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Primary IG Syndicate Desks Sound Off-Next Week Will…
February 2018      Debt Market Commentary   

Quigley’s Corner 02.16.18 – Best & Brightest Primary IG Syndicate Sound Off

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Economic Data Releases

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

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

Syndicate IG Corporate-only Volume Estimates for Next Week

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

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

Indexes and New Issue Volume

Economic Data Releases           

2018 Lipper Report/Fund Flows – Week ending February 14th

The “QC” Geopolitical Risk Monitor     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

 

Investment Grade New Issue Re-Cap

Today was a welcome no-print Friday ahead of the long three-day weekend! The Best and the Brightest are below with their thoughts and numbers for next week’s IG Corporate new issuance.  It appears that with many kids on spring break next week in what will already be a holiday-shortened work week, the midpoint average supply forecast calls for $18.78b to price.  But why hear it from me when you can simply scroll down below and read their formidable comments and thoughts along with their numbers and/or ranges?  Let’s first run down the recaps for this week and then it’s on to syndicate’s B&B!

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • The IG Corporate WTD total is 50.79% of this week’s syndicate midpoint average forecast or $9.477b vs. $18.66b.
  • MTD we’ve priced 47.28% of the syndicate forecast for February IG Corporate new issuance or $42.067b vs. $88.98b.
  • There are now 6 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index tightened 1 bp to +98 vs. +99. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.93 vs. 0.94.  (+85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +133. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
  • The 10-DMA stands at $19.4b.
  • For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield             Funds (2018 YTD net outflow of $12.164b).
  • Taking a look at the secondary trading performance of this week’s 19 IG Corporate and 4 SSA new issues, of the 23 deals that printed, 9 tightened versus NIP for a 39.00% improvement rate, 6 widened  (26.00%), 8 were flat (35.00%).   

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Import Price Index MoM January 0.6% 1.0% 0.1% 0.2%
Import Price Index ex Petroleum January 0.1% 0.5% <0.2%> 0.0%
Import Price Index YoY January 3.0% 3.6% 3.0% 3.2%
Export Price Index MoM January 0.3% 0.8% <0.1%> 0.1%
Export Price Index YoY January —- 3.4% 2.6% 2.8%
Housing Starts January 1234k 1326k 1192k 1209k
Housing Starts MoM January 3.5% 9.7% <8.2%> <6.9%>
Building Permits January 1300k 1396k 1302k 1300k
Building Permits MoM January 0.0% 7.4% <0.1%> <0.2%>
U. of Michigan Sentiment February 95.5 99.9 95.7 —-
U. of Michigan Current Conditions February 111.1 115.1 110.5 —-
U. of Michigan Expectations February 87.2 90.2 86.3 —-
U. of Michigan 1 Year Inflation February —- 2.7% 2.7% —-
U. of Michigan 5-10 Year Inflation February —- 2.5% 2.5% —-

 

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

 

IG Corporate New Issuance This Week
2/12-2/16
vs. Current
WTD – $9.477b
February 2018 vs. Current
MTD – $42.067b
Low-End Avg. $17.56mm 53.97% $88.28b 47.65%
Midpoint Avg. $18.66mm 50.79% $88.98b 47.28%
High-End Avg. $19.75mm 47.98% $89.68b 46.91%
The Low $10mm 94.77% $70b 60.10%
The High $26mm 36.45% $110b 38.24%

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 19 of today’s respondents are in the top 20 of the new 2018 League table including 21 of the top 25 according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.93% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they are 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 are 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. 

Here is this week’s geopolitical recap:

North Korea remains the number one ranked geopolitical event risk factor despite niceties during the current Olympics.  That ends on Sunday the 25th after which Kim Jong-Un will revert back to his nuclear ambitions. Equity markets seem to be settling in as the U.S. economy is running on all cylinders. U.S. equity markets have enjoyed their finest week since 2011. Interest rates are expected to rise and perhaps more quickly and higher than anticipated creating a steeper curve and rising yields.  President Trump broke with the GOP tradition of fiscal prudence with his $4.4 trillion 2019 budget to Congress that is unlikely to be enacted as is. March 2nd looms large for the EU’s anchor state, Germany, as the Socialist SPD party votes to approve or reject Angela Merkel’s grand coalition government which is a “marriage of convenience.” A “no” vote means new elections and further political turmoil for the EU’s keystone nation and largest economy. Prime Minister Theresa May has “let the dogs out” as her cabinet members began laying out the U.K’s. post-BREXIT future beginning with Boris Johnson’s speech on 2/14 while avoiding response to questions of a possible Second Referendum. Italy’s center right party continues to hold the lead heading into the March 4th election.  The immigration issue plays a big role in Italian voter sentiment. Italy’s national debt is $2.8 trillion and the banking sector owns $220b of bad loans.

Let’s now take a deep dive into the technical data.  Entering this morning’s Friday session – 

  • The IG Corporate WTD total stands at $18.94b. We priced $6.30b less than the week’s average midpoint estimate of $25.24b or 75.04%.
  • MTD we priced 36.63% of the syndicate projection for February IG Corporates or $32.59b vs. $88.98b.
  • Entering today’s session, the YTD IG Corporate-only volume is $164.975b vs. the $199.658b that priced on Thursday, February 9th, 2017 or 21.02% less than this time last year.
  • The all-in or IG Corporate plus SSA YTD volume is $233.54b vs. $268.558b on Thursday, February 9th, 2017 or $35.02b (14.99%) less than the same time year ago total. 

Here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week.   

o   NICS:  2.62 bps  

o   Oversubscription Rates: 1.96x

o   Tenors: 18.16 years

o   Tranche Sizes: $499mm

o   Spread Compression from IPTs to the Launch: <12.82> bps 

Here’s how this week’s critical primary market data compares against last week’s numbers: 

  • Week on week, average NICs tightened minutely by 0.05 bps to an average 2.62 bps vs. 2.67 bps across last this week’s 17 IG Corporate-only new issues that displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased dramatically by 2.13x to an average 1.96x vs. 4.09x. 
  • Average tenors widened considerably by 3.31 years to an average 18.16 years vs. 14.85 years.
  • Tranche sizes decreased by $324mm to $ 499mm vs. $823mm
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 4.20 bps to <12.82> bps vs. <17.02> bps.
  • Standard and Poor’s Investment Grade Composite Spread widened 1 bp to +133 vs. +132. 
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bp to 0.93 vs. 0.94 week-on-week.
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
  • The 10-DMA stands at $19.4b.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +98 vs. +97.  
  • Spreads across the four IG asset classes widened 1.00 bp week-on-week to 7.25 bps vs. 6.25 bps as measured against its cumulative post-Crisis low.
  • Spreads across the 19 major IG industry sectors widened 0.95 bps to an average 8.37 bps vs. 7.42 bps wider as measured against their average cumulative post-Crisis lows!
  • For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield Funds (2018 YTD net outflow of $12.164b).

Entering today’s Friday session here’s how much we issued this week:

  • IG Corps: $9.477b
  • All-in IG (Corps + SSA): $13.777b

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

The “Best and the Brightest” in Their Own Words

……..……and here are their responses: (more…)

Investment Grade Debt Issuance Case Study: Exelon
February 2018      Debt Market Commentary   

Quigley’s Corner 02.15.18 – Exelon Inspires Investment Grade Debt Issuance Case Study

Investment Grade New Issue Re-Cap

Explaining EXC 10bp Spread Differential

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

The “QC” Geopolitical Risk Monitor

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending February 7th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

  
Investment Grade New Issue Re-Cap – Better Clearing Levels

Today the IG dollar DCM hosted 3 issuers across 8 tranches totalling $4.575b.  The SSA space was inactive today and with nothing slated.

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • The IG Corporate WTD total is 50.79% of this week’s syndicate midpoint average forecast or $9.477b vs. $18.66b.
  • MTD we’ve priced 47.28% of the syndicate forecast for February IG Corporate new issuance or $42.067b vs. $88.98b.
  • There are now 6 issuers in the IG credit pipeline. 

At the Crossroads of Art & Science: EXC-plaining a 10 bp Spread Differential

mischler-exelon-case-study 

 

 

 

 

 

Last evening I wrote a bit about Exelon’s $800mm CoMed 30-year Global Secured FMBs rated A1/A-/A that priced at T+85 on Monday that printed with a 7 bp NIC. The comp used for the relative was the outstanding CoMed 3.75%s due 8/2047 that were T+78 pre-announcement pegging NIC as 7 bps.  The order book finished at $1.85b for a 2.31x bid-to-cover rate. Those bonds are T+83 bid this afternoon or 2 bps tighter vs. NIP. Some of the reasons for the 7 bp NIC were: 

  • It was an $800mm deal size that needed a bit more to clear
  • Market volatility/uncertainty
  • Exelon has numerous subs that need to issue and we all know that investors have long memories. In other words, do the right thing at an inflection point of sorts in our market and investors will come back to you in spades.

Now let’s fast forward to today, a mere 72 hours later, in which Exelon’s PECO Energy priced a $325mm 30-year that is also a Global Secured FMB rated Aa3/A that priced at T+77. Today’s PECO comp was the outstanding PECO “EXC” 3.70% due 9/2047 that was T+80 pre-announcement nailing NIC on today’s new issue as negative <3> bps. WHOOOOAA!  A 10 bp differential between the two and remember as a 30-year there is no curve adjusting and both entities have direct comparables to use for a relative value study. We all know that relative value is part art and part science!

On Monday 2/12 at 10:27am ET, and in the middle of CoMed’s book build, the VIX or “fear factor” was 29.70 versus this morning’s 2/15 opening session level of 18.50 when PECO was announced. That’s a whopping 37.7% drop in the all-important and eagerly watched VIX volatility index……more dramatic supporting evidence for the final spread level.

And guess what?  Exelon’s Commonwealth Edison deal on Monday was the first utility to issue since the recent historic market gyrations! That nailed it for me. Ahhhhh!  There it is! The search for a resolution in what seemed an illogical endeavor was discovered.  It was a combination of many market ingredients including a dramatic VIX and was all about the utility that opened up the issuance doors for the sector.  A question begot an answer with myriad moving parts and persistence really does pay off. So, to re-cap:

  • EXC’s CoMed deal was an $800mm deal size that needed a bit more to clear
  • Market volatility/uncertainty (re: VIX levels and a 37.7% differential between Monday’s pricing and today’s PECO pricing).
  • CoMed was the first U.S. IG Utility to print since the historic volatility and equity market gyrations.  
  • PECO is +76 bid or 1 bp tighter and CoMed is T+83 or 2 bps tighter.

Today’s IG Primary & Secondary Market Talking Points

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 8 IG Corporate-only new issues was <11.31> bps.
  • BAML’s IG Master Index tightened 1 bp to +99 vs. +100. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.94 vs. 0.95.  (+85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bps to +133 vs. +135. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $19.7b on Wednesday versus $19b on Tuesday and $22.8b the previous Wednesday.
  • The 10-DMA stands at $19.4b. 

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

 

IG Corporate New Issuance This Week
2/12-2/16
vs. Current
WTD – $9.477b
February 2018 vs. Current
MTD – $42.067b
Low-End Avg. $17.56mm 53.97% $88.28b 47.65%
Midpoint Avg. $18.66mm 50.79% $88.98b 47.28%
High-End Avg. $19.75mm 47.98% $89.68b 46.91%
The Low $10mm 94.77% $70b 60.10%
The High $26mm 36.45% $110b 38.24%

 

Global Market Recap 

  • U.S. Treasuries – closed mixed with a flatter curve.
  • Overseas Bonds – JGB’s mixed and little changed. Europe mixed with no major moves.
  • 3mth Libor – Set at 1.87250% the highest since December 2008.
  • Stocks – At 3pm stocks had strong gains with the NASDAQ leading the way.
  • Overseas Stocks – Nikkei and HS had strong rallies. Europe also closed higher.
  • Economic – Higher inflation data with weaker economic data for the 2nd day in a row.
  • Overseas Economic – Japan mixed. France unemployment rate improved (big). No inflation in Europe.
  • Currencies – The USD struggles continued. DXY Index approaching a 3-year low.
  • Commodities – CRB, crude oil and copper up (+ $20 this week) and gold small loss.
  • CDX IG: -2.32 to 53.85
  • CDX HY: -11.23 to 328.23
  • CDX EM: -5.30 to 123.35
  • VIX: +0.33 to 19.59

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

Updates are highlighted in BOLD print!

Risk Level/Main Factor Geopolitical Risks
HIGH +
“North Korea”
·        2/15 – The Seoul Olympics kicked off on Fri. 2/09 and conclude Sun. 2/25. Sources tell me to “watch” mid-March thru April as NOKO will be back to its old tricks and the game will ratchet up with newly announced war games along with a much larger allied force participating together. It’s amazing how the world comes together in a spirit of healthy competition to participate in the Olympics.  Events are governed by the standard set of rules and guidelines of each sport. Unfortunately, that’s not how the political world works. When NOKO dictator Kim Jong-Un’s sister, Kim Yo Jong steals the show thanks to an overwhelmingly liberal media at the Seoul Olympics it gives reason to pause. They should be focused on the torture, extermination, enslavement, sexual violence, murder and disappearances that take place every day in North Korean prison camps for starters. We’d all like peace to come to the Korean peninsula but let’s not be naïve. It was nice to see the two Korea’s march under one flag on the opening night of the Olympics but don’t be fooled.  1/25 -North Korea issued a statement encouraging the unification of the Korean peninsula asking all Koreans to “promote contact, travel, co-operation between North and South Korea” and saying it will “smash” all challenges against unification.  1/16 – H.R. McMaster met with Japanese & SOKO security council members concluding recent talks with NOKO are a “diversion.” 1/02 – Kim Jong Un announced, “the entire U.S. territory is within the range of a NOKO nuclear strike.” 11/20 – Pres. Trump announced the U.S. designated NOKO a “state sponsor of terrorism.”
ELEVATED
“Trumponomics”
& The Beltway
·        2/15 –  On 2/12 President Trump broke the GOP trend of fiscal prudence with his $4.4 trillion 2019 budget sent to Congress that is unlikely to be enacted as is. On 2/09 the gov’t. averted a shut-down signing into law along with a $1 trillion spending bill with major hikes to disaster relief, full-year funding for defense, infrastructure and our nation’s opioid crisis. Among major items on Trump’s 2018 agenda – a DACA fix, the Wall, Infrastructure Plan and Welfare Reform. 1/26 – Pres. Trump’s  immigration reform plan proposes a DACA fix by offering citizenship to 1.8mm undocumented immigrants brought to the U.S. as children (Dems asked for 800k) in exchange for restrictions on future immigration and a $25b border defense system and wall along the Mexican border.
CAUTION
German coalition?
BREXIT & Terror
·        2/15 – March 2nd is a key date as Germany’s Social Democrats (Socialist Party) votes to approve or reject the recent grand coalition deal referred to as a “marriage of convenience” with Merkel’s CDU/CSU party to stabilize Europe’s keystone nation and economy. A “no” vote means new elections for the Hinterland and further political tension and turmoil. 2/08 -Angela Merkel sealed a grand coalition deal with the Socialist SPD party but gave up the finance and foreign ministry’s.  Many Merkel CDU party members are upset that Wolfgang Schäuble, the longest ever serving German finance minister and a major architect of today’s Eurozone economy is now gone. The Socialist SPD party envisions a United States of Europe by 2025! Germany is the keystone of the EU and 28% of its GDP.

·        2/15 – PM Theresa May finally has cabinet members providing clarity on a post-BREXIT vision noting Boris Johnson’s speech on 2/14. He expressed an unwillingness for the U.K. to be tied down to EU regulation and alignment in lieu of British “choice”; avoided addressing a potential Second Referendum saying “….let’s not go there.” It w/b tumultuous for the U.K. to vote on any deal resultant from EU negotiations. Said U.K. will leave the Customs Union and called for a national debate on the low-skill immigration problem saying the U.K. should focus on the best indigenous talent. Supports stopping payments to the EU budget and total U.K. control of its immigration policy. Wants no EU political integration and a more global U.K. in line with its history. Refers to BREXIT future as more “hope” than “fear”. 1/01 – UK Parliament voted 309-305 requiring separate Act before BREXIT can be implemented dealing PM Theresa May a major setback in negotiations on the EU divorce bill. The U.K. is targeting an “implementation period” of March and completion by October 2018. U.K. withdrawal from the EU takes place in 3/2019.

·        February 2018 Terror Events and Casualties: 74 terrorist attacks; 180 dead; 453 wounded.

MODERATE
Italian elections, Spain & Pakistan.
·        2/15 – Italy’s center-right coalition party is expected to win the March 4th election with its leaders projecting sufficient votes to govern without a second ballot. Silvio Berlusconi, the man behind the Forza Italia Party but banned from serving due to a tax evasion charge, is calling for the EU to devise a Marshall Plan-like approach with MENA nations to help the latter keep their people from flocking to Italy which is choked by over 630,000 immigrants only 5% of which have the legal right to be there as refugees. Matteo Silvani head of the Eurosceptic Lega supports leaving federalized Europe (backed by Germany’s coalition SPD party). Italy has had 65 gov’ts. in 71 years. Unemployment is 10.8%; youth joblessness is 32.2%. Italy is the EU’s 3rd largest economy and has the world’s 3rd highest debt-to-GDP ratio at 132.5%; its national debt is $2.8 trillion (equiv.) It is the EU’s biggest economic risk. Italy’s banking sector holds $220bn of bad loans.

·        2/08 – Friction increased as the U.S. designated 3 Pakistanis as “global terrorists” linked to Al Qaeda, the Afghan Taliban and Lashkar-e Taiba militant groups. 2/06 – The U.S. gov’t said it would consider lifting its security assistance suspension against Pakistan if that nation took immediate action to alleviate U.S. concerns by focusing on all terrorist organizations “without distinction.” On Jan. 4th Pres. Trump suspended security assistance to Pakistan including $2b in defense aid tweeting on Jan. 1 that the U.S. gave it “$33bn in exchange for lies and deceit” while accusing Pakistan of arming and funding terrorists against U.S. troops.

·        2/10 – Elsa Artadi may wind up as Catalonia’s next President with self-exiled leader Carles Puigdemont possibly governing de facto from Brussels. A special council of the republic is being considered although Catalan law must be changed for that accommodation. Harvard graduate Artadi is Puigdemont’s loyal gal Friday.  Puigdemont currently still faces arrest for charges of sedition should he return to Spain.

MARGINAL
2018 US Recession?
Interest rates &
U.S. market volatility
·        2/11 – U.S. equity markets are currently in the midst of a historic, albeit transparent, efficient and healthy market correction.  Volatility will continue to be exacerbated by hawkish interest rate outlooks in which UST yields swelled to four-year highs. Fears of increased inflation tied to high deficits and lower taxes have weighed on equity markets wiping out an estimated $5 trillion globally. The U.S. economy is doing well, earnings are positive but a correction leaves more room for stocks to plunge in light of valuations. Fed is forecasting 3 hikes in 2018. (Many forecast four hikes). Should the U.S. see 4 rate hikes in 2018 and 3 more in ’19, without inflation, as some are beginning to forecast, the U.S. would be heading straight into a recession.

·        2/06 – Russian Presidential elections were moved to March 18th by Putin to coincide with 4th anniversary of annexation of Crimea.  Vlad Putin’ 87% approval rating effectively assures victory. Question is what happens in the 2024 election? Russian Constitution restricts position to two consecutive terms. Putin got around that issue in 2008 by installing Medvedev with Putin serving as Prime Minister (though he was in control). He could become Speaker of the Duma in 2024 and install someone else and then become President again. At 66 years of age and in good health, expect Putin to be around and in charge for the long haul.

·        1/11 – Cybercrime: Crypto-jacking, PowerShell-based attacks, cybercriminal underground, ransomware, viruses, hacking, worms and malware estimated to cost the world $6 trillion by 2021.

 

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/12
TUES.
2/13
WED.
2/14
AVERAGES
WEEK 2/05
AVERAGES
WEEK 1/29
AVERAGES
WEEK 1/22
AVERAGES
WEEK 1/15
AVERAGES
WEEK 1/08
AVERAGES
WEEK 1/01
New Issue Concessions 3.50 bps 2.10 bps N/A 2.67 bps <0.13> bps 0.43 bps 1.73 bps <0.725> bps <0.79> bp
Oversubscription Rates 1.70x 2.36x N/A 4.09x 2.98x 2.02x 2.15x 3.75x 2.85x
Tenors 11.50 yrs 22.57 yrs N/A 14.85 yrs 13.80 yrs 5.74 yrs 7.43 yrs 8.12 yrs 7.80 yrs
Tranche Sizes $600mm $357mm N/A $823mm $847mm $623mm $1,137mm $747mm $787mm
Avg. Spd. Compression
IPTs to Launch
<14.25> bps <14.10> bps N/A <17.02> bps <17.42> bps <13.87> bps <14.11> bps <19.12> bps <17.01> bps

 

New Issues Priced

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

Please Note: 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
CSX Corp. Baa1/BBB+ 3.80% 3/01/2028 800 +110a +95a (+/-5) +90 +90 CITI/JPM/MS/UBS
CSX Corp. Baa1/BBB+ 4.30% 3/01/2048 850 +130a +120a (+/-5) +115 +115 CITI/JPM/MS/UBS
CSX Corp. Baa1/BBB+ 4.65% 3/01/2068 350 +165-170/+167.5a +155a (+/-5) +150 +150 CITI/JPM/MS/UBS
Daimler Fin. North America A2/A FRN 2/22/2021 400 3mL+equiv 3mL+equiv 3mL+45 3mL+45 BBVA/CITI/HSBC/JPM/MIZ/SG
Daimler Fin. North America A2/A 3.00% 2/22/2021 550 +70a +65 the # +65 +65 BBVA/CITI/HSBC/JPM/MIZ/SG
Daimler Fin. North America A2/A 3.35% 2/22/2023 675 +80a +75 the # +75 +75 BBVA/CITI/HSBC/JPM/MIZ/SG
Daimler Fin. North America A2/A 3.75% 2/22/2028 625 +90a +85 the # +85 +85 BBVA/CITI/HSBC/JPM/MIZ/SG
PECO Energy Co. Aa3/A 3.90% 3/01/2048 325 +95a +80a (+/-3) +77 +77 MIZ/USB/WFS

 

Indexes and New Issue Volume              

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new high or tight.

                                                                                                                                               

Index Open Current Change
IG29 56.17 52.971 <3.199>
VIX 19.26 19.13 <0.13>
CT10 2.903% *2.910% 0.007
S&P 2,698 2,731 33  
DOW 24,893 25,200 307
Nasdaq 7,143 7,256 113
OIL 60.60 61.42 0.82  
GOLD 1,350 1,353 3  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $4.575 bn DAY: $4.575 bn
WTD: $9.477 bn WTD: $13.777 bn
MTD: $42.067 bn MTD: $60.117 bn
YTD: $174.452 bn YTD: $247.317 bn

 

2018 Lipper Report/Fund Flows – Week ending February 7th

  

  • For the week ended February 7th, Lipper U.S. Fund Flows reported an inflow of $4.734b into Corporate Investment Grade Funds (2018 YTD net inflow of $19.478b) and a net outflow of $2.743b from High Yield Funds (2018 YTD net outflow of $5.858b).
  • Over the same period, Lipper reported a net inflow of $611.901m from Loan Participation Funds (2018 YTD net inflow of $900.938m).
  • Emerging Market debt funds reported a net outflow of $679.846m (2018 YTD inflow of $3.128b).

(more…)

Investment Grade Corporate Debt Issuance Cools
December 2017      Debt Market Commentary   

Quigley’s Corner 12.08.17 : IG Corporate Debt Issuers Standing Pat

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates For This Week

Global Market Recap

The “QC” Geopolitical Risk Monitor

The Best and the Brightest” Investment Grade Corporate Syndicate Forecasts and Sound Bites for Next Week & November

“Knowing the Past for the Future” – A Look at a Decade’s Worth of December IG Corporate and SSA Issuance

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

New Issues Priced

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

Indexes and New Issue Volume

Rates Trading Lab

Lipper Report/Fund Flows – Week ending Dec 6th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases 

 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM produced zero…….zilch……….nada. It was a December Friday goose egg as they say! The geopolitical risk monitor featured quite a bit of fluid news this week so be sure to review the QC monitor by scrolling below.  Also, the “Best and the Brightest” are back this week albeit there is not much activity lining up to get done. Next week looks like a light front-loaded week of between $5-10b. The average estimate of the 25 top syndicate desks for next week’s IG Corporate only issuance is $7.58b. The FOMC holds its final meeting of 2017 next Tuesday and Wednesday the 12th and 13th with overwhelming expectations for a rate hike that has long been baked into the market………..and despite the absence of inflation.  It looks like December issuance will come to an end a few days earlier than is the historical average with a chance of posting the lowest December IG Corporate issuance volume since $21.10b printed the same week back in 2008.  Team B&B are all waiting below for you to take in their forecasts and comments.  Enjoy the read.

 

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate desk estimates:

  • The IG Corporate WTD total is 98.31% of this week’s syndicate midpoint average forecast or $18.434b vs. $18.75b.
  • MTD we’ve priced 55.86% of the syndicate forecast for December IG Corporate new issuance or $18.434b vs. $33b.
  • There are now 7 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index was unchanged at +102.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.97.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +143.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16b on Thursday versus $17.9b on Wednesday and $23.6b the previous Thursday.
  • The 10-DMA stands at $16b.

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

IG Corporate New Issuance This Week
12/04-12/08
vs. Current
WTD – $18.434b
December 2017 vs. Current
MTD – $18.434b
Low-End Avg. $17.50b 105.34% $31.33b 58.84%
Midpoint Avg. $18.75b 98.31% $33b 55.86%
High-End Avg. $20.00b 92.17% $34.67b 53.17%
The Low $15b 122.89% $25b 73.74%
The High $25b 73.736% $28b 65.84%

 

Global Market Recap 

  • U.S. Treasuries – Closed mixed with no move greater than 0.7 bps.
  • Overseas Bonds – JGB’s unchanged to better. Bunds & Gilts small red. Peripherals more green.
  • 3mth Libor – Set at highest yield (daily occurrence) since December 2008 (1.54878%).
  • U.S. Stocks – Higher heading into the last hour.
  • Overseas Stocks – Global stock rally.
  • U.S. Economic – Very good U.S. Employment Report with tame average hourly earnings.
  • Overseas Economic – China (trade) & Japan (GDP) were strong. Europe data was mixed.
  • Currencies – USD was better bid vs. all of the Big 5.
  • Commodities – Crude oil ended the week with 2 good days. Gold struggled all week.
  • CDX IG: -0.67 to 50.93
  • CDX HY: -4.47 to 316.39
  • CDX EM: -1.37 to 177.35

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

Updates are in BOLD print!

 

Risk Level/Main Factor Geopolitical Risks
HIGH +
“North Korea”
·        12/05 – U.S. reveals CHAMPs or powerful microwave pulses emitted from missiles launched from B-52s that can disable NOKO’s electronic missile and launching systems. 12/02 – WH Nat’l. Security Advisor H.R. McMaster says “possibility of war with NOKO increases every day.” 11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. SOKO Olympics begin Friday 2/2018 thru Sunday 2/25. 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
ELEVATED
“MENA and
Trumponomics and Beltway Dysfunction”
·        12/06 – Pres. Trump formally recognizes Jerusalem as Israel’s capital. Plans to move U.S. embassy there from Tel Aviv. Could take three years. Palestinian leader Mahmoud Abbas and Jordan’s King Abdullah warn Trump of dangerous consequences for stability and security in the Middle East. Turkey’s Erdogan threatens to cut ties with Israel calling the move a “red line for all Muslims” and decision puts “world and region in a ring of fire.” 12/04 – Former Yemeni President Ali Abdullah Saleh assassinated in Sanaa by former allied and Iranian-backed Houthis.  Yemen, like Lebanon are sights of proxy wars fought between Saudi Arabia and Iran. 11/28 – Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group.  Beirut, is proving ground for Saudi-Iranian proxy wars. Crown Prince Mohammed bin Salman’s plans sweeping with “Vision 2030” to wean KSA off oil. Saudi inner players arrested in anti-corruption probe involving multi-billion dollar “settlements.” Both Trump and KAS share strong views of an anti-nuclear Iran. KSA needs oil above $81 to break even. Mideast tension expected to boost the price of oil.

·        12/01 – U.S. Senate GOP passes the most sweeping tax overhaul in over 30 years in a 51-49 vote. This is the biggest tax bill and tax cuts in U.S. history. As promised, President Trump wants to sign the bill into law before Christmas.

·        12/01 – Former Trump national security advisor Michael Flynn pleaded guilty to lying to the FBI about contacts with Russia’s ambassador in 12/2016. This places a senior Trump insider in a cooperative position for the investigators.  Then again, how much credibility does a liar have?

·        U.S. trade protectionism contrarian to the world coming together on trade. Long term impact.

CAUTION
“Russia, Europe,
Uranium 1 & Terror”
·        12/06 – Enjoying an 82%+ Russian approval rating, Vladimir Putin announced he will seek a 4th term as President. Serving out a 4th 6-year term would mean 24 years at the top  including P.M. posts. Only Stalin ruled longer at 29 years. Putin moves 2018 election date to 3/18 – the 4th anniversary of annexation of Crimea….in response to Olympic Committee ruling?

·        12/05 – Russian team barred from 2018 Seoul Winter Olympics. Olympic Committee will allow Russian athletes to compete who meet stringent drug testing but they will be referred to as “athletes from Russia” in which no Russian flag can fly, no Russian anthem played and no Russian gov’t. officials can attend.

·        12/03 – Germany’s Social Democrats (Socialist Party) urged by French President Macron to from ruling coalition with Merkel’s conservative bloc.  Following the 11/20 collapse of the “Jamaica coalition” negotiations in the worst crisis of Merkel’s 12yr chancellorship.  New elections as early as next spring may still be the only solution. Sources of tension are immigration, taxation & the environment. Right wing has seat in German decision-making and wants new elections.

·        12/08 – Britain and Ireland agree on Irish border regulations mainly acknowledging there will be no border controls on the Irish Sea. It clears the way for a second a phase of talks with the EU. Negotiators reached agreement in principle on the BREXIT “divorce bill” earlier in the week in the €45b to €55b range down from €60bn that the EU initially demanded. Agreement promotes further December & January negotiations. U.K. withdrawal from EU takes place in 3/2019.

·        Atty. Gen. Sessions raised the possibility of a special counsel appointment to investigate the Uranium One Deal involving the Clinton Foundation in which a Russian company took control of 20% of entire supply of U.S. uranium supply used to make nuclear weapons in exchange for Clinton Foundation donations. In a decree on March 20, 2008 Russia’s Vladimir Putin, abolished the Federal Agency for Nuclear Power. The public corporation Rosatom (he owns) was vested with the authority to implement on behalf of the Russian Federation the rights of shareholders in the joint-stock companies in the nuclear energy industry. In 2013 Rosatom retained full ownership. Matter of U.S. national security.

·        December MTD Terror Stats a/o 12/08: 21 terrorist attacks; 114 dead; 187 wounded.

MODERATE
“China”
·        China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. National Congress of the Chinese Communists Party confirms Xi Jinping as its most powerful leader since Mao. Xi loyalists make up inner sanctum of Chinese politics into the next decade. 6% GDP in 2018 will be difficult.

·        Cybercrime, ransomware, viruses & hacking are winning cyber wars. Recent attacks have hit four continents, law firms, food companies, power grids, pharma and governments.

·        Spain’s Rajoy announces snap elections on Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Former Catalan Pres. Puigdemont to appear in court 11/17. On 11/02: 8 Catalan gov’t. members jailed in Spain for role in independence rebellion & sedition.

·        Italian elections in March 2018.

MARGINAL
“2018 US Recession?”
·        12/05 – Senate committee approved Jay Powell nomination to replace Janet Yellen in a 22-1 vote.

·        12/08 – FOMC Meeting Tues/Wed Dec. 12th/13th. Rate hike baked in despite absence of inflation. Bearish flattening signals danger for the U.S. economy. Recent bullish flattening has completely disregarded the absence of inflation. The balance sheet or “b/s” normalization program is proceeding and will remain highly incremental. Fed signals 1 more rate hike in 2017 (December12/13 FOMC); 3 in 2018. Dot plots are unchanged for 2017 & ’18; lower for ’19 & longer-term. Shifts/adjustments in monetary policy outweigh chance of a 2018 recession.

 

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

 

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 20 of today’s respondents are in the top 21 while 23 are among 2017’s YTD top 27 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.38% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted. 

As always “thank you” to all the syndicate desks that participated in today’s survey.  Below is opening to this week’s survey. 

 “Welcome to Friday. In preparation for takeoff, please ensure all negative attitudes are properly stowed. On behalf of QC Air welcome aboard. I expect sunshine and good intel today for our trip. Enjoy the ride and thanks for flying QC Air.

This week’s geopolitical recap: 

The FOMC meets next Tuesday and Wednesday the 13th and 14th.  Over 94% believe the Fed will hike rates which is already baked in. The nation’s largest Tax Reform bill in over 30 years may in fact get signed by President Trump by Christmas. The situation in North Korea remains the lone high risk event on the global risk monitor despite the U.S. claim to possess powerful CHAMPS microwave pulse technology that can disable NOKO’s missile launch systems. The situation in MENA has been upgraded to elevated with Trump’s announcement that the U.S. formally recognizes Jerusalem as Israel’s capital following warnings from Jordanian, Palestinian and Turkish leadership among others that it will destabilize the region. Yemeni President Ali Saleh was assassinated and Prince Mohammed bin Salman’s “Vision 2030” resulted in multi-billion dollar anti-corruption settlements with members of the house of Saud and major KAS players. MBS, as the Saudi Prince is commonly known, also purged rivals in order to anchor his leadership and future plans. Germany’s Social Democrats agreed to pursue preliminary talks to form a coalition government with Merkel’s conservative CDU party and will include a third CSU party. German political stability is needed to cement the EU’s keystone economy. Ireland and Britain are near an accord on future Irish border regulations that would help promote an agreement in principle on the BREXIT “divorce bill.”  Leveraging his 85% approval rating at home, Vlad Putin announced he will seek a 4th 6-year term as President of Russia that would make it the second longest tenure to Stalin’s 29 year reign. Putin also moved the Russian election to coincide with the 4th year anniversary of its annexation of Crimea, possibly in reaction to the prior day’s Olympic Committee ruling that bars Russian officials, flags and anthem at the 2018 Seoul Olympics in which Russian athletes must also agree to stringent drug testing.       

Entering this morning’s Friday session –  

  • The IG Corporate WTD total stands at $18.434b. We priced $316mm less than this week’s average midpoint estimate of $18.75b or 98.31%.
  • MTD we priced 55.86% of the syndicate projection for November IG Corporates or $18.434b vs. $33b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,325.402b vs. $1,281.017b on December 8th, 2016 or $44.385b (3.46%) more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,640.543b vs. $1,620.951b on December 8th, 2016 or $19.592b (1.21%) more than the year ago total. 

Entering this morning’s session, here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week. 

o   NICS:  1.62 bps  

o   Oversubscription Rates: 3.18x

o   Tenors: 10.69 years

o   Tranche Sizes: $576mm

o   Spread Compression from IPTs to the Launch: <16.34> bps 

Here’s how this week’s critical primary market data compares against last week’s numbers entering this morning’s session: 

  • Week on week, average NICs widened by 1.11 bps to an average 1.62 bps vs.0.51 bps across this week’s 33 IG Corporate-only new issues displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.13x to an average 3.18x vs. 3.31x. 
  • Average tenors narrowed by 0.74 years to an average 10.69 years vs. 11.43 years.
  • Tranche sizes decreased by $72mm to $576mm vs. $648mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 1.26 bps to <16.34> bps vs. <17.60> bps.
  • Standard and Poor’s Investment Grade Composite Spreads was unchanged at +143.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightned 1 bp to 0.97 vs. 0.98 week-on-week. 
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +102 vs. +103. 
  • Spreads across the four IG asset classes tightened 0.25 bps to 3.00 bps vs. 3.25 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.68 bps to 6.32 bps from 7.00 bps as measured against their post-Crisis lows.
  • For the week ended December 6th, Lipper U.S. Fund Flows reported an inflow of $622.386b into Corporate Investment Grade Funds (2017 YTD net inflow of $116.331b) and a net inflow of $217.412m into High Yield Funds (2017 YTD net outflow of $12.633b).
  • Taking a look at the secondary trading performance of this week’s 33 IG Corporate and 6 SSA new issues, of the 39 deals that printed, 23 tightened versus NIP for a 59.00% improvement rate, 11 widened  (28.25%) and 5 were flat 12.75%).

 

Entering today’s Friday session here’s how much we issued this week:

  • IG Corps: $18.434b
  • All-in IG (Corps + SSA): $24.684b 

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?” Thank you in advance for your time and contribution! 

 

The “Best and the Brightest” in Their Own Words

 

……..……and here are their responses:

(more…)

Investment Grade Debt Issuance In Advance of Thanksgiving
November 2017      Debt Market Commentary   

Quigley’s Corner 11.17.17  Investment Grade Debt Issuance Weekend Before Thanksgiving Edition

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

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

Syndicate IG Corporate-only Volume Estimates For This Week

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

Rates Trading Lab

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 Nov 15th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

The “QC” Geopolitical Risk Monitor

 

Investment Grade New Issue Re-Cap

 

Today the IG dollar DCM hosted 3 issuers across 3 tranches totaling $1.485b.  The SSA space was quiet.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate desk estimates:

  • The IG Corporate WTD total is 101.89% of this week’s syndicate midpoint average forecast or $28.775b vs. $28.24b.
  • MTD we’ve priced 87.21% of the syndicate forecast for October IG Corporate new issuance or $84.054b vs. $96.38b.
  • There are now 4 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points 

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 1 IG Corporate-only (Non $25 par) new issue was <20.00> bps.
  • Including today’s Southern Company $25 par Jr. Sub Notes the average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 2 IG Corporate-only new issues that displayed price evolution was <13.125> bps.
  • BAML’s IG Master Index tightened 1 bp to +107 vs. to +108.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.02 from 1.03.
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bps to +148 from +150. The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.4b on Thursday versus $17.2b on Wednesday and $17b the previous Thursday.
  • The 10-DMA stands at $16.4b.

 

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

 

IG Corporate New Issuance This Week
11/13-11/17
vs. Current
WTD – $28.775b
November 2017 vs. Current
MTD – $84.054b
Low-End Avg. $27.04b 106.42% $95.28b 88.22%
Midpoint Avg. $28.24b 101.89% $96.38b 87.21%
High-End Avg. $29.44b 97.74% $97.48b 86.23%
The Low $20b 143.87% $75b 1112.07%
The High $40b 71.94% $130b 664.66

 

Global Market Recap

 

  • U.S. Treasuries – Same old story with the 30yr better bid & the 2yr in the red.
  • Overseas Bonds – JGB’s were better bid. Europe was unchanged to better bid.
  • 3mth Libor – Set at 1.44067% the highest since December 2008.
  • U.S. Stocks – Could not build on yesterday’s big rally.
  • Overseas Stocks – Shenzhen was hit hard. Nikkei higher. Europe more red than green.
  • U.S. Economic – The housing data was very good. KC Manufacturing down.
  • Overseas Economic – Not a factor today.
  • Currencies – USD traded poorly vs. the Yen and also lost ground vs. the Euro & Pound.
  • Commodities – CRB, crude oil, gold, etc., took advantage of the weaker USD & rallied.
  • CDX IG: +0.06 to 55.05
  • CDX HY: +0.36 to 325.24
  • CDX EM: -2.41 to 184.16

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

-Tony Farren 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 21 of today’s respondents are in the top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.33% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted. 

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years! That’s 2014, 2015 and 2016 !!

Below is the opening segue to our weekly canvass of top fixed income syndicate desks.. 

“Good morning and TGIF Ahead of Thanksgiving week!  I thought I’d start a bit early today as next week should, for all intents and purposes, be a two-day week..   

Entering this morning’s Friday session –  

  • The IG Corporate WTD total stands at $28.775b. We priced $535mm more than this week’s average midpoint estimate of $28.24b or 101.89%.
  • MTD we priced 87.21% of the syndicate projection for November IG Corporates or $84.054b vs. $96.38b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,271.993b vs. $1,226.792b on November 10th, 2016 or $45.201b (3.68%) more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,579.184b vs. $1,557.776b on November 10th, 2016 or $21.408b (1.37%) more than the year ago total. 

Entering this morning’s session, here are the five key primary market driver averages for the 49 IG Corporate-only deals that priced this week. 

o   NICS:  6.56 bps  

o   Oversubscription Rates: 3.00x

o   Tenors: 10.44 years

o   Tranche Sizes: $553mm

o   Spread Compression from IPTs to the Launch: <17.42> bps 

Here’s how this week’s critical primary market data compares against last week’s numbers entering this morning’s session: 

  • Week on week, average NICs tightened by 1.32 bps to an average 6.76 bps vs.7.88 bps across this week’s 50 IG Corporate-only new issues that had relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, increased by 0.66x to an average 3.00x vs. 2.34x. 
  • Average tenors decreased by 0.02 years to an average 10.44 years vs. 10.46 years.
  • Tranche sizes decreased by $207mm to $553mm vs. $760mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues tightened by 3.48 bps to <17.42> bps vs. <13.94> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 1 bps to +148 vs. +147.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bps to 1.02 vs. 1.01 week-on-week. 
  • Week-on-week, BAML’s IG Master Index widened 2 bps to +107 vs. +105. 
  • Spreads across the four IG asset classes widened 1.50 bps to 8.25 bps vs. 6.75 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors also widened 1.37 bps to 10.58 bps vs. 9.21 bps also as measured against their post-Crisis lows.
  • For the week ended November 15th, Lipper U.S. Fund Flows reported an inflow of $2.407b into Corporate Investment Grade Funds (2017 YTD net inflow of $111.988b) and a net outflow of $4.442b from High Yield Funds (2017 YTD net outflow of $12.951b).
  • Taking a look at the secondary trading performance of this week’s 52 IG Corporate and 2 SSA new issues, of the 54 deals that printed, 36 tightened versus NIP for a 66.75% improvement rate, 15 widened  (27.75%) and 3 were flat 5.50%).

Entering today’s Friday session here’s how much we issued this week:

  • IG Corps: $28.775b
  • All-in IG (Corps + SSA): $84.054b 

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

Thank you in advance for your time and contribution!

In this season of Thanksgiving I have many things to be grateful for and one of them are wonderful clients like yourself. Thank you for your friendship and participation here each week and on deal day.  Wishing you and your family a great weekend and a very Happy Thanksgiving! -Ron”

The “Best and the Brightest” in Their Own Words

(more…)

FOMC Rate Decision Talking Points “Unchanged!”
November 2017      Debt Market Commentary   

Quigley’s Corner 11.01.17  FOMC Rate Decision Talking Points “Unchanged!”

 Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

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

FOMC Rate Decision Talking Points: Unchanged (as Expected)

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

Rates Trading Lab

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 25th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

The “QC” Geopolitical Risk Monitor

 

As you all know, Mischler Financial Group, Inc. is our great nation’s oldest Service Disabled Veteran broker dealer and as such our veteran give-back initiatives are prolific and lay at the core of our shared ethos here at Team Mischler.  I would appreciate it if you could all take a moment to read about our 2017 Veteran’s Day Month Pledge from my CEO Dean Chamberlain just before my evening sign-off below.  It is with great appreciation that Mischler Financial is able to “give-back” the fruits of our labor throughout the year and it is all thanks to you the issuers and accounts who elect to do business with us to address the need for best-in-class capital market services and your own internal diversity/veteran procurement initiatives. It means everything to each of us here at Mischler and the non-profit organizations we support.  Thank you all very much! –RQ 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 3 issuers across 5 tranches totaling $2.50b.  The SSA space was inactive today.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate estimates:

  • The IG Corporate WTD total is 83.16% of this week’s syndicate midpoint average forecast or $21.323b vs. $25.64b.
  • MTD we’ve priced 2.59% of the syndicate forecast for October IG Corporate new issuance or $2.50b vs. $96.38b.
  • There are now 7 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points 

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 3 IG Corporate-only new issues that displayed price evolution was <27.33> bps.
  • BAML’s IG Master Index widened 1 bp to +101 vs. +100.
  • BAML’s IG Master Index saw  the “AA” tied its post Crisis low of +58 for the third session in a row while the “A” class held its post Crisis low of +78 for the sixth consecutive session.
  • The Transportation industry sector set a new post Crisis low of +104.
  • 2 of the 19 major IG sectors tied their post Crisis lows as follows: Banking (+84)  and Energy (+132).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 0.95 vs. 0.94.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +142 vs. +143.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $21.1b on Tuesday versus $16.3b on Monday and $23.4b the previous Tuesday.
  • The 10-DMA stands at $18.7b.

Global Market Recap 

  • Treasury November Refunding: More supply in the front end coming in 2018 (February).
  • FOMC Statement – Upgraded growth (solid from moderate) & no change on inflation.
  • U.S. Treasuries – Closed mixed with the curve flattening the story.
  • Overseas Bonds – JGB’s unchanged to better. Bunds little changed & Gilts weaker.
  • 3mth Libor – Set at 1.38483% the highest since January 2009.
  • Stocks – Mixed heading into the close. Gave up big morning gains (reached ATH’s).
  • Overseas Stocks – Nikkei 21 year high. EM 6 year high. Europe 2 year high.
  • Economic – More positive economic data.
  • Overseas Economic – China unchanged, Japan mixed & U.K. data solid.
  • Currencies – USD better bid vs. Euro, PND & Yen but weaker vs. CAD & AUD.
  • Commodities – Crude oil traded at high since January before rolling over. Metals bid.
  • CDX IG: +0.45 to 52.60
  • CDX HY: +0.24 to 310.32
  • CDX EM: +0.55 to 174.91

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
10/30-11/03
vs. Current
WTD – $21.323b
November 2017 vs. Current
MTD – $2.50b
Low-End Avg. $24.74b 86.19% $95.28b 2.62%
Midpoint Avg. $25.64b 83.16% $96.38b 2.59%
High-End Avg. $27.65b 77.12% $97.48b 2.56%
The Low $15b 142.15% $75b 3.33%
The High $35b 60.92% $130b 1.92%

 

fomc-rate-decisionFOMC Rate Decision Talking Points: Unchanged (as Expected) 

Once again rates were left unchanged by the Fed, however there is more color on the $4.5 trillion balance sheet (b/s) unwind. Here’s all you need to know:

Policy:

  • The Fed left rates unchanged in the 1%-1.25% range, voting unanimously to so.
  • The Board left the discount rate unchanged at 1.75%.
  • Expects the economy to evolve in a way warranting gradual rate hikes.

Economy:

  • Economic activity is rising at solid rate despite recent storms.
  • Fed says storms are unlikely to alter the economy’s medium-term course.
  • Repeats risks are roughly balanced, while watching inflation closely.

Employment:

  • The labor market continued to strengthen while unemployment declined.
  • Repeats that market-based inflation compensation gauges are still low.

Inflation:

  • Inflation for items other than food and energy remained soft.
  • Repeats that it sees inflation stabilizing at around 2% in the medium-term

 

The U.S. Federal Open Market Committee November 1st Statement in its Entirety 

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The balance sheet normalization program initiated in October 2017 is proceeding.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles.

The “QC” Geopolitical Risk Monitor

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Investment Grade US Corporate Debt Market Comment: Distilling DCM Data
September 2017      Debt Market Commentary   

Quigley’s Corner 09.22.17-Distilling the Week’s DCM Activity; Look Back to Learn, Look Forward to Window of Opportunity

 

Investment Grade US Corporate Debt New Issue Re-Cap –A Day for Donuts, Dissecting the New Issue Pipeline

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

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 September 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Investment Grade US Corporate Debt New Issue Recap

No IG issues printed today, however, it does not mean that nothing happened. In fact, something big happened!  The Best & Brightest all came back to me once again today in the “QC’s” most eagerly anticipated Friday edition.  That’s right they’re busy lining things up for next week and they’re taking just a little bit of time out to respond in their own words and with their own volume thoughts for next week’s IG Corporate new issue volume.  And you know what? ….They’re all here just waiting for you to scroll down below.  So, let’s get thru the recaps et al and then it’s onto the best and the brightest in the world of investment grade dollar syndicate. Thank you as always to those 24 desks and the very fine operatives on all of them for participating.

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

  • The IG Corporate WTD total is 65.41% of this week’s syndicate midpoint average forecast or $17.876b vs. $27.33b.
  • MTD we’ve priced 99.02% of the syndicate forecast for September or $111.346b vs. $112.45b.
  • There are now 4 issuers in the IG credit pipeline

Today’s IG Primary & Secondary Market Talking Points

 

BAML’s IG Master Index was unchanged at +111. +106 represents the post-Crisis low dating back to July 2007.

Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.06.

Standard & Poor’s Investment Grade Composite Spread was unchanged at +154.  The +140 reached on July 30th 2014 represents the post-Crisis low.

Investment grade corporate bond trading posted a final Trace count of $17.5b on Thursday versus $18.8b on Wednesday and $20.2b the previous Thursday.

The 10-DMA stands at $17.1b.

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
North Korea
On 9/19 Trump spoke before UN referring to Kim as “Rocket Man on a suicide mission.” Says if Kim continues to threaten the U.S., allies and the world “we will have no choice but to totally destroy North Korea.” On 9/14 North Korea launched another ballistic missile over Northern Japan in the face of UN Security Council sanctions. Trump warned U.S. military options are “effective and overwhelming”. Missile traveled 2,300 miles landing in the Pacific. Guam is 2,131 from NOKO! On Sunday, 9/03 NOKO detonated a 100 kiloton hydrogen bomb 5-times more powerful than that dropped on Nagasaki causing a 6.3 magnitude earthquake according to the U.S. GS. Head of IAEA  said the hydrogen bomb test is a “new dimension of global threat” to the world. On Tuesday, 8/29 NOKO ICBM launched an ICBM over Japan that landed in the Pacific Ocean. On Monday, 9/04 U.S. Amb. to the UN, Nikki Haley said “the time has come to exhaust all diplomatic means to end this crisis.” Called for strongest sanctions vs. NOKO. Monday 8/31 began joint U.S. & SOKO military exercise the world’s largest computerized command controlled with over 80,000 troops. CIA Director Mike Pompeo says of NOKO “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Friday 8/11 Trump said “U.S. military solutions are in place, locked and loaded” matching his earlier “fire and fury” statement. On Th. 8/10 NOKO announced its plan to “pre-emptively strike Guam in mid-August.” Trump’s reaction, “Maybe my “fire and fury” threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location in U.S. U.S. sanctions against select Chinese banks to pressure PRC to influence NOKO failed. China insiders say PRC does not have influence with NOKO that the U.S. thinks it does. China in precarious position given South China Sea Islands. Asian allies now justified to build out their respective militaries.
ELEVATED
BREXIT Fallout
On July 28th Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. The Brookings Institute calls Pakistan “the world’s most dangerous country.” Democracy in nuclear-armed country with 205m population at risk.

EU and Macron-Merkel coalition to squeeze U.K. for all it can re: BREXIT “divorce” bill. Companies prepping for hard BREXIT & 2 years of weak growth. PM May wants rolling series of meetings with EU.  UK withdrawal from EU takes place in March, 2019.

CAUTION
“U.S. political gridlock”
GOP to release tax overhaul plan week of Sept. 25th & Senate will vote on new Graham-Cassidy healthcare bill to repeal Obama Care. Infrastructure reform challenges & consensus GOP support to pass legislation still in doubt. Partisan politics. Trump recently bypassed GOP to close a deal w/Dems to extend debt limit to December.

Mueller’s continuing FBI probe into Trump.

GCC Crisis continues as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base, severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.

September MTD Terror Stats: Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. There were 4 terrorist attacks thus far in September – that had 100 or more deaths – killing 615 people and wounding 733.

Cybercrime, ransomware, viruses & hacking are winning cyber wars. Recent attacks have hit four continents, law firms, food companies, power grids, pharma and governments.

Central banks shrinking balance sheets/higher volatility; low rates persist; slow inflation pick-up.

Venezuela – civil unrest continues against Maduro dictatorship. U.S. Tsy freezes Maduro family assets. Risk of VZ default.  4th largest exporter of oil to U.S. behind Canada (#1), Saudi Arabia (#2) & Mexico (#3).

MODERATE China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns.
MARGINAL
2018 U.S. Recession
Fed signals 1 more rate hike in 2017; 3 in 2018. Dot plots unch for 2017 & ’18; lower for ’19 & longer-term. Hurricane’s Harvey, Irma and Maria not yet reflected in economic data; “could” push hike to 2018. $4.5 trillion b/s unwind begins in October & absence of inflation are concerns.

 

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

 

IG Corporate New Issuance This Week
9/18-9/22
vs. Current
WTD – $17.876b
September 2017 vs. Current
WTD – $111.346b
Low-End Avg. $26.29b 68.00% N/A N/A
Midpoint Avg. $27.33b 65.41% $112.45b 99.02%
High-End Avg. $28.375b 63.00% N/A N/A
The Low $20b 89.38% $100b 111.346%
The High $36b 49.66% $125b 89.08%

 

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week’s Investment Grade Corporate Debt

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 19 of those participants are among 2017’s YTD top 20 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.46% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

Here are this week’s primary market recap and data downloads:

Fed Chair Yellen continues to express concern about the absence of inflation that she’d like to see at 2%.  The FOMC tempts markets with accolades about the how low the unemployment rate is. Meanwhile, Wednesday’s eagerly anticipated $4.5 trillion QExit guidance amounted to nothing more than “we’ll start that in October!” Although the FOMC voiced there’d be one more rate hike in 2017 and 3 in 2018, the market doesn’t really believe that. The devastating hurricanes Harvey, Irma and Maria have not begun to show up in our economic data. I don’t believe we’ll see a rate hike in 2017.  Additionally, the next meeting in late October is not followed by a press conference so it’s highly unlikely that they’ll raise rates at that time. That leaves one meeting left in December. Do you think the Fed is giving out holiday gifts this year? I think not.  The S&P, Dow and Nasdaq once again reached new all-time highs this week.

Entering this morning’s Friday session –

 

  • The IG Corporate WTD total stands at $17.876b. We priced $9.454b less than this week’s average estimate of $27.33b or 65.41%.
  • MTD we have now priced 99.02% of the syndicate projection for September IG Corporates or $111.346b vs. $112.45b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,053.881b vs. $1,055.736b on September 22nd, 2016 or 0.18% less than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,280.209b vs. $1,331.873b on September 22nd, 2016 or 4.04% less than the year ago total.
  • Entering this morning’s session, here are the five key primary market driver averages from the 37 IG Corporate-only deals that priced this week
  • NICS:  0.62 bps
  • Oversubscription Rates: 3.18x
  • Tenors: 8.21 years
  • Tranche Sizes: $483mm
  • Spread Compression from IPTs to the Launch: <18.40> bps

 

Here’s how this week’s critical primary market data compares against last week’s numbers entering this morning’s session:

 

  • Average NICs widened 0.78 bps to an average 0.62 bps vs. 1.40 bps across this week’s 37 IG Corporate-only new issues.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.12-times to 3.18x vs. 3.30x.
  • Average tenors contracted by 1.63 years to an average 8.21 years vs. 9.84.
  • Tranche sizes decreased by $192mm to $483mm vs. $675mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 37 IG Corporate-only new issues widened by 0.51 bps to <18.40> bps vs. <18.91>.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +154 vs. +158 bps.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 4 bps to 1.06 vs. 1.10 bps.
  • Week-on-week, BAML’s IG Master Index tightened 5 bps to +111 vs. +115.
  • Spreads across the four IG asset classes tightened 3.5 bps to 7.50 bps vs. 11.00 bps as measured against their post-Crisis lows.
  • The 19 major industry sectors also tightened 3.58 bps to 11.95 vs. 15.53 bps also as measured against their post-Crisis lows.
  • For the week ended September 20th, Lipper U.S. Fund Flows reported an inflow of $2.858b into Corporate Investment Grade Funds (2017 YTD net inflow of $91.384b) and a net inflow of $865.832m into High Yield Funds (2017 YTD net outflow of $8.410b).
  • Taking a look at the secondary trading performance of this week’s 37 IG Corporate and 4 SSA new issues, of the 41 deals that printed, XX tightened versus NIP for a 75.50% improvement rate, 5 widened (12.25%) and 5 were flat (12.25%).

Entering today’s Friday session here’s how much we issued this week:

  • IG Corps: $17.876b
  • All-in IG (Corps + SSA): $23.389b

 

And now ladies and gentlemen, as honored members of the “B&B” Club it’s time for the guy-in-the corner to ask today’s question, “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

Thank you in advance for your time and contribution!

Have a great evening!

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

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

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Knowing the Past for the Future; The Nuclear Option; Rates Rally, Yields Compress
April 2017      Debt Market Commentary   

Quigley’s Corner 04.03.17 Dysfunction Junction & the Nuclear Option; Mischler Debt Market Commentary

 

Investment Grade New Issue Re-Cap – Knowing the Past for the Future; The Nuclear Option; Rates Rally, Yields Compress

IG Primary & Secondary Market Talking Points

Global Market Recap

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 March 29th

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

 

It was November 21st , 2013 when Democrats, frustrated at GOP efforts to stall its Congressional plans under former President Barack Obama, decided to take a vote to stop debate on executive and judicial branch nominees with a simple Senate majority vote rather than having to secure 60 Senate votes.  House Majority leader Harry Reid (D-Nevada), and his party won 52-48.  Reid & Co. set in motion a process that day that eased passage of several key Obama executive and judicial nominees by changing the rules of engagement. Politicians have LONG memories and it’s now payback time…..and guess which party doesn’t like it?  With the tables now turned, the so-called nuclear option –a simple majority – is likely to prevail under Senate Majority leader Mitch McConnell to avoid a Democratic filibuster of Judge Gorsuch’s nomination to the Supreme Court. It may also be used for legislation as well.  Remember everyone, Harry Reid set the precedent.  The “nuclear option” or simple majority vote will weaken the power of the filibuster but it is officially in play now.

As a result, Treasuries rallied and the CT10yr is yielding 2.34%. That’s down 28 bps since the Monday before the FOMC rate hike on Wednesday March 15th.  It’s on its way lower, much lower so, issuers be advised to watch that. Be patient. Let the market come to you.  All this thanks to “Dysfunction Junction.”  The great divide between Republicans and Democrats is getting deeper and more disparate as threats of filibusters are inviting the GOP to employ the aforementioned “nuclear option” to their arsenal.  Republicans remember all too well Democratic hardball strategies used against them in the recent past. Political campaign promises need to be kept and not danced around.  The Dems will NEVER forget (and vice versa) and as they say pay back is going to be………a well, uh…………an issue shall I say?  What goes around, comes around but in the here and now, the nuclear option will be deployed and used to pass legislation as well.  Political dislocation will continue to rally rates and compress Treasury yields lower.  @.00% is in sight folks.  I’ll remind you when we get there.

If you are a banker advising issuers when to print, if they wait, you’ll look smarter and more brilliant than ever! If you’re an issuer, well, when you do print, if you listen to the “QC” please give us an ACTIVE Co-Manager opportunity on your next deal so we can show you what a true distribution value is all about.  You WILL only look even better and brighter than you already are.  One doesn’t get what one doesn’t ask for in life right?

The Monday session featured a continuum of “quirky” issues with the exception of Met Life Global Funding’s 5-year FA-backed notes.  Investment Grade primary markets currently have 10 items in the pipeline all of which are Yankee transactions.

Today, the IG DCM hosted 5 issuers across 5 tranches totaling $2.75b or 12.85% of this week’s IG Corporate-only midpoint syndicate forecast calling for $21.40b.

IG Primary & Secondary Market Talking Points

 

  • Essex Portfolio LP upsized today’s 10-year Senior Notes new issue to $350mm from $300mm at the launch and at the tightest side of guidance.
  • The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 5 IG Corporate-only new issues was <20.30> bps.
  • BAML’s IG Master Index widened 2 bps to +124 vs. +122.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.18 vs. 1.17.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.6b on Friday versus $19.3b on Thursday and $13.8b the previous Friday.
  • The 10-DMA stands at $17.7b.

 

Global Market Recap

 

  • U.S. Treasuries – USTs built on Friday’s rally.
  • Overseas Bonds – Front end JGB’s hit. Core & semi core EU bonds had a strong day.
  • Stocks – U.S. stocks closed in the red but had a nice afternoon comeback.
  • Overseas Stocks – Japan & HS closed higher. China was closed. Europe was red.
  • Economic – ISM manufacturing dipped 0.5 points but remained very strong. Vehicle sales were weak.
  • Overseas Economic – Good Tankan in Japan & positive unemployment rates in Europe.
  • Currencies – USD outperformed the Pound, CAD & AUD and lost ground vs. the Euro & Yen.
  • Commodities – Down day for CRB, crude oil & copper while gold closed with a gain.
  • CDX IG: +0.37 to 66.70
  • CDX HY: +0.47 to 339.04
  • CDX EM: +0.83 to 213.60

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
4/03-4/07
vs. Current
WTD – $2.75b
April 2017
Forecasts
vs. Current
MTD – $2.75b
Low-End Avg. $20.35b 13.51% $90.25b 3.05%
Midpoint Avg. $21.40b 12.85% $91.50b 3.01%
High-End Avg. $22.44b 12.25% $92.75b 2.96%
The Low $12b 22.92% $65b 4.23%
The High $31b 8.87% $111b 2.48%

 

It’s a Tough Job But Somebody’s Gotta Do It

It’s not always fun writing about politics but then again, politics is driving everything in our market more than ever before and it will continue to do that.  Given the myriad global risk factors playing out in our inextricably global-linked world economy, it’s safe to say we are living in dangerous times.  For my part, all I can do is try and tell you about what’s going on in a genuinely honest, insightful and hopefully, refreshing way.  Why?  Well, if you see that we “get it” i.e. understand the machinations of global markets, and appreciate that we work every day to get fresh and informative perspectives to you,  in turn you’ll notice the distinct added-value that we provide and ideally, you will conclude that we should be appointed to the list of other formidable syndicate desks you have chosen to distribute your offerings.

We might be a minority firm, but we are NOT a “one check shop.”  Mischler has a long history in which we have earned Fortune Issuers’ mandates by demonstrating best-in-class cap mkt capabilities via a proven process and recognized platform. As the nation’s oldest Service Disabled Veteran broker-dealer, our ethos is dedicated to serving not just clients with integrity, but also in-need veteran organizations. Towards that mission, we give back 10% of our firm’s profits to veteran causes year round. When hiring for roles within the organization, we prioritize hiring service-disabled veterans and recently-returning veterans who meet our criteria. Once hired, we mentor and coach up our veteran compatriots and we integrate them into becoming members of our team because they earned the opportunity. We grow our own capital month-to-month, quarter-to-quarter and year-to-year. Our operations staff is second to none; it’s not just about our getting underwriter roles for Issuer deals, more important to all, it’s about settling the trade on trade date to settlement date smoothly, each and every time.  We also take great pride in sharing with clients our daily fixed income “downloads”; content that has earned Mischler the Wall Street Letter Award for Best Broker Dealer/Research for three consecutive years – 2014, 2015  and 2016.  It’s all about a value-added proposition.

 

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

(more…)

Corporate Bond Issuers Close Books on Record Quarter; What’s Next for IG DCM?
March 2017      Debt Market Commentary   

Quigley’s Corner 03.31.17   QC’s Q1 Investment Grade Corporate Debt DCM Look-Back and Look Ahead

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

Syndicate IG Corporate-only Volume Estimates for Next Week and April

“Knowing the Past for the Future” – A Look at a Decade’s Worth of April IG Corporate and SSA Issuance

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

New Issues Priced

This Week’s IG New Issues and Where They’re Trading – Great Market Tone!

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 29th

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Month end? Quarter end?  Lots of Global economic data? You know what that means. It was a signed, sealed and delivered no-print Friday today.  That’s always welcome as it gave me a head start on today’s more involved syndicate survey.  Forecasts today are for next week’s primary market supply as well as for the month of April.  I also have a snapshot of a decade’s worth of April IG supply across three categories: all-in (Corps + SSA), Corporate as well as just SSA volumes.  I call the section “Knowing the Past for the Future.” It will help put the Best and Brightest’s thoughts and numbers into a historical perspective for you.  You should take a look at that table.

To quickly re-cap their thoughts, all 24 syndicate desks responded to my “QC” survey  The midpoint average for next week’s IG Corporate only supply is $21.40b characterized by tight voting groups with 18 of the 24 participants projecting within $20 to $25b with a low of $12b and a high of $31b.  As for April, the average was $91.50b.  Voting brackets were all over the place ranging from a low of $65b to a high of $111b. But don’t just take my word for it.  All 24 syndicate operatives contributed responses with their numbers so, scroll down below and read their meaningful thoughts.

I hope you enjoy your read and that it helps you prepare for the week and month ahead.  Thanks again to the stellar 24 participating syndicate desks who are always there for me and for YOU each and every Friday edition of the “QC”.

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index was unchanged at +122.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.17.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +163 vs. +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.3b on Thursday versus $20.7b on Wednesday and $17.8b the previous Thursday.
  • The 10-DMA stands at $17.3b.

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $22.15b
March 2017
Forecasts
vs. Current
MTD – $129.998b
Low-End Avg. $25.25b 87.72% $113.79b 114.24%
Midpoint Avg. $26.50b 83.58% $114.31b 113.72%
High-End Avg. $27.75b 79.82% $114.83b 113.21%
The Low $15b 147.67% $80b 162.50%
The High $31b 71.45% $140b 92.86

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  23 of those participants are among 2017’s YTD top 26 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 83.65% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was prefaced as follows:

 

First up, here’s are this week’s IG new issue volume talking points:

  • We fell 17% shy of this week’s syndicate midpoint average forecast or $22.15b vs. $26.50b.
  • MTD we’ve priced 13% more than the IG Corporate mid-range projection for all of March or $129.998b vs. $114.31b.
  • The all-in MTD total (IG Corporates plus SSA) now stands at $166.158b. March, 2017 has officially broken into 8th place as the highest volume month for all-in issuance (IG Corporates plus SSA).
  • The YTD IG Corporate only volume is now $393.085b. It is the highest IG Corporate-only quarterly volume total in history.
  • YTD we have officially priced $506.151b in all-in IG Corporate and SSA issuance also ranking it #1 as the highest quarterly volume total ever.

Here are this week’s five key primary market driver averages from the 38 IG Corporate-only deals that priced:

  • NICS:  0.46 bps
  • Oversubscription Rates: 3.48x
  • Tenors:  10.14 years
  • Tranche Sizes: $791mm
  • Spread Compression from IPTs to the Launch: <19.31> bps


Here’s how this week’s performance data compares against last week’s:

  • Average NICs tightened 1.29 bps this week to 0.46 bps vs. 1.75 bps.
  • Over subscription or bid-to-cover rates, the measure of demand, increased 0.58x to 3.48x vs. 2.90x.. 
  • Average tenors shortened by a meaningful 1.41 years to 10.14 years vs. 11.55 years.
  • Tranche sizes upsized by $99mm to $791mm vs. $692mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 38 IG Corporate-only new issues tightened 3.87 bps to <19.31> bps vs. <15.44>.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +163 vs. +165 week on week,
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.17 vs. 1.18 last Friday. 
  • Week-on-week, BAML’s IG Master Index tightened by 1 bp to +122 vs. +123. 
  • Spreads across the four IG asset classes tightened by 0.75 bps to 16.00 bps vs. 16.75 as measured against their post-Crisis lows. 
  • The 19 major industry sectors also tightened by 0.74 bps to 19.63 vs. 20.37 also against their post-Crisis lows.
  • For the week ended March 29th, Lipper U.S. Fund Flows reported an inflow of $3.966b into Corporate Investment Grade Funds (2017 YTD net inflow of $39.089b) and a net outflow of $248.465m from High Yield Funds (2017 YTD net outflow of $5.937b).
  • Taking a look at the secondary trading performance of this week’s 38 IG and 3 SSA new issues, of the 41 deals that printed, 32 tightened versus NIP for a 78.00% improvement rate while 4 widened (9.75%) and 5 were flat (12.25%).

The numbers are in.  Entering today’s Friday’s session here’s how much we issued this week:

  • IG Corps: $22.15b
  • All-in IG (Corps + SSA): $25.90b

Is this week’s overwhelmingly hawkish Fed-speak justified? Or, is Fed leadership talking up yields?  The GOP seemed to have recovered from the health care fiasco.  Monday saw 10 issuers stand down, but the market quickly recouped lost ground with issuers printing the rest of the week.  Today marks month-end but more importantly quarter end. The Easter break is approaching all before we re-enter black-outs.

And now the all-important “two-part” question (and answer(s) posed to the fixed income market’s top Syndicate desks, along with my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

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

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Corporate Debt Issuance Slows Due to DC Swamp Sewage Stalemate
March 2017      Debt Market Commentary   

Quigley’s Corner 03.27.17 -Corporate Debt Issuance Slows Due to DC Swamp Sewage Stalemates

 

Investment Grade Corporate Debt New Issue Re-Cap – IG Primary Markets Bogged Down by the Swamp

CT10 Year Yield Going Lower

IG Primary & Secondary Market Talking Points

Global Market Recap

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 22nd       

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Well it was a rare, highly inactive Monday for IG primary markets today. Only one well-telegraphed new issue priced that had been in the pipeline for KEB Hana Bank in the form of a $500mm 3-year FRN. I heard that as many as 10 issuers stood down today following Go/No Go calls.  So, what gives?

On Friday, I placed at the top of my edition, a comment from a widely respected Head of Syndicate.  It was an interesting comment in that it expressed an against-the-grain opinion that Friday’s healthcare bill issue might actually be good for the market in that it pulls forward focus and attention on the all-important and market impactful tax reform bill.  As we were getting ready to close shop on Friday my CEO asked me, “so do you think it’ll be busy next week?  I said, “I hate to go against 24 of the top syndicate desks, but I fear we could see a zero day on Monday and a slower week in store. A health care bill failure will send a horrible message to the market.” I added, “I hope I’m wrong and that we see lots of issuance, but I think I’m right.”  That’s how Friday ended as I left for the weekend.

First, let’s revisit my Friday syndicate voting brackets for this week’s IG new issue volume forecasts:

Next Week
3/27-3/31
1: 20b
1: 15-30b
2: 20-25b
8: 25b
6: 25-30b
5: 30b
1: 31b

 

Out of 24 desks surveyed, 19 of them, or 79%, were in a tight band of $25-$30b.  That is always a great sign.  It means a lot of joint leads verified that similar or consensus volume is expected. The comments were characterized by lots of smaller deals with the absence of any mega transaction. But, I cannot see how issuance gets done if the health care bill is pulled or doesn’t pass. Well it got pulled later on Friday as we now all know. The issue is that republicans made a mistake in prioritizing health care as the first item on their agenda. They did so because it was perceived internally as a “no brainer.” Their plan was to save a trillion dollars to justify a massive tax reform plan.  Guess what?  When it got pulled the message sent to Wall Street was that consensus will continue to be an issue within the GOP.  That’s a MAJOR problem. The historic election is now over. People no longer want to hear the same campaign rhetoric, rather they want action, as the power to legislate has been voted on and given to Trump and the GOP.  The first test was a failure. In fact, it is a massive failure.  So, the market will not be kind to an Administration that has now experienced it’s “Dysfunction Junction” wake-up call. (I refuse to call it Capitol Hill or The Beltway anymore). It’s all about action now. Failure to get a consensus on tax reform WILL lose House and Senate seats in the next elections. That would be a political disgrace after the 7 long years they had amongst themselves to one day ratify a revamped bill. That day came and went last Friday.

The result? ………..The CT10-year is going back to 2.00% to 2.10% or lower.  Here’s the challenge –  with as many as 10 Go/No Go calls this morning that wound up with issuers standing down, we risk building a congested pipeline.  That leads to creating additional congestion, sloppy deals, more concession and bankers could look bad advising clients to go now rather than wait for another 25-35 bps rally in yields. Let the market come to the issuer. The latter are in the driver’s seat.  The market is waiting for a sign of optimism. That optimism will come when positive sounders on SUBSTANTIALas in “historic” – tax reform emanates from the White House and Dysfunction Junction. When that happens, equities will rally, yields will climb quickly and we’ll be back to where the GOP wants to be. For now, the Republican Party IS part of the Swamp that desperately needs draining.  It’s a harsh but well-deserved wake-up call to get their act together.  Seven years to fix Obama Care and they come up holding nothing but a yanked deal.  Unbelievable folks!  When that happens in business people get fired fast! Trump needs to run things like a corporation and Dysfunction Junction needs a hard case of tough love. This is not what was voted for on election day. It’s all about well……….waste management………now.

 

CT10 Year Yield Going Lower

rates-going-down-mischler-debt-market

Sorry if I sound like a broken record, but I published this next piece 12 days in advance of the recent FOMC Rate Decision on Friday, March 3rd and re-printed it the day of Janet Yellen’s Press Conference on Wednesday, March 15th.  Here it is yet again:

………..I had an interesting and revealing conversation with a Chairman of a six-pack bank (That’s either BAML, CITI, GS, JPM, MS or WFS folks!) who shared thoughts on a potential March interest rate hike that the market has already built in.  I thought it would be helpful and informative to you all.  Here’s what that person said,

“Everyone is thinking a rate hike is coming in March but, the FED needs to be somewhat worried about the yield curve.  When they raised rates in December 2015 the 10yr Treasury rallied 70 bps in yield, thus crushing banks’ net interest margin or “NIM” and, having the effect of dampening growth.  When they raised rates this past December 2016, that did not happen…..instead all rates moved up a bit.  But when Yellen talked about March being a “live meeting’’, the UST 10 year went from 2.56% to 2.31%……The Fed needs to talk a good game to dampen the “animal spirits” that have elevated equity markets but, I really don’t think the Fed wants to raise rates and see the 10 year Treasury move to 2.25%. As a result, it’s a very close call…..I err on the side of thinking that the rate hike comes in June.  But, it’s  close.  If the Fed is committed to 2 to 3 hikes this year and they feel the markets are fully prepared for a March hike…they may just take advantage of that window.”

Today the CT10-year closed at 2.379% and has tightened 24.8 bps versus 2.627% on March 13th the Monday before the Fed raised rates. It’s going tighter. Issuers be patient!

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 1 IG Corporate-only new issues was <17.50> bps.
  • BAML’s IG Master Index was unchanged at +123.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.18.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +164 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $13.8b on Friday versus $17.8b on Thursday and $15.2b the previous Friday.
  • The 10-DMA stands at $17.4b.

 

Global Market Recap

 

  • U.S. Treasuries – Closed with gains except the 2yr but closed near the low prices of day.
  • Overseas Bonds – JGB’s better except the 30yr. Bunds red & Gilts green.
  • Stocks – U.S. stocks mixed heading into the close. Nice comeback in the afternoon.
  • Overseas Stocks – The Nikkei led Asia lower. Europe had more red than green.
  • Economic – Dallas Fed manufacturing was weaker than expected/last.
  • Overseas Economic – Positive IFO releases in Germany.
  • Currencies – The USD had a poor day vs. the Euro, Pound & Yen.
  • Commodities – Crude down, gold up & a 2% gain for silver.
  • CDX IG: +0.83 to 67.84
  • CDX HY: +29.80 to 354.58
  • CDX EM: +1.72 to 213.92

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/27-3/31
vs. Current
WTD – $0.50b
March 2017
Forecasts
vs. Current
MTD – $108.348b
Low-End Avg. $25.25b 1.98% $113.79b 95.22%
Midpoint Avg. $26.50b 1.89% $114.31b 94.78%
High-End Avg. $27.75b 1.80% $114.83b 94.36%
The Low $15b 3.33% $80b 135.43%
The High $31b 1.61% $140b 77.39%

 
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

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IG Debt Market Issuers Confounded By Dysfunction Junction; Mischler Debt Market Comment
March 2017      Debt Market Commentary   

Quigley’s Corner 03.23.17 –Dysfunction Junction

 

A Very Important Message

Investment Grade Corporate Debt New Issue Re-Cap – “Dysfunction Junction”

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 22th      

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab –Courtesy of Jim Levenson

Tomorrow’s Calendar

 

 Important Message to all “QC” readers:  Before we dive into the session  details re: today’s corporate debt issuance, I’d like to call your attention to a very important message from one the Fixed Income Syndicate world’s truly good people, Greg Baker of Bank of America/Merrill Lynch.  Greg is going to be competing in his third 140.6 IRONMAN challenge to raise money for a critically important cause. Without further ado I will hand it over to Greg to tell you more about it. 

 

Dear Friends,

I will be participating in IRONMAN Lake Placid on July 23rd, 2017 as part of the Multiple Myeloma Research Foundation (MMRF) Team For Cures.

The Goal:
Raise $10,000 for the MMRF
Swim: 2.4 miles
Bike: 112 miles
Run: 26.2miles

Multiple myeloma is the second most common form of blood cancer and, sadly, has one of the lowest five-year relative survival rates of all cancers. But while there is no cure, great progress is being made.

In fact, thanks to the important work of the MMRF, the world’s leading private funder of myeloma research, the FDA has approved TEN new treatments, including FOUR in just the past 18 months – a track record that’s unparalleled in the world of oncology. These drugs have almost tripled the lifespan of myeloma patients. And now the MMRF is funding over 20 additional treatments in various stages of development, giving hope to tens of thousands of patients and their families.

All donations are GREATLY appreciated! Thank you very much.
Greg

To donate, please click on the link:  https://endurance.themmrf.org/2017IMLP/Member/MyPage/986791/Gregory-Baker

As Winston Churchill so eloquently put it, “We make a living by what we get, but we make a life by what we give.” Greg is giving of himself, and I ask that you please find it in yourselves to donate what you can to help this incredible cause.  In the name of social responsibility, a heartfelt thank you from the guy-in-the-corner who is always in your corner.
Good luck Greg! -RQ

 

Investment Grade New Issue Re-Cap – Zip, Zero, Zilch Thanks to Capitol Hill and “Dysfunction Junction”

quigleys-corner-Dysfunction-Junction
Why did nothing price in today’s rare non-Friday goose egg in our IG DCM?  Simple!  Market participants and issuers are wondering if the Trump rally will stop dead in its tracks if it cannot get an Obama Care replacement bill approved by Congress.  Fractional divides within the majority controlled Republican Party reminds us all of the “circus” that is our nation’s capital known as “The Beltway.”  If support is not achieved, this writer will forever refer to Washington, D.C. as “Dysfunction Junction.”

We are already living in a nation divided with the worst media wars being fought between left and right.  Congress made some “headway” this morning by throwing out the minimum benefits that insurers are required to provide.  The final iteration, however, may not reflect the many months that Trump and his campaign staff and advisors have had to work on a replacement plan promised to be better, stronger, more efficient and one that will save the average American lots of money, while upgrading their care and keeping their choice of doctors.  Anything less than that and it will be perceived as a failure.  The session expected an announcement from House Speaker Paul Ryan – it did not happen.  A vote was expected this evening – it will not happen. The vote on legislation has officially been delayed.  Discussions will be ongoing, beginning this evening in the House at 7:00 pm ET. Markets awaited today’s healthcare/legislative conundrum with the eagerness with which it typically saves for FOMC Press Conferences.  That’s the kind of impact this decision and how it is handled will have.

Unfortunately, and further underlying all the suspense, is the real story of political dysfunction within the GOP.  A new, improved Obama Care seems to be taking a back seat to the question “will the Freedom Caucus continue to agitate any progress within the party?” If so, it will mean a long and painful 4-year term for the Trump Administration, likley result in a loss of seats in the next election and potential control of his ability to effectively govern.  Without support from within his own party effectively means no control at all.  This is all about breaking the party’s House Freedom Caucus, comprised of 20+ Republicans who have been a thorn in the side of any Republican headway.  For now, however, just getting support for whatever bill is being rushed through is challenged to find the necessary 215 votes for its passage.  The legacy of Trump’s legendary negotiating ability – recall his book “The Art of the Deal” – is also being called into question as he faces off with the nation’s lawmakers.

For the more objective Trump supporters, this could be a major disappointment and usher in more toxic additives to the “swamp” that Trump has promised to drain.  The main issue here, however, is that as important as Trump’s first real litmus test is to keep his promises on a full repeal and replacement of Obama Care is that he and his Administration will not be able to focus on any other plans unless and until he overcomes this first major hurdle.  If it fails, President Trump’s ability to achieve his eagerly anticipated and market moving tax reduction plan will be questioned and a financial crisis of confidence could likely ensue.  Perhaps the ultimate deal maker is working on health care concessions in return with a sledge hammer of a tax reduction plan. We’ll have to wait and see. I do think we could see a CT10-year below 2.00% again in short order, after which issuers will gladly hop off the fence in unison and act on a more clear view of rate direction. Robust issuance will be the flavor of the day, but first, we could see a quiet period in our primary markets.  We’ll know more tomorrow when I send out the Friday “QC” featuring the syndicate world’s “Best and the Brightest” and their views and comments on next week’s IG Corporate issuance. So, stay tuned it will be a critically important read for all of you.  For today and in conclusion, “Dysfunction Junction” is why our IG DCM was stalemated today.

IG Primary & Secondary Market Talking Points

 

  • BAML’s IG Master Index widened 1 bp to +123 vs. +122.  +106 represent the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.18 vs. +117.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +165 vs. at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Wednesday versus $20.5b on Tuesday and $21.6b the previous Wednesday.
  • The 10-DMA stands at $17.9b.

 

Global Market Recap

 

  • U.S. Treasuries – 4-day winning streak was snapped.
  • Overseas Bonds – JGB’s closed better bid. European bonds traded poorly.
  • Stocks – U.S. stocks little changed with 45 minutes left in the session.
  • Overseas Stocks – Asia closed with small gains. Europe had a good day.
  • Economic – New home sales & KC Fed manufacturing were strong.
  • Overseas Economic – U.K. retail sales were strong.
  • Currencies – The USD was mixed vs. the Big 5. The DXY Index had a small gain.
  • Commodities – Crude oil & gold closed in the red.
  • CDX IG: -0.97 to 67.37
  • CDX HY: -3.17 to 330.27
  • CDX EM: -1.52 to 216.16

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
3/20-3/24
vs. Current
WTD – $19.375b
March 2017
Forecasts
vs. Current
MTD – $107.848b
Low-End Avg. $24.92b 77.75% $113.79b 94.78%
Midpoint Avg. $25.65b 75.54% $114.31b 94.35%
High-End Avg. $26.38b 73.45% $114.83b 93.92%
The Low $20b 96.87% $80b 134.81%
The High $35b 55.36% $140b 77.03%

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, 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 Thursday’s session followed by the averages over the prior six weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
3/20
TUES.
3/21
WED.
3/22
TH.
3/24
AVERAGES
WEEK 3/13
AVERAGES
WEEK 3/06
AVERAGES
WEEK 2/27
AVERAGES
WEEK 2/20
AVERAGES
WEEK 2/13
AVERAGES
WEEK 2/06
New Issue Concessions 0.57 bps 0.11 bps 4.62 bps N/A 0.00 bps 1.17 bps <3.15> bps <0.16> bps <0.86> bps <3.44> bps
Oversubscription Rates 3.08x 3.68x 1.77x N/A 3.08x 2.73x 3.39x 3.26x 3.76x 3.92x
Tenors 15.35 yrs 10.83 yrs 8.82 yrs N/A 10.05 yrs 9.65 yrs 8.04 yrs 8.37 yrs 8.03 yrs 12.04 yrs
Tranche Sizes $578mm $788mm $650mm N/A $859mm $671mm $738mm $695mm $744mm $735mm
Avg. Spd. Compression
IPTs to Launch
<17.69> bps <19.23> yrs <7.5> bps N/A <17.99> bps <20.00> bps <16.79> bps <18.47> bps <18.45> bps <19.60> bps

 

New Issue Pipeline (more…)

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