Browsing articles tagged with "NYSE:BA Archives - Mischler Financial Group"
Janet Yellen Valentine’s Day Message; Healthcare M&A Break-Ups
February 2017      Debt Market Commentary   

Quigley’s Corner -Valentine’s Day With Love From Janet Yellen; No Love for Healthcare M&A

 

Investment Grade New Issue Re-Cap

Insure This! – Anthem for Cigna, like Aetna for Humana, is Dead in the Water – $91b in M&A Erased By Two Deals

IG Primary & Secondary Market Talking Points

Global Market Recap

Key Talking Points of Fed Testimony

Three Rates Hikes in 2017? .HIGHLY Improbable or “You Gotta Be Kiddin’ Me!”

Next Up – Greece, Grexit, France & Frexit

Tony’s Take on Today’s Fed Testimony

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

The Boeing Company $300mm 30-year Deal Dashboard

Happy Valentine’s Day to All the Ladies Among My “QC” Readership

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 February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

5 IG Corporate issuers priced 9 tranches between them totaling $9.90b.  The SSA space hosted a 2-part 3-year FXD/FRN from JBIC adding $2b to the mix.

The all-in IG day total was 6 issuers, 11 tranches and $11.90b.

 

The WTD IG Corporate total is now $16.60b or 78% of this week’s syndicate midpoint average calling for $21.33b.


Can’t Insure This! – Anthem for Cigna, like Aetna for Humana, is Dead in the Water – $91b in M&A Erased By Two Deals

You’ve read about the Anthem for Cigna merger in my M&A Pipeline near page bottom for months now.  Well, today, Cigna terminated its $54b merger agreement with Aetna following a federal judges rejection.  Let’s trace back the story. 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 was expected to close sometime during the second half of 2016. The merger would have involved 53mm members and would include $22b in new debt and loans. However, in light of a federal judge’s ruling on Monday, January 23rd that another proposed insurance merger – the $37b deal between Aetna and Humana should not be allowed to consummate due to antitrust issues it remained to be seen if the Anthem/Cigna merger would meet the same fate especially given the former deal size involved $17bn more the former. That two rejected deals have taken $91b out of the M&A pipeline. 

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs thru the launch/final pricing of today’s 9 IG Corporate-only new issues was <15.78> bps.
  • BAML’s IG Master Index tightened 2 bps to +126 vs. +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.20 vs. +121.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +167.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.7b on Monday versus $18.2b on Friday and $15.5b the previous Monday.
  • The 10-DMA stands at $20.2b.

 

Global Market Recap

 

  • Fed Chair Yellen: Hawkish but the markets are not so sure she is that hawkish.
  • U.S Treasuries – Closed in the red on Yellen but closed well off the session low prices.
  • Overseas Bonds – JGB’s mixed & steeper. Europe followed Treasuries down.
  • Stocks – Even a hawkish Yellen cannot keep U.S. stocks down (record highs again).
  • Overseas Stocks – Japan had a poor day. China unchanged. Europe at a 1 year high.
  • Economic – U.S. PPI data m/m was higher but the y/y data was not.
  • Overseas Economic – China inflation higher. Japan IP solid. EU data disappointing.
  • Currencies – USD rallied on the Yellen testimony. DXY Index back over 101.
  • Commodities – Crude oil small gain, gold unchanged, silver better & cooper red.
  • CDX IG: -0.12 to 63.15
  • CDX HY: -0.48 to 317.89
  • CDX EM: -3.18 to 208.93

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

-Tony Farren


Key Talking Points of Fed Testimony

Federal Reserve Chair Janet Yellen testified before the Senate today delivering her Semiannual Monetary Policy Report to Congress.  The big headline statement is when Yellen  said the Committee would like a balance sheet that is substantially smaller and only comprised of Treasuries.  It was the Chair’s most hawkish comment of the day.

Here are the key takeaways:

  • Fed Chair Yellen: Will evaluate progress at “upcoming meetings.”
  • “Too early to know” fiscal policy and its effects on outlook.
  • Fiscal policy should focus on improving long term economic growth.
  • Business sentiment has “noticeably improved” in the past few months.
  • U.S. monetary policy “remains accommodative.”
  • Expects the economy to continue to expand at a moderate pace.
  • Fiscal changes should put accounts on a sustainable trajectory.
  • FOMC expects neutral Fed Funds Rate to rise somewhat over time.
  • Pace of global economic activity should pick up over time.
  • Waiting too long could disrupt financial markets and result in recession.
  • Waiting too long to remove accommodation is “unwise.”
  • Fiscal policy change could affect the economy and is only one factor.
  • Further hikes are appropriate if employment and inflation evolve w/expectations.
  • Yellen repeats that waiting too long to tighten “would be unwise.”
  • Further adjustments are likely needed if the economy is on track.
  • Fed to adjust rate path views as outlook evolves.
  • Says changes in fiscal policy could affect outlook.
  • Too early to know what policies will be put in place.
  • Stresses importance of policies that lift productivity.
  • Rate decisions to be aimed at meeting the Fed’s twin goals.
  • Keeping the Fed balance sheet large supports accommodation.
  • Economy has continued to make progress toward the Fed’s goals.
  • Reassuring market-based inflation compensation has risen.
  • FOMC reaffirms long-run symmetrical inflation goal of 2%.

 

  • Wages have picked up, labor market improvement widespread.
  • Says jobless rate is in line with long-run normal estimates.
  • Business sentiment has improved in the past few months.
  • Recent rise in mortgage rates may restrain housing somewhat.
  • FOMC’s longer run goal is to shrink its balance sheet.
  • We hope asset purchases were unusual intervention.
  • Would anticipate the balance sheet eventually being much smaller.
  • Fed doesn’t want to use its balance sheet as an active policy tool.
  • The FOMC wants to rely on rate changes for policy.
  • Stopping reinvestment to happen in a gradual and orderly way.
  • Wants to wait until normalization is well under way.
  • The FOMC will discuss balance sheet strategy in the coming months.


Three Rates Hikes in 2017? .HIGHLY Improbable

Now let’s first sit back a second and re-evaluate the thought of three rate hikes in 2017.  In each of the last two years the lone annual rate hike came in December.  The chances of a rate hike in March increased from 12% to a resounding 18%. In other words “big deal!”  There is no rate hike coming in March.  Next, next look at Western Civilization.  There are critical elections in the EU with Holland up first on March 15th.  Geert Wilders is ahead in that election. He represents the far-right Party for Freedom or the “PVV”.  He is expected to gain the most seats in that general election.  Among his notable campaign promises – for which there is significant support – is to leave the Euro and the EU as well as close down all the mosques in Holland.  Okay!  You see where this is going?
Next up, France. Marine Le Pen, head of the National Front is ahead of her rival Francois Fillon, the latter bogged down by Penelope-gate, by 2-3%.  As each day goes by Le Pen is getting stronger and stronger as her message resonates with and reflects that of “true” France.  The second round or “run-off” election in May shows Le Pen behind but dramatically closing the gap. She is now trailing 58% to 42% and gaining each day. Just over a week ago the numbers were 73% to 37%. Remember the Trump election.  A voice in France WILL BE HEARD!  Among Le Pen’s promises is to also leave the EU and take back France’s wonderful but rapidly dying culture.

German elections then follow in September with Angela Merkel losing ground to Socialist Party leader and secondary school drop-out Martin Schulz. Polls currently show Merkel barely ahead 33% to 32%.  Germany’s far-right Alternative for Deutschland Party (AfD) is set to win its first parliamentary seats and thus far has captured 10% of the Hinterland’s support……interesting to say the least!

By the time this all plays out Yellen will be into late September not counting adjustment periods and shocks to the system. Oh yes, I haven’t even begun to discuss Greece so, while I’m on that topic let’s do it –

Next Up – GreeceA Global Macro View

Greece never ever went away. Greece was simply outperformed in the media by BREXIT, the U.S. Presidential election, the new Administration and the aforementioned EU elections. Let’s take a look at some of the major problems confronting the Hellenic Republic shall we? Thanks to friend and former colleague Dr. Scott MacDonald, Chief Economist for Smith’s Research and Gradings for his meaningful discourses and today’s piece titled, “Can the EU Stop Yet Another Greek Debt Crisis?” Thanks Doc!

 

  • Greece needs creditors to release a €10.3b tranche from its 2015 bail out agreement to fulfill its debt obligations and avoid default.
  • Given the aforementioned issues playing out in the EU (BREXIT, the various elections, immigrations, sweeping nationalism/populism), Greece is once again the potential linchpin for the future EU.
  • The Greek economy has contracted by 26% since 2009.
  • Unemployment hovers at 20%.
  • Inefficient bureaucracy
  • Massive debt, prevalent tax evasion
  • All this despite three prior bail outs and stringent austerity measures.
  • According to the OECD, Greece’s gross debt-to-GDP-ratio stands at 185.7% of GDP. Only Japan has a worse ration of 240%.
  • Greece posted anemic 0.4% real GDP growth in 2014 after which the country slipped back into recession in 2015 and was flat last year.
  • Concerns of the full impact of BREXIT on the EU and Greece in particular.
  • Risk of another wave of migrants for which Greece serves as a major transit point.
  • Risk from weaker global trade.
  • Germany’s Finance Minister Wolfgang Schauble ruled out debt reduction for Greece with this statement last week, “for that, Greece would have to leave the monetary union.”
  • The Euro Zone’s rescue funds, EFSF and ESM already disbursed €174b to Greece, with more needed! The ESM’s head Klaus Regling said, “we would not have lent this amount if we did not think we would get our money back.”  Tip of the day: If Regling ever returns to the private sector to head a company one day, please remember to never buy its stock = Investing 101.

In conclusion before BREXIT et al, Greece was always threatened with being kicked out of the EU.  Post-BREXIT and in the midst of a much more complicated developing geopolitical landscape, Greece might see the royal boot as a wonderful invitation!

 

Tony’s Take on Today’s Fed Testimony

The Fed and I clearly are not seeing the U.S. and the world in the same light. The Fed owns roughly $414 bln in Treasuries maturing in 2018. Where does the Fed think the Treasury will be able to come up with $414 bln to pay the Fed for their 2018 holdings?  Treasury would have to jack up issuance to pay the Fed back. Raising rates 75 bps per year, shrinking the Fed balance sheet and a sizable increase in UST issuance would be a disaster for Treasury yields and the U.S. economy. Tony Farren

 

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

 

IG Corporate New Issuance This Week
2/13-2/17
vs. Current
WTD – $16.60b
February 2017
Forecasts
vs. Current
MTD – $43.575b
Low-End Avg. $20.71b 80.15% $90.65b 48.07%
Midpoint Avg. $21.33b 77.82% $91.96b 47.38%
High-End Avg. $21.96b 75.59% $93.26b 46.72%
The Low $15b 110.67% $85b 51.26%
The High $26b 63.85% $120b 36.31%

 

The Boeing Company (NYSE:BA) $300mm 30-year Deal Dashboard

 

The Boeing Company today issued a $900mm 3-part 5-, 10- and 30-year transaction.  If I’m writing about that means Mischler was involved.  Today, the nation’s oldest Service Disabled Veteran broker dealer was were invited to serve as an active 0.50% Co-Manager on the longer 30-year tranche.

The direct comparable for today’s new 30-year tranche was the outstanding BA 3.375% due 6/15/2046 that was T+87 pre-announcement nailing NIC as negative <2> bps on today’s new print that priced at T+85.
Here’s a look at today’s Deal Dashboard for The Boeing Company’s $900mm 3-part new issue:

 

BA Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5yr +60a +45a (+/-3) +42 +42 <18> bps <1> 41.5/ <0.5>
10yr +80a +65a (+/-5) +60 +60 <20> bps <2> 59.5. <0.5>
30yr +100-105 +90a (+/-5) +85 +85 <17.5> bps <2> 85/ 0/flat

 

………and here’s a look at today’s re-opening final book sizes and oversubscription rates.

 

BA  Issue – Tranche
Size
Final Book
Size
Bid-to-Cover
Rate
5yr 300 $1.3b 4.33x
10yr 300 $1.55b 5.17x
30yr 300 $2b 6.67x

 

Boeing Company A2/A 2.125% 3/01/2022 300 +60a +45a (+/-3) +42 +42 CITI/DB/SMBC
Boeing Company A2/A 2.80% 3/01/2027 300 +80a +65a (+/-5) +60 +60 CITI/GS/MIZ
Boeing Company A2/A 3.65% 3/01/2047 300 +100-105 +90a (+/-5) +85 +85 CITI/JPM/WFS

 

Final Pricing – Boeing.
BA $300mm 2.125% due 3/01/2022 @ $98.790 to yield 2.381% or T+42  MW+10

BA $300mm 2.80% due 3/01/2027 @ $97.698 to yield 3.068% or T+60  MW+10

BA $300mm 3.65% due 3/01/2047 @ $95.392 to yield 3.912% or T+85  MW+15

 

Happy Valentine’s Day to All the Ladies Among My “QC” Readership

 

To wrap things up, this lovable guy-in-the-corner sends out a Happy Valentine’s Day wish to all the wonderful women among his “QC” distribution list, especially all the great leading ladies from fixed income syndicate land and those in Treasury/Funding from among the many issuers in his DCM universe. I wish you all a spectacular evening.

Remember guys – behind every successful man is a truly awesome woman! That’s just the way it is!

 

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

 

Have a great evening!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/13
AVERAGES
WEEK 2/06
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
New Issue Concessions 0.62 bps <3.44> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps
Oversubscription Rates 3.62x 3.92x 3.12x 3.29x 2.40x 2.85x 2.45x
Tenors 5.82 yrs 12.04 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs
Tranche Sizes $609mm $735mm $1,311 yrs $845mm $1,123mm $927mm $859mm
Avg. Spd. Compression
IPTs to Launch
<16.86> bps <19.60> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> 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
Boeing Company A2/A 2.125% 3/01/2022 300 +60a +45a (+/-3) +42 +42 CITI/DB/SMBC
Boeing Company A2/A 2.80% 3/01/2027 300 +80a +65a (+/-5) +60 +60 CITI/GS/MIZ
Boeing Company A2/A 3.65% 3/01/2047 300 +100-105 +90a (+/-5) +85 +85 CITI/JPM/WFS
J.P. Morgan Chase & Co. A3/A- 4.26% 2/22/2048 2,000 +130a +120-123 +120 +120 JPM-sole
Morgan Stanley A3/A FRN 2/14/2020 3,000 3mL+95a 3mL+80 the # 3mL+80 3mL+80 MS-sole
Novartis Capital Corp. Aa3/AA- 1.80% 2/14/2020 1,000 +50-55 +40-45 +40 +40 BAML/CITI/JPM
Novartis Capital Corp. Aa3/AA- 2.40% 5/17/2022 1,000 +65-70 +55-60 +55 +55 BAML/CITI/JPM
Novartis Capital Corp. Aa3/AA- 3.10% 5/17/2027 1,000 +90-95 +75a (+/-2) +73 +73 BAML/CITI/JPM
PNC Bank NA A2/A+ 2.625% 2/17/2022 1,000 +85a +70a (+/-2) +68 +68 CITI/GS/JPM/PNC

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
JBIC A1/A+ FRN 2/24/2020 500 3mL+equiv 3mL+equiv 3mL+57 3mL+57 BARC/CITI/DAIW/JPM
JBIC A1/A+ 2.25% 2/24/2020 1,500 MS +60a MS +58a MS +57 +80.7 BARC/CITI/DAIW/JPM

 

Indexes and New Issue Volume
*Denotes new tight or new record high.

 

Index Open Current Change  
IG27 63.268 *62.80 <0.468>
HV27 136.89 134.645 <2.245>
VIX 11.08 10.74 <0.34>  
S&P 2,328 *2,337 9
DOW 20,412 *20,504 92  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $9.90 bn DAY: $11.90 bn
WTD: $16.60 bn WTD: $18.60 bn
MTD: $43.575 bn MTD: $55.825 bn
YTD: $215.958 bn YTD: $283.108 bn

 

Lipper Report/Fund Flows – Week ending February 8th    

     

  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).
  • Over the same period, Lipper reported a net inflow of $854.782m into Loan Participation Funds (2016 YTD net inflow of $4.614b).
  • Emerging Market debt funds reported a net inflow of $358.189m (2016 YTD inflow of $502.693m).

IG Credit Spreads by Rating (more…)