Browsing articles tagged with "Ron Quigley Archives - Page 2 of 2 - Mischler Financial Group"
Fed NOT Raising Rates-Mischler Debt Market Comment
September 2016      Debt Market Commentary   

Quigley’s Corner 09.15.16 Fed Not Raising Rates

 

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

 Global Market Recap

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

IG Primary & Secondary Market Talking Points

Fixed Income Syndicate IG Corporate-only Volume Estimates for September

New Issues Priced

Lipper Report/Fund Flows

IG Corporate Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

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

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

Global Market Recap

 

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

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

-Tony Farren

 

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

 

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

 

IG Primary & Secondary Market Talking Points

 

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

(more…)

IG Corporate Debt Issuance YTD: 1tn aka 1 TRILLION
September 2016      Debt Market Commentary   

Quigley’s Corner 09.13.16 –2016 IG Corporate Debt Issuance (so far)= $1 T-r-i-l-l-ion!

 

Investment Grade Corporate Debt New Issue Re-Cap – Another Broken Record –

Global Market Recap

IG Primary & Secondary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows – Week ending September 7th

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 broken-record-ig-debt-mischler

Yesterday I wrote, “the session finished with only those two deals priced totaling $1.2b with a promise from the guy-in-the-corner that tomorrow WILL be a VERY busy day!” Well tomorrow is today and true to my word we had a blockbuster.  I then wrote, “We are only $20.822bn away from $1 trillion in IG Corporate-only issuance YTD.   Last year we set a new IG Corporate-only record by reaching the $1 trillion mark on Thursday, October 1st(see your incoming “Quigley’s Corner” 9-30-2015). We’d shatter that record by nearly three weeks if it happens tomorrow!

I am happy to report that we reached the $1 trillion dollar mark in IG Corporate-only volume at the earliest stage in any year, shattering last year’s record set on October 1st by 18 business days or 2 weeks and 3 days.

13 IG Corporate issuers printed 26 tranches between them today totaling $22.344b5 SSA issuers added 5 tranches totaling $9.25b for an all-in IG day total of 18 issuers, 31 tranches and $31.594b.

There remain 12 new issues in the imminent pipeline either currently road showing, about to conduct investor meetings/calls or have already wrapped those up.  So, there’s plenty of business to go not counting M&A deals of which Shire looms large.

IG Corporate New Issuance This Week
9/12-9/16
vs. Current
WTD – $23.194b
September 2016 vs. Current
MTD – $75.654b
Low-End Avg. $35.83b 64.73% $115.45b 65.53%
Midpoint Avg. $36.91b 62.84% $116.02b 65.21%
High-End Avg. $38.00b 61.04% $116.59b 64.89%
The Low $30b 77.31% $80b 94.57%
The High $46b 50.42% $150b 50.44%


Here’s how it looked:

Category Totals
# of IG Corporate Issuers 12
# of IG Corporate Tranches 25
Total IG Volume $22.194b
# of SSA Issuers 5
# of SSA Tranches 5
Total SSA Volume $9.25b
Total Amount of All-in Issuers 17
Total Number of All-in Tranches 30
All-in Corps + SSA Amount $31.244b

 

Here’s a look at some other records:

 

o   $31.594 ranks as the 5th highest volume day in history for IG Corps plus SSA.

o   $31.594b ranks as the 2nd busiest all-in issuance day of 2016.

 

Global Market Recap

 

o   U.S Treasuries – Terrible day for USTs Bund’s & Gilts also headed south. JGB’s better.

o   Stocks – U.S. down Friday, up yesterday & down today. Europe red & Asia was mixed.

o   Economic – Nothing of note in the U.S. China & Japan data better. Europe mixed.

o   Currencies – Very good day for the USD & DXY Index.

o   Commodities – Crude oil and commodities, in general, struggled.

o   CDX IG: +3.70 to 76.96

o   CDX HY: +16.91 to 413.84

o   CDX EM: +12.92 to 254.60

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Liberty Property Trust upsized today’s 10yr Senior Unsecured Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
  • Split-rated Aspen Insurance Holdings Ltd. increased its $25 par PerpNC10 non-cumulative Preferred new issue to $225mm from $150mm at the launch and tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 24 IG Corporate-only new issues was 16.99 bps.
  • Including today’s Aspen $25 par Preferred, the average spread compression from IPTs thru the launch/final pricing of today’s 25 IG Corporate new issues was 16.54 bps.
  • BAML’s IG Master Index widened 2 bps to +142 versus +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +190 versus +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.6b on Monday versus $15.7b Friday.
  • The 10-DMA stands at $13.8b.

 

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

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

Record Setting Week Investment Grade Debt Issuance-Again!
September 2016      Debt Market Commentary   

Quigley’s Corner 09.09.16 Another Record Setting Week for Investment Grade Issuance

 

Investment Grade New Issue Re-Cap – One and Done to Cap Off Record Setting Week

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

Lipper Report/Fund Flows – Week ending September 7th

New Issue Volume

Economic Data Releases

Rates Trading Lab- The Pain Trade(s)

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

Asia Development Bank printed its well telegraphed $500mm tap of its 5yr FRNs due 9/16/2021 and that was all she wrote to close a record setting number of deals in this holiday-shortened week.  I’ll keep it short and sweet readers.  This week hosted 40 IG Corporate issuers across 73 tranches.  Including SSA issuance, the IG dollar DCM featured 46 issuers and 79 tranches.  Both are records for any three consecutive sessions in history.  So, you’re probably wondering what’s ahead for next week?  Well, I could scribe a long ditty for you but everything is already here.  Today is Friday and you know what that means – I contacted the top 23 syndicate desks to get their thoughts and numbers for next week.  I happen to think we’ll print $50b but that’s just me.  Scroll down and read what the “Best and the Brightest” have to say about the week ahead. It’s all here.  Remember, if you fail to prepare, you’re prepared to fail.  What’s more it’s free from me to you.

Before I do, however, and knowing what it’s like to sit in the syndicate pit – the nerve center of our debt capital markets –  how about a resounding round of applause – no make it a standing “O” – for all the syndicate desks out there who accomplished such a tremendous feat this week.   Yeah you know it, I am actually standing up on my trading floor clapping my hands for all of them. You really have no idea what busy means until you run a syndicate desk. A lot less people are working a LOT harder on syndicate desks setting new records along the way.  I hope those sitting in their ivory towers remember that at the end of the year.

Global Market Recap

 

o   U.S. Treasuries – Back-to-back terrible days for global bond markets led by the long end.

o   Stocks – U.S. stocks were hit hard (3pm). Europe traded poorly. Asia closed mixed.

o   Economic – Fed Speak mixed in the U.S. Weaker data in Germany & France.

o   Currencies – Big day for the USD outperforming all of the Big 5.

o   Commodities – Very bad day in commodity land.

o   CDX IG: +3.66 to 75.31

o   CDX HY: +16.42 to 404.18

o   CDX EM: +11.28 to 243.95

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points
[icegram campaigns=”5396″]
 

o   Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 79 deals that printed, 48 tightened versus NIP for a 60.75% improvement rate while only 15 widened (19.00%) and 16 were trading flat (20.25%).

  • For the week ended September 7th, Lipper U.S. Fund Flows reported an inflow of $2.804b into Corporate Investment Grade Funds (2016 YTD net inflow of $32.901b) and a net inflow of $610.273m from High Yield Funds (2016 YTD net inflow of $10.160b).
  • BAML’s IG Master Index was unchanged at +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research was also 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 $15b on Thursday versus $16.5b Wednesday and $12.8b the previous Thursday.

 

Syndicate IG Corporate-only Volume Estimates for September

 

IG Corporate New Issuance September 2016 vs. Current
MTD – $52.46b
Low-End Avg. $115.45b 45.44%
Midpoint Avg. $116.02b 45.22%
High-End Avg. $116.59b 45.00%
The Low $80b 65.58%
The High $150b 34.97%

 

Syndicate IG Corporate-only Volume Estimates for Next Week

 

IG Corporate New Issuance Next Week
9/12-9/16
Low-End Avg. $35.83b
Midpoint Avg. $36.91b
High-End Avg. $38.00b
The Low $30b
The High $46b

 

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

 

Next Week
2: 30b
2: 30-35b
4: 35b
8: 35-40b
1: 38b
5: 40b
1: 46b

 

“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 81.07% 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 premised on the following:

“We set a new all-time activity record for number of issues and tranches in three consecutive days from (Mon-Thurs.) having featured 40 IG Corporate issuers and 73 tranches between them.  This week’s final all-in tally of $52.76b ranks as the 7th highest volume week in history for IG Corporate plus SSA issuance.  This week also finishes as the 4th highest volume week of the year for all-in IG issuance. 

Treasuries are getting slammed this morning on consensus that global Central Bank’s apprehension as to the benefits of further easing.  I personally think USTs should be moving in the opposite direction.  Yesterday ECB President Draghi called on EU governments to intercede to do more.  Here’s what we know – while he began speaking a total of 11 issuers announced 20 tranches between them totaling $12.41b.  Net, net – who cares what he thinks?  The market’s response was clear -we have a lot lined up for next week and the rest of this month so, let’s get to it. This after setting an all-time issuance records for August IG Corporate-only issuance with $114.325b priced and for all-in IG Corps plus SSA issuance with $136.575b priced.  


This week we priced $59.06b of all-in IG Corporate and SSA issuance. IG Corps were $52.46b.  In only three active days of September we priced 45% of the syndicate midpoint average forecast for IG Corporates for the entire month or $116.02b.


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

 

o   NICS:  1.30 bps

o   Oversubscription Rates: 3.23x

o   Tenors:  9.42 years

o   Tranche Sizes: $719mm

For the week ended September 1st, Lipper U.S. Fund Flows reported an inflow of $2.804b into Corporate Investment Grade Funds (2016 YTD net inflow of $32.901b) and a net inflow of $610.273m from High Yield Funds (2016 YTD net inflow of $10.160b). 

Week-on-week, BAML’s IG Master Index is 1 bp wider or +140 vs. last Friday’s +139 close.  Spreads across the four IG asset classes since I left for block leave on August 19th tightened 3 bps to 30.25 vs. 33.25. Looking at the 19 major industry sectors, spreads tightened 4.32 bps to an average 36.63 versus 40.95 bps off their post-Crisis lows also since August 19th. 

Finally, what are YOUR thoughts and number for next week’s IG new issue volume? 

 Many thanks in advance and best wishes for a great weekend! –Ron”

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

(This section available exclusively to QC distribution list recipients)

 

            

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 XX deals that printed, 48 tightened versus NIP for a 60.75% improvement rate while only 15 widened (19.00%) and 16 were trading flat (20.25%).

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
Bemis Company Inc. Baa2/BBB 3.10% 9/16/2026 300 +175a +155a (+/-5) +150 +150 145/143
BMW US Capital LLC A2/A+ FRN 9/13/2019 250 3mL+equiv 3mL+equiv 3mL+41 3mL+41 3mL+41/40
BMW US Capital LLC A2/A+ 1.45% 9/13/2019 500 +70a +65a (+/-5) +60 +60 59/57
BMW US Capital LLC A2/A+ 1.85% 9/15/2021 750 +80a +75a (+/-5) +70 +70 70/68
BMW US Capital LLC A2/A+ 2.25% 9/15/2023 750 +95a +90a (+/-5) +85 +85 84/82
BOC Aviation Ltd. BBB+/A- 2.375% 9/15/2021 500 +165a +135-140 +135 +135 130/128
Capital One NA /
McLean, VA
Baa1/A- FRN 9/13/2019 300 3mL+equiv 3mL+equiv 3mL+76.5 3mL+76.5 3mL+74/72
Capital One NA /
McLean, VA
Baa1/A- 1.85% 9/13/2019 1,250 +110a +95-100 +95 +95 94/92
Capital One NA /
McLean, VA
Baa1/A- 2.25% 9/13/2021 1,000 +120-125 +110-115 +110 +110 109/107
Cox Communications Inc. Baa2/BBB 3.35% 9/15/2026 1,000 +low 200s
(212.50)
+187.5 (+/-12.5) +175 +175 170/168
Entergy Mississippi, Inc. A3/A 4.90% 50NC5 260 N/A 4.95%a 4.90% $25 FMBs $24.98/95
GATX Corporation Baa2/BBB 3.25% 9/15/2026 350 +187.5 +175a (+/3) +172 +172 169/166
Met Life Global Funding I Aa3/AA- FRN 9/14/2018 350 3mL+equiv 3mL+equiv 3mL+34 3mL+34 3mL+34/32
Met Life Global Funding I Aa3/AA- 1.35% 9/14/2018 550 +70a +60 the # +60 +60 60/58
Met Life Global Funding I Aa3/AA- 1.55% 9/13/2019 350 +75-80 +70 the # +70 +70 70/67
Met Life Global Funding I Aa3/AA- 1.95% 9/15/2021 750 +90a +80 the # +80 +80 80/77
Southern Co. Gas Corp. Baa1/A- 2.45% 10/01/2023 350 +135a +105a (+/-5) +100 +100 96/94
Southern Co. Gas. Corp. Baa1/A- 3.95% 10/01/2046 550 +185-190 +170a (+/-5) +165 +165 160/157
Toronto Dominion Bank A2/A- 3.625% 15NC10 1,500 REV. IPTS +225a
+237.5a
+210 (+/-5) +205 +205 197/194
Woodside Finance Ltd. Baa1/BBB+ 3.70% 9/15/2026 800 REV IPTs: +237.5a
+237.50-250
+215a (+/-5) +210 +210 207/203
Associated Banc-Corp. Baa3/BB 5.375% PerpNC5 100 N/A 5.50%a 5.375% $25 Pfd $25.30/.25
California Institute of Technology (px’d 9/07) Aa2/AA- 4.283% 9/01/2116 150 +210a vs OLB N/A N/A +205 +202/
Dr. Pepper Snapple Group Baa1/BBB+ 2.55% 9/15/2026 400 +125a +110a (+/-5) +105 +105 102/99
Mizuho Financial Group A1/A- FRN 9/13/2021 1,250 3mL+equiv 3mL+equiv 3mL+114 3mL+114 3mL+113/111
Mizuho Financial Group A1/A- 2.273% 9/13/2021 1,000 +135a +120a (+/-5) +115 +115 118/116
Mizuho Financial Group A1/A- 2.839% 9/13/2026 1,000 +150a +135a (+/-5) +130 +130 127/125
Nationwide Bldg. Society Baa1/A- 4.00% 9/14/2026 1,250 +275a +255a (+/-5) +250 +250 240/235
New York Life Glbl. Fdg. Aaa/AA+ 1.25% 9/14/2021 750 + low 70s
+72.5
+65a (+/-3) +62 +62 62/60
Nissan Motor Acceptance A3/A- FRN 9/13/2019 500 3mL+equiv 3mL +equiv 3mL+52 3mL+52 3mL+53/51
Nissan Motor Acceptance A3/A- 1.55% 9/13/2019 500 +95-100 +73a (+/-3) +70 +70 71/68
Nissan Motor Acceptance A3/A- 1.90% 9/14/2021 500 +105-110 +85a (+/-3) +82 +82 82/80
Nonghyup Bank A1/A+ 1.875% 9/12/2021 500 +100a N/A N/A +85 83/82
Protective Life Glbl. Fdg. A2/AA- 1.555% 9/13/2019 350 +85a +72a (+/-2) +70 +70 70/68
Protective Life Glbl. Fdg. A2/AA- 1.999% 9/14/2021 300 +high 90s
+97.5
+90a (+/-2) +88 +88 88/86
PSE&G Co. Aa3/A 2.25% 9/15/2026 425 + low 90s
+92.5
+75-80 +75 +75 72/70
Royal Bank of Scotland Group plc BBB-/BBB+ 3.875% 9/12/2023 2,650 +275a +255a (+/-5) +250 +250 247/246
Shell International Finance Aa2/A FRN 9/12/2019 500 3mL+equiv 3mL+equiv 3mL+35 3mL+35 3mL+34/31
Shell International Finance Aa2/A 1.375% 9/12/2019 1,000 +70a +55a (+/-2) +53 +53 55/53
Shell International Finance Aa2/A 1.80% 9/12/2021 1,000 +85a +75a (+/-5) +70 +70 70/68
Shell International Finance Aa2/A 2.50% 9/12/2026 1,000 +125a +110a (+/-2) +108 +108 106/104
Shell International Finance Aa2/A 3.75% 9/12/2046 1,250 +175a +160a (+/-5) +155 +155 154/151
TJX Companies Inc. A2/A+ 2.25% 9/15/2026 1,000 +87.5 +80a (+/-2) +80 +80 78/76
Valero Energy Corp. Baa2/BBB 3.40% 9/15/2026 1,250 +200a +190 the # +190 +190 189/186
W.P. Carey Inc. Baa2/BBB 4.25% 10/01/2026 350 +300a +280a (+/-5) +275 +275 260/255
Dexia Credit Local Aa3/AA 1.875% 9/15/2021 1,250 MS +79a MS +80a MS +79 +80.45 77/75
Export Dev. Bank of Canada Aaa/AAA 1.00% 9/13/2019 1,000 MS +3a RG: MS +2a
MS +3a
MS +1 +19.35 18/16.5
IADB Aaa/AAA 1.25% 9/14/2021 2,100 MS +23a MS +23a MS +22 +23.1 21.5/19.5
Instituto de Credito Oficial Baa2/BBB+ 1.625% 9/14/2018 500 MS +70a MS +65-70 MS +65 +90.1 83/80
Kommuninvest Aaa/AAA 1.125% 9/17/2019 1,250 MS +15a MS +14a MS +14 +32.05 31/29
Asian Development Bank
(tap) New total: $1,000mm
Aaa/AAA FRN 6/16/2021 3mL+19a 3mL+19a N/A 3mL+19 3mL+19 3mL+19/17
American Honda Finance A1/A+ FRN 9/09/2021 250 3mL+equiv 3mL+equiv 3mL+61 3mL+61 3mL+59/57
American Honda Finance A1/A+ 1.70% 9/09/2021 1,000 +75-80 +65a (+/-2) +63 +63 63/61
American Honda Finance A1/A+ 2.30% 9/09/2026 500 +100a +80 the # +80 +80 76/74
BNZ International Fdg. Ltd. Aa3/AA- FRN 9/14/2021 250 3mL+equiv 3mL+equiv 3mL+98 3mL+98 3mL+94/93
BNZ International Fdg. Ltd. Aa3/AA- 2.10% 9/14/2021 600 +120a +105a (+/-5) +100 +100 100/98
Cabot Corp. Baa2/BBB 3.40% 9/15/2026 250 +low 200s
+212.5
+190a (+/-2.5) +187.5 +187.5 174/172
Duke Energy Florida A1/A 3.40% 10/01/2046 600 +130a +120 the # +120 +120 119/117
Home Depot A2/A 2.125% 9/15/2026 1,000 +90a +75a (+/-5) +70 +70 71/69
Home Depot A2/A 3.50% 9/15/2056 1,000 +160-165 +140a (+/-5) +135 +135 132/129
John Deere Capital Corp. A2/A FRN 10/09/2019 250 3mL+equiv 3mL+equiv 3mL+28.5 3mL+28.5 3mL+28/27
John Deere Capital Corp. A2/A 1.25% 10/09/2019 500 +60a +50a (+/-3) +47 +47 49/47
KeyCorp Baa3/BB+ 5.00% PerpNC10 525 5.125%a 5.00%a (+/-10) 5.00% 3mL+360.6 3mL+342/337
Korea Development Bank Aa2/AA 1.375% 9/12/2019 500 +low 70s
+72.5
+60a (+/-2.5) +57.5 +57.5 54/52
Korea Development Bank Aa2/AA 2.00% 9/12/2026 500 +low 70s
+72.5
+55-60 +55 +55 56/54
Magellan Midstream Part. Baa1/BBB+ 4.25% 9/15/2046 500 +235-240 +215a (+/-5) +210 +210 200/197
Mitsubishi UFJ Finc’l. Grp. A1/A FRN 9/13/2021 1,000 3mL+equiv 3mL+equiv 3mL+106 3mL+106 3mL+104/
Mitsubishi UFJ Finc’l. Grp. A1/A 2.19% 9/13/2021 1,500 +120-125 +110a (+/-2) +108 +108 111/108
Mitsubishi UFJ Finc’l. Grp.
(Green Bond)
A1/A 2.527% 9/13/2023 500 +130a +115-120 +115 +115 110/108
Mitsubishi UFJ Finc’l. Grp. A1/A 2.757% 9/13/2026 1,000 +135a +125a (+/-2) +123 +123 124/122
Pricoa Global Funding I AA-/A+ 1.45% 9/13/2019 350 +75-80 +60-63 +60 +60 59/58
SEB Aa3/AA- FRN 9/13/2019 500 3mL+equiv 3mL+equiv 3mL+57 3mL+57 3mL+57/55
SEB Aa3/AA- 1.50% 9/13/2019 1,000 +low 80s
+82.5
+75 the # +75 +75 74/72
SEB Aa3/AA- 1.875% 9/13/2021 1,000 +low 90s
+92.5
+85 the # +85 +85 84/82
Siemens AG A1/A+ FRN 9/13/2019 350 3mL+equiv 3mL+equiv 3mL+32 3mL+32 3mL+32/30
Siemens AG A1/A+ 1.30% 9/13/2019 1,100 +60a +50a (+/-5) +50 +50 52/50
Siemens AG A1/A+ 1.70% 9/15/2021 1,100 +70-75 +60a (+/-5) +60 +60 61/59
Siemens AG A1/A+ 2.00% 9/15/2023 750 +80a +70a (+/-5) +70 +70 71/69
Siemens AG A1/A+ 2.35% 10/15/2026 1,700 +90-95 +85a (+/-5) +85 +85 87/85
Siemens AG A1/A+ 3.30% 9/15/2046 1,000 +120a +110a (+/-5) +110 +110 112/110

 

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

Ron Quigley, Managing Director

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.
9/05
TUES.
9/06
WED.
9/07
TH.
9/08
FRI.
9/09
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 8/29
AVERAGES
WEEK 8/22
AVERAGES
WEEK 8/15
New Issue Concessions Labor Day 2.00 bps 0.55 bps 1.06 bps N/A 1.30 bps 5.47 bps 1.86 bps <4.18> bps
Oversubscription Rates Labor Day 3.20x 2.99x 3.53x N/A 3.23x 2.18x 3.73x 4.40x
Tenors Labor Day 9.59 yrs 11.33 yrs 6.90 yrs N/A 9.42 yrs 4.47 yrs 8.94 yrs 11.43 yrs
Tranche Sizes Labor Day $727mm $791mm $621mm N/A $719mm $820mm $661mm $697mm

 

 

Lipper Report/Fund Flows – Week ending September 7th

     

  • For the week ended September 1st, Lipper U.S. Fund Flows reported an inflow of $2.804b into Corporate Investment Grade Funds (2016 YTD net inflow of $32.901b) and a net inflow of $610.273m from High Yield Funds (2016 YTD net inflow of $10.160b).
  • Over the same period, Lipper reported a net inflow of $318.421m from Loan Participation Funds (2016 YTD net outflow of $4.426b).
  • Emerging Market debt funds reported a net inflow of $51.481mm (2016 YTD inflow of $5.724b).

 

 

New Issue Volume

 

Index Open Current Change
IG26 71.652 76.072 4.42
HV26 164.025 169.835 5.81
VIX 12.51 17.50 4.99
S&P 2,181 2,127 <54>
DOW 18,479 18,085 <394>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $0.00 bn DAY: $0.50 bn
WTD: $52.46 bn WTD: $59.06 bn
MTD: $52.46 bn MTD: $59.06 bn
YTD: $977.978 bn YTD: $1,240.365 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Wholesale Inventories MoM July 0.1% 0.0% 0.0% —-
Wholesale Trade Sales MoM July 0.2% <0.4%> 1.9% 1.7%

 

Rates Trading Lab: The Pain Trade

 

There is a lot of pain out there. Why, you may ask, do we have a steepening curve in the face of hawkish Fed-speak? I say it is partly because the shedding of duration trumps anything that may happen on the curve. As I have said time and again, any change in either the nature or pace of monetary stimulus will first lead to a shedding of duration. After all, it would be difficult to justify adding duration in the face of either a tighter Fed or a less dovish ECB or BOJ. I’m not saying that more restrictive monetary policy will not flatten the curve. Brainard’s speech looms as a potential harbinger of a move sooner rather than later given her traditionally dovish stance. But I do know we have a lot of supply and at least some central bank rhetoric coupled with market concerns over the efficacy of continuing current monetary policy dogma. Add unwinds of risk parity trades in a very illiquid market and you have a lot of longs all heading for the exits at the same time. I will be out of the office until next Friday attending a conference. Have a nice weekend.                                                                              -Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-19 99-27 99-18 99-05+ 98-14+
RESISTANCE LEVEL 99-18 99-23+ 99-11+ 98-28 97-27+
RESISTANCE LEVEL 99-166 99-196 99-07 98-20 97-13+
         
SUPPORT LEVEL 99-152 99-16 99-02 98-12 96-28
SUPPORT LEVEL 99-136 99-142 98-28 98-06 96-15
SUPPORT LEVEL 99-126 99-11+ 98-23+ 98-00+ 95-22

 

Tomorrow’s Calendar

 

o   China Data: Nothing Scheduled

o   Japan Data: Machine Orders, PPI, Machine Tool Orders

o   Australia: Manpower Survey

o   EU Data: GE-Germany Fourth Quarter Manpower Employment Outlook

o   U.S. Data: Nothing Scheduled

o   Supply: U.S. 3y and 10y Note

o   Events: BoE buys 3y-7y Gilts

o   Speeches: Lockhart, Kashkari, Brainard (more…)

The Perfect Storm-for Investment Grade Corporate Debt Issuance
September 2016      Debt Market Commentary   

Quigley’s Corner 09.07.16-Investment Grade Corporate Debt Issuance Storm

 

Investment Grade New Issue Re-Cap – “Heavens to Mergatroyd”

Global Market Recap

Fed Beige Book Headlines and Text

New Issues Priced

Investment Grade Spreads (by Rating/Industry)

Lipper Report/Fund Flows – Week ending September 1st      

Economic Data Releases

Rates Trading Lab

New Issue Pipeline

M&A Pipeline

 

 

After the IG dollar DCM posted the busiest day of the year yesterday with 14 issuers pricing 29 tranches for $21.075b, today could only pale in comparison, right?  WRONG! Investment Grade Corporate Debt Issuance truly is the only game in town in what is a perfect storm for issuers to secure low funding as investors clamor in their search for yield in better rated Corporate debt.  Today’s tally – 15 IG Corporate issuers priced 24 tranches totaling $18.975bn while the SSA space featured 5 issuers, 5 tranches and $6.1b bringing the all-in IG day total to 20 issuers, 29 tranches and $25.075b.

The WTD IG Corporate only volume total now stands at $40.05b or 34.5% of the syndicate midpoint average estimate for all of September!  After only two active print days thus far this month, all-in (IG Corporate plus SSA) September volume is $46.15b.

Of course it’s not just about investors seeking yield and companies issuing cost efficient debt, it’s also about the state of our inextricably global-linked world economy.  Tomorrow all eyes and ears will once again be on and tuned into what ECB President Mario Draghi says and how he says it. Although the June BREXIT impact on the EU will need more time to influence now start showing up in the EU’s numbers as everything in their economic toolbox to raise inflation has faltered.

How much can issue in September? Well, we each have our own opinion, but we also have our respective corrals of long-time, trusted “go to” market participants, sources and cognoscente, whose opinions we value and who provide great sounding boards, queries and insights along with quality daily humor, etc.  Included in my stable is Bloomberg’s formidable old school tag team of Ed Baldinger and Bob Elson.  (Pssst! Don’t be fooled though…….we all know Lisa Loray is the girl behind the curtain when it comes to the dynamic duo!) Anyway, Bob reached out today asking me, “I’m just curious but has anybody come back and changed their $125b estimate for September to something higher? Like 180b?…….Do I hear $200b?”  That’s what’s going on folks.  Here’s my response, “Yeah exactly. No one did.  But my “Best & Brightest” survey is for IG Corporates only. Across the last 3 years, September SSA issuance has averaged $29.71b so add that to the IG Corporate midpoint average forecast of $116.59b and we get $145.73b. But I get your point.  Tomorrow I am not so sure this machine churns out product at the current two-day pace as there is an important ECB meeting.  However, “if” corporations issue ahead of what can only be further negative EU economic news then I think $180b “all-in” (IG Corps plus SSA) is not out of the question!”

I then consulted with another long-time seer, sage, savant and friend, Ken Jaques of Informa Globalmarkets and asked him what he thought..  His quick reply – “I think we’ll see $165b – $170b!”  I’m just saying folks.  Bankers bank.  I get the bulge bracket syndicate desks have visibility argument but here we have – LISTEN UP – a cumulative total of 161 years of experience between Ed, Bob, Ken and I. Hey, it’s gotta count for something right?

Additionally, scroll down and take a look at the “New Issue Pipeline.”  There are 12 imminent deals waiting in the queue not to mention M&A related financings that have to get done.

Global Market Recap

 

o   U.S. Treasuries – Closed mixed & little changed. Big day for new issue corporates……AGAIN!

o   Overseas Bonds – JGB’s in rally mode. Long end trades with a bid in Europe.

o   Stocks – U.S. stocks mixed & little changed at 3:30pm. DAX is now positive YTD.

o   Economic – The Fed’s Beige Book was a non-event. JOLTS were strong.

o   Currencies – USD outperformed 4 of Big 5. The Yen was the lone winner vs. the USD.

o   Commodities – Crude oil was high while gold & silver were lower.

o   CDX IG: +0.78 to 71.94

o   CDX HY: +3.87 to 387.80

o   CDX EM: -5.15 to 230.83

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

-Tony Farren

 

Fed Beige Book Headlines and Text

 

o   The Fed reports modest economic growth as inflation remains “slight.”

o   Contacts in several districts expect modest price gains.

o   FOMC says moderate upward wage pressures increased further.

o   Labor market conditions still tight in most districts.

o   Most Fed districts reported “modest” or “moderate” growth pace.

o   Says consumer spending is little changed in most Fed districts.

o   Sights manufacturing activity rose slightly in most districts.

o   Credit demand appeared to expand at a moderate pace.

o   Auto sales fell somewhat but are still high while tourism is flat.

o   Fed says real estate markets grew moderately, commercial real estate expanded further.

o   Demand for energy related products and services weakened.

o   Fed said the election is damping the real estate outlook in several districts.

o   Fed releases Beige Book covering the period from July to late August.

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 22 IG Corporate new issues was 18.48 bps.
  • Including today’s lone $25 par preferred, the average spread compression from IPTs thru the launch/final pricing of today’s 23 IG Corporate new issues was 18.22 bps.
  • IADB executed a rare re-launch to upsize today’s 5yr Global Notes new issue to $2.1b from $2b.
  • TJX Companies Inc. increased today’s Senior Unsecured Notes new issue from $750mm to $1b.
  • Protective Life Global Funding bumped up its 3-year new issue to $350mm from $300mm or overall two-part 3s/5s transaction to $650mm from $600mm and at the tightest side of guidance.
  • BAML’s IG Master Index widened 1 bp to +140 versus +139.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 1 bp to +189 versus +188.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.6b on Tuesday versus $5.6b Friday and $15.4b the previous Tuesday.
  • The 10-DMA stands at $13.3b.

 

Syndicate IG Corporate-only Volume Estimates for September

 

IG Corporate New Issuance September 2016 vs. Current
MTD – $40.05b
Low-End Avg. $115.45b 34.69%
Midpoint Avg. $116.02b 34.52%
High-End Avg. $116.59b 34.35%
The Low $80b 50.06%
The High $150b 26.70%

 

 

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

 

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

NICs, Bid-to-Covers, Tenors and Sizes

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/05
TUES.
9/06
AVERAGES
WEEK 8/29
AVERAGES
WEEK 8/22
AVERAGES
WEEK 8/15
AVERAGES
WEEK 8/08
New Issue Concessions Labor Day 2.00 bps 5.47 bps 1.86 bps <4.18> bps 1.83 bps
Oversubscription Rates Labor Day 3.20x 2.18x 3.73x 4.40x 3.56x
Tenors Labor Day 9.59 yrs 4.47 yrs 8.94 yrs 11.43 yrs 9.05 yrs
Tranche Sizes Labor Day $727mm $820mm $661mm $697mm $732mm

 

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
Associated Banc-Corp. Baa3/BB 5.375% PerpNC5 100 N/A 5.50%a 5.375% $25 Pfd BAML/UBS
Dr. Pepper Snapple Group Baa1/BBB+ 2.55% 9/15/2026 400 +125a +110a (+/-5) +105 +105 CS/JPM/MS
Mizuho Financial Group A1/A- FRN 9/13/2021 1,250 3mL+equiv 3mL+equiv 3mL+114 3mL+114 GS/JPM/MIZ
Mizuho Financial Group A1/A- 2.273% 9/13/2021 1,000 +135a +120a (+/-5) +115 +115 GS/JPM/MIZ
Mizuho Financial Group A1/A- 2.839% 9/13/2026 1,000 +150a +135a (+/-5) +130 +130 GS/JPM/MIZ
Nationwide Bldg. Society Baa1/A- 4.00% 9/14/2026 1,250 +275a +255a (+/-5) +250 +250 BAML/BARC/CITI/JPM/UBS
New York Life Glcl. Fdg. Aaa/AA+ 1.25% 9/14/2021 750 + low 70s
+72.5
+65a (+/-3) +62 +62 BARC/GS/JPM
Nissan Motor Acceptance A3/A- FRN 9/13/2019 500 3mL+equiv 3mL +equiv 3mL+52 3mL+52 CITI/HSBC/MIZ/MUFG
Nissan Motor Acceptance A3/A- 1.55% 9/13/2019 500 +95-100 +73a (+/-3) +70 +70 CITI/HSBC/MIZ/MUFG
Nissan Motor Acceptance A3/A- 1.90% 9/14/2021 500 +105-110 +85a (+/-3) +82 +82 CITI/HSBC/MIZ/MUFG
Nonghyup Bank A1/A+ 1.875% 9/12/2021 500 +100a N/A N/A +85 CITI/CA/HSBC/JPM
Protective Life Glbl. Fdg. A2/AA- 1.555% 9/13/2019 350 +85a +72a (+/-2) +70 +70 BARC/MS/USB
Protective Life Glbl. Fdg. A2/AA- 1.999% 9/14/2021 300 +high 90s
+97.5
+90a (+/-2) +88 +88 BARC/MS/USB
PSE&G Co. Aa3/A 2.25% 9/15/2026 425 + low 90s
+92.5
+75-80 +75 +75 CS/MUFG/WFS
Royal Bank of Scotland Group plc BBB-/BBB+ 3.875% 9/12/2023 2,650 +275a +255a (+/-5) +250 +250 BAML/BNPP/MS/RBS
Shell International Finance Aa2/A FRN 9/12/2019 500 3mL+equiv 3mL+equiv 3mL+35 3mL+35 CITI/GS/JPM
Shell International Finance Aa2/A 1.375% 9/12/2019 1,000 +70a +55a (+/-2) +53 +53 CITI/GS/JPM
Shell International Finance Aa2/A 1.80% 9/12/2021 1,000 +85a +75a (+/-5) +70 +70 CITI/GS/JPM
Shell International Finance Aa2/A 2.50% 9/12/2026 1,000 +125a +110a (+/-2) +108 +108 CITI/GS/JPM
Shell International Finance Aa2/A 3.75% 9/12/2046 1,250 +175a +160a (+/-5) +155 +155 CITI/GS/JPM
TJX Companies Inc. A2/A+ 2.25% 9/15/2026 1,000 +87.5 +80a (+/-2) +80 +80 BAML/DB/JPM/WFS
Valero Energy Corp. Baa2/BBB 3.40% 9/15/2026 1,250 +200a +190 the # +190 +190 BARC/BARC/JPM/MS
MIZ/MUFG/RBC/WFS
W.P. Carey Inc. Baa2/BBB 4.25% 10/01/2026 350 +300a +280a (+/-5) +275 +275 BARC/CITI/JPM

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Dexia Credit Local Aa3/AA 1.875% 9/15/2021 1,250 MS +79a MS +80a MS +79 +80.45 DB/GS/HSBC/JPM
Export Dev. Bank of Canada Aaa/AAA 1.00% 9/13/2019 1,000 MS +3a RG: MS +2a
MS +3a
MS +1 +19.35 BMO/CITI/JPM/RBC
IADB Aaa/AAA 1.25% 9/14/2021 2,100 MS +23a MS +23a MS +22 +23.1 BAML/JPM/NOM/RBC
Instituto de Credito Oficial Baa2/BBB+ 1.625% 9/14/2018 500 MS +70a MS +65-70 MS +65 +90.1 GS/JPM/SG
Kommuninvest Aaa/AAA 1.125% 9/17/2019 1,250 MS +15a MS +14a MS +14 +32.05 CITI/DAIW/HSBC/NORD

 

Lipper Report/Fund Flows – Week ending September 1st      

 

  • For the week ended September 1st, Lipper U.S. Fund Flows reported an inflow of $224.536m into Corporate Investment Grade Funds (2016 YTD net inflow of $30.097b) and a net outflow of $386.754m from High Yield Funds (2016 YTD net inflow of $9.55b).
  • Over the same period, Lipper reported a net inflow of $61.364m from Loan Participation Funds (2016 YTD net outflow of $4.745b).
  • Emerging Market debt funds reported a net outflow of $51.481mm (2016 YTD inflow of $5.432b).

 

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 30.0 bps wider versus their post-Crisis lows!

 

ASSET CLASS 9/06 9/05 9/02 9/01 8/31 8/30 8/29 8/26 8/25 8/24 1-Day Change 10-Day Trend PC
low
IG Avg. 140 139 139 139 139 138 138 138 139 140 +1 0 106
“AAA” 81 80 80 80 80 76 76 77 77 77 +1 +4 50
“AA” 82 82 82 82 82 81 81 81 82 81 0 +1 63
“A” 110 109 109 109 109 108 108 108 109 109 +1 +1 81
“BBB” 183 183 183 183 183 181 182 182 183 183 0 0 142
IG vs. HY 369 370 370 373 371 369 372 366 375 373 <1> <4> 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 36.58 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 9/06 9/05 9/02 9/01 8/31 8/30 8/29 8/26 8/25 8/24 1-Day Change 10-Day Trend PC
low
Automotive 115 115 115 115 114 113 113 113 114 114 0 +1 67
Banking 128 128 128 128 128 126 126 126 127 128 0 0 98
Basic Industry 187 187 187 187 187 184 185 184 186 187 0 0 143
Cap Goods 102 101 101 102 101 100 101 101 102 102 +1 0 84
Cons. Prod. 109 109 109 109 109 107 107 107 108 108 0 +1 85
Energy 189 189 189 190 189 187 188 187 189 189 0 0 133
Financials 165 164 164 164 164 163 165 163 166 167 +1 <2> 97
Healthcare 116 115 115 115 115 114 114 114 115 114 +1 +2 83
Industrials 141 141 141 141 141 140 140 140 141 141 0 0 109
Insurance 163 162 162 162 162 162 162 161 163 164 +1 <1> 120
Leisure 140 141 141 140 141 140 141 142 143 143 <1> <3> 115
Media 163 163 163 163 163 162 162 163 164 163 0 0 113
Real Estate 147 148 148 149 149 148 148 149 150 150 <1> <3> 112
Retail 117 116 117 116 116 115 115 116 116 116 +1 +1 92
Services 135 134 135 135 135 133 133 134 136 135 +1 0 120
Technology 120 120 120 120 120 121 122 123 124 124 0 <4> 76
Telecom 161 160 161 160 161 160 160 160 161 161 +1 0 122
Transportation 139 138 138 139 139 138 138 138 139 140 +1 <1> 109
Utility 140 139 139 139 139 140 140 140 142 142 +1 <2> 104

 

New Issue Volume

 

Index Open Current Change  
IG26 71.162 71.635 0.473
HV26 166.84 165.17 <1.67>
VIX 12.02 11.94 <0.08>  
S&P 2,186 2,186 0
DOW 18,538 18,526 <12>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $18.975 bn DAY: $25.075 bn
WTD: $40.05 bn WTD: $46.15 bn
MTD: $40.05 bn MTD: $46.15 bn
YTD: $965.568 bn YTD: $1,227.455 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications Sept. 2 —- 0.9% 2.8% —-
JOLTS Job Openings July 5630 5871 5624 5643

 

Rates Trading Lab

 

Market held support today and we pretty much traded in tandem with Europe. Curve is showing its seasonal bias to steepen evince itself as the long end seemed to be for sale at every pop.

 

ECB takes center stage tomorrow at 7:45AM EDT. It won’t be easy for them, as they have to balance mixed confidence indicators since the Brexit referendum, ongoing uncertainty about the future relationship between the U.K. and the EU, as well as the outlook for the U.S. and the Fed rate glide-path. This week’s disappointing German data comes too late for the updated set of staff projections, but will support the doves. However, the ECB doesn’t have many QE options left lest it risks more market dislocation. We’ll probably get dovish talk from Draghi and perhaps extension of the time frame for QE coupled with some tweaks, like a possible removal of the deposit rate as the lower limit for purchases to alleviate the increasing shortage of bonds but also push short term rates even lower. It does seem certain that the ECB will highlight the need for structural reforms to boost Eurozone growth. European yields have fallen and equities have moved higher in anticipation of more accommodation despite officials trying to limit expectations, so risk is at least an initial correction in both bond and stock markets, though effects here would be muted to an extent given the outperformance of Europe.

-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-282 100-106 100-11+ 100-08+ 101-17
RESISTANCE LEVEL 99-25+ 100-062 100-05+ 99-31+ 101-01
RESISTANCE LEVEL 99-24+ 100-03+ 100-01+ 99-26 100-31
           
SUPPORT LEVEL 99-212 99-28+ 99-24 99-13 100-02
SUPPORT LEVEL 99-192 99-226 99-16 99-02 99-25
SUPPORT LEVEL 99-18 99-196 99-12 98-29 99-12

 

Tomorrow’s Calendar

 

o   China Data: Trade Balance, Import/Export, Trade Balance, Foreign Direct Investment

o   Japan Data: BoP Current Account Balance/Adjusted, Trade Balance BoP Basis, GDP, Japan Foreign Bond Buying

o   Australia: Trade Balance

o   EU Data: German-Q2 ULC U.K.-Aug RICS

o   U.S. Data: Claims, Cons Comf, Jul Cons Cred

o   Supply: Irish 10y (€1.0bn), Italy auction details, U.S. auction details

o   Events: ECB & Press Conf.

o   Speeches: Nakaso, Lowe, Jansson, Lane (more…)

IG Corporate Debt Market Outlook In Advance of Labor Day
August 2016      Debt Market Commentary   

Quigley’s Corner 08.18.16-In Advance of Labor Day: IG Corporate Debt Issuers Should Err to the Upside

 

Investment Grade New Issue Re-Cap – It Ain’t Over ‘Til It’s Over!  Guess what?  It’s O-V-E-R!

IG Primary & Secondary Market Talking Points

“The Best and the Brightest”- Fixed Income Syndicate Outlook (Beyond Labor Day)

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

From Quig-litz to Stiglitz: Is There A Solution?  A Northern and Southern Euro!

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

Lipper Report/Fund Flows

Investment Grade Credit Spreads

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Nothing…..zero..de nada!…Hasta la vista! The market is now officially in summer vacation mode folks.  Sure we might get some opportunistic issuers looking to get in ahead of the September rush, however, I was able to speak with all the major syndicate desks today.  My survey/poll was two-fold – to gauge volume forecasts for the remainder of August ($5.44b) and separately, for September issuance projections ($116.02b).  Several commented that the September tally is fluid because issuers are discussing pulling forward their issuance, so take it from me when I tell you to “err to the upside!”

September is traditionally a busy month (scroll down to my “Knowing the Past for the Future” section) as I take a look back at a decade’s worth of September IG issuance for each of IG Corporate, SSA and all-in volume.  The Fed mentioned the Italian banking crisis twice in their minutes yesterday.  The EU is coming undone. Vlad-the-Terrible Putin has a green card to annex Crimea and he will take full advantage of the fact that the EU cannot focus on him in their rearview mirror.  Putin knows this and he’ll take full advantage of it. The EU has too many troubles of its own.  We have a Presidential election on Tuesday, November 8th that could very well compress issuance from the standard stretch run to Thanksgiving (November 24th) by 12 days as a result.  When you err, err to the upside. 

IG Primary & Secondary Market Talking Points

 

  • Taking a look at the secondary trading performance of this week’s IG Corporate and SSA issues, of the 15 deals that printed, 12 tightened versus NIP for a 00% improvement rate while only 2 widened (13.33%) and 1 were trading flat (6.67%).
  • BAML’s IG Master Index tightened 1 bp to +142 versus +143.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +191 versus  +192.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.9b on Wednesday versus $15.7b Tuesday and $15.6b the previous Wednesday.
  • The 10-DMA stands at $14.2b.

 

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

 

IG Corporate New Issuance This Week
8/15-8/19
vs. Current
WTD – $8.448b
August 2016 vs. Current
MTD – $95.45b
Low-End Avg. $12.78b 66.10% $60.48b 157.82%
Midpoint Avg. $14.09b 59.96% $61.13b 156.14%
High-End Avg. $15.39b 54.89% $61.78b 154.50%
The Low $5b 168.96% $45b 212.11%
The High $20b 42.24% $75b 127.27%

 

“The Best and the Brightest” –  Syndicate Forecasts and Sound Bites for the Remainder of August and September 

 

I am happy to announce that, once again, the “QC” received unanimous responses from the 22 syndicate desks surveyed in today’s Best & Brightest poll.  20 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 20 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 80.29% 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.

 

Syndicate IG Corporate-only Volume Estimates for the Remainder of August & September

 

IG Corporate New Issuance Remainder of August
8/19-8/31
September 2016
Low-End Avg. $4.45b $115.45b
Midpoint Avg. $5.44b $116.02b
High-End Avg. $6.43b $116.59b
The Low $0b $80b
The High $15b $150b

 

A Look at How the Voting Brackets Broke-Out for the Remainder of August & September

Remainder of August September
1: 0b 1:80-85b
1: 1-2b 2: 100b
1: 2b 1: 105b
1: 2-3b 1: 100-110b
3: 0-5b 3: 110b
1: 3b 3: 115b
4: 5b 1: 110-120b
2: 5-7b 2: 120b
1: 5-7.5b 6: 125b
2: 5-10b 1: 130b
4: 10b 1:150b
1: 5-15b  

 

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

 

  • Across the past ten years, all-in dollar-denominated IG Corporate plus SSA September new issuance averaged $117.55b.
  • Over the past five years, all-in IG September new issuance averaged $138.49b.
  • Over the past three years, all-in IG September issuance has averaged $157.58b.
  • The past three years of September saw IG Corporate only issuance average $127.88b.
  • September SSA issuance has averaged $29.71b across the last three years.

 

August
(Year)
All-in IG Issuance (bn) IG Corps
only (bn)
SSA
only (bn)
2015 119.65 106.06 13.59
2014 160.96 124.25 36.71
2013 192.14 153.32 38.82
2012 143.74 124.62 19.12
2011 75.98 52.51 23.47
2010 130.14 112.41 17.73
2009 136.89 78.90 57.99
2008 29.89 17.58 12.31
2007 107.39 85.36 22.03
2006 78.73 61.41 17.32

Note: includes TARP/TALF & FDIC insured issuance

 

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

“Good morning and Happy Thursday is Friday for me! I will be taking my annual block leave beginning tomorrow morning and returning to my corner desk on Tuesday, September 6th.  It would seem summer vacations are now on the docket for the remainder of the month. August all-in IG Corporate plus SSA issuance managed to break thru the $100b mark for the first time in history.  We currently stand at $104.75b.  WTD issuance has dropped off measurably to $8.44b thus far for IG Corporate only prints. Before I leave there are over 3,000 readers of the “QC” interested in knowing your thoughts and numbers for the remainder of August as well as your projections for September issuance.


This week we priced $8.698b of all-in IG Corporate and SSA issuance. IG Corps were $8.448b or only 60% of this week’s syndicate midpoint average forecast calling for $14.09b.

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

 

  • NICS:  <4.27> bps
  • Oversubscription Rates: 4.26x
  • Tenors:  11.73 years
  • Tranche Sizes: $603mm

 

Week-on-week demand for IG corporate credit primary paper strengthened versus last week posting an average bid-to-cover rate of 4.26x vs. 3.56x.  Average NICs tightened 6.10 bps to an average negative <4.27> bps vs. last week’s +1.83 bps.  Average tranche sizes decreased to $603mm per issue vs. $735mm. Average tenors extended by an average 2.56 years to 11.73 years against last week’s 9.17 years.

Week-on-week, BAML’s IG Master Index is 3 bps tighter or +142 vs. last Friday’s +145 close.  Spreads across the four IG asset classes tightened 2.50 bps to 30.75 vs. 33.25. Looking at the 19 major industry sectors, spreads tightened 1.53 bps to an average 39.42 bps off their post-Crisis lows versus last Friday’s 40.95 bps close.               

Finally, what are YOUR thoughts and number for the remainder of August and separately for September IG issuance?

Thank you as always in advance.  Let’s give the readership a nice read to close out the summer and to prepare for the stretch run.
Best wishes to you and yours thru Labor Day! –Ron”

 

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

(Remainder of this section exclusive to distribution list recipients)

 

From Quig-litz to Stiglitz

This morning Bloomberg TV featured an interview with Columbia University economist and professor as well as Nobel laureate Joseph Stiglitz, who expressed his opinion that if the Euro Zone continues on its current dysfunctional path, it should split up! It’s gotten lots of air time, coverage and traction.  He referred to such a split as an “amicable divorce” with “two or three different currency zones.”  I watched it and had two comments to make.  The first was that Mr. Stiglitz looks like guitarist Joe Walsh might look when the latter turns 75 with a beard.  Then I found out that Stiglitz is 73 while Joe Walsh is 65.  I guess all those lost years kept Joe W. young at heart and with age.  Anyway, the other comment  I made was “hey I wrote about the EU splitting into two zones with two currencies a long time ago.”  I then went searching thru prior “QC’s to find it.  Here it is in its entirety written and distributed to you, if you were onboard the “QC” on January 27th, 2015 you’ll have on your desktops. (more…)

ManyPeopleAreSaying Geo-Political Storm on The Horizon, Debt Market View
August 2016      Debt Market Commentary   

Quigley’s Corner 08.11.16 : ManyPeopleAreSaying  “Its Always Calm Before The Storm”

 

Investment Grade Corporate Debt New Issue Re-Cap – A Day of Broken Records

Global Market Recap

IG Primary & Secondary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

You know the adage – records are meant to be broken.  Well, we broke several today beginning with the DOW, the S&P and Nasdaq all which ended the session at their all-time highs.  The last time all three established new record highs on the same day was 17 years ago back in 1999.  As for our IG dollar primary credit markets, we set a new August monthly record for IG Corporate-only issuance $86.455b vs. $71.565b (2007) and another record for all-in or IG Corps plus SSA new issuance $95.505b vs. $90.356b (2007).

What’s scary about all this is our little focused world of credit and equities just seems so hunky dory doesn’t it?  However, there calm-before-storm-mischler-debt-market-viewremains a whole lot of pain out there though.  Things are heating up again in Crimea between Ukraine and Russia and the South China Sea Islands are turning into a fiasco for the Pacific side of things. The EU seems intent on dividing between a Southern and Northern Euro Zone harkening back to my forecast for  a Northern and Southern Euro made years ago right here in the “QC.” I might have to re-run that edition soon enough!

 

Anyway, here’s the global market re-cap:

 

Global Market Recap

 

  • S. Treasuries – Terrible day for USTs.
  • Stocks – S&P & Dow traded at all-time highs. NASDAQ is knocking on the door.
  • Record Closes – S&P, Dow & NASDAQ closed at record highs. Last time this happened was 1999.
  • Overseas Stocks – Europe rallied & has recovered all Brexit losses. China down.
  • Economic – Claims remained solid, Import price index less negative y/y & mortgage data better.
  • Currencies – USD outperformed Euro, Pound & Yen but lost vs. CAD (crude rally).
  • Commodities – Big rally in crude oil sent the CRB higher. Gold closed down.
  • CDX IG: -1.03 to 71.11
  • CDX HY: -4.37 to 387.01
  • CDX EM: -1.89 to 237.60

*CDX levels are as of the 3PM ET UST close.

-Tony Farren


IG Primary & Secondary Market Talking Points

 

  • A rarity: Fidelity National Information Services Inc. added a new 30-year tranche to today’s earlier announced two-part 5s/10s.
  • Qwest Corp. upsized today’s 40NC5 $25 par Senior Notes to $850mm from $200mm and at the tightest side of guidance range.
  • The average spread compression through price evolution of today’s 11 IG Corporate new issues was 19.77 bps.
  • Including today’s IG-rated Entergy Louisiana LLC $25 par CTMBs, spread compression from IPTs thru the launch/final pricing of today’s 12 new issues was 18.65 bps.
  • BAML’s IG Master Index tightened 1 bp to +146 versus +147.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research tightened 1 bp to +199 versus +200.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.6b on Wednesday versus $16.2b Tuesday and $17.8b the previous Wednesday.
  • The 10-DMA stands at $15b.

 

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

 

IG Corporate New Issuance This Week
8/08-8/12
vs. Current
WTD – $37.505b
August 2016 vs. Current
MTD – $86.455b
Low-End Avg. $21.76b 172.36% $60.48b 142.95%
Midpoint Avg. $22.80b 164.50% $61.13b 141.43%
High-End Avg. $24.93b 150.44% $61.78b 139.94%
The Low $15b 250.03% $45b 192.12%
The High $30b 125.02% $75b 115.27%

 

 

Have a great evening!

Ron Quigley

Managing Director
Head of Fixed Income Syndicate

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

Mischler Named Best Broker-Dealer by Wall Street Letter
February 2016      Debt Market Commentary, News and Information   

 Industry’s Oldest Minority Firm Owned and Operated By Service-Disabled Vets Awarded

“Best Broker-Dealer/ Research” by Industry Peers

2016-wsl-award-best-researchStamford, CT Feb 24–Mischler Financial Group, Inc. (“Mischler”) the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans announced today that the firm was awarded “Best Research Provider” at the fifth annual Wall Street Letter (WSL) Institutional Trading Awards this week in New York City. This is the third year in which Mischler was recognized for distinction in this category. The firm was also nominated for “Best Broker-Dealer Overall”, along with industry icons Bloomberg Tradebook and Interactive Brokers.

The WSL’s Institutional Trading Awards recognizes “excellence among providers to the institutional trading industry specifically rewarding brokerage firms, exchanges and financial technology companies for achievements and innovation.” The Wall Street Letter’s audience consists of top management at securities broker/dealers, including executive management, research heads, corporate finance officials, retail heads and trading desk heads.

Ron Quigley, Managing Director of Fixed Income Syndicate at Mischler, who pens the firm’s debt market publication “Quigley’s Corner”, one of several content pieces distributed to Fortune Treasury clients and leading investment managers stated, “It’s a great honor to be selected as a contender, no less to be designated the winner of the WSL award when considering the pedigree of the firms that were nominated. It’s always good to be in good company, and it is a real tribute to be recognized by industry leaders for our capabilities.”

The full list of nominees and winners of Wall Street Letter 5th Annual Institutional Trading Awards is available via this link

About Mischler Financial Group, Inc.

Established in 1994, Mischler Financial Group, Inc. (“Mischler”) was the first FINRA-certified minority broker-dealer to be designated as a Service-Disabled-Veteran-Business Enterprise (SDVBE).  Today, Mischler is recognized as a leading boutique within the financial market ecosystem. The firm is co-headquartered in Newport Beach, CA and Stamford, CT and maintains offices in 6 major cities. The firm is staffed by more than 50 securities industry veterans and specializes in primary and secondary capital market transactions across debt and equities markets. Mischler operates as a conflict-free, institutional brokerage and investment banking platform and serves Fortune Treasury teams, leading investment managers and public plan sponsors. The firm’s website is www.mischlerfinancial.com

For Additional Information:

Dean Chamberlain, Chief Executive Officer

Tel: 203.276.6646

Email: dchamberlain@mischlerfinancial.com

 

Recession Rattling; Industry Experts Opine-Mischler Commentary
February 2016      Debt Market Commentary   

Quigley’s Corner 02.11.16 – Industry Experts On Recession Talk: Déjà vu All Over Again

  • The IG Re-Cap
  • Special Edition of the Best & Brightest
  • Takin’ It to the Street-Soundbites from Most Influential Accounts and Strategists
  • An Illustrated “Market Circle of Death”
  • Tale of the Tapes
  • Today’s 5-Section Global Market Recap
  • Urgent Bulletin to all Treasurers, Bankers, Accounts and Syndicate managers.
  • “On Black Holes, Politicians and Central Banks”
  • Everything Syndicate and Secondary from the day’s debt capital markets

 

Investment Grade New Issue Re-Cap – Apocalypse N-O-W ?

That’ll get your attention.  Here’s why – I walked in this morning and turned on the TV to Bloomberg News. Someone was being interviewed and the caption in large font at the bottom of the screen read, “Money out of global markets and into pockets.”  I knew immediately this was a “risk off” day.  I then turned on my systems and saw the extent of the carnage.  There was no IG Corporate issuance today.  We’ve now had “7” no-print non-Friday sessions YTD. That puts us on pace for 61 total non-Friday no-print days for 2016. SSA issuer Rentenbank priced its new 5-year FRN and upsized it to $750mm to $500m. That was all she wrote today.  I immediately started calling global money managers, domestic and overseas accounts, strategists and personal market contacts to get their take on things.  Here are sound bites from some of those conversations. They are very revealing and frighteningly similar.

“The Best and the Brightest” – A Must Read Special Edition

Given recent global market tumult, especially this week and today, it was obvious to me that asking anyone for next week’s forecast of IG Corporate supply would seem foolish as no one has any idea in here.  It speaks to how volatile and uncertain our markets are.  Asking that question of the Best & Brightest in tomorrow’s Friday edition ahead of a long three-day President’s Day weekend would be unfair. So, instead I asked three questions pertinent and critical to our credit markets.  The responses were very thoughtful and the meaningful responses took the Best and Brightest respondents time and reflection.  If you are in the credit markets; if you are a Treasury/Funding operative; if you are a tier I, II or III account, a banker, a salesman, a trader or an executive in this business this is a MUST read.

3 questions posed to the “Best and the Brightest” today:

“Good afternoon! I decided to withhold my usual Friday IG Corporate new issue volume forecast poll.  I simply ask that you reply to any one or each of the following questions, as your time allows.  I will print responses instead in lieu of forecasts.  I am always trying to find new ways to make the “QC” more meaningful to its readership. These questions are on many market participant’s minds including Issuers’ Treasury/Funding teams, other members of the Best & Brightest crew, Accounts and Strategists. Here are the questions:

  1. “When do you think markets unfreeze and we get back to new issue activity again, albeit at wider levels?”
  2. “What do you think it takes for the current cycle to break, and for us to find a firmer footing?”
  3. “This week the NY Fed released a research piece saying they felt there is sufficient liquidity in the U.S. credit markets. Is that true in your opinion?”

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

Corporate Debt Issuance Market Suffers Cold Spell
February 2016      Debt Market Commentary   

Quigley’s Corner 02.10.16 -Corporate Debt Issuance Suffers Cold Spell

 

Investment Grade New Issue Re-Cap – Timing is Everything – The Go/No Go Conundrum

Overall Market Re-Cap

Yellen’s Headlines re: Testimony Before the House

IG Primary Market Talking Points – One Deal Day

New Issues Priced

Lipper Fund Flows

Investment Grade Credit Spreads (by Industry/Rating)

IG Secondary Trading Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

One IG-rated 30NC5 $25 par Notes transaction for Senior Housing Properties Trust priced today totaling $250mm.  The deal was upsized from $100mm.  We have now officially gotten on the WTD IG Corporate leaderboards with today’s print albeit we’ve priced a mere 1.50% of this week’s syndicate midpoint average forecast or $250mm vs. $16.70b.  Talk about volatility! Looking at yesterday morning’s markets compared to this morning’s captures the tremendous volatility we’ve been seeing lately.  Volatility used to promote profitability but our new world order has been so restrictive and over-regulated that it’s been made more difficult to generate returns in these kinds of markets.  The severe lack of stability has also resulted in 6 no print non-Friday’s year-to-date. That annualizes out to 52 for the year at the current pace! It implies that when stability returns we have to beware of bottlenecking and congestion in our primary markets as issuers flock to print. Until then the morning “Go/No Go” calls are turning into more like “Market Update Calls” as there are myriad market movements to assess and digest.  Many issuers have shelved their deals until further notice.  According to Informa Global Markets, “YTD FIG new issue spreads have gapped out a resounding average 38 bps versus their initial pricing spread levels. Conversely, non-FIG and non-Energy YTD new issue spreads levels have leaked out just under 4 bps.”

Yesterday Market Update Calls (and/or Go/No Go’s if there were any) probably sounded a bit like this, “Good morning everyone!  I’ll just dive in to the carnage here this morning.  I think that’s the appropriate phraseology.  First off, in Asia overnight treasuries rallied in Tokyo, sold off in London and started to rally back in New York.  Volatility was due to the fact that the 10-year JGB is now trading below zero which marks a first time ever event in Japan and joins other EU instruments with negative yields.  U.S. futures opened down 135 while the seven major European exchanges are down an average 2% with oil falling back well below $30 per barrel. Speaking of oil, just yesterday (Thomson Reuters’ Reporter Hilary Flynn wrote in a story Edited by TR’s Natalie Harrison), “average spreads on junk-rated U.S. energy bonds touched their highest levels ever on Monday as oil prices remained under pressure and as bonds of Chesapeake Energy tumbled. Energy spreads widened by 113bps to T+1851bpthe biggest one day move in more than 13 years – according to Bank of America Merrill Lynch data, with the sector yielding 19.73%. Oil has severely impacted FIG equity prices and credit spreads as the big banks have large exposures to the energy sector that is, in turn, stressing cash levels.”  Spread levels on YTD FIGs widened an average 38 bps versus their new issue spread levels while non-FIG and non-Energy Industrial new issue moved out just under 4 bps YTD. Despite low UST yields that went from 2.05% two-and-a-half weeks ago to 1.73%, corporate spreads have widened against that. In fact, many dealers may have likely rate locked at 2.00% and any issuance inside here could provide highly undesirable double loss on further credit spread widening and we could potentially be looking at a false Treasury bottom here.

Conversely today opened up with stronger market tone with S&P futures up and EU exchanges 2.00% in the black, still, markets experienced another volatile day all told.

Another major issue playing on markets that’s almost lost in the mix of so much market moving news and directly correlated to China’s slow growth are the Emerging Markets.  Friend and former colleague Dr. Scott MacDonald wrote in The National Interest that EM capital markets that have been essentially shut down coming off a year, 2015 that “witnessed net capital outflows of an estimated $735 billion….the first net outflows since 1988.” EM nations are even more concerned now that the Fed is talking higher U.S. interest rates and as the USD strengthens thereby increasing the cost of dollar-denominated debt. With higher costs of debt there will be “less capital available for infrastructure development, tighter budgets and real risks to many of the social gains made over the past decade in much of Asia, Africa and Latin America.”  He continued, “The global economy is not in a good place.  One of the drivers of global economic growth over the past decade has been Emerging Markets. That is now at risk. Combined with competitive currency devaluations, different directions in monetary policy (the U.S. verses the European Central Bank and Bank of Japan), the use of increasingly unconventional monetary policies (negative interest rates, quantitative easing and forward guidance) and risky geopolitical frictions (Russia and the West over Ukraine and Russia and Turkey over Syria), policy coordination among G20 countries has generally fallen apart.”  I could continue the geopolitical list to include tensions in the South China Seas that are about to increase with the U.S. and India agreeing to a joint strategic operation in that very area; MENA dislocation; the fear of spreading Nationalism and increased terror level threats throughout the world and particularly Europe.  The EU one step closer to approving suspension of the Schengen Agreement by mandating enforced borders for a period of at least two years, slow-growth China and its myriad repercussions not to mention  a U.S. election year and the all-important global central bank monetary policies.

The point is clear – the climate for issuance is just not there.  Having said that as we try to uncover new clearing levels we look back at AT&T’s $6b 4-part that came on Friday, January 29th and well, to be quite frank, the issuer and leads look like geniuses given that spreads have only widened an average 7.5 bps across those four tranches.  Now we don’t have the benefit of tomorrow’s newspaper today but certain issuers (FIGs in particular) will require revised IPTs to get done in hear if they should decide to go at all.  One reassuring sign was today’s Mitsubishi UFJ Financial Group, Inc. (NYSE:MTU) (A1/A) announcement that it mandated Morgan Stanley and MUFG to arrange investor calls in the U.S., Europe and Asia slated to begin on Monday, February 15th in preparation for a dollar-denominated Senior Unsecured Holdco Notes transaction.  A global call was also scheduled to take place on Friday, February 12th from 11am ET to noon.  Joint active leads/books are MS and MUFG with J.P. Morgan serving in a passive role. MUFG filed to offer Fixed and FRN Senior Notes. So there is obviously business to get done but it’s a question of timing.

In readjusting starting IPTs in preparation for a would be FIG transaction, for example, it’s important to secure clearing levels palatable for the issuer that simultaneously offer an appropriate concession to investors in order to secure and hold together anchor orders.  As risk increases investors ask for more in return to participate. The flip side of that equation is that new IG Corporate product has become scarce, already trailing last year’s IG supply at this point in the new year by over 13%.  Issuers leading the charge will provide highly desired product to sell into voracious appetite for some of the safer haven corporate names offering much more attractive yields than current USTs.  The CT10 for example is yielding 1.68% as of 4:15pm ET today.  So, will the global money managers still be there?  Of course they will but at what spread levels will they hold together or will new supply, when it eventually comes suffice?

The strong recommendation these past couple of weeks seems to have been to keep a focused eye on spread levels, market conditions and have as many market calls as issuers, syndicate desks and bankers require.  Rather than get a one-day bounce before declaring “risk on” the new norm has been to wait for a couple to a few days of stability before announcing that “neutral” to “positive” or rather “stable” market tone has returned to warrant further issuance. The key word here being “sustainability.”

In the span of two-and-a-half weeks the UST 10-year shed 37 bps moving from yielding 2.05% to 1.68%.  With rate locks having taken place at 2.00% the potential for investment banks to suffer two-sided losses (new issue spreads gapping wider post pricing in a volatile market combined with subsequent wider Treasury levels that might just be sitting at a false artificial levels today, the environment is not exactly palatable for those pricing deals.  As for the energy complex and FIGs with that exposure, WTI crude has now officially seen five consecutive losing sessions closing down 2.11% to $27.35 per barrel.

So, it’s more than wise to look for back-to-back days of at least stable markets.  Stable could mean “neutral” or “flat” to “improved.”  The volatility that’s defined 2016 YTD so far has been so extreme that syndicate desks need to be confident that the window is, in fact, open for issuers to get deals done in the right environment and with a high quality book.  They are as sensitive to new deals holding together as issuers are and they want what’s the best for Companies involved.  Today’s Baa3/BBB- rated 30NC5 $25 par Notes transaction for Senior Housing was underwater with a $24.45 bid despite being upsized given good demand. Every deal in here will be watched by all market participants and will have an impact on deciding when the timing is right.

Considering that Fed Chair Janet Yellen has presented her Semiannual Monetary Policy Report to the Congress’ Committee on Financial Services throughout today and continues on Thursday before the Senate’s Committee on Banking, Housing and Urban Affairs, there is a lot of room for more volatility given Fed speak and House/Senate Q&A.  Although this Friday is not technically an early close for markets and though we have seen more prints on Friday’s YTD than not, market participants will assuredly be leaving desks a bit earlier given the upcoming long President’s Day weekend.  Which beckons “is it wise to carry new positions into a long weekend given the global backdrop?”

 

But have hope, there’s lots of business to eventually get done.  64.6% of the S&P 500 has reported earnings since January 4th, and the proportion of earnings beats to misses stands at 3.2: 1, while the proportion of revenue beats to misses is about even at 1: 1. Growth remains lackluster when compared to the same period a year ago.

 

Overall Market Re-Cap

 

USTs – Another volatile day. Closed mixed/flatter curve. Rallying after close.

Stocks – U.S. heading into close mixed (poor close). EU rallied & Nikkei sold off.

Economic – Today was all about Janet Yellen.

Currencies – The Yen cannot be stopped. The BOJ has to be in shock.

Commodities – Crude oil, gold, copper & silver all red.

CDX IG: +0.65 to 120.20

CDX HY: +0.80 to 571.98

CDX EM: +10.86 to 402.30

Swap spreads were tighter for the 2nd session in a row.

 

Yellen’s Headlines re: Testimony Before the House

 

`MONETARY POLICY IS BY NO MEANS ON A PRESET COURSE’

FED EXPECTS ECONOMY TO WARRANT ONLY GRADUAL RATE RISES

FINANCIAL STRAINS COULD WEIGH ON OUTLOOK IF PERSISTENT

S. FINANCIAL CONDITIONS HAVE BECOME LESS SUPPORTIVE

LOWER OIL, LONG-TERM BORROWING COSTS PROVIDE OFFSET

CITES EQUITY DECLINES, HIGHER USD, WIDER CREDIT SPREADS

I DON’T EXPECT THE FOMC WILL FACE RATE-CUT OPTION SOON

SEES REASONS WHY GROWTH COULD EXCEED FORECAST, CITES OIL

LABOR MKT SHOWS SOLID IMPROVEMENT, SOME SLACK REMAINS

JOB, WAGE GAINS SHOULD SUPPORT INCOMES AND SPENDING

FOMC EXPECTS INFLATION TO REMAIN LOW IN NEAR TERM

SOME SURVEYS OF INFLATION EXPECTATIONS AT LOW END

MKT-BASED INFLATION COMPENSATION `HISTORICALLY LOW’

INFLATION EXPECTED TO RISE TO 2% OVER MEDIUM TERM

EXPORT DROP DUE TO USD SIGNALS MORE GRADUAL TIGHTENING

SOME INDEBTED FIRMS HIGHLY VULNERABLE TO LOWER OIL, GDP

SOME LEVERAGED LOANS STILL SHORT OF SUPERVISOR STANDARDS

REINVESTMENT TO CONTINUE UNTIL RATE HIKES WELL UNDERWAY

FED REPORT: LEVERAGE RISKS IN FINANCIAL SECTOR `REMAIN LOW’

FED REPORT: U.S. BANKS HAVE LIMITED EXPOSURE TO EMERGING MKTS

GLOBAL ECONOMIC GROWTH SHOULD PICK UP OVER TIME

ECONOMIC DEVELOPMENTS ABROAD POSE RISK TO U.S. GROWTH

RECENT INDICATORS DON’T SUGGEST SHARP SLOWDOWN IN CHINA

YUAN DROP MAKES CHINA FX POLICY, OUTLOOK MORE UNCERTAIN

*FED: TRADE FLOWS COULD SLOW GLOBAL MONETARY POLICY DIVERGENCE

*EASING ABROAD COULD OFFSET U.S. POLICY NORMALIZATION, FED SAYS

 

Yellen Takeaway

Fed Chair Yellen was the focal point today and I have to say she did a masterful job all things considered. Yellen admitted the environment has taken a turn for the worse since the FOMC raised rates in December for the first time in 9 years. She stated financial conditions have become less supportive and also added that it’s too early to measure the impact of recent YTD global events on the economy (China, Europe, economic data, etc). Yellen had a message for the folks in the four rate hike camp this year (100 bps) and those that priced out any rate hikes this year. The message was clearly that four rate hikes are not happening in 2016 but to take all rate hikes off the table in the first week in February is a mistake. The Fed will hike rates if the economy and markets give them the opportunity.

-Tony Farren

 

IG Primary Market Talking Points – One Deal Day

 

Today’s lone IG-rated new issue, Senior Housing Properties Trust increased its new 30NC5 $25 par Notes offering to $250mm from $100mm.  Morgan Stanley had the physical books.

The average spread compression across today’s 1 IG Corporate-only new issues was 6.3125 bps from IPTs to the launch.

 

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

 

IG Corporate New Issuance Next Week
2/08-2/12
vs. Current
WTD – $0.25b
February 2016 vs. Current
MTD – $6.275b
Low-End Avg. $15.29b 1.64% $90.9375b $6.90b
Midpoint Avg. $16.70b 1.50% $92.1875b $6.81b
High-End Avg. $18.12b 1.38% $93.4375b $6.72b
The Low $5b 5.00% $60b $10.46b
The High $25b 1.00% $110b $5.70b

 

 

Have a great evening!

Ron Quigley

 

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 a review of this week’s key primary market driver averages for IG Corporates only through Wednesday’s session followed by the averages for the prior four weeks:

 

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/09
TUES.
2/10
WED.
2/11
LAST WEEK’S
AVERAGES
AVERAGES
Week 1/25
AVERAGES
Week 1/18
AVERAGES
Week 1/11
New Issue Concessions N/A N/A N/A 7.45 bps 21.77 bps 14.25 bps 12.66 bps
Oversubscription Rates N/A N/A N/A 3.01x 2.71x 1.96x 2.39x
Tenors N/A N/A N/A 8.19 yrs 7.43 yrs 5.33 yrs 7.41 yrs
Tranche Sizes N/A N/A N/A $548mm $940mm $1,235mm $1,901mm

 

New Issues Priced

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

Please note that 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
Senior Housing Prop. Trust Baa3/BBB- 6.25% 30NC5 250 6.25-6.375%a N/A 6.25% $25 MS (phys) + 5

                                                               

Lipper Report/Fund Flows

 

For the week ended February 3rd, Lipper U.S. Fund Flows reported an outflow of $1.451bn from corporate investment grade funds (2016 YTD net outflow of $4.947bn) and a net outflow of $40.897m from high yield funds (2016 YTD net outflow of $4.116bn).

Over the same period, Lipper reported an outflow of $405m from loan participation funds (2016 YTD net outflow of $2.894bn).

Emerging Market debt funds reported a net outflow of $414m (2016 YTD outflow of $1.682bn).

 

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 84.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 2/10 2/09 2/08 2/05 2/04 2/03 2/02 2/01 1/29 1/28 1-Day Change 10-Day Trend PC
low
IG Avg. 215 213 209 208 208 206 202 202 202 201 +2 +14 106
“AAA” 96 96 95 96 96 96 93 93 92 91 0 +5 50
“AA” 121 119 116 116 115 114 111 111 114 113 +2 +7 63
“A” 161 159 155 154 154 152 149 149 147 146 +2 +15 81
“BBB” 296 292 287 287 286 284 280 279 280 278 +4 +18 142
IG vs. HY 647 638 601 595 595 592 577 575 572 574 +9 +73 228

 

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 108 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 2/10 2/09 2/08 2/05 2/04 2/03 2/02 2/01 1/29 1/28 1-Day Change 10-Day Trend PC
low
Automotive 187 183 177 177 176 175 173 170 170 170 +4 +17 67
Banking 179 173 166 164 162 160 156 156 154 153 +6 +26 98
Basic Industry 409 408 402 407 412 411 406 405 405 405 +1 +4 143
Cap Goods 139 139 136 135 134 133 131 138 138 138 0 +1 84
Cons. Prod. 150 150 147 147 148 147 146 146 143 142 0 +8 85
Energy 391 387 380 380 381 377 366 368 368 367 +4 +24 133
Financials 220 215 211 210 207 204 201 197 197 196 +5 +24 97
Healthcare 153 152 150 150 149 148 146 145 145 145 +1 +8 83
Industrials 233 231 227 227 228 226 222 221 224 222 +2 +11 109
Insurance 205 201 198 197 195 193 189 189 189 188 +4 +17 120
Leisure 203 202 198 196 195 193 194 193 193 192 +1 +11 115
Media 244 241 238 237 236 233 231 229 229 227 +3 +17 113
Real Estate 194 192 188 188 186 185 184 183 183 182 +2 +12 112
Retail 165 164 161 162 162 160 159 158 158 158 +1 +7 92
Services 178 178 176 176 175 174 174 173 173 172 0 +6 120
Technology 166 165 161 162 161 160 157 155 155 153 +1 +13 76
Telecom 234 233 228 228 229 227 225 222 222 218 +1 +16 122
Transportation 200 200 198 197 196 195 193 191 191 190 0 +10 109
Utility 184 182 182 182 181 180 178 178 178 176 +2 +8 104

 

IG Secondary Trading Lab

 

BAML’s IG Master Index widened 2 bps to +215 versus +213.  +106 represents the post-Crisis low dating back to July 2007.

Standard & Poor’s Global Fixed Income Research widened 2 bps to +257 versus +255.  The +140 reached on July 30th 2014 represents the post-Crisis low.

Investment grade corporate bond trading posted a final Trace count of $16.2b on Tuesday versus $11b Monday and $19.1b the previous Tuesday.

The 10-DMA stands at $17b.

The top three most actively traded IG-rated issues were led by ABIBB 3.65% due 2/01/2026 that saw client flows account for 65% of the volume and with client buying 1.8-times selling.

ABIBB 4.90% due 2/01/2046 finished second with client and affiliate flows representing for 97% of the volume.

ABIBB 4.70% due 2/01/2036 placed third displaying 93% client flows.

 

New Issue Pipeline

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

 

Rentenbank (Aaa/AAA) announced it will issue a new 144a/REGS 5-year FRN due 2/19/2021 thru joint leads Bank of America/Merrill Lynch, Citigroup, Deutsche Bank and Toronto Dominion.  The issue is guaranteed by the Federal Republic of Germany. The deal is expected to price sometime during tomorrow’s session with IOIs being taken with IPTs in the 3mL+35 “area.”

Mitsubishi UFJ Financial Group, Inc. (A1/A) mandated Morgan Stanley and MUFG to arrange investor calls in the U.S., Europe and Asia slated to begin on Monday, February 15th in preparation for a dollar-denominated Senior Unsecured Holdco Notes transaction.  A global call will also take place on Friday, February 12th from 11am ET to noon.  Joint active leads/books are MS and MUFG with J.P. Morgan serving in a passive role. MUFG filed to offer Fixed and FRN Senior Notes today, Wednesday, February 10th.

United Mexican States (A3/BBB+) on Monday, February 8th filed a $10b shelf registration covering debt securities and warrants.

On Thursday, February 4th, Electronic Arts, which S&P assigned a “BBB-“ rating to today, asked Bank of America/Merrill Lynch to coordinate investor calls beginning tomorrow, Friday, February 5th and continuing on Monday, February 8th from 10am to 5pm ET on both days.

Molson Coors Brewing Company (Baa2/BBB), expects to issue up to $6.8b in new debt to help fund its $12b acquisition of Miller beer brands from AB InBev an SEC filing shows. On Tuesday, January 26th , Molson Coors filed an S-3ASR automatic mixed shelf registration covering debt securities, Class “B” common stock, depositary shares, warrants and units to be used for general corporate purposes including debt refis, acquisitions, working capital, CAPEX and repurchases of redemptions. Molson Coors announced last year that will acquire SAB Miller’s interest in MillerCoors for $12b contingent upon AB Inbev’s purchase of SABMiller.  The deal is expected to close some time during the second half of 2016.

Berkshire Hathaway Inc./Finance Corp. (Aa2/AA) filed an S-3ASR debt securities shelf registration on Tuesday, January 26th with proceeds flagged for general corporate purposes.

Corporacion Andina de Fomento or “CAF” (Aa3/AA-), the Latin American Development Bank, mandated Bank of America/Merrill Lynch, Citigroup, Deutsche Bank and HSBC to arrange global investor calls scheduled that began today, Thursday, January 28th in preparation for a dollar-denominated global offering that could soon follow their conclusion.

NASDAQ (Baa3/BBB-) filed an S-3ASR mixed securities shelf registration covering debt securities, preferred stock, common stock, warrants, depositary shares, purchase contracts and units with proceeds flagged for general corporate purposes, capital expenditures and working capital.

Banque Ouest Africaine de Développement or “BOAD” (Baa1/BBB) mandated BNP Paribas, Deutsche Bank, J.P. Morgan and Standard Bank to arrange fixed income investor meetings scheduled that began on Monday, January 18th in preparation for a dollar-denominated benchmark 144A/REGS S/3( c )(7) Senior Unsecured transaction that could soon follow its conclusion.  “BOAD”  is the West African Development Bank.

The State of Israel (A1/A+) filed a 424B5 registration statement under which it may offer up to $7b of debt securities and subsequently asked Barclays, Citigroup and Goldman Sachs to arrange U.S. fixed income investor meetings that began on January 12th.

The Republic of Turkey (Baa3/BBB-) filed an S-B shelf registration covering over $4.9b of debt securities.  Turkey has issued in January in 12 of the past 13 years.

CIBC Funding, L.P. guaranteed by CIBC and rated (Aa3/AA-) asked Citigroup, CIBC Capital Markets, BNP Paribas and Wells Fargo held fixed income investor calls that wrapped up on Monday, December 7th in preparation for a dollar-denominated 144a/RegS 3( c )(7) transaction that could soon follow.

Split-rated Yapi ve Kredi Bankasi A.S. (Baa3/BB+) mandated Bank of America/Merrill Lynch, Citigroup, Mistubishi UFJ Securities Inc. and Unicredit as joint leads and books to arrange investor meetings that began on Tuesday, December 1st in the U.S., Europe and Asia in conjunction with a 144A/RegS Basel III compliant Tier 2 dollar-denominated offering expected to price sometime in early 2016.

Romania (Baa3/BBB-) asked HSBC, RBI, SG and Unicredit to arrange credit update meetings with U.S. investors across four cities that concluded in New York on Thursday, December 10th.

Kia Motors Corporation (Baa1/A-) road showed with fixed income investors thru meetings arranged by Citigroup and J.P. Morgan that began on Monday, November 16th.

PT Pertamina (Persero) (Baa3/BB+/BBB-) mandated BNP Paribas, Deutsche Bank and J.P. Morgan to arrange fixed income investor meetings took place in on Monday, September 28th  in London and that made subsequent stops in New York and Boston before concluding October 2nd in L.A.

 

M&A Pipeline – $657.785 Billion in Cumulative Enterprise Value!

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

 

Fortis Inc. (A-/S&P) announced on Tuesday, February 9th that it will acquire ITC Holdings for $11.3b in a cash and stock transaction.  The terms stipulate that ITC shareholders will receive $22.57 in cash and .7520 Fortis shares per ITC share. Fortis will also assume approx. $4.4bn of consolidated ITC indebtedness. The cash portion of the deal will be financed through the issuance of about $2bn of Fortis debt and the sale of up to 19.9% of ITC to one or more infrastructure-focused minority investors. Fortis expects to maintain a solid IG credit rating.

On a consolidated basis, Southern Company (Baa1/A-) plans to raise $10.35b of debt in the capital markets this year, including the refinancing of nearly $2b of long-term debt maturities. This would account for more than 20% of an anticipated $47b of new corporate bond supply from U.S. investment grade electric utilities. Within that plan, the parent holding company would issue $8b to finance its acquisition of AGL Resources (BBB+/BBB+); this would be the largest single corporate bond issuance by a U.S. investment grade electric utility, surpassing the $6.7 billion issued by Pacific Gas & Electric in March 2004 as it prepared to complete its Chapter 11 restructuring. Southern Power (Baa1/BBB+) will be the next largest issuer, with $1,200 million budgeted for 2016, primarily to finance its growth plans.

Exelon Corp. (Baa2/BBB-) Debt financing plans for 2016 include $950 million at Commonwealth Edison (A2/A-) ($665 million maturing in 3Q16), $750 million at Baltimore Gas & Electric (A3/A-) ($300 million maturing on October 1) and $450 million at PECO Energy (Aa3/A-) ($300 million maturing on October 15). Exelon Corporation will either issue some debt to effectively replace the acquisition-related debt it redeemed in late 2015, or redeem its new 2025, 2035 and 2045 maturities, depending on whether or not it closes its $6.8b acquisition of Pepco Holdings (Baa3/BBB+). The only remaining required approval is that of the District of Columba Public Service Commission, which stated in its order of October 28, 2015 that it expected to issue its decision on or before March 4, 2016.

TE Connectivity (A-/A-) announced it will buy medical device maker Creganna Medical for $895mm in cash.  The deal will be funded with available cash and debt.

Stryker Corp. (A3/A+) announced on Monday, February 1st, that it will acquire Sage Products, LLC in an all cash transaction totaling $2.775b that will be funded with cash and new debt.

Dominion Resources Inc. “D” (Baa2/BBB+) announced on Monday, February 1st, that it will acquire Questar Corporation “STR” (A-/S&P) for $4.4b in cash.  “D” agreed to pay “STR” shareholders $25 per share and assume its debt. The deal will be funded with equity, convertibles and debt and is expected to close by the end of 2016. RBC and Mizuho are providing financing and acting as financial advisors to Dominion.  The deal is subject to shareholder and regulatory approvals.

Abbott Labs (A2/A+) announced on Monday, February 1st, it will acquire Alere Inc. (Caa1/CCC+) for $5.8b in which “ABT” will pay $56 per share of ”ALR.”  The deal will be financed with debt.  ABT expects a strong IG rating despite the new debt. The deal is subject to “ALR” shareholder as well as regulatory approvals.

Newell Rubbermaid “NWL” (Baa3/BBB-/BBB+) and Jarden Corporation “JAH” announced on December 14th, 2015 that it entered in to an agreement to combine the two companies in a cash and stock transaction valued at $15.4b. The transaction will be funded with cash, equity, and debt issued to JAH shareholders. NWL entered into a commitment letter with Goldman Sachs to provide a $10.5bn bridge facility. In an S-4 filing NWL will refinance $4.5bn of outstanding Jarden debt and will assume $632 million of outstanding Jarden debt, with up to approximately $10.2bn of new debt expected to be incurred in the form of up to approximately $8.7bn of newly issued Newell Rubbermaid debt securities, a $1.5bn term loan facility and available balance sheet cash and the net cash proceeds from Newell’s sale of its Décor business. Goldman Sachs is acting as advisor to NWL. The deal is expected to close in Q2 2016 and is subject approvals.

Total Systems Services, Inc. “TSS” (Baa3/BBB-) entered into a definitive agreement with Vista Equity Partners to acquire TransFirst, a vista portfolio company, in an all-cash transaction valued at $2.35bn. In terms of financing TSS management noted that the deal will be funded with fully committed debt financing. On a pro forma basis at closing the combined entity will have approx. $3.8bn of debt and pro forma leverage of 3.9x. The transaction is expected to close sometime in Q2 2016 and is subject to regulatory approvals. Moody’s affirmed TSS’s Senior Unsecured “Baa3” rating and “stable” outlook.

Molson Coors (Baa2/BBB-) expects to issue up to $6.8b in new debt to help fund its $12b acquisition of Miller beer brands from AB InBev an SEC filing shows. The transaction will be financed thru cash, debt and new equity.  The deal is expected to close some time during the second half of 2016.

Lockheed Martin (Baa1/BBB+) announced it will combine its information systems/global solutions entity with Leidos (Ba1/BBB-)in a deal valued at roughly $5b.  Leidos will keep its existing $1.1b debt and expects to incur $2.5b of additional debt as part of the transaction.  The deal is expected to close sometime in the second half of 2016.

Johnson Controls (Baa2/BBB+) announced it will acquire Tyco International (A3/A-) for $16.5b and with the merged entity operating in Ireland to save on taxes.  Tyco secured a $4b bank facility to fund the cash consideration inferring additional long-term dated M&A  ahead according to S&P. The deal is slated to close by the end of 2016. The new entity will be called Johnson Controls plc. Tyco has entered a commitment letter with Citigroup Global Markets to provide as much as a $4b term loan as well as a $4b 364-day year Senior Unsecured bridge loan facility.

This morning in Charlotte, shareholders of Piedmont Natural Gas (A2/A) voted to approve the Company’s acquisition by Duke Energy (A3/BBB+).  66.8% of voting shares supported the acquisition.  In late October Duke Energy, (A3/BBB+) the nation’s largest utility announced that it will buy Piedmont Natural Gas (A2/A) for $4.9b in cash.  Both companies are partners in the $5b Atlantic Coast Pipeline.  The purchase, pending regulatory approval, will add one million new rate payers to Duke Energy’s customer base.  The deal is expected to close toward the end of 2016.

Shire PLC announced this morning that it will acquire Baxalta Inc. (Baa2/BBB) for approximately $32.2 billion in cash and stock.  Shire secured an $18b bank facility to finance the cash portion and will refinance it in debt. The deal creates the single largest maker of rare disease drugs in the world.

Dow Chemical and DuPont Co. (A3/A-) announced a merger of epic proportions worth $130b that brings together among the largest and most prestigious chemical and agricultural companies.  The plan is to merge followed by a split into three businesses focused on agriculture, material sciences and a specialty brand focused on nutrition/electronics. The two companies are among the nation’s oldest with DuPont founded in 1802 and Dow in 1897.

Air Liquide SA (NR/A+) announced on November 17th that it will acquire Airgas Inc. (Baa2/BBB) for $13.4b in which Airgas will be a wholly-owned subsidiary of its new parent. The transaction will be financed bridge loans that are expected to be refinanced through equity, Euro cash and euro as well as dollar-denominated debt issuance.

Avago Technologies (Ba2/BB+) is expected to buy Broadcom (A2/A-) for $37b. The transaction is scheduled to close by the end of Q1 2016. Avago will fund the $17b cash consideration with cash on hand and $9b in new, fully-committed debt financing from a consortium of banks.

Pfizer (A1/AA) and it’s Irish counterpart Allergan (Bbaa3/BBB-) announced on Monday, November 24th a $160 billion behemoth health care services merger making it the largest M&A deal ever.  Pfizer’s U.S. headquarters looks to move across the pond to relocate to the emerald island (did someone say tax haven?) making it the world’s number one pharmaceutical company.  Most of the M&A transaction will be in cash with a debt portion heard to be in a range of $6-12b.  Post today’s close, ratings agencies have said the merger may involve a buyback of as much as $80-85b.

Michael Dell’s privately held Dell Inc., (Ba3/BB+), announced an up to $67b cash and stock deal to acquire EMC Corp. (A1/A).

BB&T (A2/A-) announced in August that it will acquire National Penn Bancshares for $1.8b in cash and stock ($550mm in cash and 31.6mm BB&T shares). The deal is expected to close mid-2016.

Black Hills Corp. (Baa1/BBB) announced in July an acquisition of SourceGas Holdings LLC (Baa2/BBB-) for $1.89b in a deal that will include approximately $500mm in new debt. Expected to close sometime in the first half of 2016.

UPS (Aa3/A+) announced it has entered into a definitive purchase agreement to acquire Coyote Logistics, a technology-driven, non-asset based truckload freight brokerage company for $1.8b from Warburg Pincus.  The transaction will be financed with available cash resources and through existing and new debt arrangements and is expected to close within 30 days.

Israel’s Teva Pharmaceutical (A3/A-) announced plans in July to purchase Dublin-based Allergan’s Pharma (Baa3/BBB-) business for $40.5b.  $33.75b in cash will be financed through a combination of new equity, debt and cash on hand. Teva entered into a $33.bridge facility commitment including $27b debt and $6.75b equity.  Timing is expected sometime in Q1 2016.

Aetna Inc. (Baa1/A) announced in July that it will buy Humana Inc. (Baa3/BBB+) for about $37 billion in cash and stock making it the largest insurance M&A deal in history.

Anthem Inc. (Baa2/A) proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal is expected to close sometime during the second half of 2016. The merger would involve 53mm members and will include $22b in new debt and loans.

Amphenol Corporation (Baa1/BBB+) announced on June 29th that it made a binding offer to acquire 100% of FCI Asia Pte. Ltd. for $1.275b. Funding will be made thru cash and debt and is expected to close by the end of 2015.

 

New Issue Volume

 

Index Open Current Change  
IG25 119.554 121.563 2.009
HV25 371.845 368.815 <3.03>
VIX 26.54 26.29 <0.25>  
S&P 1,852 1,851 <1>
DOW 16,014 15,914 <100>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $0.25 bn DAY: $0.25 bn
WTD: $0.25 bn WTD: $0.45 bn
MTD: $6.275 bn MTD: $14.359 bn
YTD: $133.259 bn YTD: $184.483 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications Feb. 5 —- 9.3% <2.6%> —-
Monthly Budget Statement January $50.0b $55.2b <$17.5b> —-

 

Rates Trading Lab

 

Tokyo Holiday Tonight: Cash Markets Will Not Open Until 2am. Andy will be on the desk from 1:30am(est).

It seems possible that market is setting itself for some sort of correction, but it also seems to be suffering from “seller’s exhaustion” as the path of least resistance, at least in the long end, is lower rates. As I said this afternoon, there are some very valid arguments for the rate complex to take a breather here, but I think it’s equally important to remember that auctions are liquidity events and in the current poor trading environment, liquidity is at a premium (no matter what the NY Fed theorizes). It’s hard to quantify, but it’s important to remember, that many buyers here are buying not because they want to, but because they have to. As for the curve, the flattening we have seen was not all that surprising given the term structure in place. Steepening trades make sense when you can collect enough carry to justify the forwards in a tightening environment. When the positive carry is not there, you really have to make a case for an easier Fed to justify a steeper curve so in that context, I think the move in the curve makes more sense.

-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-27 101-16 102-12 105-16+ 111-30
RESISTANCE LEVEL 99-256 101-11 102-08 105-09+ 111-08
RESISTANCE LEVEL 99-24 101-08+ 102-06 105-05+ 110-22
           
SUPPORT LEVEL 99-226 101-02+ 101-31 104-25 110-01
SUPPORT LEVEL 99-21 101-00+ 101-22+ 104-15 109-18
SUPPORT LEVEL 99-19+ 100-29+ 101-17+ 104-08 108-31+

 

Tomorrow’s Calendar

 

China Data: Nothing Scheduled

Japan Data: Nothing Scheduled

Australia: Consumer Inflation Expectation

EU Data: U.K.-Jan RICS

S. Data: Claims, Cons Comf

Supply: Italy 2, 6, 14y, Irish 10y, U.K. 29y, U.S. 30y

Events: Riksbank, Eurogroup

Speeches: Yellen, Cunliffe, Bailey, Stevens, Liikanen (more…)

Securities Industry Salutes Mischler Financial Group; “Best Broker-Dealer/Research” Awarded to Veteran-Owned Firm
February 2014      Company News, News and Information   

Securities Industry Salutes Mischler Financial Group; “Best Broker-Dealer/Research” Awarded to Veteran-Owned Firm

Stamford, CONN-February 26, 2014—Mischler Financial Group, the securities industry’s oldest minority investment bank/institutional brokerage owned and operated by service disabled veterans (SDVs) announced its receipt of the 2014 Wall Street Letter Institutional Trading Award for Best Broker-Dealer/Research.

2014_wsl_awards_logo The award was determined by a panel of industry peers organized by global financial news publisher Pageant Media Ltd., who weighed the content offerings from sell-side firms specializing in equities and/or and fixed income insight. The top award to Mischler recognizes the firm’s debt capital markets and fixed income syndicate commentary, produced by Ron Quigley, Managing Director and Head of Fixed Income Syndicate for Mischler. Runner-ups for the Best Broker-Dealer Research category included investment banks Stifel Financial Corp. and Sandler O’Neil + Partners L.P.

Mischler Financial was also nominated for “Best Client Service” and “Best Broker-Dealer/Equities”; categories in which other contenders included global brands Bloomberg LP, Sunguard Financial Systems, Northern Trust Securities and Instinet, among others.

Noted Dean Chamberlain, CEO of Mischler Financial Group, “It’s a real privilege to be acknowledged for excellence by our peers and to be cited for our capabilities, particularly when looking at the roster of globally-recognized Industry leaders who were also nominated.”

This year’s Wall Street Letter Institutional Trading Awards program encompassed 20 categories and more than 100 nominees; winners were announced during a formal event on February 25 in New York City attended by more than 250 financial market professionals representing the industry’s top investment banks, brokerage firms, exchanges and trading system technology concerns.

About Wall Street Letter’s Institutional Trading Awards

The Wall Street Letter 2014 Institutional Trading Awards recognize excellence among providers to the institutional trading industry. Specifically, this event recognizes top brokerage firms, exchanges and financial technology companies for achievements and innovation over the last year. Wall Street Letter is one of 11 mastheads owned by Pageant Media Ltd and is distributed daily to more than 2,500 subscribers.

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