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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…)

Corporate Debt Issuers in Deal Mode; Mischler Comments
August 2016      Debt Market Commentary   

Quigley’s Corner 08.04.16 : Corporate Debt Issuers Positioning for Deals

 

Investment Grade Corporate Debt New Issue Re-Cap – Dominion Prints $1.3b in Part to Fund Questar Merger

A Word About Utilities Amidst a “Lower-for-Longer” Environment
Duke Energy Announces Meetings for Potential Large Utility Deal

BOE Cuts Rates to Lowest Level in 7 Years

Global Market Recap

IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows – Week ending August 3rd

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

The IG Corporate primary markets continued unabated, surprising all to the upside today as 5 issuers priced 9 tranches between them totaling $4.75b. Today we surpassed the highest syndicate estimate of $45b by 8%.  The WTD IG Corporate only talent is now $48.65b representing 80% of the syndicate estimate for the entire month of August after only 4 business days or $48.65b vs. $61.13b!  There was no SSA issuance today. Dominion Resources Inc. “D” (Baa2/BBB+) announced on Monday, February 1st, that it would 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 was always expected to close by the end of 2016. RBC and Mizuho  provided the financing and acted as financial advisors to Dominion.  They were today’s two joint active book runners.  Today’s $1.3b 3-part issue will fund in part, Dominion’s merger with Questar.

 

A Word About Utilities Amidst a “Lower-for-Longer” Environment

The credit outlook for utility sector remains very stable.  Regulated electrics are growing at a healthy pace by investing in regulated rate base.  Thanks to the low rate environment combined with lower fuel costs and low inflation the second half of 2016 promises to host a continuation of horizontal mergers in the sector, vertical integrations in natural gas and divestitures of non-regulated generation.  Cheap capital translates into a great opportunity for utility infrastructure plays.  We witnessed Dominion for Questar.  Up ahead is Southern Company for Kinder Morgan; Duke for Piedmont Natural Gas; Empire District Electric for Algonquin; Fortis for ITC and NextEra Energy wasted no time replacing broken talks with Hawaii Electric with a purchase of Oncor Delivery.  Investor demand for safe haven, better-rated IG credits remains voracious. The utility sector’s defensive nature insulates it as the perfect home for money to secure the highest return in the safest asset class.

Duke Energy Announces Meetings for Potential Large Utility Deal

Today, Duke Energy (NYSE:DUK) announced it mandated Barclays, Credit Suisse, Mizuho, MUFG Securities and UBS as joint leads to arrange investor calls after which a transaction could soon follow.  As has been written in the “QC” pipeline for a while, on Friday, January 22nd, 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 2015, 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.  We’re in August and it sounds as if there is a new issue on the horizon.

            

BOE Cuts Rates to Lowest Level in 7 Years

 

  • BOE Cuts Benchmark 25 bps to record low 0.25% as result of BREXIT.
  • Will purchase £10b IG-rated Corporate Bonds of companies headquartered in the U.K. and could increase that amount to £100b.
  • Monetary Policy Committee will buy £60b of government bonds over 6 months.
  • BOE’S Carney: “I am not a fan of negative interest rates.”
  • Doesn’t see a scenario where negative rates will be discussed.
  • Says, “ I don’t see the merit in helicopter money.”
  • “All elements of the stimulus package have the scope to be increased.”

 

Global Market Recap

 

  • Super Thursday: BOE broke out the kitchen sink of tools to combat Brexit ramifications.
  • S. Treasuries – Rallied with Gilts. The rally was tempered with Employment tomorrow.
  • 3mth Libor – Set at highest yield (0.78760%) since May 2009.
  • Stocks – U.S. stocks were little changed. Europe & Asia rallied.
  • Economic – Data took a back seat to the BOE. U.S. Employment Report tomorrow.
  • Currencies – The Pound was smashed on the BOE. USD closed mixed vs. the Big 5.
  • Commodities – Back-to-back good days for the CRB & crude oil.
  • CDX IG: -1.68 to 73.27
  • CDX HY: -7.27 to 401.31
  • CDX EM: -3.64 to 255.42

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

-Tony Farren


IG Primary Market Talking Points – Mischler Co-Manages for JPM and UBS

 

  • Caterpillar Financial Services Corp. dropped the 5yr FRN tranche from today’s 5s/10s new issuance having secured ample funding from the 5yr Fixed tranche.
  • Bancomext upsized today’s 10NC5 Fixed-to-Floating Subordinated Preferred Capital Notes new issue to $700mm from $500mm at the launch and at the tightest side of guidance.
  • For the week ended August 3rd, Lipper U.S. Fund Flows reported an inflow of $2.472b into Corporate Investment Grade Funds (2016 YTD net inflow of $23.27b) and a net outflow of $2.464b into High Yield Funds (2016 YTD net inflow of $7.232b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 9 IG Corporate new issues was 20.89 bps.

 

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

 

IG Corporate New Issuance This Week
8/01-8/05
vs. Current
WTD – $48.65b
August 2016 vs. Current
MTD – $48.65b
Low-End Avg. $25.13b 193.59% $60.48b 80.44%
Midpoint Avg. $26.22b 185.55% $61.13b 79.58%
High-End Avg. $27.30b 178.21% $61.78b 78.75%
The Low $15b 324.33% $45b 108.11%
The High $45b 108.00% $75b 64.87%

 
Have a great evening!
Ron

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

Banks Dominate Day’s Debt Issuance; JPM, UBS, NWB, Legg Mason; Mischler Comment
August 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 08.03.16-Bulge Bracket Banks Dominate Day’s Debt Market Issuance.

 

Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

 

Another big day for IG primary issuance as 8 IG Corporate issuers tapped our dollar DCM to price 12 tranches between them totaling $11.50.  SSA assisted with 2 issuers, 2 deals and $1.75b bringing the all-in IG day total to 10 issuers, 14 tranches and $13.25b. WTD we’ve now priced 67% more than this week’s IG Corporate issuance estimates. MTD we have already issued 71% of the total amount projected for August…….after just three days!

             

Global Market Recap

 

  • S. Treasuries – Mixed & little changed. JGB sell off calms. Bunds/Gilts little changed.
  • 3mth Libor – Set at highest yield since May 2009 (0.77760%).
  • Stocks – The Dow snaps its 7 session losing streak.
  • Overseas Stocks – Europe bank stocks rallied. Nikkei & HS hit & . China higher.
  • Economic: US data today was solid (ADP & ISM non-manufacturing)
  • Overseas Economic: China mixed, Japan better & Europe mixed tilted to upside
  • Currencies: USD outperformed 4 of the Big 5. The Euro struggled today
  • Commodities: Good day for the CRB & crude oil but a down day for the metals
  • CDX IG: -1.83 to 75.01
  • CDX HY: -8.35 to 409.04
  • CDX EM: -4.17 to 260.25

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

-Tony Farren

 

IG Primary Market Talking Points – Mischler Co-Manages for JPM and UBS

 

  • Mischler served as a Co-Manager on today’s J.P. Morgan Chase & Co. 5NC4.  The 5NC4 structure gained much attention in today’s marketplace.  Thank you Team JPM Treasury Janeene Balmir and Adam Berg as well as JPM Syndicate’s Bob LoBue, Nick Balzano and Tom Monaghan.  Mischler served as a Co-Manager on today’s UBS Group Funding (Jersey) Ltd. two-part 5yr FXD/FRN. Thank you Team UBS. Many thanks to Bill Coughlin and his Treasury/Funding Team as well as Todd Mahoney, Igor Grinberg and Chelseay Boulos for working with me on securing our underwriting liability today for distribution throughout our middle markets network. It’s always greatly appreciated and makes a big difference in helping us to build the nation’s oldest Service Disabled Veteran broker-dealer in a value-added way. Thanks for your commitment to social responsibility today.
  • Columbia Property Trust Operating Partnership LP increased its 10-year Senior Notes new issue at the launch to $350mm from $250mm and 5bps tighter than the tightest side of guidance.
  • Legg Mason Inc. bumped up its 40NC5 $25 par Junior Subordinated Notes new issue to $500mm from $150mm.
  • NWB Bank, in the SSA space, upsized today’s tap of its 2.375% due 3/24/2026 to $250mm from $100mm. The new total amount outstanding is $1.25b.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 12 IG Corporate new issues was 14.96 bps.

 

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

 

IG Corporate New Issuance This Week
8/01-8/05
vs. Current
WTD – $43.90b
August 2016 vs. Current
MTD – $43.90b
Low-End Avg. $25.13b 174.69% $60.48b 72.59%
Midpoint Avg. $26.22b 167.43% $61.13b 71.81%
High-End Avg. $27.30b 160.81% $61.78b 71.06%
The Low $15b 292.67% $45b 97.56%
The High $45b 97.56% $75b 58.53%

Have a great evening!
Ron

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

A Day To Discover Discover Bank Debt Offering; Mischler Comments
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07-21-16  Discover Bank Debt Offering


Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points

Uncovering Discover Bank’s 10yr Fair Value  

New Issues Priced

Lipper Report/Fund Flows

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Trading Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 


It was a relatively quiet day in the IG primary market place with only 2 issuers pricing 3 tranches between them totaling $2b and with no all-in volume assist from the SSA space. With tomorrow’s being a Friday session, it looks as if we might fall about 12% short of this week’s syndicate midpoint average volume forecast. As of today, we’ve priced $30.40b vs. $34.70b.  This evening, stay tuned for Mischler’s deal-of-the day –  the story of Discover Bank’s new 10-year.

Global Market Recap

 

  • ECB Meeting & Draghi were the featured story today (below).
  • S. Treasuries – Big time comeback for USTs from the morning low prints.
  • 3mth Libor – Set at highest yield (0.71450%) since 5/20/09.
  • Stocks – Down day for the U.S. Europe closed mixed. Asia closed higher.
  • Economic  U.S. had more good data than bad. U.K. retail sales were weaker.
  • Currencies – Yen rallied 1 handle vs. the USD. USD tiny gains vs. the Euro & Pound.
  • Commodities – Poor day for crude oil and an up day for gold & silver.
  • CDX IG: +0.35 to 70.56
  • CDX HY: +2.22 to 389.87
  • CDX EM: -1.30 to 254.36

Swap Spreads: Had a very difficult day for a host of reasons (below)

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

-Tony Farren

 

IG Primary Market Talking Points

 

  • For the week ended July 20th, Lipper U.S. Fund Flows reported an inflow of $894.421m into Corporate Investment Grade Funds (2016 YTD net inflow of $19.323b) and a net inflow of $321.724m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.872b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 3 IG Corporate new issues only was 22.50 bps.

 

Discovering the Uncovering of Discover Bank’s 10yr Fair Value  
Discover Bank is the nation’s third largest credit card brand with approximately 50 million cardholders.  This past Tuesday, July 19th Discover Bank’s parent company, Discover Financial (NYSE: DFS beat Q2 2016 earnings delivering $1.47 EPS or $0.05 more than consensus estimates of $1.42.  Discover’s $2.2b in revenues was $400mm more than $1.8b forecasts. That’s a great start to pricing a new issue for a market defined by ravenous investor appetite.

 

Discover Bank wasted no time capitalizing on its strong earnings by hitting the market this morning for the first time since it’s $1b 3-year Global Notes that priced on August 10th of 2015.  The relatively infrequent issuer rated Baa3/BBB/BBB+ and “stable” on all counts, announced and priced a new $1b 10-year 3(a)(2) Senior Bank Notes new issue due July 27, 2026 through joint leads Bank of America/Merrill Lynch, Citigroup (who served as B&D), Deutsche Bank and Royal Bank of Canada.  Rule 3(a)(2) makes the issue exempt from SEC registration.  Proceeds were earmarked for general corporate purposes.  But if it’s in the “QC” it’s because the issuer gave us a role today and that role was a very nice one – Mischler Financial served as an active 2.00% Co-Manager and so without further ado, let’s get to the deal drill-down.

Initial price thoughts were released in the +215-220 range before guidance tightened to +195a with “area” defined as (+/-5 bps) after which it launched and priced at the tightest side of guidance or T+190. That’s a resounding <27.5> bps of spread compression from IPTs to the launch.

 

The comp for today’s relative value study looked to the outstanding DFS 4.25% due 3/13/2026 that was T+198 bid pre-announcement this morning or G+199. That $400mm deal originally priced on March 10th, 2014.  That pegged fair value on today’s new 10-year that priced at T+190 at negative< 9 bps>! Still another way to approach fair value was to look at the DFS 3.75% due 3/04/2025 (Holdco) that was T+205 (G+214).  One can make a case that the Opco/Holdco differential is worth 15 bps so fair value would again get you to around +199 and again nailing NIC thru this approach as negative <9> bps.  Translation……..”Congratulations to Discover Treasury Funding and the group of joints leads BAML, CITI, DB and RBC!”
Today’s order book finished at $4.4b or 4.4x-times oversubscribed.

At the break, paper was framed in a 188/186 market or 2 bps tighter on the bid.

 

Discover Bank Final Pricing
DFS $1bn 3.45% due 7/27/2016 @ $99..891 to yield 3.463% or T+190
Thank yous as well as Mischler’s five-star salute go out to Team Discover’s Tim Schmidt, who it seems I’ve been working with for all my years in the diversity space, Al Agra, Krsitopher Mclachlan and Kevin Sweeney.  To no one’s surprise, a hats off to Team Citigroup Syndicate’s Peter Aherne, Jim Hennessy who ran the book and Alisha Mingo.  Additionally a kind nod to an all-around good guy at RBC Syndicate – Paul Lynch.  Thanks to each of you for the data exchanges, relative value discussions and Citigroup for working with me on orders once again today.

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

 

IG Corporate New Issuance This Week
7/18-7/22
vs. Current
WTD – $30.40b
July 2016 vs. Current
MTD – $69.50b
Low-End Avg. $33.68b 90.26% $90.09b 77.15%
Midpoint Avg. $34.70b 87.61% $91.17b 76.23%
High-End Avg. $35.73b 85.08% $92.26b 75.33%
The Low $25b 121.60% $60b 115.83%
The High $41b 74.15% $125b 55.60%

 

Have a great evening!
Ron

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

NICs, Bid-to-Covers, Tenors and Sizes (more…)

Debt Capital Markets: The Day For Duke
March 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 03.08.16 A Salute to Women; Voracious Demand For Duke Energy Carolinas


Definition of “Female” FE = Iron + Male = Iron Man! Happy 8th Annual International Women’s Day

Investment Grade Corporate Debt New Issue Re-Cap

Duke Energy Carolinas Lights Up Mischler

IG Primary Market Talking Points – New Issue Concessions (NICs) Go Negative

New Issues Priced

Lipper Report/Fund Flows

Economic Data Reports

Rates Trading Lab

New Issue Pipeline

Investment Grade Credit Spreads (by Industry/Rating)

M&A Pipeline

 

Fact: Women are half of the world’s population, they work two-thirds of the world’s working hours, receiving 10% of the world’s income and they own less than 1% of the world’s property.  Staggering isn’t it?  Today is the 8th annual International Women’s Day.  Let those numbers sink in.  Think about that and the women in your lives and the influences they have on you and the stability they bring to your life. They are rocks of stability, reliability, they are beauty, they are life. Congratulations to all the women out there breaking down barriers by ignoring all limits.  Dick Van Dyke once said, “women will never be as successful as men, because they have no wives to advise them.” An interesting point! Also congratulations to all the firms out there in Corporate America continually moving the needle forward for women’s equality in the work force.

Investment Grade New Issue Re-Cap

It was another primary market bombardment.  Yesterday marked the first day in a long time that average NICs turned negative overall.  Bid-to-cover rates have been rising from 3x to the high 3s all week and we’re seeing more and more of previously shelved announcements hit the tapes in this perfect environment for strong issuance.  Today was led by Berkshire Hathaway’s 7-part $9b offering with proceeds used to refinance a $10b bank loan that was used to finance a portion of BRK’s acquisition of Precision Castparts Corp. and for other purposes.

The final tally on today’s avalanche of IG Corporate issuance was 8 separate issuing entities, 15 tranches and a total of $14.375b.  SSA also had a prolific day adding 5 issuers, 5 tranches and $7.3b to the mix bringing the all-in IG day total to 13 issuers, 20 tranches and a resounding $21.675b.  We are now over 47% of the way to the syndicate midpoint average forecasts for the entire month of March or $54.82b vs. $116.13b.  The MTD IG Corporate plus SSA total is: $76.37b.

 

Duke Energy Carolinas Lights Up Mischler

Now let’s get down and dirty with the story and relative study…………………….

As you can see from the below table, spread compression from IPTs to the launch was dramatic.  Both the 7- and 20-yr tranches tightened 20.5 bps with the two also pricing at the tightest side of guidance.  The preliminary sounders on size was that Duke would definitely be printing two “index eligible” transactions (a minimum $250mm each) at the low end by that they definitely had the flexibility to grow with an intention on equally splitting the two tranches…..and so it was. Today’s 7s/30s each grew to $500mm on very strong demand for perhaps the highest quality utility on the planet.

 

Duke Energy Carolinas LLC Aa2/AA- 2.50% 3/15/2023 500 +105-110 +90a (+/-3) +87 +87 BNPP/CITI/RBC/TD/UBS
Duke Energy Carolinas LLC Aa2/AA- 3.875% 3/15/2046 500 +145-150 +130a (+/-3) +127 +127 BNPP/CITI/RBC/TD/UBS

 

I prefer straight-line comparables if they’re available and with the size of Duke (NYSE:DUK) and their outstanding issuances they were indeed available. It was a simple relative value study that all began with the Duke Carolinas “DUK” 3.75% due 6/01/2045.  These Secured Global Bonds were T+125 bid pre-announcement inferring a small 2 bps NIC on today’s new 30-year that priced at T+127.  By applying the 40 bp adjustment for the standard 7s/30s utility curve gets you to fair value of T+85 versus today’s 7yr final pricing of T+87 also a 2bp NIC.

Demand was voracious for Duke.  The 7yr finished with a $1.8b final order book or 3.6-times oversubscribed while the 30s ended at $1.9b for a 3.8x bid-to-cover rate.

The new 7s went out framed in an 86/84 market round lots per side and 2bps better bid. The 30s were 126/124.

That right there folks is a great story of a very well-priced deal and at the perfect time. So, kudos once again to Team Duke Treasury/Funding.  They sure do know power and energy at Duke, but they equally know numbers and timing.

Thanks again to all the accounts that participated.  We appreciate the expediency with which you were able to do your credit work today and get your orders in. Thanks also to Peter Aherne’s top notch syndicate team with shout outs to Mr. Kevin O’Sullivan and of course the dynamic duo I simply refer to as “Alitza Mingonado!” Otherwise known as Alisha Mingo and Maritza Maldonado. You gals are the best and I wish you and all the fine ladies at Team Citi who help move the needle every day for Diversity & Inclusion a very happy International Women’s Day!   Fight On!

IG Primary Market Talking Points – Some Strong Optics from Today’s Deals.

Discovery Communications LLC (NASDAQ:DISCA) upsized today’s new 10-year Senior Notes to $500mm from $450mm at the launch and at the tightest side of guidance.

The average spread compression from IPTs thru the launch/final pricing of today’s 15 IG Corporate-only new issues and one IG-rated Preferred was 20.67 bps.

 

Syndicate IG Corporate-only Volume Estimates for March

 

IG Corporate New Issuance March 2016 vs. Current
MTD – $54.82b
Low-End Avg. $115.59b 47.43%
Midpoint Avg. $116.13b 47.21%
High-End Avg. $116.67b 46.99%
The Low $100b 54.82%
The High $150b 36.55%

 

And now I’m off to spend the rest of this chaotic day with my two favorite ladies on International Women’s Day…wife and daughter! Enjoy folks!

 

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. (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

 

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