Browsing articles tagged with "Mischler Financial Archives - Page 5 of 12 - Mischler Financial Group"
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…)

Quigley’s Corner Veterans Day: Good Day for Green Bonds & Diversity
November 2016      Debt Market Commentary   

Quigley’s Corner 11.10.16  Veterans Day Edition; Investment Grade Debt Market Pulses: Green Bonds + Diversity


Honoring Veterans Day

Investment Grade New Issue Re-Cap 

Reviewing This Week’s IG Primary Market Driver Averages by the Numbers

IG Primary & Secondary Market Talking Points

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

The Goldman Sachs Group, Inc. $2.75b 10NC9 Deal Dashboard

Southern Power Co. $1.3b 3-part 3s/5s/30s

J.P. Morgan Chase & Co. $1.10b 11NC10 Deal Dashboard

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

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

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

mischler-veterans-day-debt-market-green-bonds-diversity

I have a lot for you here today – a tribute to our Vets on Veterans Day, the Global Market Recap, a Review of this Week’s Primary Market Driver Averages, IG Primary and Secondary Market Talking Points, The WTD and MTD Volume Tables and then Deal Dashboards for the three deals that Mischler was involved in today namely Goldman Sachs, Southern Power and J.P. Morgan Chase. Following that are today’s “Thank yous”, a drill down into the EEI’s Green panel discussion and of course the “Best and Brightest” numbers and thoughts for next week’s IG new issue volume.

Why is the “QC” so late tonight?  Because it was a VERY busy day today for your humble corner correspondent.  But rather than leave for the long weekend, I read the below and thought, “the veterans we celebrate tomorrow (today actually) are the ones who had it tough.”  Ours is a cakewalk compared to what the men and women in uniform do day in and day out – for all of us.  That was about all I needed to read to realize, the “QC” gets out in its entirety tonight with nothing missing.  No short cuts, no skipping sections. If people read it great. If they don’t, well at least I left it on the floor and finished the job the way you all expect it be finished – complete.

It’s more than the trade, it’s more than the new investor, it’s more than the coverage and the capital.  This firm is owned by Service Disabled Veterans.  Metal joints, limps, shrapnel stuck in their bodies, scars where you know something near fatal happened.  All humble all dedicated and all fiercely patriotic.  It makes decisions like sticking around to finish this job pretty damned easy and I do it because they earned the certification that gives all of us here at team Mischler the opportunity to do what we do.    It’s a no brainer.  1:00AM on Veterans Day.  That’s my small give back and tribute to the great team of veterans who run the nation’s oldest SDVBE.  Thank each and every one of you from the top, down.

Investment Grade New Issue Re-Cap 

 

6 IG Corporate issuers priced 11 tranches between them totaling $8.05b and taking the WTD total to 91% of this week’s syndicate midpoint average forecast or $8.995b vs. $9.83b.

Global Market Recap

  • S. Treasuries – JGB’s, Bunds, Gilts, etc., are having a rough go with President-elect Trump.
  • 3mth Libor – Set at the highest yield (0.90206%) since May 2009.
  • Stocks – Big rally for the Dow & a new all-time high. NASDAQ was red.
  • Economic – U.S. claims data was solid. Weaker data in France & Italy.
  • Currencies – USD outperformed 4 of the Big 5 but the Pound was the star today.
  • Commodities – Copper with another strong bid. Crude oil & gold closed red.
  • CDX IG: -0.28 to 74.18
  • CDX HY: +6.34 to 411.11
  • CDX EM: +29.47 to 272.20

CDX spreads mover wider after 3pm

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

-Tony Farren

 

Reviewing This Week’s IG Primary Market Driver Averages by the Numbers

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

 

  • NICS:  <3.60> bps
  • Oversubscription Rates: 4.26x
  • Tenors:  13.31 years
  • Tranche Sizes: $692mm
  • Spread Compression from IPTs to the Launch: <22.96> bps

 

Versus last Friday’s key primary market driver averages, NICs tightened a hefty <2.68 bps> to an average <3.60> bps vs. <0.92> bps while over subscription or bid-to-cover rates grew 0.93x to 4.26x vs. 3.33x last week.  Average tenors pushed way out 1.98 years to 13.31 yrs vs. 11.33 yrs while tranche sizes grew by $223mm to $692mm vs. $469mm..

Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +184 versus last Friday’s +186.

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).

Week-on-week, BAML’s IG Master Index tightened a dramatic 5 bps to +136 vs. last Friday’s +141 close.  Spreads across the four IG asset classes also tightened a dramatic 5.25 bps to  bps to 26.75 vs. 32 as measured against their post-Crisis lows.  Looking at the 19 major industry sectors, spreads tightened 4.05 bps to 33.37 vs. 37.42 also against their post-Crisis lows.

IG Primary & Secondary Market Talking Points

 

  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 13 deals that printed, 11 tightened versus NIP for a 50% improvement rate while with 2 trading flat (15.50%).
  • 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).
  • BAML’s IG Master Index tightened 1 bp to +136 vs. +137.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 2 bps to 1.30 vs. 1.32.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +184.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $20.2b on Wednesday versus $15b Tuesday and $17.5b the previous Wednesday.
  • The 10-DMA stands at $16.6b.

 

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

 

IG Corporate New Issuance This Week
11/07-11/11
vs. Current
WTD – 8.995b
November 2016 vs. Current
MTD – $16.461b
Low-End Avg. $8.09b 111.19% $90.70b 18.15%
Midpoint Avg. $9.83b 91.51% $92.11b 17.87%
High-End Avg. $11.57b 77.74% $93.52b 17.60%
The Low $0.1b 8995.00% $71b 23.18%
The High $20b 44.97% $110b 14.96%

 

The Goldman Sachs Group, Inc. (NYSE:GS) $2.75b 10NC9 Deal Dashboard

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
10NC9 +150a +140a (+/-2.5) +137.5 +137.5 <12.5>  bps N/A 134/132 <3.5>

 

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

 

GS  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
10NC9 $2.75b $7.5b 2.73x

 

Final Pricing – The Goldman Sachs Group, Inc.
GS $2.75b 3.50% due 10yr 11/16/2026 NC9 @ $99.741 or T+137.5

Southern Power Co. (NYSE:SO) $1.3b 3-part 3s/5s/30s

 

SO Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
1.95% 2019 +95-100 +85a (+/-5) +80 +80 <17.5> bps 0 80/78 flat
2.50% 2021 +110-115 +105a (+/-5) +100 +100 <12.5> bps 0 100/98 flat
4.95% 2046 +235a +215a (+/-5) +210 +210 <25> bps <1> 209/207 <1>

 

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

 

SO  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr $600mm $1.2b 2x
5yr $300mm $700mm 2.33x
30yr $400mm $1.2b 3x

 

Final Pricing – Southern Power Co.

SO $600mm 1.95% due 12/15/2019 @ $99.975 to yield 1.958% or T+80  MW+12.5
SO $300mm 2.50% due 12/15/2021 @ $99.781 to yield 2.546% or T+100  MW+15
SO $400mm 4.95% due 12/15/2046 @ $98.562 to yield 5.043% or T+120  MS +35

J.P. Morgan Chase & Co. (NYSE:JPM) $1.10b 11NC10 Deal Dashboard

 

JPM Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
11NC10 +170a +155a (+/-3) +152 +152 <18> bps N/A 151/148 <1>

 

Final Pricing – J.P. Morgan Chase & Co.

JPM $1.1b 3.625% due 12/01/2027 @ $99.827 to yield 3.644% or T+152


Team Mischler thanks today’s three issuers who rewarded the nation’s oldest Service Disabled Veteran certified broker dealer with Co-Manager roles  –
The Goldman Sachs Group, Inc., J.P. Morgan Chase & Co. and Southern Power Co.

There are a lot of people on the issuance side as well as syndicate to thank.  The day has been relentlessly busy – which is always a good thing –

Next up was Southern Company and today’s $1.3B three-part 3s/5s/30s transaction that will use 3- and 5-year proceeds to fund eligible “Green” projects including solar and wind facilities located in the U.S. As I have written here many times before, the social responsibility overlay between Green initiatives and Diversity and Inclusion procurement initiatives are clear.  Why not turn to one of the power sector’s top financial minds none other than Southern Company’s Executive Vice President and Chief Financial Officer, Art Beattie who participated in a very meaningful panel discussion titled, Financing the Clean Energy Future at this week’s 51st Annual EEI Financial Conference in Phoenix that ran Sunday thru Wednesday.  The panel discussed Sustainability Reporting, Environmental, Social, Governance (ESG) Assessment, and of course Green Bonds.  The new buzzwords in the burgeoning field of socially and environmentally conscious investing.  The panel discussion also focused on current challenges that investment restrictions present, how they may grow in the future, and the potential path forward for old and new technologies.  Capturing new investment opportunities were also explored.

Today Southern Power Company illustrated what I mean when I say mandates and initiatives start from the top/down.  Quite literally, “SO’s” own CFO introduced new initiatives, he talked about them in front of the most seasoned power professionals in Phoenix replete with industry CEO’s other CFOs and movers and shakers. Sure enough, today Southern Power bridged Green bonds with D&I to create a wonderful opportunity that helped capture new high quality investors to the transaction.  Mischler is proud to say that we were active co-managers on Southern Company’s earlier green bond as well as today’s along with Apple’s and MTA green issuances.  Considering that Green bonds represent less than one half of one percent of the $20 trillion bond market we feel we’re in privileged company.  It’s not about where we are today, rather it’s about tomorrow and green is good as is social responsibility.  We see this mandate extending into asset backed issuance.

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

I am happy to announce that, once again, the “QC” received unanimous responses from the 22 syndicate desks surveyed in today’s Best & Brightest poll.  21 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 22 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 79.82% 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.

Syndicate IG Corporate-only Volume Estimates for Next Week

 

IG Corporate New Issuance Next Week
11/14-11/18
Low-End Avg. $28.32b
Midpoint Avg. $29.45b
High-End Avg. $30.59b
The Low $20b
The High $40b

 

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

 

Next Week
11/14-11/18
1: 20b
1: 20-25b
3: 25b
6: 25-30b
4: 30b
2: 30-35b
3: 35b
1: 35-40b
1:38b

 

 

Enjoy a safe and happy Veteran’s Day weekend!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/07
TUES.
11/08
WED.
11/09
THUR.
11/10
FRI.
11/11
AVERAGES
WEEK 11/07
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
New Issue Concessions <3> bps N/A N/A <3.67> bps Holiday <3.60> bps <0.87> bps <0.51> bps 3.31 bps
Oversubscription Rates 2.50x N/A N/A 4.44x Holiday 4.26x 3.32x 2.61x 3.05x
Tenors 4.50 yrs N/A N/A 14.91 yrs Holiday 13.31 yrs 11.33 yrs 7.77 yrs 9.16 yrs
Tranche Sizes $472mm N/A N/A $732mm Holiday $692mm $491mm $818mm $1,137mm
Avg. Spd. Compression
IPTs to Launch
<16.5> bps N/A N/A <24.14> bps Holiday <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
CF Industries Inc. Baa3/BBB 3.40% 12/01/2021 500 <50> curve +195a (+/-5) +190 +190 GS/MS
CF Industries Inc. Baa3/BBB 4.50% 12/01/2026 750 +high 200s/+287.5 +250a (+/-5) +245 +245 GS/MS
Con Edison Co. of NY Inc. A2/A- 2.90% 12/01/2026 250 +100a +85a (+/-5) +80 +80 CITI/JPM/MIZ/MUFG
Con Edison Co. of NY Inc. A2/A- 4.30% 12/01/2056 500 +165a +145a (+/-5) +140 +140 CITI/JPM/MIZ/MUFG
Goldman Sachs Group, Inc. A3/A 3.50% 11/16/2029 2,750 +150a +140a (+/-2.5) +137.50 +137.5 GS-sole
J.P. Morgan Chase & Co. Baa1/BBB+ 3.625% 12/01/2027 1,100 +170a +155a (+/-3) +152 +152 JPM-sole`
Southern Power Co. Baa1/BBB+ 1.95% 12/15/2019 600 +95-100 +85a (+/-5) +80 +80 BAML/BNPP/BARC/MIZ/SCOT/USB
Southern Power Co. Baa1/BBB+ 2.50% 12/15/2021 300 +110-115 +105a (+/-5) +100 +100 BAML/BNPP/BARC/MIZ/SCOT/USB
Southern Power Co. Baa1/BBB+ 4.95% 12/15/2046 400 +235a +215a (+/-5) +210 +210 BAML/BNPP/BARC/MIZ/SCOT/USB
Virginia Electric & Power A2/A 2.95% 11/15/2026 400 +105a +90a (+/-5) +85 +85 BNPP/MUFG/SCOT/STRH/USB
Virginia Electric & Power A2/A 4.00% 11/15/2046 500 +135a +115a (+/-5) +110 +110 BNPP/MUFG/SCOT/STRH/USB

 

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

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 13 deals that printed, 11 tightened versus NIP for a 84.50% improvement rate while with 2 trading flat (15.50%).

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

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
CF Industries Inc. Baa3/BBB 3.40% 12/01/2021 500 <50> curve +195a (+/-5) +190 +190 177/174
CF Industries Inc. Baa3/BBB 4.50% 12/01/2026 750 +high 200s/+287.5 +250a (+/-5) +245 +245 231/228
Con Edison Co. of NY Inc. A2/A- 2.90% 12/01/2026 250 +100a +85a (+/-5) +80 +80 79/77
Con Edison Co. of NY Inc. A2/A- 4.30% 12/01/2056 500 +165a +145a (+/-5) +140 +140 137/135
Goldman Sachs Group, Inc. A3/A 3.50% 11/16/2029 2,750 +150a +140a (+/-2.5) +137.50 +137.5 134/132
J.P. Morgan Chase & Co. Baa1/BBB+ 3.625% 12/01/2027 1,100 +170a +155a (+/-3) +152 +152 151/148
Southern Power Co. Baa1/BBB+ 1.95% 12/15/2019 600 +95-100 +85a (+/-5) +80 +80 80/78
Southern Power Co. Baa1/BBB+ 2.50% 12/15/2021 300 +110-115 +105a (+/-5) +100 +100 100/98
Southern Power Co. Baa1/BBB+ 4.95% 12/15/2046 400 +235a +215a (+/-5) +210 +210 209/207
Virginia Electric & Power A2/A 2.95% 11/15/2026 400 +105a +90a (+/-5) +85 +85 84/82
Virginia Electric & Power A2/A 4.00% 11/15/2046 500 +135a +115a (+/-5) +110 +110 109/107
Kellogg Co. Baa2/BBB 2.65% 12/01/2023 600 +120-125 +110a (+/-3) +107 +107 105/103
Stanley Black & Decker A-/BBB+ 1.622% 11/17/2018 345 +95-100 N/A +80 +80 75/73

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.32 1.30 <2>
IG27 74.467 75.447 0.98
HV27 168.795 163.29 <5.505>
VIX 14.38 14.74 0.36
S&P 2,163 2,167 4
DOW 18,589 18,807 218
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $8.05 bn DAY: $8.05 bn
WTD: $8.995 bn WTD: $8.995 bn
MTD: $16.461 bn MTD: $16.461 bn
YTD: $1,185.242 bn YTD: $1,515.126 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 26.75 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 10/31 10/28 1-Day Change 10-Day Trend PC
low
IG Avg. 136 137 139 140 141 141 140 139 138 137 <1> <1> 106
“AAA” 76 80 82 82 83 83 83 82 82 80 <4> <4> 50
“AA” 83 85 85 86 87 87 87 86 86 85 <2> <2> 63
“A” 107 109 110 111 112 112 112 111 111 110 <2> <3> 81
“BBB” 177 178 180 181 183 182 181 180 178 176 <1> +1 142
IG vs. HY 361 357 359 361 379 374 375 366 353 339 +4 +22 228

 

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 33.37 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 11/10 11/09 11/08 11/07 11/04 11/03 11/02 11/01 10/31 10/28 1-Day Change 10-Day Trend PC
low
Automotive 119 121 121 122 122 120 122 121 120 119 <2> 0 67
Banking 124 127 128  129 130 130 130 129 129 128 <3> <4> 98
Basic Industry 176 177 179 180 182 181 181 180 179 179 <1> <3> 143
Cap Goods 102 103 105 105 107 106 106 105 105 103 <1> <1> 84
Cons. Prod. 108 109 110 111 112 112 112 111 110 109 <1> <1> 85
Energy 179 179 180 182 184 183 183 180 179 177 0 +2 133
Financials 161 162 163 164 167 166 165 164 162 160 <1> +1 97
Healthcare 118 121 124 124 126 124 123 122 120 118 <3> 0 83
Industrials 138 140 141 142 144 143 143 141 140 139 <2> <1> 109
Insurance 148 150 152 153 154 154 153 153 153 153 <2> <5> 120
Leisure 138 139 138 138 139 138 138 138 138 138 <1> 0 115
Media 161 163 164 165 167 166 165 164 162 160 <2> +1 113
Real Estate 146 147 145 146 146 146 146 146 146 146 <1> 0 112
Retail 118 121 122 122 123 123 122 121 120 118 <3> 0 92
Services 130 130 130 130 130 130 130 129 129 129 0 +1 120
Technology 112 115 117 118 120 120 120 119 117 115 <3> <3> 76
Telecom 165 168 170 171 173 172 172 170 168 167 <3> <2> 122
Transportation 136 137 138 139 140 140 139 138 137 137 <1> <1> 109
Utility 137 137 138 138 139 139 138 138 138 137 0 0 104

 

New Issue Pipeline

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

 

  • HollyFrontier Corp. (Baa3/BBB-) asked Bank of America/Merrill Lynch, Citigroup, Goldman Sachs, MUFG and Toronto Dominion to arrange fixed income investor calls are scheduled for Monday and Tuesday, November 14th and 15th.  Citigroup coordinated.
  • Bank Nederlandse Gemeenten (Aaa/AAA) the Dutch bank and Local Government Funding Agency mandated BNP Paribas, HSBC and Toronto Dominion to arrange fixed income investor calls in preparation for its inaugural 144a/REGS Sustainability Bond transaction that could soon follow their conclusion.
  • 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 – $330.60 Billion in Cumulative Enterprise Value!

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

 

  • General Electric Co. (A3/A), a primarily equipment manufacturer, announced on November 1st that it will partner with Baker Hughes Inc. (A/A-), which is essentially a drilling and hydraulic fracturing company in what is being billed as the first “full stream” oil services company including upstream exploration and production, midstream transportation and downstream refining and marketing. Together the GE-controlled entity will represent the world’s second largest oi-field services company with projected revenues of $34bn in 2020. GE will be a 62.5% owner. GE is expected to borrow $7.4b to fund the deal.
  • Qualcomm Inc. (A1/A+) agreed to acquire NXP Semiconductors NV (Ba2/BB+) for $39b in what is the largest semiconductor purchase in history. It’s also the second largest tech merger behind Dell’s purchase of EMC.  Qualcomm will pay a 34% premium and including debt the deal is worth $47b. The deal will be financed with offshore cash and new debt. Goldman Sachs and Evercore advised Qualcomm.  Goldman Sachs and J.P. Morgan are providing debt financing for the deal.
  • AT&T (A-/BBB+) agreed to buy Time Warner (Baa2/BBB+) for $85.4b.  This follows Comcast’s purchase of NBCUniversal and Verizon’s acquisition of Yahoo. Both AT&T and Time Warner boards approved the deal that now has to confront regulatory hurdles. It hopes to complete the transaction by the end of 2017.  To finance the half cash, half stock deal will involves AT&T taking on $40b in bridge loans.
  • American Electric Power (“AEP) (Baa1/BBB+) today agreed to sell four power plants in the Midwest for a total of $2.17b to a private equity firm created by Blackstone Group and ArcLight Capital Partners. AEP is divesting of many wholesale power markets focusing instead more on its regulated utility businesses.  The closing of the transaction is expected sometime in Q1 2017.
  • Bayer AG (Baa3/BBB+) agreed to buy Monsanto Co. (A3/A-) in a deal valued at $66 billion. Bayer agreed to pay $128 per share in cash – a 21% premium to Monsanto’s closing price on 9/13.  It represents the year’s largest deal and the single largest takeover by a German company.
  • NextEra Energy Inc. (Baa1/A-) agreed to purchase Dallas-based, Oncor Electric Delivery Co. LLC (Baa1/A) for $18.4b. Oncor is the largest electric transmission operator in Texas serving approximately 10 million customers in the Lone Star state.  This not only gives NextEra a dominant position in Texas’ electric sector but is critical in taking Energy Future Holdings out of chapter 11 bankruptcy.
  • Zimmer Biomet (Baa3/BBB) completed its offer to purchase all outstanding shares of LDR stock on Wednesday, July 13th.  Zimmer announced on June 7th that it agreed to purchase medical device maker LDR Holding Corp. for $37 per share in cash for a total transaction value of $1b. Zimmer expects to maintain its IG rating and to issue $750mm in Senior Unsecured Notes in order to repay the credit facility. Goldman Sachs is acting as advisor to Zimmer Biomet.
  • This past February, Algonquin Power & Utilities Corp. (NR/BBB) announced it will acquire The Empire District Electric Company (N/A) in a $3.4b CAD or $2.4b USD equivalent all cash transaction and today, Thursday, June 16th, Empire’s shareholders overwhelmingly voted in support of the merger to the tune of 95%.  Regulatory approvals are the next step before finalizing the sale expected sometime in Q1 2017. The merger assumes $900mm in USD debt.
  • Symantec (Baa3/BBB-) announced on June 13th that it entered into an agreement to purchase Blue Coat (Caa2/CCC) for $4.56b in cash. The deal will close sometime in Q3 2016.  Both company boards approved the deal. The transaction will be funded with available cash and $2.8b of new debt. J.P. Morgan is the lead adviser to Symantec.  Bank of America/Merrill Lynch, Barclays and Wells Fargo are also advisers.
  • On Friday, April 29th the Alere Inc. (Caa1/CCC+) Board of Directors rejected a request by Abbott Labs (A2/A+) to terminate their merger agreement in return for around $40mm for transaction expenses. Abbott cited concerns about various Alere representations in their merger agreement including a delayed 2015 Form 10-K filing as well as government investigations. Abbott Labs (A2/A+) had announced on Monday, February Baa1/BBB+1st, that it would acquire Alere Inc. (Caa1/CCC+) for $5.8b in which “ABT” would pay $56 per share of ”ALR.”  The deal was to be financed with debt.  ABT expects a strong IG rating despite the new debt. The deal is subject to “ALR” shareholder as well as regulatory approvals.
  • Abbott Labs (A2/A+) announced on Thursday, April 28th that it will buy St. Jude’s Medical Inc. (Baa2/A-) in a cash-stock deal valued at $25b to reinforce the medical devices maker’s stake in cardiovascular care. Abbott will fund the cash portion of the transaction with new medium- and long-term debt. Bank of America/Merrill Lynch and Evercore are acting as advisors to Abbott. The deal is expected to close by Q4 2016.
  • Sherwin Williams (A2/A-) announced on Monday, March 21st that it will purchase Valspar Corp. (Baa2/BBB) for $9.3b or $113 per share.  The acquisition will help Sherwin-Williams gain access to big-box retailers like Lowe’s where Velspar has access. It will also provide overseas expansion opportunities.  Sherwin Williams will finance the merger with available cash, existing credit facilities and new debt.  The deal should close sometime before the end of Q1 2017.
  • TE Connectivity (A-/A-) announced it will buy medical device maker Creganna Medical for $895mm in cash.  The deal will be funded with available cash and debt.
  • Anthem Inc. (Baa2/A) in July 2015, proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal is expected to close sometime during the second half of 2016. The merger would involve 53mm members and will include $22b in new debt and loans.
  • Amphenol Corporation (Baa1/BBB+) announced on June 29th 2015 that it made a binding offer to acquire 100% of FCI Asia
TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Initial Jobless Claims Nov. 5 260k 254k 265k —-
Continuing Claims Oct. 29 2025k 2041k 2026k 2023k
Bloomberg Consumer Comfort Nov. 6 —- 45.1 44.6 —-
Mortgage Delinquencies Q3 —- 4.52% 4.66% —-
MBA Mortgage Foreclosures Q3 —- 1.55% 1.64% —-
Monthly Budget Statement October <$70.0b> <$44.2b> <$136.6b> —-

 

Rates Trading Lab

 

U.S. Treasuries had another poor performance today but not even close to the disaster that occurred yesterday. Today the benchmarks lost between 1.3 bps (2yr: 0.907%) to 6.1 bps (7yr: 1.890%). It has been a brutal week for the Treasury market. Overseas bond markets were also taken to the woodshed today (JGB’s, Bunds, Gilts, etc…). Supply was a factor today ($15 bn 30yr auction / details below) but the Trump victory on Tuesday night is 99% of the reason for the extremely heavy pressure on the Treasury market. Today the Trump camp was talking about rolling back Dodd-Frank and that type of talk leads to risk on and rates selling. I think the Treasury sell off is overdone but who wants to step in front of a freight train heading down hill with no breaks? USTs need a catalyst to offset the Trump sell off and at this point I am not sure what that catalyst will be. The Dow closed up over 200 points and traded at a new all-time high today. On the flip side the NASDAQ was in the loss column. It has been a volatile and wild two days since Trump won the Presidential election. What will the next four years bring?

-Tony Farren

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-23+ 99-00+ 98-28+ 99-11+ 89-01+
RESISTANCE LEVEL 99-21+ 98-26+ 98-17+ 99-03+ 88-03+
RESISTANCE LEVEL 99-19 98-20+ 98-11+ 98-29 87-08+
         
SUPPORT LEVEL 99-166 98-176 97-30 98-22 85-27+
SUPPORT LEVEL 99-146 98-12 97-23 98-13+ 85-11
SUPPORT LEVEL 99-116 98-08 97-18 98-01 84-24+

 

Tomorrow’s Calendar

 

  • China Data: Nothing Scheduled
  • Japan Data: Loans & Discounts Corp, PPI, Tertiary Industry Index MoM
  • Australia: Nothing Scheduled
  • EU Data: German Oct CPI U.K. Sep Const Output
  • S. Data: Nov U Mich
  • Supply: Italy 3, 7, 24, 31y (€5.25-7.25bn), Spain/France details
  • Events: Ratings reviews, U.S. closed
  • Speeches: Fischer, Debelle, Poloz, Lane

(more…)

America Has Spoken. What’s Next re USD and IG Corporate Debt?
November 2016      Debt Market Commentary   

Quigley’s Corner 11.09.16- It’s Done. America Voted for a New US President. What’s Next re USD and IG Corporate Debt Market?

 

How It Happened Across the U.S.A.
Dr. Scott MacDonald Writes a Piece for the  “QC”

Smith’s Research and Gradings – The Global Economic Doctor on the Election of 2016 and its Implications

Investment Grade New Issue Re-Cap 

IG Primary & Secondary Market Talking Points

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 2nd  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

One of the great things about being in this business for 26 years are the superlative friends and colleagues I have had the privilege to know and work with during that time. There’s a saying that you are as good as the people around you.  I have been blessed with stellar talent and thought leaders throughout my career. One such person is Dr. Scott MacDonald, who I have occasionally quoted here in the “QC.” Scott B. MacDonald or as I’ve always referred to him as simply “The Doctor”, is Chief Economist at Smith’s Research & Gradings.  Prior to his current post, he was Senior Managing Director and Chief Economist at KWR International, Inc.  Prior to that was Head of Research for MC Asset Management LLC, an asset management unit of Mitsubishi Corporation based in Stamford, Connecticut (2012-2015) and Head of Credit & Economics Research at Aladdin Capital (2000-2011) where he and I worked closely together.  He served as Chief Economist for KWR International (1999-2000) prior to which he worked at Donaldson, Lufkin & Jenrette, Credit Suisse and the Office of the Comptroller of the Currency (in Washington, D.C.).  He was ranked by Institutional Investor magazine as one of the top sovereign analysts in the financial services industry.

Scott did his Ph.D. in Political Science at the University of Connecticut, Masters in Asian Studies at the University of London’s School of Oriental and African Studies, and BA in History (Honors) and Political Science at Trinity College (Hartford). He has written 18 books and has had numerous articles published. His areas of expertise are macroeconomics, international finance and geopolitical risk.

I am privileged and honored to present “The Doctor’s” piece on President-elect Donald Trump’s Election Day victory that was penned today and appears here in the “QC”.

mischler-post-election-debt-market-comment-110816

 

Smith’s Research and Gradings – The Global Economic Doctor on the Election of 2016 and its Implications

 

The U.S. presidential election of 2016 was decidedly one for the history books.  Although 2016 is certainly not 1860, which led to the U.S. Civil War, it was a dirty, brutal and personalized campaign that tapped into the angst of a voting public angry with widening socio-economic disparities, sub-par economic growth and a dysfunctional Washington.

Why did Donald Trump, the Republican candidate, win?

  1. Public frustration with Washington’s corruption and its seeming ineffectiveness in addressing the country’s major problems.  Clinton was clearly seen as more of a Washington insider than Trump, who has never held an elected political office before.
  1. The ongoing whiff of corruption that surrounded Democratic contender Hillary Clinton (not that Trump is a saint), related to her emails and the finances of the Clinton Foundation. Past Clinton “scandals” did not help.
  1. The intervention of the FBI and WikiLeaks into the electoral process via disclosing embarrassing emails, which only maintained attention of Clinton’s email scandal. Furthermore, having her name associated with former Congressman Anthony Weiner (with his sexting scandal) obviously did not help Clinton in the last days of the campaign.
  1. The growing divisions in U.S. society, especially along an urban-rural divide. One thing that gave Trump an appeal to many living in rural areas was that he appeared to listen to them and mocked the political correctness that many found stifling.  
  1. The Democrats underestimated Trump. As General Colin Powell stated: “No battle plan survives contact with the enemy.”  This was certainly the case of Clinton with Trump.
  1. The appeal of a strongman leader. The last reflects a major paradigm change in global politics – the rise of strongman leaders, who offer simple solutions to complex problems. Considering the scope of U.S. problems and the challenging nature of international relations, Trump’s “tough guy” persona was a point of attraction to some voters. There are certainly echoes of this in other countries.

What next?  A Trump victory was not expected by global markets or political leaders in many other countries (many of whom have been critical of the Republican leader now president-elect).  The next week is likely to see an unwinding of the “Clinton trade” (risk on) in global debt and equity markets, downward pressure on oil prices, and a further pounding of the Mexican peso.

Investors find a Trump victory unsettling from the standpoint that during the campaign he was anti-trade, opened up the possibility of negotiating the U.S. debt, and wants to overhaul of the U.S. alliance system around the world (such as with NATO). The last time the U.S. embraced protectionist trade policies in a major fashion was the 1930s, in the form of the Smoot-Hawley Tariffs. U.S. protectionism was a major cause of the deepening of the global Depression. The extent of the market downdraft will depend on Trump’s acceptance speech, his comments on policy matters before he gets into the White House and who he appoints to his cabinet.

The major challenge in the days ahead will be to find a way to reunite the country after the election.  In many regards, this may be an impossible process, considering the bad blood between Democrats and Republicans since 2008.  A dangerous development in U.S. politics is the destruction of the political center – the area where compromise and dialogue are reached and policies can move forward.

The U.S. sovereign ratings are Aaa/AA+/AAA, with a stable outlook.  The policy format of the incoming Trump administration will no doubt be carefully examined, in particular on its debt management and trade policies.

For American politics to become more workable, President Trump will have to demonstrate an ability to lead, but also work within a constitutional system that he might find constraining.  As he moves to “drain the swamp”, Trump will have to make the transition from candidate to elected official and from someone who is critical of Congress to a leader who will have to find the means to work with it.  For their part, both the Republican Party (which held on to both the Congress and Senate) and Democratic Party will have to adjust to a President who has not emerged from their ranks.  A new Washington looms on the horizon – hopefully it works.

Dr. Scott B. MacDonald, Chief Economist

 

Investment Grade New Issue Re-Cap

Needless to say there was no activity in today’s IG dollar DCM.

 

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index tightened 1 bp to +139 vs. +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.34 vs. 1.35.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +184 vs. +185.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15b on Tuesday versus $14.1b Monday and $19.8b the previous Tuesday.
  • The 10-DMA stands at $16.5b.

 

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

 

IG Corporate New Issuance This Week
11/07-11/11
vs. Current
WTD – $945mm
November 2016 vs. Current
MTD – $8.411b
Low-End Avg. $8.09b 11.68% $90.70b 9.27%
Midpoint Avg. $9.83b 9.61% $92.11b 9.13%
High-End Avg. $11.57b 8.17% $93.52b 8.99%
The Low $0.1b 945.00% $71b 11.85%
The High $20b 4.725% $110b 7.65%

 

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
11/07
TUES.
11/08
WED.
11/09
AVERAGES
WEEK 10/31
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
New Issue Concessions <3> bps N/A N/A <0.87> bps <0.51> bps 3.31 bps 1.87 bps
Oversubscription Rates 2.50x N/A N/A 3.32x 2.61x 3.05x 3.28x
Tenors 4.50 yrs N/A N/A 11.33 yrs 7.77 yrs 9.16 yrs 11.51 yrs
Tranche Sizes $472mm N/A N/A $491mm $818mm $1,137mm $640mm
Avg. Spd. Compression
IPTs to Launch
<16.5> bps N/A N/A <17.87> yrs <17.42> bps

 

Indexes and New Issue Volume

Index levels are as of 2:00pm ET

Index Open Current Change
LUACOAS 1.34 1.34 0
IG27 75.757 74.823 <0.924>
HV27 172.135 170.27 <1.865>
VIX 18.74 15.45 <3.29>
S&P 2,139 2,158 19
DOW 18,332 18,541 209
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $0.945 bn DAY: $0.945 bn
WTD: $0.945 bn WTD: $0.945 bn
MTD: $8.411 bn MTD: $8.411 bn
YTD: $1,177.192 bn YTD: $1,507.076 bn

 

Lipper Report/Fund Flows – Week ending November 2nd  

     

  • For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).
  • Over the same period, Lipper reported a net inflow of $146.468m into Loan Participation Funds (2016 YTD net outflow of $1.518b).
  • Emerging Market debt funds reported a net outflow of $345.7m (2016 YTD inflow of $7.337b).

 

IG Credit Spreads by Rating (more…)