 years in existence a Green Party candidate has won a presidential election in Europe.  It’s also the first time a new Party will run Austria outside of its two reigning political monopolies the Social Democrats and People’s Party. According to the World Economic forum’s European 2020 Competitiveness Report, Austria is Europe’s 6th ranked most competitive economy. The top five are Finland, Sweden, Holland, Denmark and Germany.  There is no coincidence that five of those Nordic nations included on the list have swung far right with a strong trend toward nationalist party growth. Remember my call for an eventual Northern and Southern Euro currency split between north and south?  Those 6 economies would all be part of the northern Euro. It’s one future way that the EU and its single currency can dismantle with some modicum of order.

Rural Austrian voters appear to have voted more against Hofer’s far right Nationalist Freedom Party than for Van der Bellen’s Green Party.  Europe knows best about that but it’s not a vote of confidence for the center left government.

What this all amounts to is that Europe is continuing toward dismantle mode.  Italy now has a series of events coming up simultaneous with its banking crisis to resolve or unwind.  The latter is likely with no logical outcome other than portending B-A-D things for it and Europe.  Sorry to be so jolly this holiday time of year but I’m not going to sit back and tell you anything other than how it is.  Italy’s GDP has not grown at all in a decade while its youth unemployment rate hovers at just above 40%.  Yes that’s correct F-O-R-T-Y percent.

40% unemployment is unfathomable for the world’s third largest debtor nation.  Digest that for a moment.  Here’s another shocking statistic – Italians own more second homes per capita than any other nation on the planet.  Didn’t know that eh?  No worries you’re not supposed to.  The reason – family.  That’s historically foundational to Italian culture.  No one can sell a home in Italy today.  When the financial crisis plays out in Italy, real estate will get lambasted much more painfully than it did here in the throes of our financial crisis.  Infrastructure is also a problem.  What Italian youth is doing is taking full advantage of the Schengen agreement in the EU by finding work in other neighboring European countries.  When that happens, nationals resent it during tough times.  Are you following this?  it is not the Unites States of Europe.  It is Europe – a continent with way too many histories, cultures, languages and cuisines.  The fact that Hofer came so close to a Nationalist government that is gaining huge momentum in France and Holland is telling.  Pay attention to this because it’s not going away. Hofer wanted to develop strong ties to Trump’s incoming Administration and grow closer to its historically strong ties with Eastern Europe and Russia. The EU Presidency is handed over to Austria in 2018 which will carry significance on a wider scale.

One thing is for sure, nations will be watching out for themselves more than ever before.  It doesn’t take a leap of faith for European investors fly like heck into the safety of U.S. IG Corporate credits even after factoring in exchange rates. So we’ll have a rate hike in December after which it will be lower-for-longer again. Rates will come down as the world’s money comes flying in.

Political instability is alive and well in the EU.  Italy is in turmoil and the Euro Zone is headed toward the next chapter in its ever deepening crisis.  The U.S. is weathering the storm just fine thank you very much.  Good things are coming to our economy and nation.  The bigger question is how long will all this last?

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

 

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

 

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

 

…..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.
11/28
TUES.
11/29
WED.
11/30
TH.
12/01
FRI.
12/02
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
New Issue Concessions 0.20 bps 1.11 bps 12.50 bps 3.75 bps N/A 3.53 bps 4.5 bps 3.62 bps <3.60> bps
Oversubscription Rates 3.12x 3.43x 7.45x 2.49x 7.80x 3.38x 2.99x 2.78x 4.26x
Tenors 10. 99 yrs 13.50 yrs 10.50 yrs 8.78 yrs 8.5 yrs 10.84 yrs 12.14 yrs 11.28 yrs 13.31 yrs
Tranche Sizes $538mm $512mm $525mm $1,064mm $500mm $711mm $929mm $1,039mm $692mm
Avg. Spd. Compression
IPTs to Launch
<14.71> yrs <14.79> yrs <33.125> bps <14.83> bps <37.50> bps <17.60> bps <16.07> bps <17.69> bps <22.96> bps

 

New Issues Priced

(more…)

Weekend Edition Mischler Debt Market Comment: SecDef Soundoff
December 2016      Debt Market Commentary   

Quigley’s Corner 12.02.16 –DCM Weekend Edition-Debt Market Outlook; SecDef Soundoff

 

Investment Grade New Issue Re-Cap – Next Week and “DONE” for the Year!

Global Market Recap

IG Corporate Bond Primary & Secondary Market Talking Points

Citigroup, Inc. Deal Dashboard – Thursday’s FRN Prints Flat and 5yr Fixed Prices with Nickel NIC

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

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

On James “Mad Dog” Mattis as SecDef, Veteran Marine, Jonathan Herrick’s Scope

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

New Issues Priced

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 30th    

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:

IG Credit Spreads by Industry

Snapshot of the major investment grade sector credit spreads for the past ten sessions

New Issue Pipeline

M&A Pipeline – $301.04 Billion in Cumulative Enterprise Value!

Economic Data Releases

Rates  Trading Lab

Tomorrow’s Calendar

I have a lot for you this evening beginning with the Primary and Global Market Re-caps followed by IG Primary/Secondary Market Talking Points and a review of the WTD and MTD new issue volume performance against respective syndicate estimates.  Then of course, like every Friday, the “Best and the Brightest” that IG syndicate has to offer have all unanimously chimed in once more to let you know what to expect for next week’s IG Corporate issuance.  I think most all of us in the world of new issues feel next week is the last “GO” week of the year.  We have history to back that up, an FOMC Rate Decision meeting on Tuesday the 13th and well, a nice and well-deserved slow down for us all.  It’s also time to re-energize for January when we’re all “back-to-zero” to start it all over again.

I also bring to you this evening a nice piece written by our own Marine Veteran Jonathan Herrick – in his own words – on last evening’s President-elect Donald Trump’s nomination of General James “Mad Dog” Mattis as Secretary of Defense.  Please do take the time to read that piece.

Without further ado, let’s get to it…………


Investment Grade New Issue Re-Cap – Next Week and “DONE” for the Year!

Timing is everything as they say.  2 issuers braved the market today as NFP met expectations while the Unemployment Rate beat big time delivering a 4.60% vs. 4.90% though wages surprised to the downside.  Rates rallied, yields compressed and 2 deals got done totaling $1.1b.  We’ve now priced 15% more than this week’s syndicate midpoint average forecast or $26.40b vs. $22.89b.  Already, one third of the entire December IG Corporate new issue estimate has been achieved ($14.93b vs. $41.52b).

Please note that yesterday’s $3b Citigroup, Inc. 5-year FXD/FRN priced with a 5 bp concession.  As I wrote, “The comparable used for relative value is the outstanding Citigroup 2.35% Senior Unsecured 5-year due 8/02/2021 that opened in the morning pre-announcement T+93 (G+100) pegging NIC on the new 5-year two-part FXD/FRN transaction at 5 bps.”  However, I had a typo in my “Deal Dashboard” that showed 8 bps.  So, to be clear, both the FXD/FRN printed with a nickel or 5 bps NIC.  Thanks! –RQ.

Revised Citigroup, Inc. Deal Dashboard – Thursday’s FRN Prints Flat and 5yr Fixed Prices with Nickel NIC

 

Citi Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5yr FRN 3mL+equiv 3mL+equiv 3mL+107 3mL+107 <15> bps 5 bps 3mL+105/103 <2>
5yr FXD +120a +105 the # +105 +105 <15> bps 5 bps 105/103 0/flat

 

Global Market Recap

 

  • S. Treasuries – had a strong rally on the mixed U.S. Employment Report.
  • Overseas Bonds – Bonds in Europe had a big time rally into the Italy referendum.
  • 3mth Libor – Set at its highest yield since May 2009 (0.94639%).
  • Stocks – U.S. stocks were little changed 3:30pm. Stocks overseas closed in the red.
  • Economic – U.S. Employment Report was a mixed bag. Higher EU PPI than expected/last.
  • Currencies – USD underperformed 4 of the Big 5 & was unchanged vs. the Euro.
  • Commodities – Crude oil was higher again. Gold up and big gains for silver/wheat.
  • CDX IG: -0.74 to 72.77
  • CDX HY: -4.23 to 388.23
  • CDX EM: -2.77 to 270.30

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Nabors Industries Inc. upsized today’s new 6yr NCL Senior Notes transaction to $600mm from $500m .
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 44 deals that printed, 28 tightened versus NIP for a 50% improvement rate while 8 widened (18.25%) and 6 were flat (13.75%) and 2 was not available or “N/A” (4.50%).
  • For the week ended November 30th, Lipper U.S. Fund Flows reported an outflow of $1.302b from Corporate Investment Grade Funds (2016 YTD net inflow of $41.464b) and a net inflow of $341.7m into High Yield Funds (2016 YTD net inflow of $4.939b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 2 IG Corporate-only new issues was <37.5> bps.
  • BAML’s IG Master Index tightened 1 bp to +135 vs. +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +128 vs. +129.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bp2 to +175 vs. +177.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $23.3b on Thursday versus $25.2b on Wednesday.

The last two trading sessions represent the #1 and #2 ranked high volume sessions since record keeping began in December 2005.

  • The 10-DMA stands at $16.5b.

 

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

 

IG Corporate New Issuance This Week
11/28-12/02
vs. Current
WTD – $26.40b
December 2016
Forecasts
vs. Current
MTD – $14.93b
Low-End Avg. $21.91b 120.49% $40.87b 36.53%
Midpoint Avg. $22.89b 115.33% $41.52b 35.96%
High-End Avg. $23.87b 110.60% $42.17b 35.40%
The Low $15b 176.00% $30b 49.77%
The High $30b 88.00% $60b 24.88%

 

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

 

Once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2016’s top 24 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).  The participating desks represent 81.55% 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.

The question posed to the “Best and the Brightest” early this morning was framed as follows:

Entering today, we’ve produced $25.30b in new IG Corporate volume or over 10% more than the $22.89b syndicate midpoint average estimate. We have the big FIGs to thank for yesterday’s incredible volume.  For the most part we have next week and the following Monday before the FOMC meeting closes the door on any meaningful 2016 issuance. Given today’s payroll pickup and dramatic unemployment rate decline to 4.6% from 4.9% it’s now more than ever a foregone conclusion that a rate hike will take place on Tuesday December13th.
Here are this week’s five IG Corporate-only key primary market driver averages entering this morning’s session:

  • NICS:  3.53 bps
  • Oversubscription Rates: 3.56x
  • Tenors:  10.97 years
  • Tranche Sizes: $723mm
  • Spread Compression from IPTs to the Launch: <16.46> bps
  • Versus last Friday’s key primary market driver averages, NICs widened 0.97 bps to 3.53 bps vs. 4.50 bps.
  • Over subscription or bid-to-cover rates increased 0.57x to 3.56x vs. 2.99x vs. 2.78x vs. last week. 
  • Average tenors narrowed out by 1.17 years to 10.97 years vs. 12.14 years.
  • Tranche sizes decreased by $206mm to $723mm vs. $929mm.  
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate new issues compressed +0.39 bps to <16.46> bps vs. <16.07> bps last week.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +175 vs. +179.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +135 vs. last Friday’s +136 close. 
  • Spreads across the four IG asset classes tightened by 2 bps to 25.75 vs. 27.75 bps as measured against their post-Crisis lows. 
  • Looking at the 19 major industry sectors, spreads tightened 1.63 bps to 32.05 vs. 33.68 bps also against their post-Crisis lows.
  • Of interesting note Investment grade corporate bond trading posted a final Trace count of $23.3b on Thursday versus $25.2b on Wednesday.

Those two trading sessions represent the #1 and #2 ranked IG Corporate high volume sessions since record keeping began in December 2005! Please let me know your thoughts and numbers for next week.

Thanks as always for your time and enjoy a wonderful weekend!  -Ron”

 

The “Best and the Brightest” in Their Own Words

This section available exclusively to QC distribution list recipients

…………………………………………………………………………………………..

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
12/05-12/09
Low-End Avg. $16.78b
Midpoint Avg. $17.87b
High-End Avg. $18.96b
The Low $10b
The High $25b

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

 

Next Week
12/05-12/09
2: 10-15b
4: 15b
1: 16b
1: 17b
5: 15-20b
1: 18b
6: 20b
3:20-25b

 

mischler-us-marine-mattis-secdef

SecDef designate James Mattis

On the Nomination of James “Mad Dog” Mattis as Secretary of Defense, in the Words of Mischler’s very own Veteran Marine, Jonathan Herrick

 

“Demonstrate to the world there is ‘No better friend – No worse enemy’ than a U.S. Marine.”

-General James “Mad Dog” Mattis

 

Last evening I watched on the overhead office flat screen television, President-elect Donald Trump’s announcement that “We are going to appoint “Mad Dog” Mattis as our Secretary of Defense.  But we’re not announcing it until Monday so don’t tell anybody.”  That was a great nomination and also a lighthearted and very funny Trump-ism that I personally thought was a great moment.  Trump continued with, “They say he’s the closest thing to General George Patton that we have and it’s about time.”  That definitely makes me feel good about America.  But since Mischler is our great nation’s oldest Service Disabled Veteran broker dealer, why not hear about who he is from our very own veteran Marine, Jonathan Herrick, who signed on as fixed income desk analyst six months ago.  Jonathan is an 8-year veteran Marine who served multiple tours of duty in the mid-East and was honorably discharged from the U.S. Marine Corps as a Sergeant 1st Battalion, 8th Marine Regiment, 2nd Division.  His is a great story and he’s made an immediate impact supporting our capital markets team.  For a photo of Jonathan, please see the “QC” dated July 5th, 2016 when I featured a piece on a VOWS event or” Veterans on Wall Street” in which Jonathan and a team of other veterans rang the bell to close the Nasdaq exchange. 

Given Donald Trump’s SecDef nomination of James “Mad Dog” Mattis, Jonathan took the time to write his thoughts on the Secretary of Defense nominee from his perspective as a former Marine who served two tours in Afghanistan and one tour in Iraq. Take it away, Jon!

veteran-owned-mischler-us-marine-herrick

Veteran US Marine Jon Herrick (l) Khaki Bridge” Afghanistan in 2012.

I am proud and honored to have it featured in the “QC” for your reading pleasure: Take it away, Jon!

Our current nominee for Secretary of Defense, General James Mattis, is a legend amongst Marines of the Global War on Terror era.  One of the most respected generals of our time, Mattis is known for his aggressive “can-do” attitude, emphasis on the mental and intellectual aspects of war, and his leadership and care for the Marines he commanded.  He led the 1st Marine Division during the invasion of Iraq on the march to Baghdad and worked with General Petraeus to develop the counterinsurgency tactics that helped pacify the Anbar Province to the point that when I arrived there in 2009, our battalion took fire on only a small handful occasions over a seven month deployment.

 

A life-long bachelor, he is known in military circles as the Warrior Monk due to his focus on the military arts and emphasis on the value of education.  He would often encourage his subordinate commanders to further their own education, and that of their Marines, as he believed that lessons learned from the past can “light what is often a dark path ahead.”  Famously, he stated that “the most important six inches on the battlefield are between your ears.”  Known as an aggressive leader, he earned the nickname “Mad Dog” and went by the call sign “Chaos” during the war.  As a testament to his ability to understand the complexities of a counterinsurgency environment, he coined the term “First, do no harm” as a guideline for Marines deployed in the war zone.

Another story that is shared widely in military circles, that I first heard when I spent Christmas in Boot Camp on Parris Island in 2007, is when General Mattis took over the duty of a young married Marine on Christmas Day.  On every Marine facility, from Baghdad to Washington, there is a Marine on duty at all times.  While reading at the duty roster, he noticed that the officer scheduled to have duty on that day was married.  General Mattis, being a bachelor, sent the married Marine home to spend Christmas with his family while General Mattis himself took over the duty.  He displayed that same kind of caring leadership for his Marines both during combat deployments in Iraq and Afghanistan, and back home in the United States.

Mattis is also known to speak his mind when he disagrees with decisions that are being made and is perhaps better known for his rather blunt quotes.  One of the mantras we learned as we were moving into theater was “Be polite, be professional, but have a plan to kill everyone you meet” which on the surface may seem uncivilized, but was key to overcoming threats and working with the population in an environment where the enemy was hiding amongst civilians and using suicide bomber tactics.  Mattis’ tactics, I am convinced, prevented immeasurable loss of life on all sides of the conflict.

I believe I speak for all veterans when I say that I am incredibly excited to see what he can do for the Department of Defense.  A free thinker with a winning mindset he is just what our military needs in these uncertain times.  I will leave you with a copy of his letter to the 1st Marine Division on the eve of the invasion in 2003, and this Mattis quote; “I don’t lose any sleep at night over the potential for failure. I cannot even spell the word.”

Gen. Mattis requires a supermajority to garner Senate confirmation. Thus far he is the only Trump nominee who the Democratic Party can unilaterally block. The reason is that there is a mandated seven year “seasoning period” for military personnel post-retirement before being able to serve in a cabinet post.  Five-star General Omar Bradley is the lone exception to this rule following World War II.  As a result, Congress needs to pass legislation that would waive the 7-year requirement in order for Mattis to be confirmed.  So, perhaps we’re a bit ahead of ourselves although I personally would love to see “Mad Dog” as our “Doctor of Defense.”  Professional pundits typically frame their opinions with “most likely” and/or approaches such as “despite the prevailing view from this perch leads me to believe that the outcome will be…….” Rather than presenting future outcomes with unabashed certainty. So, now that that’s crystal clear for everyone please allow me to say “Mattis will be confirmed as our next Secretary of Defense!” There, that felt good!   I’ve never been one to leave room to invent excuses on the spot or simply switch my narrative to a different topic altogether and squirm out of something.  The record shows that and what’s more the ”QC” is still waiting to be wrong on the big calls.  I will, one day, and when I am I’ll say “ I was wrong!”  Italy will vote “NO” on the referendum this weekend and I do believe Austria’s Norbert Hofer will become the first Nationalist head of state in Europe since WWII.  It speaks volumes as to the volatility coming to Europe and a continued dismantling of the EU as we know.

 

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

Have a great weekend!
Ron Quigley

(more…)

Mischler Financial Group Bolsters Buildon.org 25th Annual Fund Raising Gala
November 2016      Giving Back   

In connection with Mischler Financial Group’s 2016 Annual Veterans Day Month Pledge, whereby a percentage of the firm’s entire month of November profits are allocated to select charitable organizations, Mischler senior execs Dean Chamberlain (CEO), along with his family members, Managing Director and Head of Capital Markets Rob Karr and Managing Director Leslie Graves subscribed to the military ethos ‘all hands on deck’ to support the buildOn.org 25th Annual Gala held Nov 2 at New York’s Waldorf Astoria Hotel.

The Nov 2nd celebration raised $3.4million to support buildOn’s mission of “breaking the cycle of poverty, illiteracy and low expectations through service and education.”

The Gala served as the public launch of buildOn’s Expect More Campaign, which will fund the first part of buildOn’s 25 year vision. The campaign aims to raise $15 million for buildOn’s U.S. Service Learning and Global School Construction programs.

In addition to Mischler Financial Group, the 2016 buildOn Gala included the sponsorship of GE, Jones Day, Ogilvy & Mather, Rodan + Fields, Deutsche Bank, Goldman Sachs, JP Morgan, Kiernan Herner LLP, KPMG, PriceWaterhouseCoopers, and Synchrony Financial.

Per November 1 announcement, Mischler’s Veterans Day Month Pledge was dedicated to buildOn.org, Bob Woodruff Foundation and The Johnny Mac Soldiers Fund.

buildon-mischler-giving-back

CEO Dean Chamberlain (second from right) with Jackson Chamberlain (right), Nina Chamberlain (3rd from right), Joni Chamberlain (4th from right), Mischler Managing Director Leslie Graves (c) and Mischler Managing Director and Head of Capital Markets Rob Karr (3rd from left) with buildOn.org team leaders.

 

 

 

 

BAML Reduces Debt Offering: No Need for FRN Tranche!
November 2016      Debt Market Commentary   

Quigley’s Corner 11.21.16-BAML Cuts Back on Debt Offering; Deal pared to $2b 

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Bank of America $2 11NC10 Deal Dashboard

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 16th   

IG Credit Spreads (by Rating/Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Today’s session saw 5 IG Corporate issuers price 7 tranches between them, including a $500mm $25 PerpNC5 preferred from Capital One Financial Corp. totaling $6.50b thereby taking care of 80% of this week’s syndicate midpoint average forecast calling for $8.11b.  We’ve now achieved 70% of the November syndicate midpoint estimate or $64.51b vs. $92.11b.

Global Market Recap

 

  • U.S. Treasuries – 2yr supply weighed on the front end of the curve.
  • Overseas Bonds – JGB’s mixed and little changed. Europe unchanged to better. Peripheral’s mixed.
  • 3mth Libor – Set at its highest yield (0.9193%) since May 2009.
  • Stocks – S&P, Dow & NASDAQ all traded at their all-time highs today.
  • Overseas Stocks – Europe more green than red. Japan and China also closed higher.
  • Economic – U.S., Europe & China not a factor. Japan exports and imports were weak.
  • Currencies – USD lost ground vs. 4 of the Big 5 but traded better during NY hours.
  • Commodities – Big day for the CRB and crude oil.
  • CDX IG: -1.20 to 75.59
  • CDX HY: -8.52 to 407.92
  • CDX EM: -6.53 to 271.85

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Bank of America dropped the FRN tranche from today’s initially announced 11NC10 FXD/FRN having found sufficient funding in the fixed tranche that launched and priced $2b at the tightest side of +190a (+/-5) guidance or +185.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 6 IG Corporate-only new issues was <16.67> bps.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate new issues including Capital One’s $25 par Pfd, was <16.07> bps.
  • BAML’s IG Master Index widened 1 bp to +136 vs. at +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +130 vs. +129.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +179  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.7b on Friday versus $20.1b Thursday and $19.8b the previous Friday.

 

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

 

IG Corporate New Issuance This Week
11/21-11/25
vs. Current
WTD – $6.50b
November 2016 vs. Current
MTD – $64.511b
Low-End Avg. $7.15b 90.91% $90.70b 71.13%
Midpoint Avg. $8.11b 80.15% $92.11b 70.04%
High-End Avg. $9.07b 71.66% $93.52b 68.98%
The Low $1b 650.00% $71b 90.86%
The High $15b 43.33% $110b 58.65%

 

Bank of America $2 11NC10 Deal Dashboard

 

BAC Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
11NC10 +205a +190a (+/-5) +185 +185 <20>  bps N/A 183/185 0/flat

 

The comparable used for today’s relative value is the outstanding BAC 4.45% due 3/2026 bullet Subordinated Notes that were G+175 bid pre-announcement this morning.  Adding in a dime or 10 bps for the call optionality takes fair value to T+185 which is where today’s deal priced flat or with no concession.

 

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

 

BAC  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
11NC10 $2b $5.7b 2.85x

 

Final Pricing – Bank of America (NYSE:BAC)
BAC $2b 4.183% due 11/25/2027 NC10 @ $100.00 to yield 4.183% or T+185

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

 

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

 

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

 

…..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.
11/14
TUES.
11/15
WED.
11/16
TH.
11/17
FRI.
11/18
AVERAGES
WEEK 11/14
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
New Issue Concessions 2.85 bps 2.79 bps 3.45 bps 5.33 bps N/A 3.62 bps <3.60> bps <0.87> bps <0.51> bps
Oversubscription Rates 2.38x 3.23x 3.01x 2.66x N/A 2.78x 4.26x 3.32x 2.61x
Tenors 11.05 yrs 10.74 yrs 9.57 yrs 10.56 yrs N/A 11.28 yrs 13.31 yrs 11.33 yrs 7.77 yrs
Tranche Sizes $991mm $707mm $704mm $1,839mm N/A $1,039mm $692mm $491mm $818mm
Avg. Spd. Compression
IPTs to Launch
<14.5> bps <21.57> bps <18.35> bps <17.11> bps N/A <17.69> bps <22.96> bps <17.87> yrs <17.42> bps

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Bank of America Baa3/A- 4.183% 11/25/2027 2,000 +205a +190a (+/-5) +185 +185 BAML-sole
BP Capital Markets PLC A2/A- 3.216% 11/28/2023 1,200 +120-125 +115a (+/-5) +110 +110 BAML/CITI/BNPP/CS/GS
MUFG
BP Capital Markets PLC A2/A- 3.723% 11/28/2028 800 +145-150 +145a (+/-5) +140 +140 BAML/CITI/BNPP/CS/GS
MUFG
Capital One Finc’l. Corp. Baa3/BB 6.00% PerpNC5 500 RG: 6-6.125%
6.125%a
N/A 6.00% $25 Pfd MS(phys)BAML/JPM/UBS
WFS
Enbridge Inc Baa2/BBB+ 4.25% 12/01/2026 750 +225a +205a (+/-5) +200 +200 BARC/DB/MIZ/MUFG
Enbridge Inc. Baa2/BBB+ 5.50% 12/01/2046 750 +275a +255a (+/-5) +250 +250 BARTC/DB/MIZ/MUFG
New York St. Electric & Gas A3/A- 3.25% 12/01/2026 500 +110a N/A +100 +100 BAML/MIZ/MUFG/RBC

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.30 0  
IG27 76.786 75.733 <1.053>
HV27 159.565 157.265 <2.30>
VIX 12.85 12.42 <0.43>  
S&P 2,181 2,198 17
DOW 18,867 18,956 89  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $6.50 bn DAY: $6.50 bn
WTD: $6.50 bn WTD: $6.50 bn
MTD: $64.511 bn MTD: $65.611 bn
YTD: $1,233.292 bn YTD: $1,564.276 bn

 

Lipper Report/Fund Flows – Week ending November 16th   

     

  • For the week ended November 16th, Lipper U.S. Fund Flows reported an inflow of $470.0m into Corporate Investment Grade Funds (2016 YTD net inflow of $41.437b) and a net outflow of $2.284b from High Yield Funds (2016 YTD net inflow of $4.001b).
  • Over the same period, Lipper reported a net inflow of $666.3m into Loan Participation Funds (2016 YTD net outflow of $896.7m).
  • Emerging Market debt funds reported a net outflow of $1.058b (2016 YTD inflow of $6.464b).

 

IG Credit Spreads by Rating (more…)

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

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

 

Investment Grade New Issue Re-Cap 

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

Global Market Recap

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

The Economic Outlook

Monetary Policy

IG Primary & Secondary Market Talking Points

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 9th

IG Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

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

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

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

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

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

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

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

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

 

Global Market Recap

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

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

-Tony Farren


Yellen’s Fed About to Raise Rates

 

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

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

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

 

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

Chair Janet L. Yellen

The Economic Outlook

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

November 17, 2016

 

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

 

The U.S. Economic Outlook

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

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

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

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

Monetary Policy

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

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

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

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

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

Thank you.

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

…………..be ready.

IG Primary & Secondary Market Talking Points

(more…)

Corporate Bond Issuers Stand Down-But Not For Long
November 2016      Debt Market Commentary   

Quigley’s Corner 11.16.16- What’s a Corporate Bond Issuer To Do Now?

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 9th   

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

6 IG Corporate issuers tapped the dollar DCM today pricing 13 tranches between them totaling $9.15b and bringing the WTD total to nearly 85% of this week’s syndicate midpoint average forecast or $25b vs. $29.45b.  The SSA space hosted BNG’s $600mm 3-year for an all-in IG day total of 7 issuers, 14 tranches and $9.75b.

We do know that both Abbott Labs (NYSE: ABT) and Chevron Phillips Chemical Company LLC wrapped their respective investor calls today so they are both clear to “go” from that perspective in terms of issuance.  In the current environment, I’m not so sure issuers want to print sizeable deals on a Friday or hold back jumbo deals over the weekend.  What’s that mean? Simple. Both could price tomorrow in which case we could see a $20bn or more day tomorrow in our IG dollar DCM.  Stay tuned.

Global Market Recap

 

  • S. Treasuries – USTs hit overnight but rallied during NY hours and were led by the 30yr.
  • Overseas Bonds – JGB’s very weak. Core EU little changed and Peripherals hit hard.
  • Stocks – U.S. stocks mixed at 3:30pm, Europe down, Nikkei higher and China unchanged.
  • Economic – U.S. PPI was lower than expected/last and IP and Cap U were weaker.
  • Currencies – USD mixed vs. Big 5. DXY Index strongest 2003 and ADXY weakest since 2009.
  • Commodities – Crude oil with a small loss, gold little changed and copper sold off.
  • CDX IG: +1.31 to 75.30
  • CDX HY: +4.98 to 415.03
  • CDX EM: +8.97 to 271.81

*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 13 IG Corporate-only new issues that displayed price evolution was 18.35 bps.
  • BAML’s IG Master Index tightened 1 bp to +135 vs. +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 2 bps to +128 vs. 1.30.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +180 vs. +181.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.3b on Tuesday versus $18.2b Monday and $15b the previous Tuesday.  That’s the 5th highest Tuesday session since 2005 and the 2nd highest Monday session since November 2005.
  • The 10-DMA stands at $17.4b.

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

 

IG Corporate New Issuance This Week
11/14-11/18
vs. Current
WTD – $25.00b
November 2016 vs. Current
MTD – $41.461b
Low-End Avg. $28.32b 88.28% $90.70b 45.71%
Midpoint Avg. $29.45b 84.89% $92.11b 45.01%
High-End Avg. $30.59b 81.73% $93.52b 44.33%
The Low $20b 125.00% $71b 58.40%
The High $40b 62.50% $110b 37.69%

 

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

Have a great evening!
Ron Quigley

 

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

 

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.
11/14
TUES.
11/15
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
New Issue Concessions 2.85 bps 2.79 bps <3.60> bps <0.87> bps <0.51> bps 3.31 bps
Oversubscription Rates 2.38x 3.23x 4.26x 3.32x 2.61x 3.05x
Tenors 11.05 yrs 10.74 yrs 13.31 yrs 11.33 yrs 7.77 yrs 9.16 yrs
Tranche Sizes $991mm $707mm $692mm $491mm $818mm $1,137mm
Avg. Spd. Compression
IPTs to Launch
<14.5> bps <21.57> bps <22.96> bps <17.87> yrs <17.42> bps  

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
AEP Transmission Co. LLC A2/A- 3.10% 12/01/2026 300 +110a +90-95 +90 +90 BARC/CS/JPM/SCOT(a)
BAML/MIZ/RBS/STRH(p)
AEP Transmission Co. LLC A2/A- 4.00% 12/01/2046 400 +140a +115-120 +115 +115 BARC/CS/JPM/SCOT(a)
BAML/MIZ/RBS/STRH(p)
American Honda Fin. Corp. A1/A+ FRN 11/19/2018 750 3mL+equiv 3mL+31a (+/-3) 3mL+28 3mL+28 BNPP/DB/JPM/MS
American Honda Fin. Corp. A1/A+ 1.50% 11/19/2018 450 +low-mid 60s
+63.75
+55a (+/-3) +52 +52 BNPP/DB/JPM/MS
ANZ Banking Group Ltd./NY Aa3/AA- FRN 9/23/2019 850 3mL+equiv 3mL+equiv 3mL+66 3mL+66 ANZ/GS/JPM/WFS
ANZ Banking Group Ltd./NY Aa3/AA- 2.05% 9/23/2019 900 +90-95 +85a (+/-5) +80 +80 ANZ/GS/JPM/WFS
ANZ Banking Group Ltd./NY Aa3/AA- FRN 9/23/2021 400 3mL+equiv 3mL+equiv 3mL+87 3mL+87 ANZ/GS/JPM/WFS
ANZ Banking Group Ltd./NY Aa3/AA- 2.55% 9/23/2021 850 +100-105 +95a (+/-5) +90 +90 ANZ/GS/JPM/WFS
HollyFrontier Corp. (tap)
New Total: $1bn
Baa3/BBB- 5.875% 4/01/2026 750 +hi 300s/+387.5a +362.5 the # +362.5 +362.5  
HSBC Holdings Inc. A2/A+ 4.375% 11/23/2026 1,500 +235a +215-220 +215 +215 HSBC-sole
Mastercard Inc. A2/A 2.00% 11/21/2021 650 +70a +50a (+/-5) +45 +45 BAML/CITI/HSBC/MIZ/USB
Mastercard Inc. A2/A 2.95% 11/21/2026 750 +100a +80a (+/-5) +75 +75 BAML/CITI/HSBC/MIZ/USB
Mastercard Inc. A2/A 3.80% 11/21/2046 600 +120a +100a (+/-5) +95 +95 BAML/CITI/HSBC/MIZ/USB

 

  (more…)

Rate Rise Realities; No More “Lower for Longer”-Mischler Debt Market Comment
November 2016      Debt Market Commentary   

Quigley’s Corner 11.15.16-Trump and Rate Rise Realities; No More “Lower for Longer”

 

Below is the opening extract from Quigley’s Corner aka “QC” Tuesday November 15, 2016 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC observations are one of three distinctive research content pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. Any political views expressed are those of the author only.

Investment Grade Corporate Debt New Issue Re-Cap :

Rates Are Going Up in December Folks! Dalio, Montag and…Quigley?!

Chronology of a Politician and a Great Veteran Story

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 9th   

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

 

4 IG Corporate issuers priced 7 tranches between them totaling $4.95b with one $500mm assist from the SSA space thanks to EDC’s new 4-year, bringing the all-in IG day totals to 5 issuers, 8 tranches at $5.45b.  We’ve now priced 53.82% of this week’s syndicate midpoint average forecast or $15.85b vs. $29.45b.

rate-rise-realities-mischler-debt-marketInflation is Coming Back and Rates Are Going Up in December Folks! Dalio, Montag and..Quigley!?!?

You hear that sound?  That’s the sound of banks revving up their engines.  Not only did I write about the post-Election rally yesterday, but I also got specific about previous Washington dysfunction, over regulation and higher rates and inflation.”  Today Tom Montag, COO of Bank of America Corp chimed in with similar promise of the new incoming President-elect Trump’s first term saying, there is a “sense of optimism” that “the government will work better together to supply the foundation of growth that we as a bank can optimize.”  He continued, “We have a lot of regulations, so it’s probably healthy to take a breath.”

Bridgewater Chief Ray Dalio said today, “There is a good chance that we are at one of those major reversals that last a decade.  We believe that we will have a profound President-led ideological shift that is of a magnitude, and in more ways than one, analogous to Ronald Reagan’s shift to the right. Of course, all analogies are also different, so I should be clearer. Donald Trump is moving forcefully to policies that put stimulation of traditional domestic manufacturing above all else, that are far more pro-business and that are far more protectionist.”

IG CDX tightened 1.5 bps, HV reeled in 4.8, the VIC compressed 1.11 while the DOW reached another all-time high closing up 55 to 18,923 with the S&P up 16 and Nasdaq up 57.

And now, continuing on where I left off yesterday in the “QC” – President-elect Donald Trump will unleash inflation and rates WILL go up! The populist/Republican platform is so expansionary he will single handedly create inflation.  If you are or were a detractor, forget it. That was politics folks. Get ready to dive deep into reality.  The Fed will raise money on net interest margins and create inflation.  The Fed has no choice.  How’s that from one of the first and most vocal prognosticators of “lower-for-longer” after all these years?  It will hurt overseas as a result, but that was then and this is now!  The U.S.A. cannot worry as much about impacts overseas when we have a US-focused agenda designed to improve operating efficiency.  A hike in December will roil Europe, but it will not be done to hurt Europe. Rather, it’s going to happen to take care of our nation.  The ramifications will be plenty and they will most assuredly crack the fragile Euro egg wide open.  Fret not, however, as the risk reward for IG fixed income will remain healthy.  Although investors are switching into equities, foreign and specifically European investors will find a substantially improved risk/reward upside to investing in U.S. IG credit markets.  More yield, less risk than staying investing in the EU with so much discord.  So strap yourselves in because long-term interest rates are about to go up and the inflationary spending spree is about to take place.  Good bye to the low rates that have been hitting bank earnings and revenues.  A healthier banking system is the foundation for a healthier economy.

How Congressman David Young Led the Way for Veteran Change

Well, here we are on November 15th, 2016 one week detached from our historic November 8th national elections and 2 years and 5 months away from David Young’s first Congressional district win (R-IA).  He has wasted no time getting things done having arrived on the scene in Washington in a big way by working hard and producing results.  To capture part of the sweeping positive changes about to take place in our country, there is more to report on David Young. My favorite Iowans spent the last week picking up all their big barn signs, etcetera around their 16 county district. Now, David Young, can go back to the Beltway and continue to fight for good change. One of his many passions is his No Veterans Crisis Line Call Should Go Unanswered Act (H.R. 5392) bill that passed in the House 357-0.  Re-read that folks.  That’s right…..357-0!  Now, perhaps his bill can get thru the Senate and onto Obama’s desk.  (It should be known and WILL be now known here in the “QC” that none other than Harry Reid stopped it prior to the election).  Reid can’t retire soon enough!

Congressman Young’s legislation seeks to provide necessary responsiveness and performance improvements to the Veterans Crisis Line, which is the confidential, toll free hotline for veterans seeking suicide prevention and crisis resources help from U.S. Department of Veterans Affairs (VA) responders.

As Congressman Young said, “Our veterans, who have made such significant sacrifices on behalf of our nation and in defense of our freedoms, deserve quality mental health care resources which are accessible and responsive. There is absolutely no excuse for a veteran to contact the Veterans Crisis Line and not get the help they are seeking. Our veterans deserve better, which is why I have put forth this important bipartisan legislation to make critical fixes to the Veterans Crisis Line – fixes it clearly needs. I thank my colleagues for working with me to advance this bill and put our veterans first.”

 

Chronology of How Young’s Veteran Bill Happened in the House

 

  • September 21, 2016 – Congressman Young’s No Veterans Crisis Line Call Should Go Unanswered Act was approved in a markup by the full U.S. House Veterans Affairs Committee.
  • September 14, 2016 – Congressman Young urges his colleagues to support the No Veterans Crisis Line Call Should Go Unanswered Act on the floor of the U.S. House of Representatives.
  • September 8, 2016 – South Dakota Senator John Thune introduces companion legislation to Congressman Young’s No Veterans Crisis Line Call Should Go Unanswered Act.
  • September 1, 2016 – Congressman Young sends a letter to VA Secretary McDonald highlighting continued problems with the Veterans Crisis Line.
  • June 28, 2016 – Congressman Young reacts to a Government Accountability Office (GAO) report finding approximately 30 percent of text messages sent as tests to the Veterans Crisis Line went unanswered.
  • June 23, 2016 – Congressman Young testifies before the U.S. House Veterans Affairs Committee on the importance of the legislation.
  • June 7, 2016 – Congressman Young introduces the No Veterans Crisis Line Call Should Go Unanswered Act in response to concerns voiced by Iowa veterans about unanswered calls, emails or other communications, and failed attempts to receive help from the Veterans Crisis Line.

Congratulations to Iowa’s David Young for fighting for our nations veterans and for being such a part of great changes taking place in the United States. David is the recipient of this evening’s Mischler five-star salute from all of us here at team Mischler.  He is the first recipient that has nothing to do with a bond deal.  It’s all about his work for our veterans.
Global Market Recap

 

  • U.S. Treasuries – USTs mixed with more red and flatter. JGB’s sold off. Europe big rally.
  • Stocks – NASDAQ leads U.S. stocks higher. Europe  and Asia closed mixed.
  • Economic – U.S. retail sales were stronger than expected and had upward revisions to the last.
  • Overseas Economic – U.K. CPI lower than expected/last. German data a touch softer.
  • Currencies – USD was under pressure overnight but rallied during NY hours to lose higher.
  • Commodities – Big rally in crude oil drives the CRB higher.
  • CDX IG: -2.91 to 74.60
  • CDX HY: -17.60 to 413.31
  • CDX EM: -14.97 to 267.30

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Plains All American Pipeline LP upsized today’s 10-year Senior Notes new issue to $750mm from $500mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues that displayed price evolution was 21.57 bps.
  • BAML’s IG Master Index was unchanged at +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.30.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +181 vs. +182.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Monday versus $19.8b Thursday and $14.1b the previous Monday.
  • The 10-DMA stands at $16.9b.

 

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

 

IG Corporate New Issuance This Week
11/14-11/18
vs. Current
WTD – $15.85b
November 2016 vs. Current
MTD – $32.311b
Low-End Avg. $28.32b 55.97% $90.70b 35.62%
Midpoint Avg. $29.45b 53.82% $92.11b 35.08%
High-End Avg. $30.59b 51.81% $93.52b 34.55%
The Low $20b 79.25% $71b 45.51%
The High $40b 39.62% $110b 29.37%

 

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

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

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/14
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
New Issue Concessions 2.85 bps <3.60> bps <0.87> bps <0.51> bps 3.31 bps
Oversubscription Rates 2.38x 4.26x 3.32x 2.61x 3.05x
Tenors 11.05 yrs 13.31 yrs 11.33 yrs 7.77 yrs 9.16 yrs
Tranche Sizes $991mm $692mm $491mm $818mm $1,137mm
Avg. Spd. Compression
IPTs to Launch
<14.5> bps <22.96> bps <17.87> yrs <17.42> bps  

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
21st Century Fox America Baa1/BBB+ 3.375% 11/15/2026 450 +140a +120a (+/-3) +117 +117 JPM-sole
21st Century Fox America Baa1/BBB+ 4.75% 11/15/2046 400 +200a +180a (+/-3) +177 +177 JPM-sole
Plains All American Pipeline Baa3/BBB 4.50% 12/15/2026 750 +mid 200s/+250a +230-235 +230 +230 BAML/BNPP/JPM/WFS
Simon Property Group LP A2/A 2.35% 1/30/2022 550 +95-100 +80a (+/-5) +75 +75 BAML/CITI/GS/USB
Simon Property Group LP A2/A 3.25% 11/30/2026 750 +120-125 +110a (+/-5) +105 +105 BAML/CITI/GS/USB
Simon Property Group LP A2/A 4.25% 11/30/2046 550 +145-150 +135a (+/-5) +130 +130 BAML/CITI/GS/USB
Westpac Banking Corp. A3/A+ 4.322% 11/23/2031 1,500 +237.5 +215a (+/-5) +210 +210 BAML/CITI/JPM/MS

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
EDC Aaa/AAA FRN 11/23/2020 500 3mL+13a 3mL+13a 3mL+13 3mL+13 BNPP/BARC/DB

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.30 0  
IG27 75.503 73.988 <1.515>
HV27 166.425 161.645 <4.78>
VIX 14.48 13.37 <1.11>  
S&P 2,164 2,180 16
DOW 18,868 18,923 55  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $4.95 bn DAY: $5.45 bn
WTD: $15.85 bn WTD: $16.35 bn
MTD: $32.311 bn MTD: $32.811 bn
YTD: $1,201.092 bn YTD: $1,531.476 bn

 

Lipper Report/Fund Flows – Week ending November 9th   

     

  • For the week ended November 9th, Lipper U.S. Fund Flows reported an inflow of $675.4m into Corporate Investment Grade Funds (2016 YTD net inflow of $40.967b) and a net outflow of $668.6m from High Yield Funds (2016 YTD net inflow of $6.285b).
  • Over the same period, Lipper reported a net outflow of $45.4m from Loan Participation Funds (2016 YTD net outflow of $1.563b).
  • Emerging Market debt funds reported a net inflow of $345.7m (2016 YTD inflow of $7.522b).

 

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 26.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/14 11/11 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 1-Day Change 10-Day Trend PC
low
IG Avg. 136 136 136 137 139 140 141 141 140 139 0 <3> 106
“AAA” 75 76 76 80 82 82 83 83 83 82 <1> <7> 50
“AA” 82 83 83 85 85 86 87 87 87 86 <1> <4> 63
“A” 107 107 107 109 110 111 112 112 112 111 0 <4> 81
“BBB” 178 177 177 178 180 181 183 182 181 180 +1 <2> 142
IG vs. HY 375 361 361 357 359 361 379 374 375 366 +14 +9 228

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 33.42 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 11/14 11/11 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 1-Day Change 10-Day Trend PC
low
Automotive 119 119 119 121 121 122 122 120 122 121 0 <2> 67
Banking 124 124 124 127 128  129 130 130 130 129 0 <5> 98
Basic Industry 178 176 176 177 179 180 182 181 181 180 +2 <2> 143
Cap Goods 101 102 102 103 105 105 107 106 106 105 <1> <4> 84
Cons. Prod. 108 108 108 109 110 111 112 112 112 111 0 <3> 85
Energy 182 179 179 179 180 182 184 183 183 180 +3 +2 133
Financials 161 161 161 162 163 164 167 166 165 164 0 <3> 97
Healthcare 117 118 118 121 124 124 126 124 123 122 <1> <5> 83
Industrials 139 138 138 140 141 142 144 143 143 141 +1 <2> 109
Insurance 147 148 148 150 152 153 154 154 153 153 <1> <6> 120
Leisure 136 138 138 139 138 138 139 138 138 138 <2> <2> 115
Media 160 161 161 163 164 165 167 166 165 164 <1> <4> 113
Real Estate 144 146 146 147 145 146 146 146 146 146 <2> <2> 112
Retail 117 118 118 121 122 122 123 123 122 121 <1> <4> 92
Services 129 129 130 130 130 130 130 130 130 129 0 0 120
Technology 113 112 112 115 117 118 120 120 120 119 +1 <6> 76
Telecom 167 165 165 168 170 171 173 172 172 170 +2 <3> 122
Transportation 138 137 136 137 138 139 140 140 139 138 +1 0 109
Utility 137 137 137 137 138 138 139 139 138 138 0 <1> 104

 

New Issue Pipeline

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