Browsing articles tagged with "Mischler Financial Archives - Page 7 of 12 - Mischler Financial Group"
20th Century Bond Yields-Knowing the Past for the Future-Mischler Comment
October 2016      Debt Market Commentary   

Quigley’s Corner 10.12.16  Investment Grade Corporate Debt Comments: 20th Century Bond Yields

 

Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary & Secondary Market Talking Points

FOMC: Minutes: Headlines & Text

Knowing the Past for the Future – “20th Century Bond Yields”

Consumers Power Company Supplemental Indenture – 2.875% FMBs due 1977 Dated Sept 1, 1947

A Special Salute to Women’s Syndicate Association 2016 Holiday Charity Gala

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 5th  

IG Credit Spreads (by Rating/Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

It was a slow day today in our IG dollar DCM with one lone corporate issuer – Sumitomo Mitsui Trust Bank – pricing a $1b two-part 3-year FXD/FRN. I should add, however, that overall volume benefitted nicely from the SSA’s KfW $5b 3-year bringing the all-in IG day totals to 2 issuers, 3 tranches and $6b.

 

Let’s look at the global re-cap followed by the pertinent IG primary and secondary market talking points and a quick snapshot of WTD and MTD volumes in relation to syndicate forecasts and a look at today’s FOMC Minutes Headlines and Text.

 

o   U.S. Treasuries – Losing session for USTs but they did close above the session low prices.

o   Overseas Bonds – JGB’s closed mixed with long end bid. Poor session in Europe.

o   3mth Libor – Set at the highest yield since May 2009 (0.88111%).

o   Stocks – U.S. mixed at 3:30pm. Europe more red than green. Asia closed down.

o   Economic – The FOMC Minutes were a mixed bag. We have a divided Fed.

o   Currencies – USD mixed. The DXY Index traded over 98 for the 1st time since March.

o   Commodities – Crude oil & gold had small losses. Wheat traded poorly.

o   CDX IG: +0.03 to 75.78

o   CDX HY: -0.31 to 406.40

o   CDX EM: -3.25 to 237.40

*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 2 IG Corporate-only new issues was 15.00 bps.
  • BAML’s IG Master Index tightened 1 bp to +138 vs. +139.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +134 vs. +135.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research 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 $11.2b on Friday versus $17.3b Thursday and $15.3b the previous Friday.
  • The 10-DMA stands at $15.8b.

 

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

 

IG Corporate New Issuance This Week
10/10-10/14
vs. Current
WTD – $11.605b
October 2016 vs. Current
MTD – $28.205b
Low-End Avg. $14.15b 82.01% $87.83b 32.11%
Midpoint Avg. $15.02b 77.26% $88.59b 31.84%
High-End Avg. $15.89b 73.03% $89.35b 31.57%
The Low $10b 116.05% $75b 37.61%
The High $20b 58.025% $125b 22.56%

 

FOMC Minutes: Headlines & Text

 

o   Substantial majority of officials saw risks as roughly balanced.

o   A few officials still saw risks weighted to the downside.

o   Several FOMC members saw rate rise “relatively soon.”

o   The decision to wait was a ”close call.”

o   It was noted that a “reasonable argument” could be made to hike.

o   A number of officials saw policy firming over the next few years.

o   Many FOMC members saw few signs of inflation pressure.

o   Several officials saw multiple headwinds to inflation.

o   Many saw some labor market slack remaining.

o   Differing views were voiced on the extent of labor market slack.

o   Some saw more scope for growth without pressuring the labor market.

o   Cost/benefit of undershooting full employment was discussed.

 

Consumers Energy Company’s John Murphy Transcends The Records for the “QC!” 

When I write my “Best and Brightest” syndicate forecast poll as we enter each new month I include a section titled “Knowing the Past for the Future” that takes a look at a decade’s worth of that month’s IG Corporate and SSA issuance.  It helps put the current forecast into historical perspective.  I then include an average over the past decade, five years and three years showing a year-by-year issuance break-out across that decade.  Many find it very helpful, useful and informative so, I do it.  Well guess what?  History is relative and it seems current market participants continue to enjoy records and “top ten lists” as does most of our nation.  “What’s the largest week of all-time?”..……..”What’s the highest IG Corporate monthly volume of all-time?” or how about ………….”…the lowest yield or coupon of all-time?”  A very astute and super good guy by the name of John Murphy at Consumers Energy Company  (NYSE:CMS) located in Jackson, Michigan reached out to me this morning regarding last evening’s “QC.”

 

Here’s what he wrote:

Ron,

Hope you’re well.  I continue to enjoy your market commentary.  While catching up on the end of last week’s versions, I noted the following info from your Thursday edition:

“However, all issuers should know that if you blinked you might have missed some historic news.  In speaking with Andrea Johnson of Informa Globalmarkets (US) Inc. she discovered and revealed that “the President and Fellows of Harvard College priced the lowest ever 30-year yield and set a new all-time low for 40-year coupons.”

You’ll see from your attached commentary from 2012 in the third paragraph below, you addressed this same subject regarding perceived ‘lowest ever” 30-yr rates.  Certainly today’s low rates are remarkable, but as you indicated below, they are modern low rates, not lowest ever.  I’ve attached a scan from the supplemental indenture of one of Consumers Energy’s (formerly Consumers Power) early 30 year bonds from 1947 (2 7/8%).  Best wishes.

John Murphy

 

And here is a re-print of my closing commentary dated March 10, 2012 that John is referring to:

All time low investment grade rated corporate bond coupons: In addition, I’d like to mention that a respected elder statesman of the U.S. utility industry, who also happens to be an avid reader of this daily, delineated for me the difference between the “modern era” of bond yields with those of the 20th century specifically during the 1950s.  Many financial information and data services publish various top ten or top twenty low coupon rate grids and the like.  People enjoy placing facts and data in historical contexts and quite honestly, our society loves to know “the biggest this” and “the lowest that”, “who is number one” and “what are the top ten”.  It’s an extension of our culture.  The reader was very kind to express his enjoyment of my write ups however he observed that references to all-time low coupons should be modified to “modern history.”  From 1945 thru the early 1950s high grade corporate bond yields hovered at around 2.75% to 3%.  He particularly identified several 30-year FMBs that carried low 3% coupons noting that there are other utilities with similar histories.  So, we acknowledge the history lesson, we enjoy such exchanges and encourage any of our readers to chime in with opinions, suggestions or snippets of history that make for fun and informative exchanges which result in a better product.  As a result of this great “history lesson” going forward I will identify low coupon records in the context of “modern history,”  After all, available data bases are wonderful and helpful sources of information, but history didn’t start when those data bases began.  I’d also like to thank the reader for the friendly and informative exchange as well as for supplying me with a reference page that he stumbled upon in an old textbook. It graphs what interest rate “indices” illustrate from what he jokingly referred to as the “Pleistocene era.”  The sub 3% era on the graph for corporate 30-year bonds corresponds nicely with several U.S. utilities’ “golden age” of coupon rates.  Treasury/Funding teams as well as all market participants should get a kick out the below chart titled “20th Century Bond Yields” and followed by the “Indenture” cover.

Please enjoy!

 

Knowing the Past for the Future – “20th Century Bond Yields”

20th-century-bond-yields-mischler

Consumers Power Company Supplemental Indenture – 2.875% FMBs due 1977 Dated September 1, 1947

 

owest-rates-ever-corporate-debt-mischler

 

 

 

Now THAT right there folks is pretty cool stuff! Definitely a wealth of knowledge whom we appreciate! John is highly respected and regarded in our domestic utility sector and he literally personifies the term “Know the Past for the Future” especially given his 40+ years at CMS.  Thank you John for the e-mail this morning pal.

 

For those of you wondering, Andrea Johnson’s data base dates back to 1993 hence, “of the modern era.”……….and “yes” AJ enjoyed the well-intended and collegial history lesson.

 

Next up………………………………………

 

Women’s Syndicate Association 2016 Holiday Charity Gala to Help Raise Funds for “Strong Women, Strong Girls” (SWSG)

wsa-annual-event-swsg

Speaking of women who are great at what they do, much like Andrea Johnson who is the best at what she does, I received an IPREO wire this morning from The Women’s Syndicate Association (WSA).  I would guess that anyone in syndicate received the same this morning as well.  It is a cordial invitation to attend WSA’s 2016 Holiday Charity Gala on Wednesday, November 30, 2016.

Here it is:

 

Join us for a festive evening with the entire syndicate community, in an effort to raise proceeds for an important charity (listed below). Note:  This is a street-wide event, in which all attendees are welcome (i.e., non-members/members, males/females).

Venue details are as follows:

Date:            Wednesday, November 30, 2016

Time:            6:00pm – 10:00pm

Location:     Brasserie 8 ½

9 West 57th Street (Between 5th/6th Ave)

New York, NY 10017

Cost of the event is $150.00 per person, which includes Hors D’oeuvres, Buffet Dinner and Open Bar. Raffle tickets will be sold at the venue (cash only) to fund the selected charity.

Please use the following link to register and submit payment for all  guests, prior to November 23rd:

https://www.eventbrite.com/e/wsa-holiday-charity-gala-tickets-28511792539

If you are interested in making a generous donation for this event, please contact Gina Kashinsky at gina.kashinsky@ipreo.com or 212.849.0363.  All donations are welcomed and appreciated!

We look forward to commencing the holiday season with you all in the most benevolent fashion!

 

A Word About the Women’s Syndicate Association     


With over 250 active members, including alumni, the Women’s Syndicate Association or “WSA” is valued for its success in helping women form lasting ties with colleagues across the financial services industry.  The WSA sponsors a wide variety of events throughout the year to create unique opportunities for its members to meet and share their experiences.  Through the Women’s Syndicate Association, members have been able to build mutually beneficial relationships that stretch from the workplace to their home life.  The “QC” is only too happy to promote the WSA for all they do to give back to wonderful causes 365 days of the year!  Chances are that most of my 3,500+ readership group, especially those in syndicate, have been attending the annual WSA shindig for years.  Let’s remember all the hard work the members of WSA do away from their meaningful annual reception as in the case of their latest fundraiser for Strong Women Strong Girls.

WSA’s 2016 Beneficiary: Strong Women Strong Girls (SWSG)

Founded in 2004, this non-for-profit organization is dedicated to mentoring females in under-resourced communities to build strength and empowerment. Strong Women, Strong Girls strives to support positive mentoring relationships between college women and pre-adolescent girls in underserved local communities with the vision that every girl realizes her inner strengths to dream and do.

Some glaring FACTS about women and girls that you need to know:

o   Today, a girl’s self-esteem peaks in the 4th grade, when she is just 9 years old.

o   Today, women represent only 11% of the engineers in the work force.

o   Today women make up only 18% of the House of Representatives.

o   Today, working women are only paid 2/3 of what men make doing the same job.

o   Today, only 3% of women are CEO’s of Fortune 500 companies.

 

Those statistics need to be changed for the 52% of the world’s population – who are women.

And now the ask – please find it in yourselves to attend the upcoming WSA event and/or donate to this wonderful worthy cause that helps empower women to achieve their full potential.  Strong women make a difference in our world, our industry and in our personal lives.  As they say at SWSG: “Strong girls will dream farther; Strong women will help them get there.”  I’ll also add that dedicated and encouraging men will co-sign and support those dreams and achievements!  There’s everything right about this folks so get your check books out and write one to SWSG.  I donated today as well.

Please use the following link to register and submit payment for all  guests, prior to November 23rd:

https://www.eventbrite.com/e/wsa-holiday-charity-gala-tickets-28511792539

If you are interested in making a generous donation for this event, please contact Gina Kashinsky at gina.kashinsky@ipreo.com or 212.849.0363.  All donations are welcomed and appreciated

As they say at Strong Women, Strong Girls:

Succeed like a girl.

There is no ceiling.

Thank you and have a great evening!
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 and Sizes (more…)

Mischler IG Corporate Debt Comment Weekend Edition-Best & Brightest
October 2016      Debt Market Commentary   

Quigley’s Corner 10.07.16 IG Corporate Debt Comment-QC Weekend Edition-Best & Brightest

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

Investment Grade Credit Spreads (by Rating/Industry)

Lipper Report/Fund Flows – Week ending October 5th  

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab 

It was a very well telegraphed and welcome no-print Friday today, at least as of this writing.  Next week hosts two holidays – Columbus Day Monday and Yom Kippur Wednesday. They’ll combine with earnings blackouts to keep a damper on IG issuance that is expected to be similar to this week.  However, beginning next Friday the FIGs release Q3 earnings with reports from Citigroup, J.P. Morgan and Wells Fargo on Friday the 14th followed by BAML on Monday the 17th, Goldman Sachs on Tuesday the 18th and Morgan Stanley on Wednesday the 19th.  The hope and the “chatter” suggests they will post positive earnings.  With a trend toward hawkish Fed-speak and decent numbers today despite a 0.1% rise in the Unemployment Rate from 5% from 4.9%, the expectation is that IG issuance will pick up considerably the week after next – so, beginning Monday, October 17th.

But, why rely on little old me when I am here to bring you 23 of syndicate’s “cream of the crop” when it comes to all things new issues?  Read what the “Best and the Brightest” have to say just below.  All the comments, all the numbers, all the data!  You too can become a syndicate guru!  Sit back, relax and enjoy the read and then have a great weekend!

 

IG Primary & Secondary Market Talking Points – Strong Market Tone Judging by Secondary Trading Levels of This Week’s New Issues – 80% Tighter!

 

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 30 deals that printed, 24 tightened versus NIP for a 80.00% improvement rate while only 6 widened (20.00%).

  • For the week ended October 5th, Lipper U.S. Fund Flows reported an inflow of $1.396b into Corporate Investment Grade Funds (2016 YTD net inflow of $39.321b) and a net inflow of $1.908b into High Yield Funds (2016 YTD net inflow of $11.352b).
  • 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 +135 vs. +136.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +185 vs. +186.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.3b on Thursday versus $18.7b Wednesday and $15.8b the previous Thursday.
  • The 10-DMA stands at $16.1b.

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

 

IG Corporate New Issuance This Week
10/03-10/07
vs. Current
WTD – $13.60b
October 2016 vs. Current
MTD – $13.60b
Low-End Avg. $17.35b 78.39% $87.83b 15.48%
Midpoint Avg. $18.54b 73.35% $88.59b 15.35%
High-End Avg. $19.74b 68.90% $89.35b 15.22%
The Low $15b 90.67% $75b 18.13%
The High $26b 52.31% $125b 10.88%

 

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

 

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  21 of those participants are among 2016’s top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  Today’s cumulative underwriting percentage of the participating desks was 80.88% 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:

“Good morning all, TGIF and how much are you looking forward to the long 3-day Columbus Day weekend?  We missed this week’s IG Corporate syndicate midpoint average forecast by nearly 27% or $13.60b vs. $18.54b.  Although only 30 tranches this week including SSA, investors remain starving for IG credit witness yesterday’s 8.75x bid-to-cover rate on Western Gas’s $200mm tap and Harvard achieving the lowest yield for a 30yr and the 3rd lowest 30yr coupon while tying for the 4th lowest 30yr spread at T+70 and then topping that achievement with the lowest 40yr coupon in history at 3.30% vs. Home Depot’s 2nd place 3.50% a resounding 20 bps away!  There’s lots of money waiting to fly into IG credit product and with 13 IG deals in the pipeline and FIGs a week away from beginning Q3 earnings releases one has to think there is supply coming in the next couple of weeks.  


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

 

o   NICS:  4.36 bps

o   Oversubscription Rates: 4.20x

o   Tenors:  12.16 years

o   Tranche Sizes: $523mm

Versus last Friday’s four key primary market driver averages, NICs widened 1.65 bps to 4.36 bps vs. 2.71 bps while oversubscription rates pointed to increasing demand for IG credit gaining 0.68x to 4.20x vs. last week’s 3.52x bid-to-cover rate.  Average tenors again extended by 1.65 years to 12.16 years vs. 10.51 years and tranche sizes also reduced again by $123mm to $523mm vs. $646mm.  

 For the week ended October 5th, Lipper U.S. Fund Flows reported an inflow of $1.396b into Corporate Investment Grade Funds (2016 YTD net inflow of $39.321b) and a net inflow of $1.908b into High Yield Funds (2016 YTD net inflow of $11.352b).

 Week-on-week, BAML IG Master Index tightened 4 bps to +139 vs. last Friday’s +143 close.  Spreads across the four IG asset classes also tightened 3.75 bps to 29.75 vs. 33.50 as measured against their post-Crisis lows.  Looking at the 19 major industry sectors, spreads tightened 3.74 bps to an average 35.42 vs. 39.16 also against their post-Crisis lows.

Lastly, now that you have all the intel and data done for you, allow me to exercise the Quig Pro Quo by asking, ”what is your forecast for IG Corporate new issuance next week?  Numbers are GREAT but thoughtful responses are really quite compelling to the 3,500 readers of the “QC” and are most appreciated by the guy-in-the-corner!”  

Wishing you and yours a safe, healthy and happy Columbus Day weekend! –Ron

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

 

This section available exclusively to Quigley’s Corner DL subscribers

 

Syndicate IG Corporate-only Volume Estimates for Next Week

 

IG Corporate New Issuance Next Week
10/10-10/14
Low-End Avg. $14.15b
Midpoint Avg. $15.02b
High-End Avg. $15.89b
The Low $10b
The High $20b

 

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

Next Week
10/10-10/14
1: 10b
1: 12b
1: 12.5b
4: 10-15b
9: 15b
1: 16b
4: 15-20b
2: 20b

 

Wishing you and yours a fabulous long Columbus Day weekend!
Ron

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

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s this week’s day-by-day re-cap of 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.
10/03
TUES.
10/04
WED.
10/05
TH.
10/06
FRI.
10/07
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
AVERAGES
WEEK 9/12
New Issue Concessions 2.44 bps 3.5 bps 15 bps <3.33> bps N/A 4.36 bps 2.71 bps 0.69 bps 4.66 bps
Oversubscription Rates 3.80x 3.32x 4.61x 5.58x N/A 4.20x 3.52x 3.23x 3.47x
Tenors 10.18 yrs 7.06 yrs 10.48 yrs 25.62 yrs N/A 12.16 yrs 10.51 yrs 9.36 yrs 11.28 yrs
Tranche Sizes $650mm $475mm $428mm $387mm N/A $523mm $646mm $964mm $710mm

 

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 30 deals that printed, 24 tightened versus NIP for a 80.00% improvement rate while only 6 widened (20.00%).

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

 

                     Issuer                    Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
Pres. & Fellows of Harvard
College
Aaa/AAA 3.15% 7/15/2046 500 +80a +70 the # +70 +70 65/63
Pres. & Fellows of Harvard
College
Aaa/AAA 3.30% 7/15/2056 500 +100a +90a (+/-2.5) +87.5 +87.5 83/81
Public Storage A3/BBB+ 4.90% PerpNC5 350 4.90%a 4.90% the # 4.90% $25 Pfd $24.72/.76
Western Gas Partners LP
(tap) New total: $600mm
BBB-/BBB- 5.45 4/01/2044 200 +312.5-325
mid = +318.75a
+280a +280 +280 274/270
AFDB Aaa/AAA FRN 6/15/2020 600 3mL+19a 3mL+19a 3mL+19 3mL+19 3mL+20/18
MassMutual Glbl. Funding Aa2/AA+ 1.55% 10/11/2019 600 +low 70s/+72.5a +62a (+/-2) +60 +60 58/56
MTN (Mauritius) Investments Limited Baa3/BB+ 5.373% 2/13/2022 500 5.375-5.50% 5.375% the # 5.375% $100.00 410/405
MTN (Mauritius) Investments Limited Baa3/BB+ 6.50% 10/13/2026 500 6.50%a 6.50% the # 6.50% $100.00 460/455
Spectra Energy Partners LP Baa2/BBB 3.375% 10/15/2026 600 +200a +170a (+/-3) +167 +167 164/162
Spectra Energy Partners LP
(tap) New total: $700mm
Baa2/BBB 4.50% 3/14/2045 200 +237.5a +205a (+/-3) +202 +202 200/202
Tanger Properties Ltd. Part.
(tap) New total: $350mm
Baa1/BBB+ 3.125% 9/01/2026 100 +165a +155a (+/-2) +153 +153 152/148
UPL Corporation Limited Baa3/BBB- 3.25% 10/13/2021 500 +220a +200 the # +200 +200 195/192
Kommunivest Aaa/AAA 1.00% 11/13/2018 500 MS+5a MS+5 N/A +26.9 27/25
World Bank “IBRD” Aaa/AAA FRN 10/13/2020 500 3mL+10a 3mL+10a 3mL+10 3mL+10 3mL+11/9
ERP Operating LP A-/A- 2.85% 11/01/2026 500 +140a N/A +125 +125 119/117
National Retail Properties Baa2/BBB- 5.20% PerpNC5 300 N/A 5.25%a 5.20% $25 Pfd $24.88/92
Realty Income Corp. Baa1/BBB+ 3.00% 1/15/2027 600 +170a +150a (+/-5) +147 +147 138/136
Sempra Energy Baa1/BBB+ 1.625% 10/07/2019 500 +85-90 +75a (+/-3) +72 +72 69/67
Korea Housing Fin. Corp.
(covered)
Aa1/NR 2.00% 10/11/2021 500 +100a +85-90 +85 +85 80/78
General Motors Finc’l. Co. BBB-/BBB- FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+127 3mL+127 3mL+121/119
General Motors Finc’l. Co. BBB-/BBB- 2.35% 10/04/2019 750 +155a +145 the # +145 +145 140/138
General Motors Finc’l. Co. BBB-/BBB- 4.00% 10/06/2026 750 +260a +245a (+/-5) +240 +240 222/219
PepsiCo. Inc. A1/A FRN 10/04/2019 250 3mL+equiv 3mL+equiv 3mL+27 3mL+27 3mL+26/24
PepsiCo. Inc. A1/A 1.35% 10/04/2019 750 +55-60 +50a (+/-5) +45 +45 42/40
PepsiCo. Inc. A1/A FRN 10/06/2021 250 3mL+equiv 3mL+equiv 3mL+53 3mL+53 3mL+52/49
PepsiCo. Inc. A1/A 1.70% 10/06/2021 750 +65-70 +60a (+/-5) +55 +55 50/48
PepsiCo. Inc. A1/A 2.375% 10/06/2026 1,000 +90-95 +80a (+/-5) +75 +75 70/68
PepsiCo. Inc. A1/A 3.45% 10/06/2046 1,500 +130-135 +120a (+/-5) +115 +115 113/110
Xylem Inc. Baa2/BBB 3.25% 11/01/2026 500 +200a +170a (+/-5) +165 +165 148/145
Xylem Inc. Baa2/BBB 4.375% 11/01/2046 400 +250a +215a (+/-5) +210 +210 179/176

 

Lipper Report/Fund Flows – Week ending October 5th  

     

  • For the week ended October 5th, Lipper U.S. Fund Flows reported an inflow of $1.396b into Corporate Investment Grade Funds (2016 YTD net inflow of $39.321b) and a net inflow of $1.908b into High Yield Funds (2016 YTD net inflow of $11.352b).
  • Over the same period, Lipper reported a net inflow of $432m into Loan Participation Funds (2016 YTD net outflow of $2.887b).
  • Emerging Market debt funds reported a net inflow of $116.9m (2016 YTD inflow of $6.666b).

 

New Issue Pipeline (more…)

Mischler Military Ethos: The Next Generation
October 2016      Company News, Giving Back, News and Information   

Many military families across the United States (and in other countries) boast a proud tradition of extending their military service legacy down through the generations. At Mischler Financial Group, our senior leaders, including Founder/Chairman Walt Mischler and now, Chief Executive Dean Chamberlain are intimately familiar with the sometimes bittersweet emotion experienced when our children come of age and make the life-changing decision to embrace a path that requires a commitment that can inevitably put our children in harm’s way.

With a sense of pride and admiration (and always a sense of concern), Mischler Financial Group extends a REALLY BIG HOOAH TO RACHEL CHAMBERLAIN, SCHOLAR ATHLETE-ROTC CADET-UCLA CLASS OF ’20 , Pictured below, Cadet Chamberlain (l) joins the incoming Bruin Battalion.

ucla rotc class of '20

(l) Rachel Chamberlain, UCLA ROTC CLASS ’20

 

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

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

 

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

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 28th

IG Credit Spreads (by Rating & Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

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

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

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

o   Global High Yield is down 21%

o   Government and Agency offerings rose 76%

o   Emerging Markets Debt is down 23%

o   Overall Debt Underwriting fees declined 9%

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

This pie chart displays the drama in those numbers:

mischler corporate debt comment

 

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

 

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

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

 

Global Market Recap

 

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

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

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

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

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

o   CDX IG: +0.50 to 75.63

o   CDX HY: +2.30 to 403.45

o   CDX EM: -0.65 to 233.06

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Thank You’s Galore

 

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

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

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

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

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

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

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

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

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

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

 

New Issues Priced

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

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

 

IG

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

 

Indexes and New Issue Volume

 

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

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

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

 

Lipper Report/Fund Flows – Week ending September 28th

     

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

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 33.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 9/30 9/29 9/28 9/27 9/26 9/23 9/22 9/21 9/20 9/19 1-Day Change 10-Day Trend PC
low
IG Avg. 143 143 143 143 142 141 141 142 142 142 0 +1 106
“AAA” 84 84 84 84 83 82 82 83 83 83 0 +1 50
“AA” 87 87 87 86 86 85 85 86 85 85 0 +2 63
“A” 113 114 114 114 113 112 112 113 113 113 <1> 0 81
“BBB” 185 185 185 185 184 183 183 185 184 185 0 0 142
IG vs. HY 354 366 371 375 374 369 368 380 382 383 <12> <29> 228

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 38.95 bps wider versus their post-Crisis lows!

                                    

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

  (more…)

Three’s A Crowd; Durable Goods and Debt Capital Markets-Mischler Comment
September 2016      Debt Market Commentary   

Quigley’s Corner 09.27.16 Durable Goods and Debt Capital Market Issuance

Investment Grade New Issue Re-Cap – Three’s a Crowd

Tomorrow’s Durable Goods Number Should Result in Issuance and Here’s Why:

Global Market Recap

IG Primary & Secondary Market Talking Points

Presidential Debate Ratings Set New Records

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 21th

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Tomorrow’s Calendar

 

Lehigh University stood alone owning today’s IG Corporate calendar with its $150mm 30-year 3(a)4exempt taxable bond, Series 2016 new issue. The reason?  Big problems in Europe.  Three issuers stood down this morning across the pond and ECB President Mario Draghi spoke of a pervasive sense of urgency in the EU in which he urged governments to “act to stem rising public discontent” adding, “they must show that the Union brings tangible benefits to people’s lives.”  (Oh Really????)  He continued with “the ECB cannot sustain the European recovery alone.” (Duh!!!!)  This, after how many years of applying a kick-the-can mentality that segued to helicopter money and a gung ho “whatever it takes the ECB, we’ll do it” attitude.  This is a change of coarse and invites a serious discussion once again about the viability and sustainability of the European Union. Further compounding continental concerns, Deutsche Bank continued as a primary focus and lynchpin to the entire European banking system.  One FIG and one industrial also stood down in the U.S. IG primary markets as well – that I am aware of.

So, when markets are somewhat volatile, as September has been despite $137b IG Corporate and $158b all-in IG, I tend to turn to “go to” contacts for a more detailed discourse.  In other words, those I’ve known forever and who have withstood the test of time.  Believe it or not there aren’t many of THEM around.  They do likewise.  I gave a ring to my favorite Scotsman Mr. Paul Cohen who during his years as a banker at Banque Paribas, BNP Paribas and Dresdner essentially covered most all corporates including some fallen angels.  Besides being an all-around very good guy, he knows his stuff and is a great person for you to reach out to have him add you to his daily disty list.  Paul is a primary market strategist who writes for Bloomberg London covering IG Euro new issuance.  In our inextricably global-linked world economy that I always write about here, minding your dollars and euros makes sense (cents!) Ask him to put you on his loop and please do tell him that the guy-in-the-corner sent you. All free and all informative for each one of YOU! Remember folks, it’s all about timely, accurate information and how you apply it that keeps you on top of your game while better understanding our markets!  So, go ahead and reach out to him.

The Three Musketeers; The Three Little Pigs; The Three Billy Goats Gruff!  Does the power of three really makes things better?  Funnier? Paul and discussed the theory of “threes” this afternoon…….the three deals that stood down that is.  Paul said, “three deals were pulled within 24 hours across the pond as market conditions changed since last week with issuers perhaps needing to be a bit more flexible in terms of their cost of funding expectations.”  He continued………”a flight-to-quality could be in the cards over the next day or two as the market digests the implications of theses pulled transactions beginning with Lufthansa, followed by NordLB and finally Korean Air.” Now, here’s the good part that cuts through the headline –  Lufthansa is a split-rated credit and perceived by many market participants to fall into the lower ratings category due to investment guidelines that typically err on the side of caution while also satisfying the ECB’s CSPP criteria by maintaining one investment grade rating.  NordLB does harbor its own particular “situation” with its shipping business and acquisition of Bremer LB.  Lastly, the Korean Air Lines pull was the result of contagion from Lufthansa.

So, at first blush, market players came in this morning hearing “3 deals were pulled in Europe…..OMG!”  Knowing the smart minds out there and having access to them with a bit of Quig-Pro-Quo thrown in for good measure, reveals a bit more story, a bit more color and a bit more understanding that’s not nearly as frightful as the words Mario Draghi uttered today or that the market is conjecturing as surrounds Deutsche Bank.  Just a helpful tip for you! And a thank you to Paul “Pablo” Cohen.

Tomorrow’s Durable Goods Number Should Result in Issuance and Here’s Why:

 

durable goods reportOn the home front, IG corporates clearly took a breather today which is a good thing.  We have a Durable Goods Orders number out at 8:30am tomorrow morning which is relatively important given recent volatility so, I suspect that number hits first after which if it’s pretty much as expected or <1.5%> we’ll see issuance. The prior number was 4.4% so perhaps it surprises to the upside.  2 out of 3 is 66% so I’ll say I don’t expect it to miss.  Wrightson, for example is generally an outlier but they also happened to be pretty good. They conjecture that tomorrow’s August Durable Goods report will be 1.5% to the upside – a nice swing versus negative expectations.  The reason?  Boeing’s August orders will translate into a 24% increase in civilian aircraft orders in seasonally adjusted terms which will make up for softness elsewhere.  Just putting it out there folks.

 

Global Market Recap

 

o   U.S. Treasuries: 30yr leads UST rally. Bunds & Gilts improved. JGB curve much steeper.

o   Stocks – Bounce back day for U.S. stocks. Europe closed down & Asia rallied.

o   Economic – U.S. consumer confidence stole the show. The strongest since 2007.

o   Overseas economic – China’s industrial profits increased the most in 3 years.

o   Currencies – U.S. outperformed the Euro but lost ground vs. the PND, Yen, CAD & AUD.

o   Commodities – CRB, crude oil, heating oil, gold, copper & silver all down.

o   CDX IG: -1.06 to 78.05

o   CDX HY: +19.57 to 415.59

o   CDX EM: -0.03 to 238.58

*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 1 IG Corporate-only new issue was 10.00 bps.
  • BAML’s IG Master Index widened 1 bp to +142 versus +141.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +138 versus +137.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +190 versus +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.8b on Monday versus $13.3b Friday and $12b the previous Monday.
  • The 10-DMA stands at $15.5b.

 

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

 

IG Corporate New Issuance This Week
9/26-9/30
vs. Current
WTD – $5.75b
September 2016 vs. Current
MTD – $136.518b
Low-End Avg. $22.13b 25.98% $115.45b 118.25%
Midpoint Avg. $23.30b 24.68% $116.02b 117.67%
High-End Avg. $24.48b 22.49% $116.59b 117.09%
The Low $15b 38.33% $80b 170.65%
The High $36b 15.97% $150b 91.01%

 

Presidential Debate Ratings Set New Records

Yesterday, I wrote the following about last evening’s first Presidential debate between Clinton and Trump, “You can watch it on virtually any major broadcast and/or cable news network as all of them will be televising this one.  It WILL break all Presidential debate records by a LOT.” Well, the results are in.  More than 46 million people watched the debate across six broadcast networks according to preliminary Nielsen data released by Univision.  CNN published its own data confirming, along with virtually all media outlets. That’s a new record and 7.7% more than the 42.7mm viewers who watched the first Obama-Romney debate in 2012 on those same six channels.

Including cable news network ratings, the debate audience soared to 83 million viewers officially becoming the most-watched Presidential debate in history breaking the 80.6 million who watched Jimmy Carter debate Ronald Reagan back in 1980.

Yet another good reason for you to stay tuned into the daily “QC.”

Have a great evening!
Ron Quigley, Managing Director / 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. (more…)

GO Bonds- State of Hawaii- Mischler Muni Market Outlook Week of Sept 26
September 2016      Muni Market   

Go Get Your GO Bonds….Mischler Muni Market Update for week commencing 09.26.16 looks back to last week’s metrics and provides a lens focused on selected municipal bond offerings for this week. As always, the Mischler Muni Market snapshot provides public finance investment managers, institutional investors focused on municipal debt and municipal bond market participants a summary of prior week’s muni bond activity, including credit spreads, money flows and a curated view of pending municipal finance offerings scheduled for this week’s pending issuance.

This week’s negotiated market is led by $676.0 million tax-exempt and taxable GO bonds for the State of Hawaii. The competitive market is led by $200.0 million GO bonds for Mecklenburg County, North Carolina on Thursday.

 

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

For reading ease, please click on image below

mischler muni market

 

 

Mischler Financial Group debt capital market expertise, inclusive of Debt Origination, Distribution, Primary Market Access and Secondary Market trading across the full spectrum of fixed income markets is courtesy of our 18-member team of debt market veterans is what makes MFG’s Fixed Income Group a compelling partner to Fortune issuers, corporate treasurers and the world’s leading institutional investors.

To illustrate our presence within the Debt Capital Markets space: since 2014 alone,  Mischler has led, co-managed and/or served as selling group member for more than $500 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, new companies via IPO, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is a federally-certified Service-Disabled Veteran Owned Business Enterprise (SDVOBE) and a recognized minority broker-dealer. Mischler Muni Market updates are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

The Circus Comes To Town (Hempstead, NY) -Mischler Debt Market Comment
September 2016      Debt Market Commentary   

Quigley’s Corner Weekend Edition 09.23.16- The Circus Comes to Town; Ringling Brothers Barnum and Bailey Presidential debates

 

Investment Grade Corporate Bond New Issue Re-Cap – “The Ronald” Pre-Debate Comment

IG Primary & Secondary Market Talking Points

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

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Two IG Corporate issuers took advantage to price new prints this afternoon.  5-BBB First Midwest Bancorp issued a 10-year Subordinated Notes deal and Flowers Foods, Inc. brought an upsized $400mm 10-year Senior Notes deal. So, 2 IG Corporate deals, 2 tranches for a total of $550mm.  Additionally, the SSA space featured the Russian Federation that tapped its outstanding 4.75% due 5/27/2026 to the tune of $1.25b bringing its total amount outstanding to $3b and resulting in a Friday all-in IG day total of 3 issuers, 3 tranches and $1.7b.

As we look toward next week, our IG primary markets will slow down a bit from the rabid pace of these last couple of weeks with roughly $20-25b expected.  I am a big fan of the higher end of supply estimates given Central Bank dovishness, the approach of Q3 earnings and the quickly approaching the circus comes to town (of Hempstead, NY, home of Hofstra University where the first round of the Ringling Brothers Barnum and Bailey Presidential debates will be held on Monday, September 26th.  I am personally looking forward to getting back to some good old fashioned comedy, which I’m sure it will be folks.  Election Day is Tuesday, November 8th so, issuers, bankers and syndicate managers have a window open from now through then after which we’ll enter a period of listening defining and second guessing new administration policies beginning in 2017 and cabinet appointments whoever winds up pulling this election off.  As of now it IS very much up in the air and I expect it to be VERY close as in down-to-the-wire and the dark horse could win this one so DO NOT BE SURPRISED.  Take it from…well, Tthe Ronald! Sorry but I couldn’t resist that one!

Anyway, another great week for the IG DCM.  As this is the “QC’s” Friday edition just scroll below to find out what the top syndicate desks have to say about next week’s forecasts.  I personally err to the upside as I said earlier.  I am calling for $30b+ but do the prudent thing and digest the numbers and more importantly read the thoughts of the Best and Brightest that syndicate has to offer in the section named for them just below a bit.

 

IG Primary & Secondary Market Talking Points

 

  • Flowers Foods Inc. upsized today’s 10-year Senior Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 44 deals that printed, 25 tightened versus NIP for a 57.00% improvement rate while only 14 widened (32.00%) 4 were trading flat (9.00%) and 1 was not available or N/A (2.00%).
  • For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 1 IG Corporate-only new issue that posted price evolution was 17.5 bps.
  • BAML’s IG Master Index tightened 1 bp to +141 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +137 versus +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.5b on Thursday versus $16.3b Wednesday and $15.9b the previous Thursday.
  • The 10-DMA stands at $15.7b.

 

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

 

IG Corporate New Issuance This Week
9/19-9/23
vs. Current
WTD – $38.563b
September 2016 vs. Current
MTD – $130.768b
Low-End Avg. $29.09b 132.56% $115.45b 113.27%
Midpoint Avg. $30.28b 127.35% $116.02b 112.71%
High-End Avg. $31.48b 122.50% $116.59b 112.16%
The Low $20b 192.81% $80b 163.46%
The High $40b 96.41% $150b 87.18%

 

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s this week’s day-by-day re-cap of key primary market driver averages for IG Corporates followed by this week’s and the prior three week’s averages:
Please note that this week’s average tenors and tranche sizes are slightly different than what I posted in the aforementioned question to the Best and Brightest as it reflects today’s two new issues for First Midwest Bancorp and Flowers Foods. Those two issues announced after I sent my survey question out. Thanks for understanding! RQ

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/19
TUES.
9/20
WED.
9/21
TH.
9/22
FRI.
9/23
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 9/12
AVERAGES
WEEK 9/05
AVERAGES
WEEK 8/29
New Issue Concessions <2.81> bps 4 bps N/A 1.92 bps N/A 0.69 bps 4.66 bps 1.30 bps 5.47 bps
Oversubscription Rates 3.15x 2.40x N/A 3.32 bps N/A 3.23x 3.47x 3.23x 2.18x
Tenors 12.13 yrs 8 yrs N/A 8.05 yrs 10 yrs 9.36 yrs 11.28 yrs 9.42 yrs 4.47 yrs
Tranche Sizes $1,426mm $642mm N/A $852mm $150mm $964mm $710mm $719mm $820mm

 

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

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

“Good morning and a Happy Friday to you!  One heck of a week eh?  We blew right past this week’s syndicate midpoint average forecast by 26% or $38.16 vs. $30.28b. We also surpassed the syndicate estimates for September IG Corporates by 12% or $130.36b vs. $116.02b……with another week to go!  All-in IG supply including SSA issuance is now at $151.96b.  That represents the fourth busiest month of this prolific year. To put that into proper context, $4b more of all-in supply puts this month into 9th place all-time; $27b puts us third place ALL-TIME.

This week hosted more dovishness from the FOMC and BOJ that fueled yesterday’s $17+b corporate supply.    Here are this week’s IG Corporate-only key primary market driver averages:

 

o   NICS:  0.69 bps

o   Oversubscription Rates: 3.23x

o   Tenors:  9.33 years

o   Tranche Sizes: $1,000mm

 

Versus last Friday’s four key primary market driver averages, NICs tightened 3.97 bps to 0.69 vs. 4.66 bps. while oversubscription rates remain strong at 3.23x losing 0.24x vs. last week’s 3.47x bid-to-cover rate.  Average tenors contracted 1.95 years to 9.33 years vs. 11.28 years but tranche sizes swelled significantly by $290mm to an even $1b vs. last week’s average $710mm.   

For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b). 

Week-on-week, BAML’s IG Master Index tightened 2 bps to +141 vs. last Friday’s +143 close.  Spreads across the four IG asset classes tightened 2 bps to 31.50 vs. 33.50. Looking at the 19 major industry sectors, spreads tightened by 1.74 bps to an average 38.00 vs. 39.74 off their post-Crisis lows..
And now I ask the question what are YOUR thoughts and number for next week’s IG new issue volume? 

 (canvass results of fixed income syndicate desks is available exclusively to recipients of the QC Distribution List)

Have a great weekend!
Ron (“The Ronald”) Quigley, Managing Director / Head of Fixed Income Syndicate

(Above canvass results of fixed income syndicate desks is available exclusively to recipients of the QC Distribution List) Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.)  (more…)

In Advance of Fed and BoJ Comments, Corporate Debt Issuers Sidelined
September 2016      Debt Market Commentary   

Quigley’s Corner 09.21.16 No Prints and No Rate Increases; Corporate Debt Issuers Sit it Out

 

Investment Grade New Issue Re-Cap 

A Big Red Zero – Land of the Rising “None” as BoJ Keeps Rates at <0.1%> & Introduces More Shifts to Policy

“Fed” Up with Rates, FOMC Holds; November Increase Has No Chance Pre- Election and Santa Claus is Coming to Town…with Coal?

All You Want and Need to Know About Today’s Fed Decision

In Janet’s Words

IG Primary & Secondary Market Talking Points

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

Investment Grade Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

It was a no print day today as corporate debt issuers respected both the impact of the BoJ and FOMC.

dewey moment mischler debt market Not so fast my friends…..not so fast!  It’s not exactly a “Dewey Defeats Truman” moment. Still, let’s call it like it is folks – I did say “the next best thing to having tomorrow’s newspaper today is the ‘QC’”.  Then on Monday, September 19th and alluding to today’s BoJ and FOMC rate decisions, I wrote, “Fed Holds; BoJ Cuts Rate and Then Some.” Well, I guess it’s not “tomorrow’s newspaper today” but I still think it’s the “next best thing to it.” The Fed Held, the BoJ introduced new fringy though convoluted easing details (“and then some”) but the BoJ kept rates unchanged.  Two out of three isn’t bad, but that’s why it’s “the next best thing.” If I played baseball, I’d be in the Hall of Fame with a .666 average.  Joking aside, a Fed that infers raising rates by December should have hiked rates today, but they didn’t. This is more of the same readers.  Look for Fed members – both voting and non-voting – to continue giving speeches and appearing on television to opine about the rate flux that has restricted so many from doing so much.  The street is the leader; the Fed is the ultimate laggard.  It’s how it is.  Today was more of the same. No surprise at all.  The government should consider issuing a gag order on any and all Fed-speak in between meetings for all members, both voting and non-voting.  They only confuse the situation and shock markets.

First up, let’s look at what the BoJ did while we were in REM sleep this morning:

A Big Red Zero – Land of the Rising “None” as BoJ Keeps Rates at <0.1%> & Introduces More Shifts to PolicyBoJ Mischler Debt Market Comment

Central Banks from the FOMC to the BOE and from the ECB to the BoJ all seem to be pointing to the downside risks to continued rate cuts while at the same time highlighting that monetary policy needs to be substantially accommodative while calling on governments to share more of the economic burdens. Here’s what’s clear: growth is anemic to non-existent, inflation unchanged to nowhere, accommodative policies are manifesting themselves in new policy twists and turns and big government needs to get more involved.  Hmmm…..sounds like things aren’t quite working out, eh?

 

Here are the talking points from this morning’s BoJ announcement:

 

o   The BoJ left interest rates at its still record low <0.1%>.

o   Committed to intervene until inflation reaches 2% and remains stable above that level.

o   Will cap 10-year yields at 0.00% by continuing to buy 10yr JGBs implying that the BoJ must continue intervening to prevent borrowing costs from rising and to ensure that it can borrow for a decade for free.

o   Changed its policy from a focus on a base money target to controlling the yield curve.

o   Pledged to maintain its government bond-buying in line with ¥80 trillion annually while buying fewer long-dated maturities hoping to pump up long-term interest rates thereby helping banks boost profits. There was no expansion of its current quantitative easing program.

 

Will this new approach be effective?  Only time will tell.  It certainly is a shift in monetary policy to control the yield curve. It is NOT a bazooka by any stretch and more like “fiddling around the edges.”  As for the 2.00% target? Folks, we all know that’s a loooong way off. Market participants have a lot of questions with many sharing that the “BoJ should’ve just cut rates again.” Equity markets loved the news. The DOW closed up 163, the S&P was in the black 23, the VIX compressed over 2.5 and CDX27 tightened 3.2 bps.

“Fed” Up with Rates, FOMC Holds; November Increase Has No Chance Pre- Election and Santa Claus is Coming to Town…with Coal?

The Fed held rates albeit the subsequent press conference was more optimistic, if one can call it that, saying the economy appeared “slightly balanced” and “the case for an increase in the fed funds rate strengthened but decided, for the time being to wait for further evidence of continued progress toward its objectives.”  You all know about the myriad global event risk factors out there.  There are so many that on any given day in our inextricably global-linked world economy, should one or several of them get worse, which is entirely plausible-to-likely, the Fed can skirt around a hike by once again pointing to global events, as they have in the past, to justify standing down.  In fact, in its statement Chair Yellen said, “we will closely monitor inflation and global developments.” What’s more, the next FOMC meeting will be held on November 1srt and 2nd and is not associated with a Summary of Economic Projections or a press conference by Yellen. It is highly unlikely that the Fed raises rates in November given that the meeting will take places 6 days before one our nation’s most tumultuous and raucous elections.  Last year saw one rate hike to close out 2015 at its December meeting.  Santa Claus will be coming to town early at the year’s last meeting of 2016 held December 13th-14th …………..but don’t be surprised to find coal in the stocking.

Folks, Q3 is about over.  You hear that sound?   That’s the sound of trucks?  They’re backing up to print between now and Election Day – BIG TIME. 12 IG issuers are in the pipeline with a whole lot of M&A deals getting closer.

Here’s All You Want and Need to Know About Today’s Fed Decision

o   The FOMC kept rates unchanged as three officials dissent for a hike.

o   George, Mester, Rosengren dissented in favor of a hike.

o   Case for rate hike strengthened as forecast shows a 2016 increase.

o   Fed “decided to wait for the time being for additional evidence.”

o   Reiterates they expect the economy to “warrant only gradual hikes.”

o   FOMC repeats it will closely monitor inflation and global developments.

o   Job market continued to strengthen and economy picked up.

o   Says “job gains are solid and household spending is growing strongly.”

o   Market-based measures of inflation remain low.

o   Sees inflation rising to 2% over the medium term.

o   Business fixed investments has remained soft.

o   Near-term risks to its outlook “appear roughly balanced.”

o   Maintains its reinvestment policy.

 

In Janet’s Words

o   “FOMC policy should help economy move toward goals.”

o   “Economic growth appears to have picked up.”

o   “Economy to expand at moderate pace in next few years.”

o   “Pace of job gains above rate needed for new entrants.”

o   “Unemployment measures show more people seeking jobs.”

o   “PCE inflation still short of 2% objective.”

o   “Can’t take inflation expectations stability for granted.”

o   “Don’t want to overshoot inflation goal significantly.”

o   “We chose to wait for more evidence of progress.”

o   “On current course, some gradual hikes will be warranted.”

o   “There appears little risk of falling behind curve.”

o   “We’re generally pleased with how U.S. economy is doing.”

o   “Seeing evidence economy is expanding more strongly.”

o   “We’re not seeing pressures suggesting overheating.”

o   “Economy has a little more room to run than thought.”

o   “Zero lower bound is a concern.”

o   “My colleagues and I discussed timing of next rate hike.”

o   “Most of us judged it sensible to wait for more evidence.”

o   “Monetary policy is somewhat accommodative.”

o   “Should be concerned about risks from reach for yield.”

o   “Most of my colleagues agree with my Jackson Hole remark.”

o   “Of course we’re worried bubbles could form.”

o   “Soundness of banking system has improved substantially.”

o   “Less disagreement on FOMC than you might think.”

o   “Important to have a range of views expressed on the FOMC.”

o   “We don’t discuss politics at our meetings.”

 

Global Market Recap

 

o   FOMC – Unchanged as expected but there were 3 dissenters. Dots were dovish (again).

o   BOJ – Main policy target is the yield curve from the monetary base (rates unchanged).

o   U.S. Treasuries – Closed mixed & flatter. USTs traded better after the FOMC/Yellen.

o   Overseas Bonds – Europe was unchanged to red & steeper. JGB’s was all red & flatter.

o   Stocks – Strong session for U.S.

o   Overseas Stocks – Europe closed higher. Nikkei rallied & China small gains.

o   Economic – Nothing of note in the U.S. Data in Japan was weak.

o   Currencies – USD lost ground vs. all of the Big 5. The Yen was very strong.

o   Commodities – CRB, crude oil, gold & silver were all well bid.

o   CDX IG: -3.25 to 78.44

o   CDX HY: -18.52 to 391.26

o   CDX EM: -12.30 to 230.74

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index was unchanged at +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +139 versus +140.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.1b on Tuesday versus $12b Monday and $15.8b the previous Monday.
  • The 10-DMA stands at $15.4b.

 

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

 

IG Corporate New Issuance This Week
9/19-9/23
vs. Current
WTD – $20.963b
September 2016 vs. Current
MTD – $113.168b
Low-End Avg. $29.09b 72.06% $115.45b 98.02%
Midpoint Avg. $30.28b 69.23% $116.02b 97.54%
High-End Avg. $31.48b 66.59% $116.59b 97.06%
The Low $20b 104.81% $80b 141.46%
The High $40b 52.41% $150b 75.45%

 

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

 

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

Fed NOT Raising Rates-Mischler Debt Market Comment
September 2016      Debt Market Commentary   

Quigley’s Corner 09.15.16 Fed Not Raising Rates

 

Investment Grade Corporate Debt New Issue Re-Cap – IG Lotto:Corporate Volume Tops Weekly Syndicate Estimates

 Global Market Recap

All You Need to Know About Today’s Bank of England Meeting

IG Primary & Secondary Market Talking Points

Fixed Income Syndicate IG Corporate-only Volume Estimates for September

New Issues Priced

Lipper Report/Fund Flows

IG Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Today’s winning lotto numbers are 11-16-945 as in 11 IG Corporate issuers, priced 16 tranches totaling $9.45b.  With that amount we have officially broken through this week’s syndicate midpoint average forecasts by over 7% or $39.745b vs. $36.91b. Notable today was that 4 issuers upsized their transactions from initial morning announcement sizes.

Remember what I wrote this past Monday folks (Check your “QC” dated 9/12/2016.  – “Look folks, the Fed is not raising rates this year.  Many sight December as the next hike but it’s not happening.” The world can barely stand on two feet let alone get economic engines back to growth mode.  Today’s numbers confirm that. With that, read my lips, or read my commentary, but the take-away is the same: Fed NOT Raising Rates (at least not anytime soon, nor with any degree of significance that would upend the current global financial market environment).

Global Market Recap

 

  • S. Treasuries – USTs closed mixed with steeper curve. 5/30’s has steepened 10 days in a row.
  • 3mth Libor – Set at its highest yield (0.85656%) since May 2009.
  • Stocks – US stocks with a strong rally. FTSE leads Europe higher. Nikkei had a bad day.
  • Economic – Very disappointing day on the U.S. economic front.
  • Currencies – USD mixed & little changed vs. Euro & PND but lost ground vs. Yen/CAD/AUD.
  • Commodities – Crude eked out a gain, heating oil higher & gold lost ground.
  • CDX IG: -3.0 to 74.31
  • CDX HY: -11.76 to 405.92
  • CDX EM: -5.58 to 255.94

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

-Tony Farren

 

All You Need to Know About Today’s Bank of England Meeting

 

  • BOE Sees chance of another rate cut this year but holds today at 0.25%; Vote 9-0.
  • BOE keeps gilt purchase plan at £435b; Vote 9-0.
  • Holds corporate bond plan at £10b; Vote 9-0.
  • Monetary Policy Committee Majority expect rate cut “if” August outlook is confirmed.
  • Initial impact of August stimulus is “encouraging.”
  • Some near-term indicators are “better than expected.”
  • Inflation reaching 2% target in first half of 2017.
  • Lower bound is close to but a bit above, zero.
  • Second half slowdown may be less severe than previously forecast.
  • Cannot infer from near-term about 2017 or 2018 projections.
  • MPC view of “contours of economic outlook” are unchanged.
  • Hawkish BOE members Forbes, McCafferty say extra gilt purchases still not warranted.

 

IG Primary & Secondary Market Talking Points

 

  • Kite Realty Group LP upsized today’s 10-year Senior Notes new issue to $300mm from $250mm at the launch and at the tightest side of guidance.
  • CCL Industries Inc. increased today’s 10-year Senior Notes new issue to $500mm from $400mm at the launch and at the tightest side of guidance.
  • Dairy Farmers of America Inc. bumped up its new $1,000 par PerpNC10 cumulative preferred securities, Series “C” new issue to $150mm from $100mm at the launch and at the tightest side of guidance.
  • Pitney Bowes Inc. boosted its 5-year Senior Notes new issue to $600mm from $400mm at the launch.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 16 IG Corporate-only new issues was 23.34 bps.
  • BAML’s IG Master Index widened 1 bp to +143 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +191.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17b on Wednesday versus $15.8b Tuesday and $16.5b the previous Wednesday.
  • The 10-DMA stands at $14b.

(more…)

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

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

 

Investment Grade New Issue Re-Cap

Global Market Recap

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

IG Primary & Secondary Market Talking Points

New Issues Priced

New Issue Volume

Lipper Report/Fund Flows – Week ending September 7th

Investment Grade Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

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

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

 

Global Market Recap

 

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

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

-Tony Farren

 

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

 

 3M Corp-new-debt-issuance

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

 

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

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

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

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

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

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

 

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

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

 

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

 

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

 

Diversity & Inclusion Story

 

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

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

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

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

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


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

 

IG Primary & Secondary Market Talking Points

 

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

 

Syndicate IG Corporate-only Volume Estimates for September

 

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

 

 

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

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