Browsing articles tagged with "service-disabled veteran broker dealer Archives - Mischler Financial Group"
FIGs Lead Day’s DCM Funding; Gulf Power Co “Deal-of-the-Day”- Mischler Comment
May 2017      Debt Market Commentary   

Quigley’s Corner 05.15.17 FIGs Lead DCM Funding; Southern Co’s Gulf Power Building The Future of Energy 

 

Investment Grade Corporate Debt New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

Syndicate IG Corporate-only Volume Estimates This Week and May

Building the Future of Energy – Gulf Power Co. $300mm 3.30% Senior Notes due 5/30/2027

Answering Another Call of Duty: Southern Company’s Commitment to the Military – Pride. Duty. Honor. Discipline.

A Reiteration of Mischler’s 2017 Memorial Day Month Pledge

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending May 10th         

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

12 IG Corporate issuers announced deals today pricing 16 tranches between them totaling $13.50b.  There was no SSA activity in the session. The day’s highest volume deals came from two FIGs namely HSBC Holdings Plc and Wells Fargo that each printed a $3 billion transaction.  Additionally, today’s IG dollar DCM featured a total of four 2-part transactions from ANZ Banking Group Ltd., ANZ Banking Group NY Branch, BPCE and Manufacturers & Traders Trust.  However, the session’s Deal-of-the-Day belongs to Southern Company’s subsidiary Gulf Power Co. that issued a $300mm 3.30% due 5/30/2027.  You know what that means!  If it’s a Deal-of-the-Day, I’m writing about it; and if I’m writing about it, it means Mischler Financial, the nation’s oldest Service Disabled Veteran broker dealer served on the deal as an active 3.00% Co-Manager.

Let’s first run through today’s IG primary market tally and re-caps before we take the deep dive into the Gulf Power deal.

  • The IG Corporate WTD total is now over 45% of this week’s syndicate midpoint average forecast or $13.50b vs. $29.73b.
  • MTD we’ve now priced nearly 70% of the IG Corporate mid-range syndicate projection for May or $86.138b vs. $123.42b.
  • There are now 8 IG Yankee and/or SSA new issues in the IG credit pipeline.
  • The all-in IG Corporate plus SSA MTD total is now $93.538b.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 16 IG Corporate-only new issues was <18.67> bps which includes the Dominion Energy Inc. remarketing.
  • BAML’s IG Master Index was unchanged at +118.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.12.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +162 versus +161.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14.7b on Friday versus $17.9b on Thursday and $13.7b the previous Friday.
  • The 10-DMA stands at $16.7b.

 

Global Market Recap

 

  • S. Treasuries – Small losses in very light volume.
  • Overseas Bonds – JGB’s were mixed. Long end in EU core & semi core struggled.
  • Stocks – Bid heading into close. S&P’s and NASDAQ traded at all-time highs.
  • Overseas Stocks – Asia better, expected small loss for Nikkei. FTSE & DAX reach all-time highs.
  • Economic – Empire manufacturing weaker. NAHB housing stronger. Full calendar tomorrow.
  • Overseas Economic – Japan PPI YoY highest since November, 2014. Weaker data in China.
  • Currencies – Back-to-back down days for the DXY Index.
  • Commodities – CRB, crude oil, gold, copper & silver higher. Down day for wheat.
  • CDX IG: -0.83 to 61.78
  • CDX HY: -2.56 to 324.66
  • CDX EM: -3.40 to 190.85

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

-Tony Farren

 

Syndicate IG Corporate-only Volume Estimates This Week and May

 

IG Corporate New Issuance This Week
5/15-5/19
vs. Current
WTD – $13.50b
May 2017
Forecasts
vs. Current
MTD – $86.138b
Low-End Avg. $28.69b 47.05% $122.27b 70.45%
Midpoint Avg. $29.73b 45.41% $123.42b 69.79%
High-End Avg. $30.77b 43.87% $124.56b 69.15%
The Low $20b 67.50% $100b 86.138%
The High $40b 33.75% $150b 57.43%

 

Answering Another Call of Duty: Southern Company’s Commitment to the Military – Pride. Duty. Honor. Discipline.

Southern Company knows that veterans are the foundation of military service and of the utility Company. After they have served their nation, Southern Company seeks and encourages veterans to turn their military training into an opportunity to serve its 4.5 million customers.

Veterans are a natural fit for Southern Company because the cultures of the military and the utility industry are very similar – both exemplify dedication, commitment to safety, teamwork and excellence in all they do. This is why many veterans who have joined Southern Company are not just participants, but leaders, in the company.

Veterans currently account for 10% of Southern Company’s employees. The company’s military recruitment and development efforts have earned Southern Company a designation as the highest-ranked utility on G.I. Jobs’ Top 100 Military Friend Employers list for six consecutive years. The company has also been recognized as a Top 10 Company for Veterans by DiversityInc., a Most Valuable Employer by CivilianJobs and a Best for Vets Employer by Military Times EDGE.

Additionally, Southern Company is a founding partner of Troops to Energy Jobs program, supports the Joining Forces initiative, participates annually in more than 30 military recruitment events and partners with military transition centers across the country. Today, Southern Company and its subsidiaries including Gulf Power co. are the only electric utilities in the nation to partner with the U.S. Army, U.S. Navy, U.S. Marine Corps and U.S. Air Force to develop innovative energy projects both on and off base.

Navy Veteran Helps Recruit Top Veteran Talent

jamal-jessie southern co

Jamal Jessie

Veteran and Southern Company military recruiter Jamal Jessie says he views the U.S. Military as the best military in the world, so when he transitioned from a 20-year career with the U.S. Navy to civilian life in 2015, it only made sense to work for one of the best companies for veterans.

It was Southern Company’s ranking among GI Jobs Top 100 Military Friendly Employers that led Jamal there.

As Jamal tells it, “As a recruiter for the Navy, my scope of responsibility was vast. The leadership opportunities and the opportunity to build relationships set me up for success not only in the Navy but also now at Southern Company. I connected with and built relationships with people within the Navy and in the community, and that’s similar to what I do now – meeting with people on bases to attract top talent for Southern Company.”

May is National Military Appreciation Month, and citizens nationwide are encouraged to celebrate those who have served our country or are serving our country. Because the military and our industry’s cultures are similar – exemplifying dedication, commitment to safety, teamwork and excellence – we actively recruit military personnel who are transitioning out of service.  In fact, veterans account for 10 percent of our company’s 32,000 employees.

Without knowing it, Jamal had been preparing for his recruiting position for years. He joined the Navy after graduating from high school. Jamal spent his first 10 years in communications and was deployed at-sea four times. He then went on to serve as a full-time recruiter for 10 more years until he retired in 2014.

“Veterans play a huge part in our safety and in our lives, every day,” Jamal says, “and Southern Company gives us the opportunity to do the same thing here.”

When it comes to recruiting, Jamal says, “We are looking for the best of the best.” He partners with our operating companies and business units, developing strategies to recruit talent for specific positions. He travels to military bases where he fosters relationships and talks to military personnel who are transitioning from military to civilian working life to find that talent.

“We speak the same language, we have trust,” he says. “Southern Company values the veteran. We understand the teamwork and the training that veterans bring to our organization. The skills match is a huge advantage for both veterans and Southern Company.”

A Reiteration of Mischler’s 2017 Memorial Day Month Pledge.

Consistent with Mischler Financial Group’s annual initiative to commemorate Memorial Day and honor those who made the ultimate sacrifice while serving in our US military, this year we have dedicated a percentage of the month’s commission revenue to two organizations that are near and dear to our hearts and minds.

As we have done in prior Memorial Day and Veterans Day observances, Mischler is pleased to continue our support of Army Ranger Lead The Way Fund, the non-profit dedicated to raising funds to support disabled U.S. Army Rangers and the families of Rangers who have died, have been injured, or are currently serving in harm’s way.

As part of our May 2017 profit pledge, Mischler is equally proud to support the American Cancer Society via our sponsorship of the ACS 12th Annual Financial Services Cares Gala, which will be held June 22 at the New York Hilton Hotel. This year’s gala, which is expected to raise more than $1 million, will pay tribute to former KPMG Chairman & CEO Eugene O’Kelly, who passed away from cancer in 2005 and whose estate remains an ardent supporter of ACS cancer research grants.

Each of us here at Mischler, whether personally, through family members and/or friends and acquaintances, are all-too-familiar with the cancer’s devastating impact. Our support of the ACS is a testament to the crucial work it performs via research grants and assistance to patients undergoing treatment and their caregivers.

As the month of May pledge kicks off, thank you in advance to our sales/trading desk counterparties across the investment management industry and to the many Fortune 500 treasury teams we work with, for your ongoing support of our mission.

 

Dean A. Chamberlain (SDV)

Chief Executive Officer

Mischler Financial Group, Inc.

Southern Company and Mischler Financial truly is a formidable partnership not only when it comes to our day jobs in placing a new issue but also in our shared ethos of giving back opportunities to our military men and women in uniform – those willing to make the ultimate sacrifice.

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

Have a great evening!
Ron Quigley

  (more…)

YTD USD Investment Grade Issuance=$500bil+; FOMC Talking Points; Mischler Comment
May 2017      Debt Market Commentary   

Quigley’s Corner 05.03.17-YTD USD IG DCM-$500bil+ Issued; FOMC Talking Points: Rates Unchanged

 

Investment Grade New Issue Re-Cap – What FOMC Meeting? YTD IG Corporate Issuance Passes $500b Mark

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

FOMC Statement Key Talking Points – Unanimous Vote to Leave Rates Unchanged

Citigroup, Inc. $250mm (tap) 4.125% Sub Notes due 7/25/2028 Deal Dashboard

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending April 26th         

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Oh my.  I have to admit that even I was surprised by the amount of IG Corporate new issues that priced in today’s FOMC Rate Decision Day session.  This might well have been the busiest (or one of the busiest) FOMC Rate Decision sessions for issuance as far back as I can remember.  The IG dollar DCM featured 8 issuers across 8 tranches (Citigroup, Inc. and Citigroup, N.A. are two separate issuing entities), totaling $6.864b.  KBN tapped a 3-year FRN bringing the all-in IG day totals to 9 issuers, 9 tranches and $7.364b.

50% of today’s IG Corporate deals upsized at the tightest side of guidance with one transaction, for ACWA Power, launching 5 bps tighter than the tightest side of guidance. So, all-in-all a very nice day that speaks volumes about what to expect in our IG dollar DCM in May, apparently motivated by strong corporate earnings.

As a result,

  • Today, we officially passed the $500b mark for YTD IG Corporate issuance. We currently stand at $504.804b.
  • The IG Corporate WTD total is now 97.58% of this week’s syndicate midpoint average forecast or $27.899b vs. $28.58b.
  • MTD we’ve now priced nearly 22.60% of the IG Corporate mid-range syndicate projection for April or $27.899b vs. $123.42b.
  • There are now 5 IG Yankee and/or SSA new issues in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

 

  • Guardian Life Global Funding upsized its 144a/REGS 5-year FA-backed Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
    AvalonBay Communities Inc.
    bumped up its 10-year Senior Notes new issue today to $400mm from $300mm at the launch and at the tightest side of guidance.
  • ACWA Power Management and Investments One Limited increased its 144a/REGS Senior Secured Bond new issue today to $814mm from a minimum of $600mm at the launch and 5bps tighter than the tightest side of guidance.
  • Kommunalbanken or “KBN” upsized today’s tap of its outstanding FRNs due 6/16/2020 to $500mm from $300mm at the launch and at the tightest side of guidance.  The new outstanding amount is $1.8b.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 8 IG Corporate-only new issues was <17.41> bps.
  • BAML’s IG Master Index tightened 1 bp tp +122 vs. +123.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.16.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Tuesday versus $12b on Monday and $19.9b the previous Tuesday.
  • The 10-DMA stands at $16.7b.

 

Global Market Recap

 

  • U.S. Treasuries – Closed down except the 30yr as the Ultra-Long Bonds got a poor review.
  • Overseas Bonds – Bunds & Gilts unchanged to small gains. Peripheral bonds rallied.
  • Stocks – NASDAQ running out of steam?
  • Overseas Stocks – China closed down. Europe had more green than red.
  • Economic – U.S. data was good across the board (ADP, ISM non-manufacturing, etc.)
  • Overseas Economic – Positive data released in Europe.
  • Currencies – USD better vs. the Yen, Euro & Pound. Big gain for the AUD.
  • Commodities – The metals were led lower by copper which was hit very hard.
  • CDX IG: -0.04 to 62.84
  • CDX HY: +1.30 to 324.76
  • CDX EM: +1.52 to 191.76

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

-Tony Farren

 

Syndicate IG Corporate-only Volume Estimates This Week and April

 

IG Corporate New Issuance This Week
5/01-5/05
vs. Current
WTD – $27.889b
May 2017
Forecasts
vs. Current
MTD – $27.889b
Low-End Avg. $27.96b 99.75% $122.27b 22.81%
Midpoint Avg. $28.58b 97.58% $123.42b 22.60%
High-End Avg. $29.21b 95.48% $124.56b 22.39%
The Low $20b 139.45% $100b 27.889%
The High $36b 77.47% $150b 18.59%

 

FOMC Statement Key Talking Points – Unanimous Vote to Leave Rates Unchanged

fed-interest-rate-decision

  • The Fed left rates unchanged and in the 0.75% to 1% target range.
  • Repeats it expects the economy to warrant gradual rate hikes.
  • Says the growth slowdown in Q1 ’17 is likely to be transitory.
  • Fed: “fundamentals underpinning consumption growth stayed solid.”
  • Reiterates that “risks to outlook appear roughly balanced.”
  • Core inflation continued to run somewhat below 2%.
  • 12-month inflation is running close to its 2% goal.
  • The labor market continued to strengthen despite slower growth.
  • The Fed noted that job gains were solid, while household spending rose only modestly.
  • Sighted that business investment firmed.
  • Repeated its maintaining balance-sheet reinvestment strategy.
  • The Fed said today’s FOMC vote was unanimous.

 

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 and Head of Fixed Income Syndicate

 

Citigroup, Inc. $250mm (tap) 4.125% Sub Notes due 7/25/2028 Deal Dashboard

…and the Citigroup Legend Who Wore a Propeller Beanie Cap
Today’s Citigroup tap comes exactly one week after Citigroup’s always formidable 13th Annual Diverse Broker Dealer breakfast, so, there was an extra feel good behind today’s opportunity.

My affiliation covering Citigroup began with the legendary Dr. Charles “Chuck” E. Wainhouse, Citigroup’s former long-time Global Head of Capital Markets and Treasury, when I scheduled a meeting with him when I was at BNP Paribas Syndicate back in 2000 and later again in 2004,  when I first entered diversity & inclusion space. In our meeting, Chuck wore a colorful propeller beanie cap while sitting at the head of a long intimidating conference room table.  If you find that a bit odd, so did I at first, until I quickly learned that as fun a guy as Chuck was, he knew how to take the edge off things, but first and foremost he was clearly a most formidable and brilliant mind.  There are a lot of takeaways there folks.  He was one of our industry legends for sure.

Years ago, as I familiarized myself with the D&I broker dealer space working toward a value-added proposition, I was simultaneously disappointed by limited commitments across-the-sell-side to build respective D&I platforms meaningfully and sustainably……words I often use here in the “QC.” It seemed many on Wall Street focused too much on merely a “check-the-box” mandate in exchange for a “check-in-the-mail.”  Those who advanced the proposition did so with an overwhelming lack of delivery and execution across myriad promises of a value-added proposition. But I persevered when given the opportunity, and I chipped away at delivering meaningful distribution, daily capital markets coverage (the “QC” in its various iterations over the years) conferences, panels, etcetera.  Then one day that experience all culminated when the stars aligned and I found Mischler and Mischler found me. An intensive four-month vetting process ensued.  I concluded that the executive leadership here at Team Mischler was aggressively committed to same ethos I was working to promote and deliver;  a relentlessly consistent value-added proposition each and every day.  That IS the way it IS here and it’s the only way to do it right.

For each rung that I climbed on the diversity broker dealer ladder, Chuck Wainhouse was always there to welcome me and the new team I was aligned with.  He’d say, “Quigley, you’re like your brother….. You guys never give up and you’re always stubborn about doing it right.  Good for you. I respect that. We need more people like you doing it right! It’s a great mandate!”  He placed me on speaker phone on one occasion and asked his Admin to “bring over my appointment book……. I’m scheduling Quigley to come in and see me with his new team. This guy does a great job!” The takeaway is simple – I have fond memories in my dealings with Citigroup over the years.  So started my single longest relationship in the Debt Capital Markets – Citigroup is a keystone to our platform and cornerstone to any serious and successful D&I broker dealer.

So, admittedly this is a bit of a reminiscence here today folks given the quick relative value study on today’s $250mm tap but I thought perhaps a story you might enjoy.

Ending today’s piece where it began, it’s great to know that every year the family that is known as Team Citi makes themselves available for a highly meaningful Annual Diverse Broker Dealer Breakfast, followed by a formidable fixed income, equity and municipal presentation with Q&A followed by great social time with some of the best talent in our business.  All for a wonderful cause – encouraging and rewarding a value-added all-inclusive proposition with the best firms in the business.

Congrats to everyone at team Citi Treasury/Funding, Origination and Syndicate.
Have a look at the Deal Dashboard:

 

CITI (tap) IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
4.125% ‘28 +low 190s
(+192.50a)
+186 the # +186 +186 <6.5> bps 0/flat 184/182 <2>

 

Investors showed up in a big way on FOMC Rate Decision day contributing to build a highly impressive $1.1 billion order book making today’s $250mm tap 4.4-times oversubscribed. It is not often one sees a big FIG bid-to-cover rate beginning with a “4” handle.  Well done!

 

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

 

CITI (tap) Size Final Book
Size
Final
Bid-to-Cover
4.125% ‘28 $250mm $1,100mm 4.4x

 

Final Pricing – Citigroup, Inc.(tap) 4.125% Sub Notes due 7/25/2028
C $250mm 4.125% Sub. Notes due 7/25/2028 @ $99.559 to yield 4.174% or T+186
New Total Deal Size: $1.75b

(more…)

Janet Yellen Valentine’s Day Message; Healthcare M&A Break-Ups
February 2017      Debt Market Commentary   

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

 

Investment Grade New Issue Re-Cap

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

IG Primary & Secondary Market Talking Points

Global Market Recap

Key Talking Points of Fed Testimony

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

Next Up – Greece, Grexit, France & Frexit

Tony’s Take on Today’s Fed Testimony

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

The Boeing Company $300mm 30-year Deal Dashboard

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

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

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

 

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


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

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

IG Primary & Secondary Market Talking Points

 

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

 

Global Market Recap

 

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

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

-Tony Farren


Key Talking Points of Fed Testimony

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

Here are the key takeaways:

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

 

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


Three Rates Hikes in 2017? .HIGHLY Improbable

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

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

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

Next Up – GreeceA Global Macro View

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

 

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

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

 

Tony’s Take on Today’s Fed Testimony

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

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

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

 

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

 

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

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

 

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

 

Have a great evening!

Ron Quigley

 

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

 

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

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

 

New Issues Priced

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

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

 

IG          

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

 

SSA

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

 

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

 

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

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

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

 

Lipper Report/Fund Flows – Week ending February 8th    

     

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

IG Credit Spreads by Rating (more…)

IG Corporate Spreads Widen as Clinton-Trump Spread Tightens
November 2016      Debt Market Commentary   

Quigley’s Corner 11.03.16 : IG Corporate Spreads Widen as Presidential Election Spread Narrows

 

Investment Grade New Issue Re-Cap  : Gaming Spreads as Presidential Polls Yield Uncertainty

Global Market Recap

BOE Rate Decision Talking Points

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 26th  

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

With only five days detached from what could be the single most pivotal U.S. Presidential election in our nation’s history, definitely the most contentious, the slow pace of our IG DCM reflects just how critical this election is to the world.  4 IG Corporate issuers priced 5 tranches between them totaling only $1.85b.  The IG Corporate WTD total is now only 42% of this week’s syndicate midpoint average forecast or $10.791b vs. $25.13b.

 

Global Market Recap

 

  • S. Treasuries – USTs & European bonds closed mixed & steeper. JGB’s were closed.
  • Stocks – S&P & NASDAQ posted their 8th losing session in a row.
  • Overseas Stocks – Europe & Asia closed mixed.
  • Economic – Today’s U.S. data summed up the economic recovery: Some good & some bad.
  • Currencies – 3rd losing session in a row for DXY Index. Big rally for the Pound.
  • Commodities – How low can crude oil go? Gold gave back some of its recent gains.
  • CDX IG: -0.28 to 79.69
  • CDX HY: -0.51 to 431.75
  • CDX EM: -2.06 to 251.58

CDX spreads mover wider after 3pm

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

-Tony Farren

 

BOE Rate Decision Talking Points

 

  • BOE keeps benchmark interest rate at 0.25%; vote 9-0.
  • Keeps gilt-purchase program at £435 bn; vote 9-0.
  • Keeps corporate-bond plan at £10 bn; vote 9-0.
  • MPC drops signal that another rate cut likely this year.
  • Policy can respond “in either direction” to outlook change.
  • Persistent uncertainty on EU deal to weigh on U.K. Economy.
  • Says MPC has limited tolerance for above-target inflation.
  • Sees inflation breaching 2% target in Q2 2017.
  • Sees inflation staying above 2% to end of forecast period.
  • Raises 2017 CPI forecast to 2.7% vs. 2%; 2018 to 2.7% vs. 2.4%.
  • Says medium-term slowdown due to CPI squeeze on consumers.
  • Sees 4Q GDP at 0.4%, raises 2016 forecast to 2.2%.
  • Raises 2017 GDP to 1.4% vs. 0.8%; cuts 2018 to 1.5% vs. 1.8%.
  • Says near-term outlook stronger, medium-term weaker.
  • GBP impact on CPI temporary, policy offset may have costs.
  • GBP impact on CPI “adversely affected” MPC trade-off.

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate-only new issues that displayed price evolution was 22.20 bps.
  • BAML’s IG Master Index widened 1 bp to +140 vs. +139.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bps to +135 from +134.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research widened 2 bps to +185 vs. +183.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.5b on Wednesday versus $19.8b Tuesday and $18.9b the previous Wednesday.
  • The 10-DMA stands at $16.9b.

 

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

 

IG Corporate New Issuance This Week
10/31-11/04
vs. Current
WTD – $10.791b
November 2016 vs. Current
MTD – $6.466b
Low-End Avg. $24.26b 44.48% $90.70b 7.13%
Midpoint Avg. $25.13b 42.94% $92.11b 7.02%
High-End Avg. $26.00b 41.50% $93.52b 6.91%
The Low $15b 71.94% $71b 9.11%
The High $35b 30.83% $110b 5.88%

 

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

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

 

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

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/31
TUES.
11/01
WED.
11/02
AVERAGES
WEEK 10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
New Issue Concessions 0.50 bps <2.29> bps 3 bps <0.51> bps 3.31 bps 1.87 bps 4.36 bps
Oversubscription Rates 2.99x 2.90x 2.73x 2.61x 3.05x 3.28x 4.20x
Tenors 8.39 yrs 11.93 yrs 11.30 yrs 7.77 yrs 9.16 yrs 11.51 yrs 12.16 yrs
Tranche Sizes $721mm $379mm $393mm $818mm $1,137mm $640mm $523mm
Avg. Spd. Compression
IPTs to Launch
<14.21> bps <17.71> bps <22.50> bps <17.42> bps      

 

New Issues Priced

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

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

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Johns Hopkins University Aa3/AA- 3.837% 5/15/2046 500 +135a N/A +123 +123 JEFF/JPM
Principal Finc’l. Group Inc. Baa1/BBB+ 3.10% 11/15/2026 350 +160a +130-135 +130 +130 CITI/CS/HSBC
Principal Finc’l. Group Inc. Baa1/BBB+ 4.30% 11/15/2046 300 +200a +170-175 +170 +170 CITI/CS/HSBC
PSE&G Baa2/BBB 1.60% 11/15/2019 400 +85-90 +70a (+/-2) +68 +68 BARC/JPM/RBC
PSE&G Baa2/BBB 2.00% 11/15/2021 300 +95-100 +80a (+/-2) +78 +78 BARC/JPM/RBC

 

Indexes and New Issue Volume

Please note that Index levels are as of 4:45pm ET.

Index Open Current Change  
LUACOAS 1.35 1.35 0  
IG27 79.977 80.702 0.725
HV27 178.86 179.72 0.86
VIX 19.32 22.08 2.76  
S&P 2,097 2,088 <9>
DOW 17,959 17,930 <29>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $1.85 bn DAY: $1.85 bn
WTD: $10.791 bn WTD: $10.791 bn
MTD: $6.466 bn MTD: $6.466 bn
YTD: $1,175.247 bn YTD: $1,505.131 bn

 

Lipper Report/Fund Flows – Week ending October 26th  

     

  • For the week ended October 26th, Lipper U.S. Fund Flows reported an inflow of $1.701b into Corporate Investment Grade Funds (2016 YTD net inflow of $42.787b) and a net outflow of $48.26m from High Yield Funds (2016 YTD net inflow of $11.070b).
  • Over the same period, Lipper reported a net inflow of $290.611m into Loan Participation Funds (2016 YTD net outflow of $1.665b).
  • Emerging Market debt funds reported a net inflow of $390.9m (2016 YTD inflow of $7.723b).

 

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 31.75 bps wider versus their post-Crisis lows!

 

ASSET CLASS 11/02 11/01 10/31 10/28 10/27 10/26 10/25 10/24 10/21 10/20 1-Day Change 10-Day Trend PC
low
IG Avg. 140 139 138 137 136 136 135 135 135 135 +1 +5 106
“AAA” 83 82 82 80 80 80 78 78 77 76 +1 +7 50
“AA” 87 86 86 85 85 84 83 83 83 83 +1 +4 63
“A” 112 111 111 110 109 109 108 108 108 108 +1 +4 81
“BBB” 181 180 178 176 175 176 175 174 175 174 +1 +7 142
IG vs. HY 375 366 353 339 333 330 325 325 327 327 +9 +48 228

 

IG Credit Spreads by Industry

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

Goldman Sachs Raises the D&I Barbell w 1bil Debt Issuance
October 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 10.25.16- Goldman Sachs Raises the D&I Barbell

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard

Goldman Sachs Diversity Dealer Game Changer

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller
New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

6 IG Corporate issuers priced 7 tranches between them totaling $4.90b bringing the WTD total to $14.75b or 60% of this week’s syndicate midpoint average estimate calling for $25.48b.  But today was all about one deal –  a TLAC deal for The Goldman Sachs Group, Inc.  The deal had much more to do about breaking and shattering new ground for diversity and inclusion.  And you know what?  THAT is the story I’m telling tonight.  Let’s check our various recaps first and then continue scrolling down to another great read from the House of Gold!

Global Market Recap

 

  • S. Treasuries – USTs closed mixed & little changed with a flatter curve.
  • Overseas Bonds – Core Europe were little changed & JGB’s had small gains.
  • 3mth Libor – Set at the highest yield since May 2009 (0.88567%).
  • Stocks – U.S. red at 3:30pm. Europe closed red except the FTSE. Asia closed higher.
  • Economic – The U.S. data was solid except for consumer confidence (-4.9 points).
  • Overseas Economic – Strong IFO data in Germany but the data in France was weaker.
  • Currencies – USD mixed vs. the Big 5. DXY Index reached highs since early February.
  • Commodities – Good day for gold, copper & silver but not for crude oil.
  • CDX IG: +0.75 to 74.52
  • CDX HY: +2.97 to 400.24
  • CDX EM: -1.13 to 231.09

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 15.79 bps.
  • BAML’s IG Master Index was unchanged at +135.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +_130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +181.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $14b on Monday versus $12b Friday and $13.9b the previous Monday.
  • The 10-DMA stands at $15.3b.

 

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

 

IG Corporate New Issuance This Week
10/24-10/28
vs. Current
WTD – $14.75b
October 2016 vs. Current
MTD – $83.345b
Low-End Avg. $24.61b 59.93% $87.83b 94.89%
Midpoint Avg. $25.48b 57.89% $88.59b 94.08%
High-End Avg. $26.35b 55.98% $89.35b 93.28%
The Low $15b 98.33% $75b 111.13%
The High $35b 42.14% $125b 66.68%

 

The Goldman Sachs Group, Inc. $1b 11NC10 FRN Deal Dashboard

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
11NC10 FRNs 3mL+180a 3mL+175 # 3mL+175 3mL+175 <5> +5 3mL+176/174 +1

Here’s a look at the relative value analysis to derive NIC on today’s GS 11NC10 FRNs.

  • The outstanding GS 10yr was G+144 pre-announcement this morning.
  • Add 5 bps for the 10s/11s curve = G+149
  • Add in 16 bps for 10yr mid swaps = G+165
  • Interpolating 10yr m/s to 11yr m/s = 5 bps or G+170 to get an 11yr bullet equivalent.
  • NIC = 5 bps.

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

 

GS  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
11NC10 FRNs $1b $2.7b 2.7x

 

Goldman Sachs Final Pricing
GS $1b 11NC10 FRNs due 10/28/2026 @ $100.00 or 3mL+175

goldman sachs-diversity-D&I

Goldman Sachs Diversity Dealer Game Changer: It’s All About Capability & Distribution
What Goldman Sachs did today was something they tried about 18 months ago.  They were experimenting then and carried thru today with the single most formidable ratcheting up of meaningful diversity and inclusion initiatives that I have ever seen before in this space.  What they did, and as I wrote in this morning’s very early deal announcement at 7:47 am ET, was to encourage strong participation among today’s 12 diversity co-managers on their $1bil 11NC10 FRNs.  It was Goldman’s most inclusive transaction.  Everyone started from the same playing field upon today’s announcement. The built-in ‘incentive’ was where the pedal meets the metal so to speak by “rewarding unique orders in addition to each firm’s underwriting liability.” In Mischler’s case, that was 0.5%.  It was all completely about distribution. What that did was send a signal to diversity firms to ratchet up their game and prove their capabilities by delivering on each of their respective promises to provide meaningful incremental/tertiary tier II and III HIGH QUALITY distribution.  These are the true value add elements that separate the wheat from the chaff.

Let me explain the above: Irrespective of industry, and notwithstanding cultural and/or corporate guidelines designed to embrace and advance diversity and inclusion (D&I) initiatives with regard to internal hiring, strategic engagements and/or outsourcing, the fact is Goldman “gets the joke.” Based on my own lengthy tenure on Wall Street, it is clear to me, if not most that GS’s goal is not to simply “check the box” and  arbitrarily select from the myriad of “minority-owned brokerdealers” when they are the Issuer or the lead bookrunner of a particular underwriting. For those who didn’t get the memo, Goldman is a globally-recognized thought-leader i.e. best practices, and when it comes to D&I, they don’t simply ‘check the box’; their internal mandate is to enlist only truly capable firms, not merely those whose owners fall into one of the various minority classifications (e.g. Woman-owned aka WMBEs, African American-owned, Hispanic American owned, Service-Disabled Veteran owned, etc).

At Mischler, we agree with the GS philosophy wholeheartedly. It is imperative to embrace diversity, but the embrace should be driven by capability and excellence, not merely whether the firm is owned by a ‘certified minority’ . It is an approach that Mischler embraces when selecting the Veteran-centric philanthropic organizations that we support year round and during the months of May and November, when we pledge a portion of the entire month profits to honor Memorial Day and Veterans Day. NO enterprise, whether it be a Fortune Corporation/Issuer, a Public Plan Sponsor, a global investment bank, or an Investment Manager that has D&I goals and/or mandates should be ‘checking the box’ without first checking the actual capabilities of the respective service provider!

In the case of today’s $1bil placement, GS remained focused on reviewing their myriad diversity order books and to only select co-manager firms according to an internal and granular set of criteria.  Among other things, Goldman would have the right to scrutinize accounts and reflect their thoughts through their final allocations to each firm.

With our underwriting liability of 0.5% applied to today’s deal size of $1b that equates to $5mm allocation. Assuming we secured our full 5mm underwriting liability (given our typical high quality order books), it would be a tall order to allocate each of several dozen institutional accounts with a meaningful amount of paper.  The prospective allocations would simply not prove meaningful enough to those fund managers. But Goldman wanted to capture new, quality middle markets accounts that include a range of investor profiles, as well as geographically diverse placement opportunities across the globe. Goldman included a good firm today when they called Mischler Financial, the nation’s oldest Service Disabled Veteran broker dealer. We are grateful for the bulge bracket firms who look for the distribution value-add.  That said, one particular firm (shall I say notorious shop?) recently asked us to build a book, encouraged our orders and claimed they’d work together on securing us the best possible allocation, only to give us an otherwise deminimis allocation of bonds once the books were closed.

Before readers infer a sense of sour grapes on the part of this writer, that is not the case.  We’re big boys and girls here and we’ve been to more rodeos than many of our peers insofar as the new issue allocation process. But, as I shared that story with several bulge bracket firms during the past several days, the senior syndicate team members I spoke with genuinely found it “deplorable” that any desk would put a prospective co-manager or selling group member through the exercise of building a book of firm IOIs, only to leave that firm and their accounts with less than crumbs for the effort. In fact, one syndicate head said, “If we know allocations will be very difficult we will always tell you there’s no distribution this go ‘round, but we would NEVER be so egregious to encourage it and then disrespect you like that. It’s plain bad business that hurts what you guys are trying to do and you work so hard at doing it right!”  Indeed! And that story got around folks, but then there is Goldman Sachs–a firm that has historically proven to have honor and integrity whenever interacting with their underwriting group partners.

Conclusion, Goldman did something bold and daring today for diversity and inclusion and for their transaction.  It IS a game changer that incentivizes on a much grander scale.  The message sent is clear – Goldman will partner with you, but you need to work hard at it; you need to deliver and execute consistently and you need to show us quality accounts, solid order books and be able to place the paper when we give it to you.

Who and where are the Mischler investor accounts that participated in today’s GS transaction?  They represented a total of 13 different investor profile types. They exist throughout the United States. They are in the United Kingdom and throughout Europe. They are in Asia, they are in the Caribbean and LATAM.  There were over 3 dozen MFG clients on today’s GS order book.  They are true quality accounts; good, solid, reliable investors who are often crowded out in our new world order by global money managers who pin down most of today’s new issues.  These middle market investors yield too. They want to buy the best, highest-rated IG credits.  They often add to positions in the secondary market.

And, they all showed up today.  I personally thank each and every one of them.  They get the “QC” and they read it.  They understand all the hard labor we expend in this space, and they understand we are led by an executive team that is honorable and financially committed to stick with it for the long haul.  We are called Mischler Financial Group. We’re about a proudly earned certification; we’re about the strongest distribution in the business; we’re about very strong capital, a fantastic operations team that is second to none, and we’re about stellar relationships across the DCM and Syndicate ecosystem. That’s what it takes in today’s competitive landscape and we greatly appreciate the wonderful partnership we share with Goldman Sachs. We’re also grateful for Goldman’s revolutionary transaction today; one that was focused on best-in-class financial industry partners who can help extend the GS brand with integrity and reliability!

Words Count, Most of All These Two Words: Thank You.

Before this “guy-in-the-corner” walks out of his bedroom each morning, I say “thank you”.  It’s important folks.  Sometimes the only prayer we ever have in life is “thank you” and it will be enough.  You know that I mean that.  It’s time for roll call again and it gives me great pleasure to shout out Team Goldman Sachs not only for being there for our firm today, but for Diversity & Inclusion in general.  Thank you to Team GS not for merely moving the needle forward today for inclusive initiatives, but for bulldozing it ahead with a new powerful distribution incentive.  Your trajectory in finding new ways to lend meaning to the mandate never surprises, rather it overwhelms because you are doing great things the right way.  Our firm, and others with proven capabilities grow as a result and all the accounts that participated today in yet another major bank’s TLAC issuance will come to us to execute across myriad other product lines.  So, from the desk of Chairman and CEO Lloyd Blankfein to Jonny Fine; from Tony Shan to Matt Jackson; from Salina Lee and Elizabeth Plunkett to Jason Ghilarducci, you are all part of one team that came together again on deal day to raise the bar for D&I while fortifying your own self-funding with new global investors that cover a diversity of profiles and regions.

Simply said, “Thank you all!”

An Open Letter and Offer to Mr. Scott Stringer – New York City Comptroller

Mr. Scott Stringer seems like a nice enough fellow. His resume includes being the 44th and current New York City Comptroller and a New York Democratic politician who previously served as the 26th Borough President of Manhattan.  Regarding Mr. Stringer’s recent and LOUD October 16th press request for The Goldman Sachs Group Inc. (among 14 other major companies) to disclose data on the diversity of their suppliers and to increase spending with firms owned by minorities and women and veterans.  The fact is, there is currently no mandate on the part of NYC Comptroller to include SDV-owned broker-dealers, although select managers do informally include such firms. I invite Mr. Stringer and/or his designates to read the “QC.” They’ll find what they’re looking for, which is nothing but a best-in-class procurement initiative in the IG dollar DCM; no, make that Global Debt Capital Markets.

Contrary to the less-than-subliminal context of the above noted press release, Goldman does understand and fully embraces the notion that supplier diversity is the next frontier for companies seeking to manage risk and create sustainable shareowner value. In fact, Goldman has ‘gotten it’ for many years. Starting from inside the office of Chairman and CEO Lloyd Blankfein right on down to the DNA of his top lieutenants like Jonathan “Jonny” Fine, who heads syndicate at the House of Gold, Goldman knows that a broader pool of diverse financial suppliers provides tangible benefits to corporations in terms of price and quality.  In today’s case, their very own company!  As Mr. Stringer said, and I quote, “The Company talks the talk but absent disclosure, it’s impossible to measure the impact of their efforts.”

Mr. Stinger, I’m the guy-in the corner and I’m here to RESPECTFULLY suggest to you that Goldman has not only moved the needle forward for all of D&I in the financial services industry, they are at the cutting edge. Contrary to what you implied in the press statement, and despite the ubiquitous trend of bashing big banks in general, I’d humbly argue that for GS, it’s not all about the money, rather it’s about incentivizing us (minority firms) to grow so that we’re around in the future.  Goldman has created such a meaningful diversity mandate that it has literally helped my firm, Mischler Financial Group, Inc. to become one of the best in the country in the fixed income markets. We are a sustainable proposition. GS has raised the bar in a healthy spirit of competition in the entire diversity space across our industry in order to bring out the best in all of us and our respective platforms.

As opposed to ‘calling out’ GS and challenging their D&I process, we respectfully encourage the NYC Comptroller’s office to take a page from the GS playbook vis a vis the process by which NYC’s pension funds determine how and who they include within their own “minority broker” approvals and respective allocation of order schemes. The NYC Comptroller’s Office does not [yet] recognize Service-Disabled veteran brokerdealers; but does recognize other minority classifications within this industry. At such time as you expand the minority classifications to include SDV-owned/operated BDs,  you’ll discover that Mischler was one of the very first firms to be certified by State of New York in connection with the 2014 NYS legislation that established mandates for NYS agencies to procure from Service-Disabled Veteran owned enterprises. While the NYC Comptroller office has not yet embraced State of New York’s SDV legislation, we are hopeful that you will, and when you do, it will likely prove additive in many ways.

Mr. Stringer, if you’d like more perspective and/or insight about this topic, I’m happy to have a dinner with you. We’ll go “Dutch treat.”   I promise you it’ll be a fun and informative meeting, and I’ll happily share with you the history of outreaches made to your office specific to this subject that have seemingly fallen through the cracks. You’ll have one less thing to check off your “to do” list! Hopefully, our firm will not be penalized for creating ‘greater transparency’ via this “op-ed.”  My contact info is at the bottom of the page.

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

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

 

NICs, Bid-to-Covers, Tenors and Sizes

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/24
AVERAGES
WEEK 10/17
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
New Issue Concessions 2.67 bps 3.31 bps 1.87 bps 4.36 bps 2.71 bps
Oversubscription Rates 2.52x 3.05x 3.28x 4.20x 3.52x
Tenors 6.75 yrs 9.16 yrs 11.51 yrs 12.16 yrs 10.51 yrs
Tranche Sizes $985mm $1,137mm $640mm $523mm $646mm

 

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
Comm. Bank of Australia Aa2/AA- FRN 11/07/2019 500 3mL+equiv 3mL+equiv 3mL+64 3mL+64 CBA/HSBC/JPM
Comm. Bank of Australia Aa2/AA- 1.75% 11/07/2019 1,000 +90-95 +80 the # +80 +80 CBA/HSBC/JPM
Goldman Sachs Group, Inc. A3/A FRN 11NC10 1,000 3mL+180a 3mL+175 the # 3mL+175 3mL+175 GS-sole
Lennox International Inc. Baa3/BBB 3.00% 11/15/2023 350 +180a +155a (+/-5) +145 +145 JPM/WFS
M&T Bank Corp. Baa2/BBB- 5.125% 11/01/2026 500 5.25%a 5.125% the # 5.125% 3mL+352 CS/JPM/RBC/UBS
National Rural Utilities Coop Fin. Corp. A2/A 1.50% 11/01/2019 300 +65-70 +55a (+/-5) +50 +50 JPM/MIZ/PNC/STRH
Orange SA Baa1/BBB+ 1.625% 11/03/2019 1,250 +80-85 +70a (+/-3) +67 +67 BAML/JPM/MS/MUFG

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.30 1.30 0
IG27 73.767 74.537 0.77
HV27 161.385 161.635 0.25
VIX 13.02 13.46 0.44
S&P 2,151 2,143 <8>
DOW 18,223 18,169 <54>
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $4.90 bn DAY: $4.90 bn
WTD: $14.75 bn WTD: $14.75 bn
MTD: $83.345 bn MTD: $126.695 bn
YTD: $1,158.081 bn YTD: $1,481.915 bn

 

Lipper Report/Fund Flows – Week ending October 19th  

     

  • For the week ended October 19th, Lipper U.S. Fund Flows reported an inflow of $2.431b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.086b) and a net outflow of $160m from High Yield Funds (2016 YTD net inflow of $11.119b).
  • Over the same period, Lipper reported a net inflow of $514.8m into Loan Participation Funds (2016 YTD net outflow of $1.956b).
  • Emerging Market debt funds reported a net inflow of $621.7m (2016 YTD inflow of $7.333b).

 

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 26.75 bps wider versus their post-Crisis lows!

 

ASSET CLASS 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
low
IG Avg. 135 135 135 135 136 137 136 137 137 137 0 <2> 106
“AAA” 78 77 76 76 76 78 78 79 79 79 +1 <1> 50
“AA” 83 83 83 82 83 84 84 84 84 84 0 <1> 63
“A” 108 108 108 108 109 109 109 110 110 110 0 <2> 81
“BBB” 174 175 174 175 176 176 176 177 177 177 <1> <3> 142
IG vs. HY 325 327 327 331 336 339 336 345 338 338 <2> <13> 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 32.21 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 10/24 10/21 10/20 10/19 10/18 10/17 10/14 10/13 10/12 10/11 1-Day Change 10-Day Trend PC
low
Automotive 117 117 117 117 117 118 118 119 119 119 0 <2> 67
Banking 127 127 128 128 129 130 129 130 129 130 0 <3> 98
Basic Industry 177 179 179 180 180 180 179 180 179 180 <2> <3> 143
Cap Goods 101 101 101 101 101 102 102 102 102 102 0 <1> 84
Cons. Prod. 105 105 105 104 105 106 106 106 106 107 0 <2> 85
Energy 174 175 175 177 179 179 178 180 180 181 <1> <7> 133
Financials 160 160 161 161 162 163 163 163 163 163 0 <3> 97
Healthcare 114 114 114 114 114 114 114 114 115 116 0 <2> 83
Industrials 136 136 135 136 136 137 137 137 137 138 0 <2> 109
Insurance 154 155 155 155 156 155 155 156 156 156 <1> <2> 120
Leisure 136 135 136 136 137 137 137 137 138 138 +1 <2> 115
Media 157 157 155 155 155 157 157 158 158 159 0 <2> 113
Real Estate 147 147 147 148 148 149 149 148 149 149 0 <2> 112
Retail 115 114 114 114 114 115 115 115 115 115 +1 0 92
Services 128 128 128 128 129 129 129 130 130 130 0 <2> 120
Technology 112 112 112 111 112 113 113 114 114 115 0 <3> 76
Telecom 162 161 156 155 156 157 158 158 158 158 +1 +4 122
Transportation 136 136 137 137 137 137 137 138 138 137 0 <1> 109
Utility 136 137 137 138 138 138 139 139 139 139 <1> <3> 104

 

New Issue Pipeline

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

(more…)

Draghi Talk; Mischler Debt Market Comment via Quigley’s Corner
October 2016      Debt Market Commentary   

Quigley’s Corner 10.20.16- Draghi Talk; The BIGGEST Oct in IG Bond History

 

Investment Grade New Issue Re-Cap 

Global Market Recap

La Dolce Vita – Draghi Talks About “The Good Life” in the EU (?!)

IG Primary & Secondary Market Talking Points

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

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 19th  

Investment Grade Corporate Debt Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

Believe it or not, we very quietly slid into 9th place among the top 10 highest all-in IG issuance weeks.  All-in IG issuance combines both IG Corporates and SSA deals.  Generally speaking,  SSA weekly issuance typically accounts for about 20%-25% of all-in weekly volume, give or take.  This week, however, thanks to The Kingdom of Saudi Arabia’s $17.5b 3-part inaugural deal, EIB’s $4.5b 3yr and today’s $4.25b IBRD two-part 3s and 10s, SSA issuance has thus far eclipsed IG Corporates 50.36% vs. 49.64%.

On the day, 3 IG Corporates priced 3 deals totaling $1.4b bringing the WTD total to $28.34b vs. $23.17b or 22% above this week’s syndicate midpoint average estimate. SSA added IBRD $4.25b two-part 3s & 10s bringing the all-in IG day total to 4 issuers, 5 tranches and $5.65b.  The all-in MTD total is now $108.145b.  This month is on pace to finish as the most prolific October in IG history.

 

Global Market Recap

 

  • U.S. Treasuries – USTs closed mixed, little changed & flatter.
  • Overseas Bonds – Long end Bunds had a strong session. JGB’s were little changed.
  • 3mth Libor – Set at the highest yield since May 2009 (0.88178%).
  • Stocks – U.S. small losses (3:15pm) Europe rallied after Draghi. Nikkei well bid.
  • Economic – U.S. data fine. Germany PPI remained negative. U.K. retail sales weaker.
  • Currencies – Strong day for the USD outperforming all of the Big 5.
  • Commodities – Crude hit hard after rallying to a 15-month high yesterday.
  • CDX IG: +0.15 to 73.87
  • CDX HY: +0.66 to 398.69
  • CDX EM: -2.93 to 234.07

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

-Tony Farren

 

La Dolce Vita – Draghi Talks About “The Good Life” in the EU…..N-O-T!  

ECB Head Mario Draghi announced that the ECB will not stop QE without first tapering it fortifying the opinion that it will extend well beyond March 2017. Draghi said, “an abrupt ending to bond purchases is unlikely” and “it is not present in anybody’s mind.”

Here are all the pertinent talking points from today’s short news conference with ECB President Mario Draghi:

  • The ECB left its benchmark rates unchanged as expected.
  • ECB’s Main Refinancing Rate was left unchanged at 0.0% as expected.
  • The ECB’s Deposit Facility Rate persisted at -.40% ……as expected.
  • ECB’s Marginal Lending Facility Rate continued at 0.25% also as expected.
  • ECB’s Asset Purchase Target also remained unchanged at €80 bln per month.
  • Draghi sees rates at present or lower level for extended period.
  • Sees rates at present, lower level well past QE horizon.
  • Says QE will run through March 2017 or beyond if needed.
  • QE will run until inflation path is consistent with goal.
  • ECB to preserve stimulus needed to raise inflation.
  • ECB policy ensures very favorable conditions.
  • ECB ready to act using all instruments within mandate.
  • December assessment will benefit from new forecasts.
  • Council will review committee work on QE in December.
  • Baseline remains subject to downside risks.
  • Sees moderate economic growth at steady pace.
  • No signs of convincing upward trend in core inflation.
  • Sees gradual rise in inflation.
  • Inflation rates rising further in 2017, 2018.
  • Economy resilient to global, political uncertainty.
  • Domestic demand supported by policy pass-through.
  • Investment supported by favorable financing conditions.
  • Low oil prices, job gains provide support for consumers.
  • Sluggish pace of reforms also a risk.
  • Loan dynamics follow path of gradual recovery.
  • ECB measures significantly helping credit.

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 3 IG Corporate-only new issues was 21.83 bps.
  • BAML’s IG Master Index tightened 1 bp to +135 vs. +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +129 vs.  +130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Investment grade corporate bond trading posted a final Trace count of $18.1b on Wednesday versus $17.3b Tuesday and $16.7b the previous Wednesday.
  • The 10-DMA stands at $15.8b.

 

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

 

IG Corporate New Issuance This Week
10/17-10/21
vs. Current
WTD – $28.34b
October 2016 vs. Current
MTD – $64.795b
Low-End Avg. $22.30b 127.09% $87.83b 73.77%
Midpoint Avg. $23.17b 122.31% $88.59b 73.14%
High-End Avg. $24.04b 117.89% $89.35b 72.52%
The Low $15b 188.93% $75b 86.39%
The High $30b 94.47% $125b 51.836%

 

Have a great evening!
Ron Quigley, Managing Director and 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 Wednesday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
10/17
TUES.
10/18
WED.
10/19
AVERAGES
WEEK 10/10
AVERAGES
WEEK 10/03
AVERAGES
WEEK 9/26
AVERAGES
WEEK 9/19
New Issue Concessions 6.62 bps 3.17 bps 1.71 1.87 bps 4.36 bps 2.71 bps 0.69 bps
Oversubscription Rates 2.11x 2.91x 2.86x 3.28x 4.20x 3.52x 3.23x
Tenors 6.06 yrs 10.71 yrs 12 yrs 11.51 yrs 12.16 yrs 10.51 yrs 9.36 yrs
Tranche Sizes $1,043mm $1,050mm $1,249mm $640mm $523mm $646mm $964mm

 

Indexes and New Issue Volume

 

Index Open Current Change  
LUACOAS 1.30 1.29 <0.01>  
IG27 73.725 73.938 0.213
HV27 162.135 161.645 <0.49>
VIX 14.41 13.75 <0.66>  
S&P 2,144 2,141 <3>
DOW 18,202 18,162 <40>  
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $1.40 bn DAY: $5.65 bn
WTD: $28.34 bn WTD: $57.09 bn
MTD: $64.795 bn MTD: $108.145 bn
YTD: $1,139.531 bn YTD: $1,463.365 bn

 

Lipper Report/Fund Flows – Week ending October 19th   (more…)

IG Corporate Debt Issuance-7th Busiest Month; Entergy Louisiana Snapshot
September 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 09.28.16 –Entergy Lousiana; Investment Grade Debt Issuance: Sep is 7th Busiest Month Ever

 

QC Quote of The Day: “Demand for IG corporate credit and particularly the defensive nature of the utility sector is resounding..”

 

Investment Grade New Issue Re-Cap 

Global Market Recap

IG Primary & Secondary Market Talking Points

Deal-of-the-Day: Entergy Louisiana, LLC

Entergy Louisiana, LLC Final Pricing Details

A Brief Look at Entergy’s Call to Diversity and Social Responsibility

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 21st

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 European equities were all up across the boards this morning and Deutsche Bank stock (NYSE:DB) rallied back a bit despite “counter party risk” being a topic of discussion in some circles.   September has witnessed market volatility swing 10yr Treasury yields within a very wide 20 bp band from 1.72% to 1.49%.  Driving that volatility are the recent policy decisions and comments from the Central Banks, namely the FOMC, ECB, BOE and BOJ.  Oil markets, highly correlated to the month’s wild equity swings we’ve witnessed hasn’t helped stability at all.  Still, we’ve wound up pricing $136b in new IG Corporate issuance and $161b including SSA.  Heap indigestion on top of that and the fact that corporates are averaging anywhere from 0-10 bps NICs with utilities averaging 0-5 bp NICs and it illustrates just how resilient and amazing this primary market month has been.  All of the recent market volatility elevated the importance of this morning’s Durable Goods Number forecast to be <1.5%> against the 4.4% prior number.  It delivered a 0.00% and primary markets were off to the races given the stable back drop.

Having said all that, it was not a crowded day for issuance today creating a nice opportunity for several companies to print new deals. 5 IG Corporate issuers owned today’s IG primary markets pricing 8 tranches between them totaling $6.90b.  We have now priced 54% of this week’s syndicate midpoint average forecast for IG Corporates or $12.65b vs. $23.30b.  MTD we’re now over 23% above the syndicate estimate or $143.418b vs. $116.02b.  September all-in (IG Corporate plus SSA) issuance is now $168b which ranks as the 7th busiest month on record with two more days remaining! It’s pretty safe to say that September will finish as the second busiest month of 2016.

As Team Mischler was an active 2.50% Co-Manager on today’s Entergy Louisiana, LLC $400mm 10-year Collateral Trust Mortgage Bond new issue, it was the clear winner to be crowned as the session’s Deal-of-the-Day!  For the deal drill-down please scroll just below. Entergy Louisiana is a sub of Entergy Corp., NYSE: ETR

 

Global Market Recap

 

  • S. Treasuries: Small losses across curve. First all-out losing session in the last 11.
  • Stocks – U.S. & Europe stocks rallied. Nikkei traded poorly & China small losses.
  • Economic – Durables were better than expected but nothing to get excited about.
  • Currencies – The CAD rallied with higher crude oil. The USD outperformed the Yen.
  • Commodities – Big rally for crude oil as OPEC agreed on a production cut (no details given).
  • CDX IG: -2.0 to 75.42
  • CDX HY: -9.68 to 404.28
  • CDX EM: -0.53 to 234.0

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 8 IG Corporate-only new issues was 18.875 bps.
  • BAML’s IG Master Index widened 1 bp to +143 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.2b on Tuesday versus $12.8b Monday and $19.1b the previous Tuesday.
  • The 10-DMA stands at $15.8b.

 

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

 

IG Corporate New Issuance This Week
9/26-9/30
vs. Current
WTD – $12.65b
September 2016 vs. Current
MTD – $143.418b
Low-End Avg. $22.13b 57.16% $115.45b 124.23%
Midpoint Avg. $23.30b 54.29% $116.02b 123.61%
High-End Avg. $24.48b 51.67% $116.59b 123.01%
The Low $15b 84.33% $80b 179.27%
The High $36b 35.14% $150b 95.61%

 

Deal-of-the-Day: Entergy Louisiana, LLC

entergy louisianaThe fairly quiet and stable day made it a good one for the few issuers who had the foresight to take advantage of an uncrowded new issue calendar, to print new deals.  One of those astute Treasury/Funding teams was Entergy that announced and priced a $400mm “will not grow” 10-year Collateral Trust Mortgage Bond for Entergy Louisiana, LLC through joint leads BNP Paribas, Goldman Sachs, KeyBanc, SMBC Nikko and U.S. Bancorp.  Co-Managers were Mischler Financial Group, Inc., Regions, Toronto Dominion and Williams Capital.

The deal announced in the early morning session post the 8:30 economic data releases as a $400mm “will not grow” CTMB new issue carrying initial price thoughts in the T+110 “area” before ratcheting in nicely to T+95 “area” guidance with “area” defined as +/-5 bps. It launched at the tightest side of guidance to launch and price at T+90.  That’s a full 20 bps of spread compression wherein the average IG Corporate contraction from IPTs to the launch this month has been more like 15 bps. A great level for the issuer, leads and Co-Managers to have achieved together.

Relative value was straight line on today’s new 10-year.  We looked at the outstanding Entergy Arkansas (A2/A) 3.50% due 4/01/2026 that was T+86 (G+90) pre-announcement, and the Entergy Louisiana 3.25% due 4/01/2028 that was T+103 bid or G+98.  Since the latter is a 12-year I adjusted 5 bps for the 12s/10s curve getting me to G+93. Taking an average of those two comps equates to a G+91.5 inferring that today’s new issue priced with a negative 1.5 bp NIC or <1.5> bp concession at today’s final T+90 pricing spread level.

I know I sound like a broken record, but really folks, demand for IG corporate credit and particularly the defensive nature of the utility sector is resounding.  Today’s order book topped out at $1.6b before the tighter launch level saw several tier I accounts drop their orders. The final order book held in extremely well without them finishing at $1.1b for a still very strong 2.75x bid-to-cover rate.  I am particularly pleased and even more proud to say that our tier II and III incremental/tertiary middle markets accounts did not drop from the book at all except for one limit order.  It was the single most satisfying outcome on a new issue since reinventing myself in the diversity space nearly 12 years ago.  A lot of that satisfaction comes from working with an issuer like Entergy and a lead left like Goldman Sachs who believe in, embrace and WILL reward the value-added proposition.

What Does True “Inclusion” Mean on Deal Day?
It’s all about involvement from start to finish.  Of critical importance is Entergy’s consistent mandate to introduce true best practices throughout the deal day issuance process,  and to include their co-managers on all calls pertaining to the deal as follows:

 

  • Auditor Due Diligence Call
  • Organizational and Market Update Call
  • Business Due Diligence Call
  • Go-No Go Call
  • Guidance Call
  • Launch Call
  • Pre-Pricing Due Diligence Call
  • Pricing Call

 

That right there is called getting us involved.  We feel a part of the deal in that we’re immediately informed as the call takes place.  We sound more informed in discussions with accounts and it just makes for a much more professional and complete approach for Co-Managers.

The Entergy Louisiana, LLC Deal Dashboard

 

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
ETR 10yr +110a +95a (+/-5) +90 +90 <20> bps <1.5> 89/87 <1>

 

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

 

ETR Issue Tranche Size Book at the Top Final Book
Size
Bid-to-Cover
Rate
10yr $400mm $1.6b $1.1b 2.75x

 

A Brief Look at Entergy’s Call to Diversity and Social Responsibility

 

As the nation’s oldest Service Disabled Veteran broker dealer you all know that wear our SDVBE certification/dedication proudly. When the opportunities knock we expect to be the best there is at providing value to our customers (issuers, syndicate teams and accounts).  I extol the virtues of our give-back component at every opportunity I get right here in the “QC” and all of Mischler’s employees embraces our veteran causes with one common, shared ethos.

It follows then that when we are granted opportunities to serve on transactions, we extol those same virtues held near and dear to the Issuers who we serve.  So please give a bit of time to the below.  There’s so much more to what Entergy and its wholly-owned subsidiaries do for diversity and social responsibility, but I thought I’d highlight some recent recognition they’ve received in 2016.  True to their corporate slogan it’s about “The Power of People.” It’s nice for bankers to know how to bank and structure deals, but the below is also helpful for them to better understand the corporate culture behind the issuers whose mandates they seek to secure. It brings the entire process full circle and makes the endeavor more than just about the money!

You should all know that Entergy has once again been named to the Dow Jones Sustainability North America Index. The index measures performance in economic, environmental and social dimensions against industry peers around the globe. Entergy was one of only four U.S. electric utilities named to the index. The company achieved perfect scores of 100 in the focus areas of Corporate Citizenship and Philanthropy, Biodiversity, Climate Strategy and Water-Related Risks. This is the 15th consecutive year Entergy has been included on either the World or North America index or both.

Corporate Responsibility Magazine’s 2016 list of the 100 Best Corporate Citizens

Entergy is also ranked 18th on Corporate Responsibility Magazine’s 2016 list of the 100 Best Corporate Citizens. Entergy was the highest-ranking electric utility on the list. In the category of philanthropy and community support, Entergy was ranked number 4. The list recognizes companies demonstrating transparency and accountability in highly competitive industries. This is the seventh time Entergy has been named to the list.

 

Cogent Reports – 2016 Most Trusted Utility Brand

 

During 2016, Cogent Reports conducted online surveys with more than 50,000 customers of the country’s 129 largest utility companies. Results placed Entergy as one of the top utilities nationwide in brand trust. Cogent Reports attributes the high score to Entergy’s focus on charitable giving, community volunteerism and support of low-income customers.

Saving the best for last, you all know Mischler is the nation’s Oldest Service Disabled Veteran broker dealer and our commitment to giving back to veteran causes is a shared ethos among all Team Mischler employees.  We honor Entergy for winning the 2016 Patria Award and send our heartfelt thanks and Mischler five-star salute to all of you in Treasury/Funding for being part of the Entergy’s culture and commitment to giving back to our nation’s veterans. 

 

Pro Patria Award

In 2016, Entergy won the 2016 Pro Patria Award from the U.S. Department of Defense’s Employer Support of the Guard and Reserve for promoting supportive work environments for members of the National Guard and Reserve. And among 2,400 nominees, Entergy was also named one of the 30 finalists for the 2016 Secretary of Defense Employer Support Freedom Award, the highest recognition given by the Department of Defense’s Employer Support of the Guard and Reserve.

So, I think it’s clear to see that Entergy is not only constantly moving the needle forward for diversity and inclusion in our IG dollar Debt Capital Markets but it is ingrained in ETR’s corporate culture.  This evening’s “QC” lays out a picture perfect illustration of what it means when a company Entergy consistently focuses work on growing and expanding diversity and social responsibility.  When an issuer gives Mischler an opportunity to grow sustainably, this daily owes it to that Company to extol the virtues of all the great things it is doing toward effective and landmark Corporate Governance. We take it seriously and the companies we serve do as well.  That is a story you will always find here in the “QC.”

Issuers do care and are looking for diversity co-managers who consistently deliver quality orders to their transactions in order to capture new investors to their profile.  I also know that when the world’s largest financial institutions lend to and bank the U.S. Fortune 500, issuers care a lot about who does it right, who does it wrong, and who doesn’t do it all.  So, maybe think about that and dedicate a section of your pitch books to diversity and social responsibility.  In our highly competitive financial services industry it just might be the difference between a mandate or not; an active role or a passive one; a role or none at all.  I am telling you this because the guy-in-the-corner really is in your corner.  It’s all helpful advice.
And of course, thanks to all of our tier II and III high quality middle markets accounts  – you all know who you are – yet I can’t mention you by name.  You are all great business partners, not to mention those who are longtime friends outside the office.  You’ve been there from the get go and as I always say, “it’s about the quality of the order” and in that regard, “you’re all BlackRock in our book.”  Thank you!


Entergy Louisiana, LLC Final Pricing Details

$400mm ETR 2.40% CTMBs due 9/01/2026 @ $99.577 to yield 2.448% or T+90. MW+15

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

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

Why Corporate Treasurers Embrace Diversity BDs..Mischler Fixed Income Commentary 05-31-13

Market Comment:

Greetings to special rare Sunday edition of the Syndicate Closing Commentary.  I know we’re supposed to rest on Sunday but with lots of things going on this weekend and the AFSA conference last week, playing wearing five hats and playing catch-up on a Monday is never a good idea.  Besides, after all the positive feedback I received on this commentary from all the movers and shakers in Treasury/Funding, diversity leaders, origination and syndicate folk as well as accounts that I encountered at last week’s 23rd Annual AFSA Credit Summit in Boston, I have been moved and inspired by all you and your respective organizations to go the extra mile and deliver what you said you enjoy. So without further ado, let’s get to it.

AFSA’s 23rd Annual Credit Summit Features Diversity & Inclusion Luncheon Panel:

Of the many offerings at this year’s AFSA conference, one was especially close to the team at Mischler Financial Group.  On Wednesday, May 29th, AFSA featured a showcase luncheon panel on “Diversity and Inclusion.”  It was a comprehensive discussion that explored the impact of diversity in problem solving and innovation; how to leverage its benefits in creating new financial products and a review of the details of recent diversity bond issuance and trends.  This year’s Summit Chairman was Steve Howard, Global Head of Capital Markets & Derivatives, Toyota Financial Services who did a wonderful job while serving our industry well in his role.  The panel was moderated by Suni Harford, Managing Director Regional Head of Markets, North America at Citigroup Inc.  In 2012, Ms. Harford ranked 16th among the most powerful women in banking by American Banker Magazine.  Featured panelists were Zeeshan Naqvi, Director of Global Long-Term Funding, GE Corporate Treasury; Kaishi Riaz, Global Capital Markets, BlackRock, Dean Chamberlain, Principal and CEO, Mischler Financial Group, Inc., Chris Williams, Chairman and CEO, The Williams Capital Group, L.P. and Alexandra Lebenthal, Lresident and CEO, Lebenthal & Company. 

Suffice to say this was the single highest attended panel at the conference and represented a lot of hard work across on behalf of all the participating organization to break thru the “glass ceiling” of diversity.  There is more work to do and we never get “there” wherever “there” is, but the cumulative efforts of these participants and their respective Company’s have never and will never give up in providing value-added propositions and a shared ethos motivated and driven by meritocracy.  Minority boutique banks are NOT “check-the-box” mandates.  The competitive nature of our financial services industry has motivated meaningful boutique investment bank and full service broker-dealer build-outs in pursuit of “sustainable” platforms.  Sustainability means a value-added proposition and vice versa.  Not to get corny or anything but if I could express it another way, the minority space has broken out much like that glass “Wonkavator” did in the final scene of the 1971 version of Wille Wonka & the Chocolate Factory.  If you don’t get it, place the DVD in a tray and watch from the last few minutes of the film beginning in Willy Wonka’s office in which everything is cut in half until the final credits. (more…)