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

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

 

Investment Grade New Issue Re-Cap

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

IG Primary & Secondary Market Talking Points

Global Market Recap

Key Talking Points of Fed Testimony

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

Next Up – Greece, Grexit, France & Frexit

Tony’s Take on Today’s Fed Testimony

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

The Boeing Company $300mm 30-year Deal Dashboard

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

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

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

 

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


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

You’ve read about the Anthem for Cigna merger in my M&A Pipeline near page bottom for months now.  Well, today, Cigna terminated its $54b merger agreement with Aetna following a federal judges rejection.  Let’s trace back the story. Anthem Inc. (Baa2/A) in July 2015, proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal was expected to close sometime during the second half of 2016. The merger would have involved 53mm members and would include $22b in new debt and loans. However, in light of a federal judge’s ruling on Monday, January 23rd that another proposed insurance merger – the $37b deal between Aetna and Humana should not be allowed to consummate due to antitrust issues it remained to be seen if the Anthem/Cigna merger would meet the same fate especially given the former deal size involved $17bn more the former. That two rejected deals have taken $91b out of the M&A pipeline. 

IG Primary & Secondary Market Talking Points

 

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

 

Global Market Recap

 

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

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

-Tony Farren


Key Talking Points of Fed Testimony

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

Here are the key takeaways:

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

 

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


Three Rates Hikes in 2017? .HIGHLY Improbable

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

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

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

Next Up – GreeceA Global Macro View

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

 

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

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

 

Tony’s Take on Today’s Fed Testimony

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

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

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

 

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

 

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

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

 

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

 

Have a great evening!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/13
AVERAGES
WEEK 2/06
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
New Issue Concessions 0.62 bps <3.44> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps
Oversubscription Rates 3.62x 3.92x 3.12x 3.29x 2.40x 2.85x 2.45x
Tenors 5.82 yrs 12.04 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs
Tranche Sizes $609mm $735mm $1,311 yrs $845mm $1,123mm $927mm $859mm
Avg. Spd. Compression
IPTs to Launch
<16.86> bps <19.60> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps

 

New Issues Priced

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

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

 

IG          

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Boeing Company A2/A 2.125% 3/01/2022 300 +60a +45a (+/-3) +42 +42 CITI/DB/SMBC
Boeing Company A2/A 2.80% 3/01/2027 300 +80a +65a (+/-5) +60 +60 CITI/GS/MIZ
Boeing Company A2/A 3.65% 3/01/2047 300 +100-105 +90a (+/-5) +85 +85 CITI/JPM/WFS
J.P. Morgan Chase & Co. A3/A- 4.26% 2/22/2048 2,000 +130a +120-123 +120 +120 JPM-sole
Morgan Stanley A3/A FRN 2/14/2020 3,000 3mL+95a 3mL+80 the # 3mL+80 3mL+80 MS-sole
Novartis Capital Corp. Aa3/AA- 1.80% 2/14/2020 1,000 +50-55 +40-45 +40 +40 BAML/CITI/JPM
Novartis Capital Corp. Aa3/AA- 2.40% 5/17/2022 1,000 +65-70 +55-60 +55 +55 BAML/CITI/JPM
Novartis Capital Corp. Aa3/AA- 3.10% 5/17/2027 1,000 +90-95 +75a (+/-2) +73 +73 BAML/CITI/JPM
PNC Bank NA A2/A+ 2.625% 2/17/2022 1,000 +85a +70a (+/-2) +68 +68 CITI/GS/JPM/PNC

 

SSA

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

 

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

 

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

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

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

 

Lipper Report/Fund Flows – Week ending February 8th    

     

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

IG Credit Spreads by Rating (more…)

Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest
February 2017      Debt Market Commentary   

Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

The Best and the Brightest” –  Fixed Income Syndicate Forecasts and Sound Bites 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

Lipper Report/Fund Flows – Week ending February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

Economic Data Releases

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Tomorrow’s Calendar

It was another no-print Friday today and a welcome one at that.  I am happy to announce that one additional syndicate desk earned its way into the “Best and the Brightest” so, my survey now includes 24 desks. They are the ones you want and need to hear from. They are very patiently lined up and waiting below with their numbers and thoughts for next week’s IG dollar DCM supply. So, kick back, relax, have a cup of coffee, knock back a beer or enjoy glass of wine or perhaps just sit by the fireplace and read what you need to know.  Let’s recap things first and on with the show!

 

IG Primary & Secondary Market Talking Points

 

  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 26 deals that printed, 14 tightened versus NIP for a 00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +121 vs. 1.22.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +167.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.4b on Thursday versus $22.1b on Wednesday and $22.5b the previous Thursday.
  • The 10-DMA stands at $20.3b.

 

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

 

IG Corporate New Issuance This Week
2/06-2/10
vs. Current
WTD – $14.70b
February 2017
Forecasts
vs. Current
MTD – $27.275b
Low-End Avg. $23.74b 61.92% $90.65b 30.09%
Midpoint Avg. $24.72b 59.47% $91.96b 29.66%
High-End Avg. $25.70b 57.20% $93.26b 29.25%
The Low $15b 98.00% $85b 32.09%
The High $35b 42.00% $120b 22.73%

 

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

 

I am happy to announce that I’ve added a new top syndicate desk to the “QC’s” “Best & Brightest” survey!  As they are in the top 25 they are a most welcome addition.  Once again, the “QC” received unanimous responses from the 24 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2017’s YTD top 25 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 21 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg 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 86.61% 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 the third consecutive year! That’s 2014, 2015 and 2016 !!  More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! -RQ

 

The question posed to the “Best and the Brightest” early this morning framed with the following:
Here are this week’s numbers:

  • WTD, we missed this week’s IG Corporate syndicate midpoint average forecast by over 40% having priced only $14.70b vs. $24.72b.
  • Thus far in February we priced 30% of the monthly syndicate projection or $27.275b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $268.558b! 

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

  • NICS:  <3.44> bps
  • Oversubscription Rates: 3.92x
  • Tenors:  12.04 years
  • Tranche Sizes: $735mm
  • Spread Compression from IPTs to the Launch: <19.60> bps


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

 

  • NICs tightened 2.57 bps to <3.44> bps vs. <0.87> bps.
  • Over subscription or bid-to-cover rates increased by 0.80x to 3.92x vs. 3.12x.. 
  • Average tenors extended by 0.44 years to 12.04 years vs. 11.60 years.
  • Tranche sizes declined dramatically by $576mm to $735mm vs. $1,311mm, the result of last week’s hefty jumbo deal tranche sizes from MSFT, AT&T and AAPL.
  • Spread compression from IPTs to the launch/final pricing of this week’s 20 IG Corporate-only new issues widened ever so slightly by <0.17> bps to <19.60> vs. <19.77> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 1 bp to +167 vs. +166.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +128 vs. +127. 
  • Spreads across the four IG asset classes tightened 0.50 bps to 20.50 vs. 21.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.46 bps to 24.74 vs. 25.20 bps also against their post-Crisis lows.
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).

 

Corporate America has posted earnings.  Most issuers have exited blackouts.  Thursday’s storm may have hampered a bit of issuance this week and next week is expected to be sizeable. Chair Yellen testifies before the U.S. Senate Banking Panel on Tuesday the 14th. This represents Yellen’s first appearance since raising rates last month. All eyes and ears will be tuned into that especially since the January FOMC meeting was not followed by a Press Conference. Meanwhile Japan’s Prime Minister Abe arrives today for his first official summit with President Trump through the weekend.    

My approach to the “Quig” Pro Quo is to give something first and then ask.  So, it’s now time for the question, – “what are your thoughts and numbers for next week’s IG Corporate new issue volume?” 

Thank you very much and a have a great weekend! -Ron”

 

The “Best and the Brightest” in Their Own Words*

 

*Responses the QC Best & Brightest are available exclusively to QC email subscribers

 

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
2/13-2/17
Low-End Avg. $20.71b
Midpoint Avg. $21.33b
High-End Avg. $21.96b
The Low $15b
The High $26b

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

 

Next Week
2/13-2/17
1: 15b
2: 15-20b
10: 20b
1: 21b
4: 20-25b
5: 25b
1: 26b

 

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

Have a great weekend!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/06
TUES.
2/07
WED.
2/08
TH.
2/09
FRI.
2/10
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
New Issue Concessions <3.62> bps <7.5> bps 5.25 bps N/A N/A <3.44> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps
Oversubscription Rates 4.25x 4.56x 2.18x 7.33 N/A 3.92x 3.12x 3.29x 2.40x 2.85x 2.45x
Tenors 12.83 yrs 16.65 yrs 6.40 yrs 10 yrs N/A 12.04 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs
Tranche Sizes $744mm $850mm $690mm $300mm N/A $735mm $1,311 yrs $845mm $1,123mm $927mm $859mm
Avg. Spd. Compression
IPTs to Launch
<19.17> bps <25.40> bps <11.5> bps <35> bps N/A <19.60> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps

 

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

 

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 26 deals that printed, 14 tightened versus NIP for a 54.00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).

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

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
H.B. Fuller Co. Baa3/BBB 4.00% 2/15/2027 300 +200a +170a (+/-5) +165 +165 156/153
ADB Aaa/AAA 2.00% 2/16/2022 3,750 MS +19a MS +19a MS +18 +26.95 25/24
BP Capital Markets PLC A2/A- FRN 8/14/2018 500 N/A 3mL+40a (+/-5) 3mL+35 3mL+35 3mL+29.5/26.5
BP Capital Markets PLC
(tap) New Total: $1.75b
A2/A- 2.315% 2/13/2020 500 +85a +70a (+/-5) +65 +65 63/60
BP Capital Markets PLC A2/A- 3.224% 4/14/2024 1,000 +120a +115a (+/-5) +110 +110 108/105
BP Capital Markets PLC A2/A- 3.588% 4/14/2027 850 +130a +125 the # +125 +125 121/118
CMS Energy Corp. Baa2/BBB 3.45% 8/15/2027 350 +125-130 +115a (+/-5) +110 +110 111/109
BNG Aaa/AAA 1.50% 2/15/2019 2,250 MS +13a MS +13a MS +13 +44.25 44/42
Citigroup Inc.
(tap) New Total: $1.75b
Baa3/A- 4.75% 5/18/2046 750 +185a +175a (+/-2) +173 +173 176/173
Fondo Mivivienda S.A.
(tap) New Total: $650mm
BBB+/BBB+ 3.50% 1/31/2023 150 +180a +175a (+/-5) +170 +170 170/167
MPLX LP Baa3/BBB- 4.125% 3/01/2027 1,250 very high 100s +193.75a +180a (+/-5) +175 +175 175/171
MPLX LP Baa3/BBB- 5.20% 3/01/2047 1,000 +50 bps curve
243.75
+225a (+/-5) +220 +220 215/212
Symantec Corp. Baa3/BB+ 5.00% 8NC3 1,100 +mid to hi 5.00%
or 5.625%a
5.25-5.30%
or 5.375%a
5.00% +271 277/272
Dexia Capital Local Aa3/AA- FRN 2/15/2019 500 3mL+50 N/A N/A 3mL+50 3mL+50/47
EIB Aaa/AAA 1.75% 5/15/2020 3,000 MS +14a MS +14a MS +12 +42.5 41/40
KfW Aaa/AAA 1.25% 9/13/2018 1,000 MS <4>a MS <4>a MS <4> +17.45 17.6/17.4
TVA Aaa/AAA 2.875% 2/01/2027 1,000 +low 50s / +52.5a +50a (+/-2) +48 +48 48/46
Discover Financial Services BBB-/BBB+` 4.10% 2/09/2027 1,000 +190a +175a (+/-5) +170 +170 171/167
Estee Lauder Cos. Inc. A2/A+ 1.80% 2/07/2020 500 +55-60 +45a (+/-5) +40 +40 38/36
Estee Lauder Cos. Inc. A2/A+ 3.15% 3/15/2027 500 +90-95 +80 (+/-5) +75 +75 77/74
Estee Lauder Cos. Inc. A2/A+ 4.15% 3/15/2047 500 +125-130 +115a (+/-5) +110 +110 113/111
First Republic Bank Baa1/BBB+ 4.625% 2/13/2047 400 +high 100s
+187.5a
RG: +170a (+/-5)
+175a (+/-5)
+165 +165 164/160
GATX Corp. Baa2/BBB 3.85% 3/30/2027 300 +170a +150a (+/-3) +147 +147 149/146
IHS Markit Ltd. BB+/BBB 4.75% 2/15/2025 500 5.00% 4.75%a 4.75% +244 219/217
Vale Overseas Ltd.
(tap) New Total: $2bn
BBB-/BBB 6.25% 8/10/2026 1,000 5.45%a 5.20-5.25% 5.20% +278.3 269/265
Wells Fargo & Co. A2/AA- FRN 2/11/2022 2,000 3mL+95-100 3mL+93 the # 3mL+93 3mL+93 3mL+89/86

 

Indexes and New Issue Volume

Index levels are as of 12:00 noon ET.
*Denotes new record high

Index Open Current Change  
IG27 64.712 65.024 0.312
HV27 138.575 137.87 <0.705>
VIX 10.88 10.72 <0.16>  
S&P 2,307 *2,313 6
DOW 20,172 *20,242 70  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $14.40 bn WTD: $22.15 bn
MTD: $26.975 bn MTD: $37.225 bn
YTD: $199.358 bn YTD: $264.508 bn

 

Lipper Report/Fund Flows – Week ending February 8th    

     

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

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 20.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
IG Avg. 128 128 128 127 127 128 128 128 126 126 0 +2 106
“AAA” 75 76 75 75 74 75 76 77 75 71 <1> +4 50
“AA” 79 80 79 79 79 80 80 79 78 78 <1> +1 63
“A” 103 104 103 103 103 104 104 104 103 103 <1> 0 81
“BBB” 161 162 161 161 160 161 161 161 159 160 <1> +1 142
IG vs. HY 265 270 265 264 259 265 267 272 270 267 <5> <2> 228

 

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 24.74 bps wider versus their post-Crisis lows!

 

INDUSTRY 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
Automotive 112 112 112 112 113 115 116 117 116 117 0 <5> 67
Banking 119 120 119 119 118 120 121 121 119 120 <1> <1> 98
Basic Industry 155 157 156 156 155 156 156 157 156 156 <2> <1> 143
Cap Goods 94 95 95 95 95 95 95 95 95 95 <1> <1> 84
Cons. Prod. 106 106 106 105 105 105 106 106 105 105 0 +1 85
Energy 157 159 157 157 156 157 157 157 154 154 <2> +3 133
Financials 139 141 141 142 141 143 144 144 142 143 <2> <4> 97
Healthcare 115 115 114 114 113 114 114 114 112 112 0 +3 83
Industrials 130 130 129 129 129 129 130 129 128 128 0 +2 109
Insurance 138 139 139 139 138 139 139 139 138 139 <1> <1> 120
Leisure 127 128 127 128 128 129 129 128 129 129 <1> <2> 115
Media 156 157 156 156 155 156 156 155 154 153 <1> +3 113
Real Estate 140 141 141 141 140 141 141 141 139 140 <1> 0 112
Retail 115 115 115 114 114 115 115 114 112 112 0 +3 92
Services 123 123 123 123 123 123 123 122 121 121 0 +2 120
Technology 104 105 104 104 103 105 105 105 103 101 <1> +3 76
Telecom 168 168 166 166 165 165 166 164 161 161 0 +7 122
Transportation 127 128 128 128 127 128 129 128 126 126 <1> +1 109
Utility 127 128 128 128 127 127 127 127 126 127 <1> 0 104

                                  

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Import Price Index MoM January 0.3% 0.4% 0.4% 0.5%
Import Price Index ex Petroleum MoM January —- 0.0% <0.2%> <0.1%>
Import Price Index YoY January 3.4% 3.7% 1.8% 2.0%
U. of Michigan Sentiment February 98.0 95.7 98.5 —-
U. of Michigan Current Conditions February —- 111.2 111.3 —-
U. of Michigan Expectations February —- 85.7 90.3 —-
U. of Michigan 1 Year Inflation February —- 2.8% 2.6% —-
U. of Michigan 5-10 Year Inflation February —- 2.5% 2.6% —-
Monthly Budget Statement (2:00pm ET) January $45.0b —- <$27.5b> —-

 

*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones

 

New Issue Pipeline (more…)

Mischler IG Debt Market Comment: Knowing Past for the Future; Eye on AEP
January 2017      Debt Market Commentary   

Quigley’s Corner 01.27.17 – Investment Grade Corporate Debt Outlook; Eye on AEP

 

Investment Grade New Issue Re-Cap 

Utility Update re: American Electric Power (NYSE:AEP)

IG Primary & Secondary Market Talking Points

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

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

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

“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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 25th     

IG Credits by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

It was a no-print Friday.  There were a couple filings for Seagate and McKesson, meaning they could be on the short-term horizon for issuance.  Blackouts may prevent a monster week next week, but I am hearing the week after next things should start to build up again for our IG Corporate primary markets (barring a black swan fly over!)
Let’s recap things: first up front and then it’s onto those people who pitch, price and print YOUR deals.  They’re all waiting for you to scroll down below and greet them. That’s right, Friday means it’s time for the “Best & and the Brightest” that syndicate has to offerThey’re all here again to share their numbers, ranges and thoughts on both next week AND February projected new issuance of U.S. investment grade corporate debt. So, pull up a chair, sit down, relax and allow me to inform you through the manifestation of their gracious time and patronage!
Utility Update re: American Electric Power

It’s been in my M&A Pipeline near page bottom of the “QC” every day now for over 4 months – “On Wednesday, September 14th, American Electric Power (“AEP) (Baa1/BBB+) agreed to sell four power plants in the Midwest for a total of $2.17b to a private equity firm created by Blackstone Group and ArcLight Capital Partners. AEP is divesting of many wholesale power markets focusing instead more on its regulated utility businesses.  The closing of the transaction is expected sometime in Q1 2017.”

Well, that was then and this is now.  AEP is expected to close that $2.17b sale “very soon.” On the heels of very strong 2016 earnings that saw EPS beat $3.94 vs. $3.81 estimates and $3.69 the prior year, combined with successful rate base investments and rate increases, AEP looks to be in a very strong position warranting recent S&P upgrades across its corporate structure while keeping them all on a “positive” credit watch. It’s a utility to watch folks.

IG Primary & Secondary Market Talking Points

  • Market tone was incredibly strong today. Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 32 deals that printed, 28 tightened versus new issue pricing for a 50% improvement rate while 2 widened (6.25%) and 2 were flat (6.25%). It sets things up nicely for further issuance ahead!
  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $1.589b into Corporate Investment Grade Funds (2016 YTD net inflow of $9.697b) and a net outflow of $532.417m from High Yield Funds (2016 YTD net outflow of $121.533m).
  • BAML’s IG Master Index tightened 1 bp to +126 vs. +127.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +120.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • 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 $21.2b on Thursday versus $23.0b on Wednesday and $23.5b the previous Thursday.
  • The 10-DMA stands at $19.3b.

 

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

 

IG Corporate New Issuance This Week
1/23-1/27
vs. Current
WTD – $23.65b
January 2017
Forecasts
vs. Current
MTD – $140.383b
Low-End Avg. $19.09b 123.89% $107.87b 130.14%
Midpoint Avg. $20.46b 115.59% $108.41b 129.49%
High-End Avg. $21.83b 108.34% $108.96b 128.84%
The Low $15b 1157.67% $80b 175.48%
The High $26b 90.96% $145b 96.82%

 

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

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  21 of those participants are among 2017’s YTD top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 22 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg 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 87.97% 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 the third consecutive year! That’s 2014, 2015 and 2016. 

We framed the following background info for our 23 fixed income syndicate peers throughout the top Wall Street banks…folks who are in the know..
Will January 2017 break the all-time monthly volume record?

  • WTD, we surpassed the syndicate midpoint average forecast by over 23% or $23.65b vs. $20.46b.
  • MTD we priced over 29% more than the January average forecast or $140.383b vs. $108.41b.
  • All-in YTD IG Corporate and SSA issuance stands at $195.133b making it the 2nd highest monthly volume of all-time. We have $18.267b to break the record set in May 2016 of $213.40b. Will we get there?

Here are this week’s five IG Corporate-only key primary market driver averages after the close of yesterday’s:

  • NICS:  1.13 bps
  • Oversubscription Rates: 3.29x
  • Tenors:  6.67 years
  • Tranche Sizes: $845mm
  • Spread Compression from IPTs to the Launch: <18.20> bps

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

  • NICs tightened 2.29 bps to 1.13 bps vs. 3.42 bps last week.
  • Over subscription or bid-to-cover rates grew by 0.89x to 3.29x vs. 2.40x. 
  • Average tenors dramatically compressed by 5.33 years to 6.67 years vs. 12 years.
  • Tranche sizes reduced $278mm to $845mm vs. $1,123.
  • Spread compression from IPTs to the launch/final pricing of this week’s 28 IG Corporate-only new issues tightened by <3.51> bps to <18.20> vs. <14.69> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 1 bp to +164 vs. +165.
  • Week-on-week, BAML’s IG Master Index tightened 2 bps to +126 vs. +128. 
  • Spreads across the four IG asset classes tightened 1.50 bps to 19.00 vs. 20.50 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.95 bps to 24.00 vs. 24.95 bps also against their post-Crisis lows.

As more and more major corporations exit blackouts, we increase the chances of further issuance ahead.  Thus far in his first week as our new President, Donald Trump has been true to his word – he has disrupted D.C. (as well as airports) through an assortment of measures including but not limited to: (i) issuing an executive order to roll back Obamacare, (ii) froze new federal agency regulations for review, (iii) claims to be re-negotiating NAFTA,(iv) pulled the U.S. out of the TPP, (v) met or spoken with U.K., Canadian and Mexican leaders while encouraging U.S. companies to grow jobs in America by closing their foreign plants.  He has taken action on his campaign promise to build a wall along our southern border with Mexico and restricting immigration laws. Those latter steps have also created mass protests throughout the country and in many other countries. On Election Day November 8th, 2016 the DOW closed at 18,332.  Today the Dow sits at an all-time high of 20,100. That’s up 1,768 points or 9.64% making it the number one ranked Post-Election gain since 1900 eclipsing the 7.75% gain of Calvin Coolidge’s Presidency in the Roaring Twenties. Reminding those of us across the financial industry to advance the caveat: “Past performance is not to be considered an indication of future performance.”

The “Best and the Brightest” in Their Own Words

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

FOMC Minutes-Distilling the Minutiae; Mischler Debt Market Comments
January 2017      Debt Market Commentary   

Quigley’s Corner 01.04.17 – FOMC Minutes; Distilling the Minutiae and Market Reaction(s)

Today’s Issuers: American Airlines (NYSE:AMR); Citigroup Inc (NYSE:C); Credit Suisse Group; Ford Motor Credit Corp (parent NYSE:F); Toyota Motor Credit Corp TMCC (parent NYSE:TM) and…

Investment Grade New Issue Re-Cap – U.S. and Europe Posting Prolific IG Volume Totals – 7th Busiest IG USD Primary Day in History

Global Market Recap

Credit Suisse AG $4.5b two-part 6NC5 and 11NC10 Senior Notes Deal Dashboard

FOMC Minutes Brought to You by Our Fighting Irishman Mr. Tony Farren

FOMC Voting Line-Up for 2017 from 2016

IG Primary & Secondary Market Talking Points

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending December 28th     

IG Credit Spreads by Rating

IG Credits by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

To tell you how busy the IG primary markets have been today, let’s first go to Europe of all places, where it would seem things might appear a bit better than anticipated resulting in issuers’ fear of higher rates sooner rather than later.  You all know what I feel about Europe’s geopolitical situation (I’m in the Bear camp), but the market likes to be way ahead of the curve.  The result, according to my longtime friend and former BNP Paribas colleague, Mr. Paul Cohen, who heads Bloomberg Editorial in London, “this week’s European IG issuance stands at €29.93b exceeding by 89%, London syndicate expectations for the entire week after only just two days and the highest new issue volume since March 16th and only the third time in three years that more than €22b dollar priced during a single session.” Additionally he said, “Europe priced its first sovereign issue today for Ireland – a €4b long 20-year.”  I call that “getting off the fence” to take full advantage of the current rate environment. We know how market players react, from issuers to bankers and traders and sales – they want to be ahead of the pack. Europe clearly has a long and bumpy road ahead of itself, but for today that’s a staggering issuance statistic across the pond.

Conversely, we here in the U.S. of A. have much more substantial evidence of an improving economy with promise for our future.  However, don’t be fooled by today’s FOMC Minutes (more on that later). Rates aren’t going up merely on Trump’s promises, rather once in office, the Beltway needs to show it can get things done.  With Republicans owning the White House, Senate and Congress the expectation is that great change may come fast and furious but don’t get too far ahead of yourselves.  Rate hikes will be a slow crawl folks. Remember that!  

Regardless, as a result, today was the 7th busiest day for all-in IG dollar new issuance.  That’s right, we priced a total of 7 IG Corporate issuers across 22 tranches totaling $22.785b.  Meanwhile 2 SSA issuers joined the fray, issuing 3 tranches between them totaling $5.75b bringing the staggering record all-in IG day total to 9 issuers, 25 tranches and $28.535b.  The all-in (IG Corporates plus SSA) WTD total is now $48.435b. In terms of IG Corporate-only WTD volume, we have priced over 39% of the syndicate midpoint average forecast for all of January or $108.41b.

My advice? Be smart, look good and continue issuing.

Mischler was grateful to once again secure a part in this great start to the New Year, having served as an active Co-Manager on today’s $4.5b two-part from Credit Suisse Group AG in the form a 6NC5 and 11NC10 Senior Notes new issue. Let’s first look at the Global re-cap and then I’ll show you the CS Deal Dashboard.

I also encourage you to ask Paul Cohen, who is located in London, to add you to his disty list.  If you are already on Bloomberg, it’s free and you’ll be glad you did.  So, send him a message or chat. He’s an all-around great guy.  He’ll be happy to keep you in touch with IG primary market stats and commentary from across the pond and “Yes” he is part of the Ed, Bob and Lisa show who do what he does but they do it here in New York.  Note also that Paul is a very seasoned originator/banker and he can talk-the-talk and hold his own with any of my “QC” readership. See that?  Another value-added suggestion from the guy-in-the-corner.

 

Global Market Recap

 

  • The FOMC Minutes were not as hawkish as the December Meeting.
  • U.S. Treasuries – Mixed & little changed.
  • Overseas Bonds – JGB’s mixed/steeper. EU more red than green. Supply tomorrow.
  • 3mth Libor – Set over 1% (1.00511%) for the first time since May 2009.
  • Stocks – NASDAQ leading U.S. stocks higher (3:30pm).
  • Overseas Stocks – Europe closed mixed. Big rally for Nikkei. China higher.
  • Economic – Vehicle sales looked to be very strong.
  • Overseas Economic – Higher EU CPI. Better economic data in Europe, China & Japan.
  • Currencies – The USD weaker was vs. all of the Big 5. Strong session for ADXY Index.
  • Commodities – Good day for the CRB, crude oil, copper & wheat.
  • CDX IG: -2.27 to 63.40
  • CDX HY: -7.21 to 338.48
  • CDX EM: -6.45 to 233.39

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

-Tony Farren

 

 

Credit Suisse AG $4.5b two-part 6NC5 and 11NC10 Senior Notes Deal Dashboard

 

CS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
6NC5 +185a +165 the # +165 +165 <20> bps 11 bps 163/161 <2>
11NC10 +205a +185 the # +185 +185 <20> bps 2 bps 183/180 <2>

 

The 11NC10 relative value study pointed to the outstanding CS 4.55% due 4/17/26 which was quoted T+166bp (G+170).  The 10s/11s curve is worth about 4 bps getting you to T+174 implying an 11 bp NIC on this tranche.

 

The 6nc5 tranche comped best to the Credit Suisse  CS 3.45% due 4/16/2021 that was T+130bp (G146) pre-announcement.  Accounting for 5 bps for the 4s/5s curve and tagging on another 12 bps for the 5s/6s curve lands fair value at T+163 pointing to a 2 bp NIC versus today’s 11NC10 +165 final spread level.

 

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

 

CS  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
6NC5 $1.75b $4.7b 2.69x
11NC10 $2.25b $6.4b 2.84x

 

Final Pricing – Credit Suisse Group AG
CS $1.75b 3.574%% 6NC5 1/09/2023 callable 1/09/2022 @ $100.00 to yield 3.574% or T+165  MW +25

CS $2.25b 4.282% 1/09/2028 callable 1/09/2027 @ $100.00 to yield 4.282% or T+185  MW +30

 

FOMC Minutes Brought to You by Our Fighting Irishman Mr. Tony Farren

 

  • About half of FED officials included fiscal policy in their forecasts.
  • Many officials stressed uncertainty on fiscal policy effects.
  • Numerous officials judged the FED might need to raise rates faster.
  • Fed officials endorse gradual rate hikes as upside risk debated.
  • Weighed upside risks to growth from fiscal policy.
  • Several saw a stronger U.S. dollar holding down inflation.
  • Officials were split on the inflation outlook.
  • Almost all officials expected a labor market overshoot.
  • FED: downside risks included a stronger U.S. dollar and weakness abroad.
  • Need improved confidence could boost investment.
  • Housing market data signaled firmer residential investments.
  • Sighted continued moderate consumers spending gains.
  • Noted that businesses are more optimistic on their outlooks.
  • Fed officials saw rising communication challenge on the rate path.

 

Tony’s Take: Deep Dive Into Rates – Expectations vs. Reality

 

  • The FOMC’s Minutes were not as hawkish as the market perceived the FOMC to be on Fed day (December 14th).
  • The roughly half of FOMC Members that took fiscal policy into account prior to its being introduced must have expressed the more optimistic view in their Dots and not their forecasts for growth, employment and inflation. The economic forecasts were very little changed in December from September.
  • One critical factor is the market has not focused enough on is that the 2017 FOMC will not be nearly as hawkish as the 2016 FOMC was. The biggest hawk on the 2017 FOMC is Vice-Chair Fischer. I sent out a piece on the 2017 vs. 2016 FOMC yesterday at 11:45 am……oh you missed that? Well my good firned the guy-in-the-corner has been kind enough to re-print it for you below.

 

Take a look …………………..

 

FOMC Voting Line-Up for 2017 from 2016

 

The FOMC takes a dovish turn in 2017 from 2016. A better description for the 2017 might be a less hawkish FOMC than 2016. In 2017 the FOMC will add 2 doves and 2 neutral voters and they will be replacing 1 dove, 2 hawks & 1 neutral. The neutral voter (Bullard) had entered 2016 known as a hawk. 3 of the 4 voters in 2016 that are being replaced in 2017 were dissenters at FOMC Meetings in 2016 and all 3 favored rates hikes when the FOMC remained on hold. In an interesting twist, 3 of the new voters in 2017 are the most recently appointed Regional Fed President’s –  Patrick Harker (Philadelphia/July 1, 2015); Robert Kaplan (Dallas/September 8, 2015) and Neel Kashkari (Minneapolis/January 1, 2016). In 2017 out of the current 10 voting members (currently 2 open Fed Governor seats) there will be 6 doves, 1 hawk & 3 neutral voters. Last year (2016) there was 5 doves, 3 hawks & 2 neutral voters.

Here are the details:

 

New Voters 2017 Dove / Hawk
Charles Evans (Chicago) Very Dovish
Patrick Harker (Philadelphia) Neutral (possible hawkish lean)
Robert Kaplan (Dallas) Neutral
Neel Kashkari (Minneapolis) Dove

 

New Voters 2017 Dove / Hawk
James Bullard (St. Louis) Neutral (formally hawkish)
Esther George (Kansas City) Very Hawkish (lived up to reputation)
Loretta Mester (Cleveland) Hawk (lived up to reputation)
Eric Rosengren (Boston) Dovish (formally known as very dovish)

 

The 2017 Line-Up
Doves (6): Yellen, Brainard, Tarullo, Dudley, Evans & Kashkari
Hawks (1): Fischer
Neutral (3): Powell, Harker & Kaplan

 

Who the Heck  is Tony Farren?  Well, for Starters…

Interesting stuff isn’t it?  Think twice about the rush to hike folks!  And do yourselves another favor please, when you sign on to Bloomberg tomorrow morning look up Tony Farren and ask him to put you on his disty list. Here’s why I say that – I’ve worked right next to “Rocket” Spinella, Chris Garavante and Tommy Lynette on Danny Napoli’s best-in-class Treasury desk at Mother Merrill back in the day. In fact, that team was so good that Tom Hanks sat next to those guys for a couple days to prep for his role as the Master of the Universe when he starred in Brian De Palma’s “Bonfire of the Vanities.”  I happened to be about 10 feet away sitting on corner desk (go figure) of the IG Corporate Institutional trading desk across from another Wall Street legend Mr. Seth Waugh.  Joe Moglia (net worth $1.2b according to monte Burke’s book) sat behind me in institutional sales.  To this day he’s the best motivator on the planet.  Talk about Wall Street celebs, there’s a lot of them right there.  I was lucky and fortunate enough to be around them.  That’s not to mention syndicate etc.  I know I know……relax, I never cease to amaze people.  Anyway, Hanks wanted to know how the phone screens worked, the mannerisms and language used on a real-time Treasury desk for his role as Sherman McCoy so he picked the best and busiest on the street and so it goes.

Here’s my point – out of all that talent that surrounded me especially on the govie desk, Tony Farren is a sharp and experienced market player ( and an ND grad) and could be right in the mix with those people during “those” times.  He’s here at Mischler and is a foundational part of our UST team not to mention a wealth of knowledge.  Reach out to him and ask him to add you to his disty list. Take what you want and leave the rest. Everything he sends out is great stuff.  You’ll be glad you did.  Heck, the guy makes me look good to.  There’s a reason why I added in his Global Market Re-Cap every night and this evening’s Farren intel is a good example of the great stuff you might be missing out on.  Do it.  That’s right I’m talking to YOU. Just do it. Thanks! RQ. 

IG Primary & Secondary Market Talking Points

  • American Airlines Inc. upsized today’s two-part EETC pass through certificates new issue to $536.811m from $404.943m on the Class “AA” tranche and $248.627 from $187.553m on the Class “A” tranche.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 22 IG Corporate-only new issues was 14.45 bps.
  • BAML’s IG Master Index tightened 2 bps to to +128 vs. +130.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +122 vs. 1.23.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +168 vs. +169.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.8b on Tuesday versus $2.5b on Friday and $5.7b the previous Tuesday.
  • The 10-DMA stands at $7.9b.

 

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

 

IG Corporate New Issuance January 2017
Forecasts
vs. Current
MTD – $42.685b
Low-End Avg. $107.87b 39.57%
Midpoint Avg. $108.41b 39.37%
High-End Avg. $108.96b 39.17%
The Low $80b 53.36%
The High $145b 29.44%

 

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

Have a great evening!

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/02
TUES.
1/03
AVERAGES
WEEK 12/26
AVERAGES
WEEK 12/19
AVERAGES
WEEK 12/12
AVERAGES
WEEK 12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
New Issue Concessions N/A 1.76 bps N/A N/A <0.50> bps 4.26 bps 3.53 bps 4.5 bps
Oversubscription Rates N/A 2.62x N/A N/A 2.41x 3.68x 3.38x 2.99x
Tenors N/A 7.53 yrs N/A N/A 10.67 yrs 9.21 yrs 10.84 yrs 12.14 yrs
Tranche Sizes N/A $796mm N/A N/A $708mm $760mm $711mm $929mm
Avg. Spd. Compression
IPTs to Launch
N/A <16.96> bps N/A N/A <17.17> bps <22.24> bps <17.60> bps <16.07> bps

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
American Airlines Inc. Aa3/AA 3.65% 2/15/2029 536.811 3.875%a 3.70%a (+/-5) 3.65% +120 CITI/CS/DB(a)MS/GS+(p)
American Airlines Inc. A2/A 4.00% 2/15/2029 248.627 4.125% 4.00%a (+/-5) 4.00% +155 CITI/CS/DB(a)MS/GS+(p)
Citigroup Inc. Baa1/A FRN 1/10/2020 1,000 3mL+equiv 3mL+equiv 3mL+79 3mL+79 CITI-sole
Citigroup, Inc. Baa1/A 2.45% 1/10/2020 1,500 +110a +100a (+/-2) +98 +98 CITI-sole
Citigroup, Inc. Baa1/A 3.887% 1/10/2028 2,750 +162.5a +145a the # +145 +145 CITI-sole
Credit Suisse Group AG BBB+/A- 3.574% 1/09/2023 1,750 +185a +165 the # +165 +165 CS-sole
Credit Suisse Group AG BBB+/A- 4.282% 1/09/2028 2,250 +205a +185 the # +185 +185 CS-sole
Ford Motor Credit Corp. Baa2/BBB FRN 1/09/2020 1,000 3mL+equiv 3mL+equiv 3mL+100 3mL+100 BARC/CACIB/CS/JPM/MIZ
RBC/SMBC
Ford Motor Credit Corp. Baa2/BBB 2.681% 1/09/2020 1,250 +140a +125a (+/-5) +120 +120 BARC/CACIB/CS/JPM/MIZ
RBC/SMBC
Ford Motor Credit Corp. Baa2/BBB 3.81% 1/09/2024 750 +175a +160a (+/-3) +157 +157 BARC/CACIB/CS/JPM/MIZ
RBC/SMBC
Lloyds Banking Group Baa1/A+ 3.00% 1/11/2022 1,500 +130a +115 the # +115 +115 GS/HSBC/LLOYD/MS/WFS
Lloyds Banking Group Baa1/A+ 3.75% 1/11/2027 1,250 +160a +145a (+/-5) +140 +140 GS/HSBC/LLOYD/MS/WFS
National Australia Bank Ltd. Aa2/AA- FRN 1/10/2020 250 3mL+equiv 3mL+equiv 3mL+59 3mL+59 CITI/MS/NAB/RBC
National Australia Bank Ltd. Aa2/AA- FRN 1/10/2022 500 3mL+equiv 3mL+equiv 3mL+89 3mL+89 CITI/MS/NAB/RBC
National Australia Bank Ltd. Aa2/AA- 3.50% 1/10/2027 750 +120a +110a (+/-2) +108 +108 CITI/MS/NAB/RBC
National Australia Bank/NY Aa2/AA- 2.25% 1/10/2020 1,000 +90a +80a m(+/-2) +78 +78 CITI/MS/NAB/RBC
National Australia Bank/NY Aa2/AA- 2.80% 1/10/2022 1,000 +100a +90a (+/-2) +90 +90 CITI/MS/NAB/RBC
Toyota Motor Credit Corp. Aa3/AA- FRN 1/09/2019 400 3mL+equiv 3mL+equiv 3mL+26 3mL+26 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- 1.70% 1/09/2019 850 +60a +52a (+/-2) +50 +50 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- FRN 1/11/2022 300 3mL+equiv 3mL+equiv 3mL+69 3mL+69 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- 2.60% 1/11/2022 1,200 +80a +72a (+/-2) +70 +70 BNPP/CITI(B&D)JPM/MIZ/TD
Toyota Motor Credit Corp. Aa3/AA- 3.20% 1/22/2027 750 +low 90s/+92.5 +82a (+/-2) +80 +80 BNPP/CITI/JPM(B&D)MIZ/TD

           

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Asia Development Bank Aaa/AAA 1.75% 1/10/2020 3,000 MS +8a MS +8a MS +8 +28.05 CITI/GS/JPM/NOM
Asia Development Bank Aaa/AAA 2.,625% 1/12/2027 1,000 MS +38a MS +38 MS +38 +23.75 CITI/GS/JPM/NOM
Bank of Montreal Aaa/AAA 2.50% 1/11/2022 1,750 MS +low/mid 60s
63.75a
MS+60 MS +60 +61.2 BMO/BARC/HSBC/TD

 

Indexes and New Issue Volume

 

Index Open Current Change
IG27 65.669 63.476 <2.193>
HV27 141.03 137.58 <3.45>
VIX 12.85 11.85 <1.00>
S&P 2,258 2,271 13
DOW 19,882 19,942 60
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $22.785 bn DAY: $28.535 bn
WTD: $42.685 bn WTD: $48.435 bn
MTD: $42.685 bn MTD: $48.435 bn
YTD: $42.685 bn YTD: $48.435 bn

 

Lipper Report/Fund Flows – Week ending December 28th     

     

  • For the week ended December 29th, Lipper U.S. Fund Flows reported an inflow of $1.620b into Corporate Investment Grade Funds (2016 YTD net inflow of $46.95b) and a net inflow of $592.117m into High Yield Funds (2016 YTD net inflow of $11.275b).
  • Over the same period, Lipper reported a net inflow of $923.798m into Loan Participation Funds (2016 YTD net inflow of $6.261b).
  • Emerging Market debt funds reported a net outflow of $38.770m (2016 YTD inflow of $3.721b).

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 20.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 1/03 1/02 12/30 12/29 12/28 12/27 12/23 12/22 12/21 12/20 1-Day Change 10-Day Trend PC
low
IG Avg. 128 130 129 128 128 128 129 129 129 129 0 <1> 106
“AAA” 70 71 71 70 70 71 71 72 72 72 0 <2> 50
“AA” 79 80 80 79 79 80 80 80 80 80 0 <1> 63
“A” 103 104 103 103 103 103 103 103 104 104 0 <1> 81
“BBB” 164 166 164 163 164 164 164 164 165 165 0 <1> 142
IG vs. HY 285 292 292 290 287 282 287 288 290 290 0 <5> 228

 

IG Credit Spreads by Industry (more…)

2017 Investment Grade Debt Issuance Outlook: HUGE Start to New Year
January 2017      Debt Market Commentary   

Quigley’s Corner 01.03.17- 2017 Investment Grade Corporate Bond Issuance Off to HUGE Start

11 IG Corporate Issuers priced 25 tranches between them, totaling $19.90 billion; Fortune Co’s Duke Energy, FedEx & John Deere;  Barclays Leads Bank Issuers

 

Investment Grade New Issue Re-Cap – Monumental Day; If Not Quite As Big as The Trojans’ Rose Bowl Win!!

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

Barclays PLC $1.5b 30yr Senior Unsecured Notes Deal Dashboard

Duke Energy Florida LLC 2-part 3s/10s FMBs Deal Dashboard

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 December 28th     

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Here’s what I last wrote in my pre-holiday “QC” dated Thursday, December 15th: “Rest up. Spend time with your families.  Enjoy the holidays, however you celebrate them.  Live, love and laugh because it starts all over again in 19 days on Tuesday, January 3rd.  In between that time fall 3 weekends (6 days), as well as Christmas and New Year’s Day.  My wish is that USC topples PSU in the Granddaddy of them all on Monday, January 2 at 5pm ET on ESPN.  That right there will be the most entertaining of all the Bowl games.  Fight On Trojans!”

So, the question is, “how happy is the guy-in-the-corner? USC’s wins 52-49 in what is perhaps the greatest Rose Bowl ever played.  How ‘bout them Trojans?  Chad Helton……Sam Darnold…….the entire Trojan team.  You gotta be kidding me.  Fight On!  They’re back and so am I from my winter hiatus.  So, let’s get to it!

The IG dollar DCM waited for no one.  I woke up at 4:45am this morning to the sounds of the bankers driving down Weaver Street to either ride in early or to catch the Metro North 4:52 a.m. milk train to Manhattan.  It usually always confirms a busy day on the Street.   Sure enough, it was once again very reliable.  I figured, “what the heck,  I have plenty to catch up on at work,” so I got in early and am glad that I did.  11 IG Corporate issuers priced 25 tranches between them totaling $19.90 billion or 18.50% of the syndicate midpoint average estimate for all of January ($108.41b) – which is historically a busy month. Mischler was very proud to have been actively involved in two deals across three tranches – first serving on Barclays PLC’s 30-year Senior Unsecured Notes new issue and then getting an equally great call from the good folks at Duke Energy Florida LLC to serve on its 3- and 10-year FMBs.  In all, it was a very busy day.  But before we get into those deal drill downs let’s first check out Tony Farren’s Global market re-cap, followed by today’s talking points and  then it’s onto the BACR and DUK new issues.

Welcome back everyone and I hope you all enjoyed the break.  Happy New Year!

 

Global Market Recap

 

  • U.S. Treasuries – USTs were red except the 30yr but had an impressive rally during NY hours.
  • Overseas Bonds – Higher inflation & U.K. PMI and supply concerns hammered bonds in the EU.
  • 3mth Libor – Set at its highest yield since May 2009 (0.99872%).
  • Stocks – U.S. stocks higher at 3:30pm but well off the session high levels.
  • Overseas Stocks – Asia higher, EU entered bull market & FTSE record high close.
  • Economic – ISM manufacturing the best in 2 years with prices paid at the highest level since 2011.
  • Overseas Economic – Manufacturing PMI in China & U.K. improved. Higher CPI in Germany, France & Spain.
  • Currencies – DXY Index traded at strongest level since 2002.
  • Commodities – CRB closed down with energy trading poorly but gold & silver rallied.
  • CDX IG: -1.40 to 66.18
  • CDX HY: -6.62 to 348.00
  • CDX EM: -2.17 to 239.91

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 25 IG Corporate-only new issues was 16.96 bps.
  • BAML’s IG Master Index widened 1 bp to +130 vs. +129.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +123 vs. 1.22.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +169 vs. +168.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $2.5b on Friday versus $4.1b on Thursday and $2.2b the previous Friday.

 

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

 

IG Corporate New Issuance This Week
1/02-1/06
vs. Current
WTD – $19.90b
January 2017
Forecasts
vs. Current
MTD – $19.90b
Low-End Avg. no poll taken N/A $107.87b 18.45%
Midpoint Avg. no poll taken N/A $108.41b 18.36%
High-End Avg. no poll taken N/A $108.96b 18.26%
The Low no poll taken N/A $80b 24.87%
The High no poll taken N/A $145b 13.72%

 

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

 

  • Across the past ten years, all-in dollar-denominated IG Corporate plus SSA January new issuance averaged $135.00b.
  • Over the past five years, all-in IG January new issuance averaged $143.38b.
  • Over the past three years, all-in IG January issuance has averaged $145.46b.
  • The past three January’s saw IG Corporate only issuance average $108.90b.
  • January SSA issuance has averaged $36.56b across the last three years.

 

January
(Year)
All-in IG Issuance (bn) IG Corps
only (bn)
SSA
only (bn)
2016 169.124 126.984 42.14
2015 115.12 96.35 18.77
2014 152.14 103.36 48.78
2013 153.06 119.06 34.00
2012 127.48 81.14 46.34
2011 149.12 111.89 37.23
2010 110.69 74.80 35.89
2009 155.45 69.23 86.22
2008 144.35 75.74 68.61
2007 73.44 51.14 22.30

*Note: includes TARP/TALF & FDIC insured issuance

 

 

Barclays PLC $1.5b 30yr Senior Unsecured Notes Deal Dashboard

 

Mischler served as an active 1.00% Co-Manager on today’s 30-year tranche of Barclays PLC’s goliath $5 billion 4-part, so this serves as the deal dashboard for the 30-year piece. For my relative value study I looked at the outstanding BACR Senior Unsecured Notes due 8/17/2045 that were T+170 pre-announcement pegging NIC on today’s new 30-year as 20 bps.

 

Investor appetite for the 4-part was simply voracious.  The FRN garnered a $1b book while the 6NC5 And 11NC10 books each hovered at around $4bn.  The 30-year was tops at $4.8b. So a great start of the year for BACR and our IG DCM.

Proceeds from today’s 4-part will be used for general corporate purposes.

 

BACR Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
BACR +210a +195a (+/-5) +190 +190 <20> bps 20 bps 180/178 <10>

 

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

 

BACR  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
BACR $1.5b $4.8b 3.20x

 

Final Pricing – Barclays PLC
BACR $1.5b 4.95% 30yr due 1/20/2047 @ $99.907 to yield 4.956% or T+190

 

Duke Energy Florida LLC 2-part 3s/10s FMBs Deal Dashboard

 

For relative value, Duke Energy Carolinas (Aa2/A) recently brought a 10-year, the DUK 2.95% due 12/01/2026, this past November 14th.  This higher-rated DUK was quoted T+71bp (G+71), versus its T+75 new issue pricing.  Today’s A1/A rated Duke Energy Florida LLC 10-year new issue landed 4 bps back of that, however, it did correspond with the November Carolinas final pricing level. So, looking at it from that angle, concession was flat.  Accounting for a 20 bps 5s/10s curve gets you to +55. Next, factoring in a 10 bps 3s/5s curve lands us at +45 for 3-year fair value inferring a negative 5 bp concession on today’s Duke Florida 3-year.

 

Proceeds will be used to fund capital expenditures for ongoing construction, capital maintenance, to repay $250mm principal of the 5.80% FMBs due 2017 and for general corporate purposes.

 

DUK Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
DUK +55a +45a (+/-5) +40 +40 <15> bps <5> 39/38 <1>
DUK +90a +80a (+/-5) +75 +75 <15> bps 0 73/71 <2>

 

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

 

DUK  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
DUK $250mm $750mm 3x
DUK $650mm $1.5b 2.31x

 

Final Pricing – Duke Energy Florida LLC
DUK $250mm 1.85% 3yr FMBs due 1/15/2020 @ $99.886 to yield 1.889% or T+40  MWC +7.5

DUK $650mm 3.20% 10yr FMBs due 1/15/2027 @ $99.940 to yield 3.207% or T+75  MWC +15

 

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

Have a great evening!

Ron Quigley

 

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

 

Here’s a day-by-day recap of the five key primary market driver averages for IG Corporates reflecting the last active week of 2016 issuance and the prior six week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/12
TUES.
12/13
WED.
12/14
TH.
12/15
FR
12/16
AVERAGES
WEEK 12/26
AVERAGES
WEEK 12/19
AVERAGES
WEEK 12/12
AVERAGES
WEEK 12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
New Issue Concessions <1.83> bps N/A N/A 1.50 bps N/A N/A N/A <0.50> bps 4.26 bps 3.53 bps 4.5 bps
Oversubscription Rates 2.15x N/A N/A 2.94x N/A N/A N/A 2.41x 3.68x 3.38x 2.99x
Tenors 6 yrs N/A N/A 20 yrs N/A N/A N/A 10.67 yrs 9.21 yrs 10.84 yrs 12.14 yrs
Tranche Sizes $688mm N/A N/A $750mm N/A N/A N/A $708mm $760mm $711mm $929mm
Avg. Spd. Compression
IPTs to Launch
<15.75> bps N/A N/A <20.00> bps N/A N/A N/A <17.17> bps <22.24> bps <17.60> bps <16.07> bps

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Barclays PLC Baa2/BBB FRN 6NC5 750 3mL+equiv 3mL+166a (+/-5) 3mL+162.5 3mL+162.5 BARC-sole
Barclays PLC Baa2/BBB 3.684% 6NC5 1,500 +195a +180a (+/-5) +175 +175 BARC-sole
Barclays PLC Baa2/BBB 4.337% 11NC10 1,250 +210a +195a (+/-5) +190 +190 BARC-sole
Barclays PLC Baa2/BBB 4.95% 1/20/2048 1,500 +210a +195a (+/-5) +190 +190 BARC-sole
BNP Paribas A1/A+ 3.80% 1/10/2024 1,750 +170-175 +160 the # +160 +160 BNP-sole
Credit Agricole SA Baa2/A FRN 1/10/2022 300 3mL+equiv 3mL+equiv 3mL+143 3mL+143 CACIB-sole books
JLMs: CITI/DB/SG/TD/UNI
Credit Agricole SA Baa2/A 3.375% 1/10/2022 1,000 +165a +145-150 +145 +145 CACIB-sole books
JLMs: CITI/DB/SG/TD/UNI
Credit Agricole SA Baa2/A 4.125% 1/10/2027 1,000 +195a +175-180 +175 +175 CACIB-sole
JLMs: CITI/DB/SG/TD/UNI
Daimler Finance N.A. LLC A3/A FRN 1/06/2020 400 3mL+requiv 3mL+equiv 3mL+63 3mL+63 BAML/COBA/JPM/MIZ
Daimler Finance N.A. LLC A3/A 2.30% 1/06/2020 1,000 +95a +85a (+/-2) +83 +83 BAML/COBA/JPM/MIZ
Daimler Finance N.A. LLC A3/A 2.85% 1/06/2022 850 +105a +95a (+/-2) +93 +93 BAML/COBA/JPM/MIZ
Daimler Finance N.A. LLC A3/A 3.45% 1/06/2027 750 +120a +105 the # +105 +105 BAML/COBA/JPM/MIZ
Duke Energy Florida LLC A1/A 1.85% 1/15/2020 250 +55a +45a (+/-5) +40 +40 BAML/SCOT/TD/UBS/WFS
Duke Energy Florida LLC A1/A 3.20% 1/15/2027 650 +90a +80a (+/-5) +75 +75 BAML/SCOT/TD/UBS/WFS
FedEx Corporation Baa2/BBB 3.30% 3/15/2027 450 +110-115 +95a (+/-5) +90a +90 RF/SCOT/STRH/WFS
FedEx Corporation Baa2/BBB 4.40% 1/15/2047 750 +160-165 +145a (+/-5) +140a +140 RF/SCOT/STRH/WFS
John Deere Capital Corp. A2/A FRN 10/15/2018 250 3mL+equiv 3mL+equiv 3mL+27 3mL+27 BAML/CITI/GS
John Deere Capital Corp. A2/A 1.65% 10/15/2018 350 +65a +50a +47 +47 BAML/CITI/GS
John Deere Capital Corp. A2/A 2.65% 1/06/2022 400 +85a +75a (+/-3) +72 +72 BAML/CITI/GS
Principal Life Glbl. Fdg. II A1/A+ 2.15% 1/10/2020 500 +low 80s/+82.5 +75a (+/-3) +72 +72 BARC/CS/DB
Rabobank Nederland NY Aa2/A+ FRN 1/10/2022 500 3mL+equiv 3mL+equiv 3mL+83 3mL+83 CS/GS/JPM/RBC
Rabobank Nederland NY Aa2/A+ 2.75% 1/10/2022 1,000 +100a +87.5a (+/-2.5) +85 +85 CS/GS/JPM/RBC
Santander UK Grp. Hldgs. Baa1/A 3.571% 1/10/2023 1,000 +185a +165a (+/-2) +163 +163 BAML/DB/GS/SANT/WFS
Westpac Banking Corp. Aa2/AA- FRN 1/11/2017 500 3mL+equiv 3mL+equiv 3mL+85 3mL+85 BAML/HSBC
Westpac Banking Corp. Aa2/AA- 2.80% 1/11/2017 1,250 +105a +90a (+/-2) +88 +88 BAML/HSBC

           

Indexes and New Issue Volume

 

Index Open Current Change
IG27 67.585 65.669 <1.916>
HV27 144.05 141.03 <3.02>
VIX 14.04 12.85 <1.19>
S&P 2,239 2.258 19
DOW 19,763 19,882 119
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $19.90 bn DAY: $19.90 bn
WTD: $19.90 bn WTD: $19.90 bn
MTD: $19.90 bn MTD: $19.90 bn
YTD: $19.90 bn YTD: $19.90 bn

 

Lipper Report/Fund Flows – Week ending December 28th     

     

  • For the week ended December 29th, Lipper U.S. Fund Flows reported an inflow of $80.9m from Corporate Investment Grade Funds (2016 YTD net inflow of $43.710b) and a net inflow of $3.75b into High Yield Funds (2016 YTD net inflow of $10.723b).
  • Over the same period, Lipper reported a net inflow of $1.504b into Loan Participation Funds (2016 YTD net inflow of $3.826b).
  • Emerging Market debt funds reported a net outflow of $776.74m (2016 YTD inflow of $3.961b).

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 20.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 1/03 1/02 12/30 12/29 12/28 12/27 12/23 12/22 12/21 12/20 1-Day Change 10-Day Trend PC
low
IG Avg. 128 130 129 128 128 128 129 129 129 129 <2> <1> 106
“AAA” 70 71 71 70 70 71 71 72 72 72 <1> <2> 50
“AA” 79 80 80 79 79 80 80 80 80 80 <1> <1> 63
“A” 103 104 103 103 103 103 103 103 104 104 <1> <1> 81
“BBB” 164 166 164 163 164 164 164 164 165 165 <2> <1> 142
IG vs. HY 285 292 292 290 287 282 287 288 290 290 <7> <5> 228

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 26.21 bps wider versus their post-Crisis lows!

 

INDUSTRY 1/03 1/02 12/30 12/29 12/28 12/27 12/23 12/22 12/21 12/20 1-Day Change 10-Day Trend PC
low
Automotive 119 121 118 118 118 119 119 119 119 119 <2> 0 67
Banking 120 120 120 120 120 120 120 121 121 121 0 <1> 98
Basic Industry 168 170 167 166 166 165 166 166 166 166 <2> +2 143
Cap Goods 97 98 97 96 96 96 96 96 97 97 <1> 0 84
Cons. Prod. 105 106 106 105 105 106 106 106 106 106 <1> <1> 85
Energy 161 163 160 160 160 160 161 160 161 161 <2> 0 133
Financials 151 152 151 151 150 149 150 150 151 150 <1> +1 97
Healthcare 113 114 114 113 114 114 114 114 115 115 <1> <2> 83
Industrials 130 130 130 129 130 130 130 130 131 131 0 <1> 109
Insurance 141 143 142 141 141 141 141 141 142 141 <2> 0 120
Leisure 134 132 130 129 129 131 132 132 132 134 +2 0 115
Media 153 155 154 154 154 154 155 155 155 156 <2> <3> 113
Real Estate 141 143 141 140 141 141 141 141 141 141 <2> 0 112
Retail 108 109 109 108 109 109 109 109 110 110 <1> <2> 92
Services 123 123 123 123 123 123 123 124 124 123 0 0 120
Technology 102 105 103 102 104 104 104 105 105 106 <3> <4> 76
Telecom 158 159 159 159 159 159 160 160 161 161 <1> <3> 122
Transportation 127 128 128 127 127 127 127 127 128 128 <1> <1> 109
Utility 129 130 130 129 129 129 129 129 129 130 <1> <1> 104

                                  

New Issue Pipeline

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

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

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


Investment Grade Corporate Debt New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

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

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 30th    

Investment Grade Credit Spreads (by Rating & Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar     

 

 

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

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

 

Global Market Recap

 

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

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

ford-debt-issuance-mischler-diversity-inclusion

Diversity & Inclusion Going Further with Ford Motor Company

 

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

 

Ford and Veteran Causes

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

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

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

Global Macro: Italexit; Austria and Sweeping Populism

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

italexit-mischler-global-macro

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

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

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

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

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

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

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

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

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

 

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

 

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

 

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

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

 

New Issues Priced

(more…)

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

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

 

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

Global Market Recap

IG Corporate Bond Primary & Secondary Market Talking Points

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

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

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

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

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

New Issues Priced

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 30th    

IG Credit Spreads by Rating

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

IG Credit Spreads by Industry

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

New Issue Pipeline

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

Economic Data Releases

Rates  Trading Lab

Tomorrow’s Calendar

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

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

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


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

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

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

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

 

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

 

Global Market Recap

 

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

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

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

  • The 10-DMA stands at $16.5b.

 

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

 

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

 

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

 

Once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2016’s top 24 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  The participating desks represent 81.55% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

 

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

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

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

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

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

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

 

The “Best and the Brightest” in Their Own Words

This section available exclusively to QC distribution list recipients

…………………………………………………………………………………………..

Syndicate IG Corporate-only Volume Estimates for Next Week

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

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

 

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

 

mischler-us-marine-mattis-secdef

SecDef designate James Mattis

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

 

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

-General James “Mad Dog” Mattis

 

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

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

veteran-owned-mischler-us-marine-herrick

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

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

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

 

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

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

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

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

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

 

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

Have a great weekend!
Ron Quigley

(more…)

Twas The Eve Before the US Presidential Election and the Debt Markets Indicated..
November 2016      Debt Market Commentary   

Quigley’s Corner 11.04.16 “’ Twas the Eve Before the Election..and Debt Markets Indicated Volatility Risk … ”

“…Please be mindful that this event could give rise to volatile market conditions; consequently, there is a risk of FX and Rates markets trading in wide ranges during the period.  Voice and electronic trading desks will endeavor to operate at as close to normal levels of service as conditions allow.  With respect to electronic trading specifically, you should bear in mind that low levels of liquidity or high volatility during the period could impact bid-offer spreads, or result in potential delays in order execution…” Head of Rates Trading,  Primary Dealer/Global Investment Bank

 “QC” Call to “Get Out and Vote” next Tuesday November 8th

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Potential Election Day Trade Volatility

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

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

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 2nd  

Investment Grade Corporate Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Your humble fixed income servant already voted in my home state of Connecticut via absentee ballot two weeks ago, as I would not have made it in time to cast my ballot traveling back from Phoenix on Election Day.  Each of us understands what a contentious election this one is.  Whoever floats your boat please just get out and cast yours on Tuesday the 8th or hopefully you sent in your ballot in your home state. If you do not vote you do not have a right to complain.  It’s not the voting that is democracy rather it’s the counting.  SO, GET OUT AND VOTE – IT’S A CIVIC SACRAMENT! For those of us blessed enough to have been called to citizenship in a country in which we govern ourselves by choosing our own leaders, voting is one of the duties of our vocation. Enough said.

Sunrise and sunset will be about 1 hour earlier on Nov 6, 2016 than the day before. There will be more light in the morning. Thank Goodness!

Investment Grade New Issue Re-Cap

Bank of America was the sole visitor to today’s IG dollar DCM printing a $1bn 4NC3 Senior Notes new issue due 11/09/2020.  The “Green Bond” is callable after 3 years on 11/09/2019 at par.  BAML was the sole book runner.  Proceeds from the transaction will be used to fund renewable energy projects including the financings of or investments in equipment and systems that facilitate the use of energy from renewable sources such as solar, wind and geothermal energy.

Please continue through the below right into the “Best & Brightest’s” IG Corporate new issue supply forecasts for next week from the street’s top syndicate gurus.  I have all their numbers and thoughts about next week’s Election Day/Veteran’s Day influenced and shortened week waiting for you. It’s all here folks and I make it easy – I write it, I talk to all of them and conveniently deliver it to your desktop or hand held device free of charge!  I’m told it’s good and so, naturally I think it’s good but why listen to me? Wall Street Letter has awarded the “QC” it Best Broker Dealer research for three years in a row – 2014, 2015 and 2016.  What’s not to like about that? I mean really! So, relax, be informed and have yourselves a great weekend!

Global Market Recap

 

  • S. Treasuries – The 30yr lead the UST rally despite the solid Employment Report.
  • Overseas Bonds – Gilts led the core EU bond rally while Peripheral sold off.
  • Stocks – U.S. stocks with small losses at 3:45pm. Bad day for Nikkei & Europe.
  • Economic – The U.S. Employment Report was solid. The trade balance improved.
  • Currencies – USD lost vs. Euro & Pound but had a small gain vs. the Yen, CAD & AUD.
  • Commodities – The crude oil sell off continued. Gold was unchanged.
  • CDX IG: +0.15 to 80.85
  • CDX HY: -2.52 to 433.56
  • CDX EM: -2.76 to 250.86

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 23 deals that printed, 11 tightened versus NIP for a 00% improvement rate while only 8 widened (35.00%) 4 were trading flat (17.00%).
  • For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 1 IG Corporate-only new issue was 10.00 bps.
  • BAML’s IG Master Index widened 1 bp to +141 vs. +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +135.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +186 vs. +185.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.9b on Thursday versus $17.5b Wednesday and $20.3b the previous Thursday.
  • The 10-DMA stands at $16.8b.

 

Note About Potential Election Day Trade Volatility

I thank my Corporate Secondary trader, Annie Bonner for the following prescient note that she sent around today and that definitely has a place in the “QC”.
It is self-explanatory:

As we saw with Brexit, dealers are sending out notices to prep for Election Day markets.

 

For example, from one Primary Dealer wrote:

“……….Please be mindful that this event could give rise to volatile market conditions; consequently, there is a risk of FX and Rates markets trading in wide ranges during the period.  Voice and electronic trading desks will endeavor to operate at as close to normal levels of service as conditions allow.  With respect to electronic trading specifically, you should bear in mind that low levels of liquidity or high volatility during the period could impact bid-offer spreads, or result in potential delays in order execution.”

 

As Annie concluded, “We’ll probably be seeing more of these today & Monday.”

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

 

IG Corporate New Issuance This Week
10/31-11/04
vs. Current
WTD – $11.791b
November 2016 vs. Current
MTD – $7.466b
Low-End Avg. $24.26b 48.60% $90.70b 8.23%
Midpoint Avg. $25.13b 46.92% $92.11b 8.11%
High-End Avg. $26.00b 45.35% $93.52b 7.98%
The Low $15b 78.61% $71b 10.52%
The High $35b 33.69% $110b 6.79%

 

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

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2016’s top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  The participating desks represent 80.93% 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 the third consecutive year! That’s 2014, 2015 and 2016 !!  More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! -RQ

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

If anyone says the U.S. Presidential election is not important in our inextricably linked new world order just point to our IG dollar DCM this week in which we managed to price a mere 42% of this week’s syndicate midpoint average forecast or $10.79b vs. $25.13b.

Here are some impactful events coming up next week that should keep a damper on issuance……among other things:

  • Mon thru Wed. 11/7-11/09 – EEI’s 51st Annual Financial Conference in Phoenix taking Utility issuers off the radar.
  • Tuesday, 11/08 – U.S. Presidential Election
  • Friday, 11/11 – Veteran’s Day (Federal Holiday, many leave work a bit earlier the day before – Thursday 11/10).


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

 

  • NICS:  <0.92> bps
  • Oversubscription Rates: 3.33x
  • Tenors:  11.33 years
  • Tranche Sizes: $469mm
  • Spread Compression from IPTs to the Launch: <178.26> bps

Versus last Friday’s key primary market driver averages, NICs widened a mere 0.06 bps to <0.92> vs. <0.98> bps while over subscription or bid-to-cover rates grew 0.72x to 3.33x vs. 2.61x last week.  Average tenors moved way out 3.62 years to 11.33 yrs vs. 7.71yrs while tranche sizes decreased by a lot – by $357mm to $469mm vs. $826mm.  

Standard and Poor’s Investment Grade Composite Spreads widened 5 bps to +186 versus last Friday’s +181.

For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).

Week-on-week, BAML’s IG Master Index widened 4 bps to +141 vs. last Friday’s +137 close.  Spreads across the four IG asset classes also widened 3.75 bps to 32 vs. 28.25 as measured against their post-Crisis lows.  Looking at the 19 major industry sectors, spreads widened 4.58 bps to 37.42 vs. 32.84 also against their post-Crisis lows.
Please let me know your number and most importantly your thoughts for next week’s IG Corporate issuance.  

……and here are their formidable responses:

(this section available exclusively to Quigley’s Corner distribution list recipients)

 

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

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

 

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

Please note: The below table averages for this week includes today’s BAML 4NC3 new issue. As a result, the numbers differ ever so slightly from the averages in my question to the “Best & Brightest” which was written and sent at the open this morning.  Thanks! -RQ

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

 

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/31
TUES.
11/01
WED.
11/02
TH.
11/03
FRI.
11/04
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
New Issue Concessions 0.50 bps <2.29> bps 3 bps <3.75> bps flat or 0 bps <0.87> bps <0.51> bps 3.31 bps 1.87 bps
Oversubscription Rates 2.99x 2.90x 2.73x 4.80x 3.25x 3.32x 2.61x 3.05x 3.28x
Tenors 8.39 yrs 11.93 yrs 11.30 yrs 15.50 yrs 4 yrs 11.33 yrs 7.77 yrs 9.16 yrs 11.51 yrs
Tranche Sizes $721mm $379mm $393mm $370mm $1,000mm $491mm $818mm $1,137mm $640mm
Avg. Spd. Compression
IPTs to Launch
<14.21> bps <17.71> bps <22.50> bps <22.20> bps <10> bps <17.87> yrs <17.42> bps    

 

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

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 23 deals that printed, 11 tightened versus NIP for a 48.00% improvement rate while only 8 widened (35.00%) 4 were trading flat (17.00%).

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

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
Johns Hopkins University Aa3/AA- 3.837% 5/15/2046 500 +135a N/A +123 +123 127/125
Principal Finc’l. Group Inc. Baa1/BBB+ 3.10% 11/15/2026 350 +160a +130-135 +130 +130 129/127
Principal Finc’l. Group Inc. Baa1/BBB+ 4.30% 11/15/2046 300 +200a +170-175 +170 +170 165/162
PSE&G Baa2/BBB 1.60% 11/15/2019 400 +85-90 +70a (+/-2) +68 +68 66/64
PSE&G Baa2/BBB 2.00% 11/15/2021 300 +95-100 +80a (+/-2) +78 +78 76/74
Bank of Nova Scotia Aa3/A+ FRN 11/01/2018 166 N/A N/A N/A 3mL+45 3mL+47/45
Children’s Hosp. Med. Ctr. Aa2/AA 2.853% 11/15/2026 100 N/A N/A N/A +105 106/104
Danske Bank A/S A2/A FRN 11/10/2020 200 N/A N/A N/A 3mL+73 3mL+73/70
Occidental Petroleum A3/A 3.00% 2/15/2027 750 +145a +130a (+/-5) +125 +125 122/120
Occidental Petroleum A3/A 4.10% 2/15/2047 750 +180a +160a (+/-5) +155 +155 152/150
EQT Midstream Partners LP BBB-/BBB- 4.125% 12/01/2026 500 +262.5a +245a (+/-5) +240 +240 240/238
Kimco Realty Baa1/BBB+ 2.70% 3/01/2024 400 +130-135 +120a (+/-3) +117 +117 118/116
Kimco Realty Baa1/BBB+ 4.125% 12/01/2046 350 +180-185 +165a (+/-5) +160 +160 159/157
Lazard Group LLC A-/BBB+ 3.625% 3/01/2027 300 +200a +190a (+/-5) +185 +185 189/187
Rogers Communications Inc. Baa1/BBB+ 2.90% 11/15/2026 500 +125a N/A +125 +125 130/128
Ryder System Inc. Baa1/A- 2.25% 9/01/2021 300 +120-125 +100a (+/-3) +97 +97 97/95
Southwest Airlines Co. Baa1/BBB+ 3.00% 11/15/2026 300 +mid-100s/+150a +130a (+/-3) +127 +127 128/126
Axis Capital Holdings Ltd. Baa3/BBB 5.50% PerpNC5 550 N/A N/A5.50-5.625%a
+5.5625%a
5.50% $25 Pfd $25.75/.80
CMS Energy Corp. Baa2/BBB 2.95% 2/15/2027 275 +135a +120a (+/-5) +115 +115 115/113
Illinois Tool Works A2/A+ 2.65% 11/15/2026 1,000 +95a +85 the # +85 +85 80/78
Proctor & Gamble Co. Aa3/AA- 1.70% 11/03/2021 875 +55a +45a (+/-2) +43 +43 42/40
Proctor & Gamble Co. Aa3/AA- 2.45% 11/03/2026 875 +75a +65a (+/-2) +63 +63 62/60
Wabtec Baa3/BBB 3.45% 11/15/2026 750 +187.5a +165a (+/-2.5) +162.5 +162.5 158/155

 

Indexes and New Issue Volume

Please note that Index levels are as of 4:15pm ET

Index Open Current Change  
LUACOAS 1.35 1.35 0  
IG27 80.702 80.967 0.265
HV27 179.245 180.23 0.985
VIX 22.08 22.91 0.83  
S&P 2,088 2,085 <3>
DOW 17,930 17,888 <42>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $1.00 bn DAY: $1.00 bn
WTD: $11.791 bn WTD: $11.791 bn
MTD: $7.466 bn MTD: $7.466 bn
YTD: $1,176.247 bn YTD: $1,506.131 bn

 

Lipper Report/Fund Flows – Week ending November 2nd  

     

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

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 32.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/03 11/02 11/01 10/31 10/28 10/27 10/26 10/25 10/24 10/21 1-Day Change 10-Day Trend PC
low
IG Avg. 141 140 139 138 137 136 136 135 135 135 +1 +6 106
“AAA” 83 83 82 82 80 80 80 78 78 77 0 +6 50
“AA” 87 87 86 86 85 85 84 83 83 83 0 +4 63
“A” 112 112 111 111 110 109 109 108 108 108 0 +4 81
“BBB” 182 181 180 178 176 175 176 175 174 175 +1 +7 142
IG vs. HY 374 375 366 353 339 333 330 325 325 327 <1> +47 228

 

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 37.42 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 11/03 11/02 11/01 10/31 10/28 10/27 10/26 10/25 10/24 10/21 1-Day Change 10-Day Trend PC
low
Automotive 120 122 121 120 119 119 119 117 117 117 <2> +3 67
Banking 130 130 129 129 128 127 128 127 127 127 0 +3 98
Basic Industry 181 181 180 179 179 178 179 177 177 179 0 +2 143
Cap Goods 106 106 105 105 103 102 102 101 101 101 0 +5 84
Cons. Prod. 112 112 111 110 109 108 108 107 105 105 0 +7 85
Energy 183 183 180 179 177 176 176 175 174 175 0 +8 133
Financials 166 165 164 162 160 159 160 160 160 160 +1 +6 97
Healthcare 124 123 122 120 118 117 117 115 114 114 +1 +10 83
Industrials 143 143 141 140 139 138 138 137 136 136 0 +7 109
Insurance 154 153 153 153 153 153 153 154 154 155 +1 <1> 120
Leisure 138 138 138 138 138 137 138 137 136 135 0 +3 115
Media 166 165 164 162 160 160 159 157 157 157 +1 +9 113
Real Estate 146 146 146 146 146 146 146 147 147 147 0 <1> 112
Retail 123 122 121 120 118 117 117 116 115 114 +1 +9 92
Services 130 130 129 129 129 128 128 128 128 128 0 +2 120
Technology 120 120 119 117 115 114 115 113 112 112 0 +8 76
Telecom 172 172 170 168 167 165 165 163 162 161 0 +11 122
Transportation 140 139 138 137 137 136 136 136 136 136 +1 +4 109
Utility 139 138 138 138 137 136 136 136 136 137 +1 +2 104

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Trade Balance September <$38.0b> <$36.4b> <$40.7b> <$40.5b>
Change in Nonfarm Payrolls October 173k 161k 156k 191k
Two-Month Payroll Net Revisions October —- 44k <7k> —-
Change in Private Payrolls October 170k 142k 167k 188k
Change in Manufacturing Payrolls October <4k> <9k> <13k> —-
Unemployment Rate October 4.9% 4.9% 5.0% —-
Average Hourly Earnings MoM October 0.3% 0.4% 0.2% 0.3%
Average Hourly Earnings YoY October 2.6% 2.8% 2.6% 2.7%
Average Weekly Hours All Employees October 34.4 34.4 34.4 —-
Change in Household Employment October —- <43.0> 354.0 —-
Labor Force Participation Rate October —- 62.8% 62.9% —-
Underemployment Rate October —- 9.5% 9.7% —-

  (more…)

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

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

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

Investment Grade Credit Spreads (by Rating/Industry)

Lipper Report/Fund Flows – Week ending October 5th  

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab 

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

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

 

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

 

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

  • For the week ended October 5th, Lipper U.S. Fund Flows reported an inflow of $1.396b into Corporate Investment Grade Funds (2016 YTD net inflow of $39.321b) and a net inflow of $1.908b into High Yield Funds (2016 YTD net inflow of $11.352b).
  • BAML’s IG Master Index tightened 1 bp to +139 vs. +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +135 vs. +136.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +185 vs. +186.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.3b on Thursday versus $18.7b Wednesday and $15.8b the previous Thursday.
  • The 10-DMA stands at $16.1b.

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

 

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

 

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

 

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  21 of those participants are among 2016’s top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  Today’s cumulative underwriting percentage of the participating desks was 80.88% which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead. *Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

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

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


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

 

o   NICS:  4.36 bps

o   Oversubscription Rates: 4.20x

o   Tenors:  12.16 years

o   Tranche Sizes: $523mm

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

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

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

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

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

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

 

This section available exclusively to Quigley’s Corner DL subscribers

 

Syndicate IG Corporate-only Volume Estimates for Next Week

 

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

 

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

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

 

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

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

NICs, Bid-to-Covers, Tenors and Sizes

 

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

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

 

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

 

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

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

 

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

 

Lipper Report/Fund Flows – Week ending October 5th  

     

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

 

New Issue Pipeline (more…)

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

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

 

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

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 28th

IG Credit Spreads (by Rating & Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

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

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

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

o   Global High Yield is down 21%

o   Government and Agency offerings rose 76%

o   Emerging Markets Debt is down 23%

o   Overall Debt Underwriting fees declined 9%

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

This pie chart displays the drama in those numbers:

mischler corporate debt comment

 

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

 

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

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

 

Global Market Recap

 

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

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

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

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

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

o   CDX IG: +0.50 to 75.63

o   CDX HY: +2.30 to 403.45

o   CDX EM: -0.65 to 233.06

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Thank You’s Galore

 

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

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

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

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

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

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

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

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

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

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

 

New Issues Priced

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

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

 

IG

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

 

Indexes and New Issue Volume

 

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

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

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

 

Lipper Report/Fund Flows – Week ending September 28th

     

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

 

IG Credit Spreads by Rating

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

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

 

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

IG Credit Spreads by Industry

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

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

                                    

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

  (more…)

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