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Mischler IG Debt Market Comment 10-05-16 : TMCC; ECB; Economic Front
October 2016      Debt Market Commentary   

Quigley’s Corner 10.05.16 Mischler IG Debt Market Comment

 

Investment Grade New Issue Re-Cap

Good News on the U.S. Economic Front This Week

Central Banks

Positive Developments Outside of Economic Data & Central Banks

Global Market Recap

A Look at FNMA Placement Statistics
Toyota Motor Credit Corp. Makes D&I History

IG Primary & Secondary Market Talking Points

Lipper Fund Flows

New Issues Prices

Indexes and New Issue Volume

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Well, with tomorrow’s heavy calendar for economic data, it’s one last chance to pick up $6.5b in new issuance to match the syndicate midpoint average forecast for the week. We’re currently at $12.05b vs. $18.54b.  Today saw 5 IG Corporate issuers price 7 tranches between them totaling $3b with two SSA assists for an all-in IG day total of 7 issuers, 9 tranches and $4b. It’s good that I have good old reliable Tony Farren, my rates guru par excellence to rely on when I am out of the office.  Today is one of those days and I’ll tell you all about it in a moment.  First, a look at today’s market moving events reveals that Gallup’s Job Creation Index held steady in September for the fifth month in a row at +33.  That represents the highest score recorded since Gallup began tracking that metric in January 2008.

As Tony wrote today:
Good News on the U.S. Economic Front This Week

 

  • ISM manufacturing PMI moved back over 50 (51.5 from 49.4).
  • ISM non-manufacturing increased 5.7 points to 57.1 after a 4.1 point drop last month.
  • Cap goods non-defense ex-air increased for the 3rd month in a row (Aug +0.9%, July +0.8% & June +0.5%).
  • U.S. Employment Report – ??? (Friday morning).

 

Central Banks

 

  • BOJ – Last Friday the BOJ announced they will cut back on the amount of long end bonds it will be buying in an attempt to steepen the JGB curve.
  • ECB – Yesterday a Bloomberg article stated the ECB was considering tapering QE. Was it a bogus article or a trail-balloon from the ECB? Bonds in Europe have traded poorly this week.
  • Are we seeing a change in the way Central Banks are going to go about their business? If Central Banks are counting on help from the fiscal side I think they are going to be disappointed.

Positive Developments Outside of Economic Data & Central Banks

 

  • Crude oil higher – Crude oil has traded higher after an understanding was reached at last week’s informal OPEC meeting to discuss oil production cuts.
  • U.S. Congress passed a spending bill last week that averts a partial U.S. Government shut down.
  • Deutsche Bank – The sentiment concerning DB has improved substantially since the beginning of last week.
  • The hawkish Fed Speakers are warming up and starting to flex their muscles but they have a large hurdle to get over on Friday…US Employment Report!

 

Global Market Recap

 

  • U.S. Treasuries – had its 4th losing session in a row. Long end in Japan & EU hit.
  • 3mth Libor – Set at the highest yield since May 2009 (0.86794%).
  • Stocks – U.S. stocks with solid gains at 3:15pm.
  • Overseas stocks – Europe mostly down but bank stocks rallied. Asia was higher.
  • Economic – This week U.S. economic data has bolstered the Fed hawks case.
  • Currencies – USD weaker vs. 4 of the Big 5. Yen down for 7th session in a row.
  • Commodities – Good day for commodities as crude oil nearly rallies to 50.
  • CDX IG: -1.23 to 74.47
  • CDX HY: -4.64 to 402.28
  • CDX EM: -3.14 to 234.91

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

-Tony Farren

 

A Look at FNMA Placement Statistics

Thanks in advance to our own Annie “Agency” Bonner for the following information:

 

BY INVESTOR TYPE:

 

  • 40% Fund Mgr
  • 28% Commercial Banks
  • 11% Central Banks
  • 9% Insurance Companies
  • 7% Corporate/Pensions
  • 2% State/Local Govt
  • 2% Other
  • <1% Retail

BY REGION:

 

  • 81% US
  • 11% Asia
  • 6% Europe
  • 1% Other
  • 1% ??

 

Once Upon a Time Four Years Ago or “Where It All Started”

 

Four years ago Zeeshan Naqvi, now with Moody’s Investors Service Inc., and formerly with GECC Treasury/Funding, paid a visit to Mischler to deliver GE’s annual report card of diversity broker dealer performance for 2012.  GECC’s diversity initiative offered the space the most coveted rotation for minority- women- and veteran- investment bank inclusion.  On that November day Mischler was told it finished atop GECC’s diversity broker dealers across their three main criteria:

 

  • Order Book Size
  • Quality of Orders
  • Final Allocations

 

The hour long meeting took place at our offices here at One Stamford Landing in Stamford, Connecticut.  While discussing our middle markets distribution network we suggested that Zeeshan and GECC meet our accounts for a non-deal roadshow.  He thought it was a great idea and soon enough Mischler was asked to conduct the first ever non-deal roadshow by a diversity firm for an issuer that just happened to be the most prolific at the time in our IG dollar DCM.  It resulted in a wonderful luncheon in Manhattan wherein 18 Mischler institutional accounts attended to hear GE’s story. Several took last minute flights on their own coin for the occasion…….that event advanced GE’s brand in the world of diversity in our financial services industry, and has been emulated by other global brands within the financial industry ecosystem…In particular, TMCC….

 

Toyota Motor Credit Corp.  (TMCC) Makes D&I History with Mischler-Sponsored Investor Luncheon Opportunity

 

Earlier today, TMCC’s Kate Oddo and Bill Pang conducted a non-road show investor luncheon/forum in NYC, with the goal of sharing and having open dialogue with existing and prospective institutional investors as to TMCC capital markets initiatives, and also sharing with the audience TMCC’s perspective about Diversity & Inclusion. BAML took the lead and hosted the event and Mischler was designated by TMCC as ‘co-manager’ in coordinating the day’s program, and we presented TMCC a total of 58 new accounts today.  12 accounts were represented in person with 46 dial-ins.  MFG clients that participated included insurance companies, re-insurers, managers of endowments, pensions, charitable trusts and foundations, RIA’s, SFOs, commercial banks, private wealth managers, private banks, trust company managers, fund managers for captive insurance and multi-family offices whose managed assets include some of the wealthiest people in the United States. To all of you accounts out there – you know who you are– you contributed to making history today, for moving the needle forward for D&I in an indelible way for our IG DCM, and for being there for the nation’s oldest Service Disabled Veteran broker dealer.

But most of all I and we would like to thank Toyota’s Kate Oddo and Bill Pang for their foresight to challenge us to be the best we can be with such a formidable.  This was a golden opportunity for Toyota to raise the bar for financial diversity broker dealers and investment banks.  We appreciate your meaningful focus to create a game-changing event for diversity and inclusion and for the thought leadership you both provided for Toyota, Mischler and our debt capital markets.  People have taken note of this.

IG Primary & Secondary Market Talking Points

 

  • Mischler Financial served as an active Co-Manager on today’s FNMA $3.5b 5-year Unsecured Notes new issue.  We thank the fine folks at Fannie Mae for including Mischler, nation’s oldest SDVBE in such a meaningful way.  Thanks also to all the accounts who gave us orders.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 7 IG Corporate-only new issues was 16.92 bps.
  • BAML’s IG Master Index tightened 1 bp to +141 vs. +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 tightened 1 bp to +187 vs. +188.  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 $12.4b Monday and $18.2b the previous Tuesday.
  • The 10-DMA stands at $15.9b.

 Ya Gotta Believe! Go Mets!

Have a great evening!
Ron

 

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

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

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

 

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

Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

Lipper Report/Fund Flows – Week ending September 7th

New Issue Volume

Economic Data Releases

Rates Trading Lab- The Pain Trade(s)

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

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

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

Global Market Recap

 

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

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

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

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

o   Commodities – Very bad day in commodity land.

o   CDX IG: +3.66 to 75.31

o   CDX HY: +16.42 to 404.18

o   CDX EM: +11.28 to 243.95

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

-Tony Farren

 

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

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

  • For the week ended September 7th, Lipper U.S. Fund Flows reported an inflow of $2.804b into Corporate Investment Grade Funds (2016 YTD net inflow of $32.901b) and a net inflow of $610.273m from High Yield Funds (2016 YTD net inflow of $10.160b).
  • BAML’s IG Master Index was unchanged at +140.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research was also unchanged at +189.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15b on Thursday versus $16.5b Wednesday and $12.8b the previous Thursday.

 

Syndicate IG Corporate-only Volume Estimates for September

 

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

 

Syndicate IG Corporate-only Volume Estimates for Next Week

 

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

 

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

 

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

 

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

 

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  21 of those participants are among 2016’s top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  Today’s cumulative underwriting percentage of the participating desks was 81.07% which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

 

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted. The question posed to the “Best and the Brightest” early this morning was premised on the following:

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

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


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


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

 

o   NICS:  1.30 bps

o   Oversubscription Rates: 3.23x

o   Tenors:  9.42 years

o   Tranche Sizes: $719mm

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

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

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

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

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

(This section available exclusively to QC distribution list recipients)

 

            

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

 

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

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

 

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

 

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

Ron Quigley, Managing Director

NICs, Bid-to-Covers, Tenors and Sizes

 

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

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

 

 

Lipper Report/Fund Flows – Week ending September 7th

     

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

 

 

New Issue Volume

 

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

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

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

 

Economic Data Releases

 

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

 

Rates Trading Lab: The Pain Trade

 

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

 

UST Resistance/Support Table

 

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

 

Tomorrow’s Calendar

 

o   China Data: Nothing Scheduled

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

o   Australia: Manpower Survey

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

o   U.S. Data: Nothing Scheduled

o   Supply: U.S. 3y and 10y Note

o   Events: BoE buys 3y-7y Gilts

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

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

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

 

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

Global Market Recap

Fed Beige Book Headlines and Text

New Issues Priced

Investment Grade Spreads (by Rating/Industry)

Lipper Report/Fund Flows – Week ending September 1st      

Economic Data Releases

Rates Trading Lab

New Issue Pipeline

M&A Pipeline

 

 

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

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

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

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

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

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

Global Market Recap

 

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

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

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

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

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

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

o   CDX IG: +0.78 to 71.94

o   CDX HY: +3.87 to 387.80

o   CDX EM: -5.15 to 230.83

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

-Tony Farren

 

Fed Beige Book Headlines and Text

 

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

o   Contacts in several districts expect modest price gains.

o   FOMC says moderate upward wage pressures increased further.

o   Labor market conditions still tight in most districts.

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

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

o   Sights manufacturing activity rose slightly in most districts.

o   Credit demand appeared to expand at a moderate pace.

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

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

o   Demand for energy related products and services weakened.

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

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

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

 

Syndicate IG Corporate-only Volume Estimates for September

 

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

 

 

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

 

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

NICs, Bid-to-Covers, Tenors and Sizes

 

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

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

 

New Issues Priced

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

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

 

IG

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

 

SSA

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

 

Lipper Report/Fund Flows – Week ending September 1st      

 

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

 

IG Credit Spreads by Rating

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

Spreads across the four IG asset classes are an average 30.0 bps wider versus their post-Crisis lows!

 

ASSET CLASS 9/06 9/05 9/02 9/01 8/31 8/30 8/29 8/26 8/25 8/24 1-Day Change 10-Day Trend PC
low
IG Avg. 140 139 139 139 139 138 138 138 139 140 +1 0 106
“AAA” 81 80 80 80 80 76 76 77 77 77 +1 +4 50
“AA” 82 82 82 82 82 81 81 81 82 81 0 +1 63
“A” 110 109 109 109 109 108 108 108 109 109 +1 +1 81
“BBB” 183 183 183 183 183 181 182 182 183 183 0 0 142
IG vs. HY 369 370 370 373 371 369 372 366 375 373 <1> <4> 228

 

IG Credit Spreads by Industry

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

Spreads across the major industry sectors are an average 36.58 bps wider versus their post-Crisis lows!

                                    

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

 

New Issue Volume

 

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

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

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

 

Economic Data Releases

 

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

 

Rates Trading Lab

 

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

 

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

-Jim Levenson

 

UST Resistance/Support Table

 

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

 

Tomorrow’s Calendar

 

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

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

o   Australia: Trade Balance

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

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

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

o   Events: ECB & Press Conf.

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

IG Debt and ECB: Corporate America Remains Best Story
September 2016      Debt Market Commentary   

Quigley’s Corner 09.06.16 IG Debt and ECB Purchase Program: Corporate America Is Best In Class

 

Investment Grade New Issue Re-Cap – The “Back to Work Edition” – Waste Not, Want Not

Global Market Recap

IG Primary & Secondary Market Talking Points

Lipper Report/Fund Flows – Week ending September 1st      

New Issues Priced

IG Credit Spreads (by Rating & Industry)

New Issue Volume

Economic Data Releases

Rates Trading Lab: Reality Bites

New Issue Pipeline

M&A Pipeline

 

There’s a lot to talk about.  My vacation travelogue would be fun reading today were it not for 13 IG Corporate issuers priced 29 tranches today totaling $21.075b!

The IG dollar DCM waits for no one, or facetiously speaking, perhaps it waited for me to get back to the corner desk!  Two things are certain:

Investors are rabid over yield and when I hear long-time and highly reliable sources telling me that the search for yield has investors targeting local currency bonds in emerging markets (i.e. Indonesia, Ghana and Brazil) well, you know they’re desperate.  It’s like a pack of wild animals with nothing left to quench their thirst but to chew mud in rapidly drying watering holes. Deals are being pulled forward and we have already priced 18% of this month’s syndicate IG Corporate volume forecasts or $21.075b vs. $116.02b on this, the first day of activity for the IG primary markets.  In my last “QC” prior to block leave on August 18th I wrote, “The world is changing fast and our financial markets don’t like it.  Needless to say, with all the discord, the U.S. is the best story going thanks to Corporate America.  Until rates begin to rise in Europe – “if” they ever rise in Europe – the flight to better rated U.S. credits will be historic!”   Well, today was the right way to kick things off.  Nothing like getting back in the saddle!

Due to having been on block leave recently I did not have the opportunity to scribe what would have been a fantastic D&I story, including the fair value piece about the two-part Coca Cola deal that Mischler was honored to serve on as an active Co-Manager on Monday, August 29th.  We’d been banking Coca Cola and looking forward to that first opportunity to show them what we do here at Team Mischler.  Well, that opportunity came at a time when I was off on my tropical island summer holiday.  But, that never kept a good man down before. Sure enough, we delivered and it was on a two-part new issue that included the tightest 5yr new issue spread of the year. The KO 5yr also tied for the second lowest coupon with both MSFT and AAPL; two other issuers for whom NIC on the KO Mischler has served.  The KO 5-yr priced at +40 and is +38 bid today while the KO 10yr printed at +70 and is +66 bid.  That’s more impressive when considering that 5yr NIC was 1-2 bps and the 10s was 4 bps.  Books were 2.8x and 3.4x covered respectively.  But the story didn’t stope there.

Coca Cola’s Treasury Team was impressed with our performance enough to also invite us to serve actively on its Euro denominated 20-year new issue that was announced in London or 3:00am ET.  What do you think happened?  The guy-in-the-corner and Mr. Rob Karr, joined by our veteran Marine Jonathan Herrick woke up early. 3:00am early.  Despite being my departure date from paradise, Mischler built an order book and placed on its first ever Euro denominated new issue.  We’ve served as Co-Managers on Euro transactions before but not actively.  We’ve been building that up for several years here and had our day in the sun on August 30th which just happened to be my birthday.  A very memorable one indeed.

Thank yous go out to Coca Cola’s VP, Treasurer, Chris Nolan; Director, Financial Markets/Corporate Treasury, Lisa Myers; Manager of Global Investments, Kelly Bryant and Principal Treasury Analyst, Aaron B. Wells.   We appreciate our inclusion on your transactions and for providing Team Mischler the opportunity to prove our capital market capabilities and to realize yet another milestone in the history of our nation’s oldest Service Disabled Veteran broker dealer.

Today Mischler served as an active Co-Manager on American Honda Finance’s new three-part 5yr FXD/FRN and 10 yr.

 

Global Market Recap

 

o   U.S. Treasuries – USTs staged a big rally on weak U.S. economic data. JGB’s, Bunds & Gilts rallied.

o   Stocks – The NASDAQ led U.S. stocks higher.

o   Overseas Stocks – Europe closed mixed (bank stocks lower). Asia closed higher.

o   Economic – U.S. data was weaker especially the non-manufacturing composite (6-year low).

o   Currencies – USD was weaker before the non-manufacturing number & then hit harder afterward.

o   Commodities – Huge day for gold & silver. Crude oil closed higher.

o   CDX IG: -0.94 to 71.61

o   CDX HY: -4.20 to 385.75

o   CDX EM: -5.42 to 235.98

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Today Mischler served as an active Co-Manager on American Honda Finance’s new three-part 5yr FXD/FRN and 10 yr. (Parent co NYSE:HMC)    Thank yous to Honda’s Scott Davis, Michi Rey and Ursula Chamberlain, as well as Team Citigroups’s Jim Hennessey, Patrice Altongy, Morgan Forester, Adnes Hernandez and Frank Conlon for working with us.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 29 IG Corporate new issues was 14.69 bps.
  • For the week ended September 1st, Lipper U.S. Fund Flows reported an inflow of $224.536m into Corporate Investment Grade Funds (2016 YTD net inflow of $30.097b) and a net outflow of $386.754m from High Yield Funds (2016 YTD net inflow of $9.55b).
  • BAML’s IG Master Index was unchanged at +139.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +188.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $5.6b on Friday versus $12.8b Thursday and $9.4b the previous Friday.
  • The 10-DMA stands at $13b.

 

Syndicate IG Corporate-only Volume Estimates for September

 

IG Corporate New Issuance September 2016 vs. Current
MTD – $21.075b
Low-End Avg. $115.45b 18.25%
Midpoint Avg. $116.02b 18.16%
High-End Avg. $116.59b 18.08%
The Low $80b 26.34%
The High $150b 14.05%

 

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

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

 

New Issues Priced (more…)

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

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

 

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

Global Market Recap

IG Primary & Secondary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

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

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

 

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

 

Global Market Recap

 

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

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

-Tony Farren


IG Primary & Secondary Market Talking Points

 

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

 

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

 

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

 

 

Have a great evening!

Ron Quigley

Managing Director
Head of Fixed Income Syndicate

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

Investment Grade Debt Issuance-Full Steam Ahead
August 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 08.08.16-Investment Grade Issuance – Not a “Sleepy Summer Monday”; $11bil Floated

 

Investment Grade New Issue Re-Cap – “It’s Just Another Manic Massive Monday!”

Global Market Recap

IG Primary & Secondary Market Talking Points

CenterPoint Energy Deal Drill Down: A Case Study in Fortune Co. Diversity & Inclusion Goals

Ford Motor Credit Corp: Banking on the Little Engine That Can and Does

Mischler’s “Give Back” Component

New Issues Priced

Lipper Report/Fund Flows

IG Secondary Market Trade Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Issuer)

New Issue Pipeline

M&A Pipeline

Last week it was the $19.75 b 7-part Microsoft deal, today it was a slew of issuers’ – 13 to be exact – who priced 19 tranches between them totaling $11.80b. UMS added a $2.75b two-part in the SSA space to bring the all-in IG day total to 14 issuers, 21 tranches $14.55bn.  We have now priced 51% of this week’s syndicate midpoint average estimate for IG Corporates after just one session or $11.8b vs. $22.8b.  What’s more is we priced just over 99% of the forecast for all of August or $60.75b vs. $61.13b.

But of all the deals that priced today, CenterPoint Energy Houston Electric, LLC and Ford Motor Credit Co. LLC are the deals of the day because Mischler Financial Group, Inc. was involved in both.  Let’s take them in alphabetical order and start with CenterPoint Energy Houston Electric, LLC. But first here’s a look at the Global Recap –

 

Global Market Recap

 

  • U.S. Treasuries – Mixed & little changed but a strong bounce off the morning low prices.
  • Overseas Bonds – JGB’s sold off, Bunds basically unchanged & Gilts rallied (record low yields)
  • 3mth Libor – First trade over 0.80% since 5/15/09 (0.80650%).
  • Stocks – S&P’s & NASDAQ opened at all-time highs but rolled over.
  • Overseas Stocks – Europe, Japan, Hong Kong & China rallied.
  • Economic – Fed’s labor market conditions index was the strongest YTD.
  • Europe – Weak data in China but stronger data in Japan & Germany.
  • Currencies – U.S. better vs. PND/Yen, little changed vs. Euro/AUD & weaker vs. AUD.
  • Commodities – Crude rallied because OPEC said so (wish everything was that easy!).
  • CDX IG: +0.65 to 71.37
  • CDX HY: -0.02 to 392.36
  • CDX EM: -5.37 to 241.56

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

-Tony Farren


IG Primary & Secondary Market Talking Points

 

  • HCA Inc. upsized today’s 1srt Lien Senior Secured notes new issue to $1.2bn from $1bn.
  • CubeSmart LP increased today’s 10-year Senior Unsecured Notes new issue to $300mm from $250mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 19 IG Corporate new issue was 12.53 bps.
  • BAML’s IG Master Index tightened 2 bps to +149 versus +151.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 12 bps to +191 versus +203.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $12.6b on Friday versus $16.4b Thursday and $13.9b the previous Friday.

CenterPoint Energy Deal Drill Down

 centerpoint-energy

Firm market tone carried over from last week so today’s early back-drop pointed toward an unquestionable “go” on the morning call with the issuer, CenterPoint Energy Houston Electric, LLC.  Dow futures pointed to a +25 opening with the IG index 1.25 bps tighter, a CT10-year at 1.587% and a nice pop for oil. Last week’s Dominion prints were 3 to 5 bps tighter and last Friday’s Southwestern Public Service 30-year was 1 bp tighter as well.   The recommendation was clearly to go ahead with today’s new CNP 10-year GMBs.

Price evolution started with the announcement of a CenterPoint Energy Houston’s $300mm “will not grow” 10-year General Mortgage Bond new issue due 9/01/2026 with IPTs in the T+100 “area.”  Additionally, on the “Go/No Go” call this morning, CFO Bill Rodgers announced that CNP had no interest in turning itself into a REIT which opened the doors for dozens of major institutional investors to fly into today’s deal.  The spread level reeled in much tighter to T+85a guidance level with “area” defined as +/-2.  The deal launched and priced at the tightest side of guidance or T+83. 

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing of today’s deal. 

CNP Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
10yr T+100a  +85a (+/-2) +83 +83 <17> bps <5> 80/78 <3>

 

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

 

CNP Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
10yr $300mm $1bn + 3.33x

 

CenterPoint Energy Houston Fair Value Study

 

  • In terms of relative value leads pointed to the outstanding CNP 30-year or the 4.50% due 4/01/2044 that was T+118 late Friday.  A nice large block traded at that level late last Friday.  With the 10s/30s curve worth 30 bps that lands fair value on today’s new 10-year at T+88 versus today’s T+83 final spread level for a negative 5 bps concession! Market tone has been really strong of late and the issuer was all over the leads and vice versa to capitalize on timing the transaction for this morning with the caveat that it be priced by 1:30 ahead of all the potential visitors to the session’s IG DCM.  Syndicate desks all agreed this week’s calendar would be front-loaded. Sure enough CNP was the first deal to price today at 1:30.  What’s more CFO Bill Rodgers announced on this morning’s “Go/No Go” call that CNP had decided not to pursue becoming a REIT.  With that resolved and off the table, all CNP spreads reacted by tightening. It all made for a perfect environment in which to price CNP’s new 10-year GMB.
  • Paper was framed in an 80/78 market after being freed to trade or 3 bps tighter on the bid side.  Truly a phenomenal transaction.

This is what makes companies happy, Public Utility Commissions happy, rate payers happy – all while creating a more meaningful and value-added proposition for social responsibility. There’s only everything right and nothing wrong with that. Congrats all around.

 

CenterPoint Energy Houston Electric LLC – Final Pricing

CNP $300mm 2.40% due 9/01/2026 @ $99.884 to yield 2.413% or T+83. MW+15

 

Diversity & Inclusion at the Heart of CNP

Let me begin by saying this is NOT, repeat NOT a utility new issue deal review and D&I study for the sake of saying thank you.  Rather this is a piece to illustrate what it is when a utility company, or any company for that matter in Corporate America does everything right in creating a formidable and lasting Diversity and Inclusion mandate. I’ll point the differences and add-ons that make today’s CenterPoint Energy Houston 10-year new issue another in a long list of issuers who are making a concerted effort to bring genuine differentiation to their D&I program versus others.  It also serves to raise the bar for D&I in our IG dollar DCM for ALL issuers.  That is the best way I can thank CNP for today’s opportunity in which Mischler was invited to demonstrate our capital markets capabilities, and on a larger scale, it is what this daily is meant for – to show time and time again the good things that corporate America is doing for social responsibility by creating unique diversity programs that start from the top down, permeating a company’s corporate DNA.

First I’d like to start way back when Bill “Buck” Rogers, a West Point grad was at American Water when my CEO, Dean Chamberlain and I visited him in Southern New Jersey.  He had his entire Treasury/Funding team in a conference room.  He shared stories of West Point and when he was a senior utility banker at Merrill Lynch.  He said, “I like your newsletter.  I think it’s very good.  We’re thinking of embarking on our first D&I transaction and I want to do something different, something lasting, something meaningful.  I want you to think if you were the CFO of this company why a D&I mandate is productive and useful? How is it additive? Why do we want new investors to our program? Why would a Public Service Commission care?  What’s it say about the Company and who would you use and why?  He then said, “I have my own ideas but I’d like you to tell us in your words!”

Well, I must say, that’s why I call a golden opportunity.  I touched upon all his points and a few months later AWK issued its first D&I transaction. Lo and behold all the minority firms I recommended were vetted by the Company, among others and the four firms, including Mischler, served as Co-Managers.  It was a tremendous success for AWK.

At this point you’re probably wondering to yourselves, “but today’s deal is CNP not AWK” what’s up with the guy-in-the-corner?”  Well, for one thing Bill Rogers is now CFO at CenterPoint Energy.  Among the first things he and his Treasury/Funding team tackled was to construct a landmark D&I initiative that resulted in an annual banker’s meeting in Houston that included not only their bulge bracket and loan lending institutional bankers but welcomed by invitation the best-in-class diversity broker dealers in the financial services industry.  That, right there spoke volumes from the onset about what CNP was developing resulting in last January 16th’s  first D&I new issue for CNP – a 5yr transaction and what continued today on today’s 10-year deal.

Much like Exelon’s breakthrough banker’s meeting back in the Fall of 2014, CNP’s presentation was perhaps the best organized I’ve been a part. I still have the CNP three-ring binder on my desk.  In it is a comprehensive CenterPoint Energy Overview, Presentations, Financial Information, Recent Press Releases, all CenterPoint Contacts and Supplemental Materials.  Fast forward to a few weeks ago when I received a call from CNP Treasury leadership – Carla Kniepp, Bob Mcrae and Brett Jerasa the Treasurer, Assistant Treasurer and Manager respectively to vet us as a potential member of their diversity rotation.  Last Wednesday I received yet another communication from the triad asking me to put together a two slide presentation including an overall market update, sector update and credit opinion along with indicative pricing with comparables.  Although the last two weeks have been phenomenally busy for Team Mischler, the offer and opportunity to be treated as a joint lead even though we served on today’s deal as an active Co-Manager, was something I relished.  The ask actually meant the ultimate compliment and conveyed the value the issuer saw in our opinion and pricing methodology, daily debt capital markets coverage and distribution capabilities.  Trust and respect are critical foundations to success. So, we got to work.

If the story segued from that point today’s relative value study, it would represent the quickest and most formidable diversity and inclusion initiative I’ve ever seen take place in our DCM. However, what makes the story even better is that it didn’t stop there.  Rather I received this e-mail from the CNP Director of Corporate Finance, Brett Jerasa over this weekend:

Ron,

 

In order to help your sales efforts on Monday, here is a brief overview of CenterPoint Energy Houston Electric’s credit thesis. This is the same messaging we use for Fixed Income investors and the Ratings Agencies. I’ve also attached the earnings press release from this morning.

Thank you,
Brett

 

Now, most lead lefts and underwriters know what Mischler does when it comes to distribution and so do many of America’s Fortune 250 companies.  We pride ourselves on our gold nugget middle-market distribution network and placement opportunities, and I always write here that each and every one of them is a BlackRock to me.  To be given talking points for our sales efforts ratchets up the proposition from our perspective.  Note that Brett wrote, “it is the same messaging we use for Fixed Income investors and the ratings Agencies.”  I wrote him back over the weekend and said, “Brett, I have to say this is a first, believe it or not.  The credit thesis you attached is brilliant and very helpful. I will definitely use that in my marketing efforts……”Just another way to move the needle forward for D&I!”

Who gets our five-star salute?  I’m proud to say Bill “Buck” Rogers, Chief Financial Officer and Executive Vice President; Carla Kniepp, Vice President and Treasurer; Bob Mcrae, Assistant Treasurer, Financing and Brett Jerasa, Manager, Treasury. Thank you all very much for today’s opportunity.  You should not only feel good about today’s financing for your company and its shareholders, but equally so for what you’ve done today for social responsibility which best reflects those ratepayers – the people who turn on and off the light switches in Houston Texas.  My hope is that today’s Lone Star State story spreads as fast as you helped inaugurate it within and outside of CNP.  I’ve never quite seen anything like it before.

Next grateful appreciation once again for “all of those little BlackRock accounts” who have trusted in our mandate and our promise to get on deals and chip away at securing allocations for you.  Thanks for the UST business you’ve expanded into with me, ABS and MBS business and Municipal bond business, and thanks for the equity trading you’ve executed and agency participations. You are touching every spoke within our special operations unit here.  It takes all of us to bring about the best outcome: from onboarding MSDA and MAAUs five years ago when I first landed here; to introducing the platform to so many wonderful issuers; nurturing those relationships to get on their deals and adding business lines as our trajectory allows.  From the core of you who followed me here and signed up based on our past experiences and then others added on as our DCM universe expanded and grew. Our efforts in DCM coverage have opened doors to ECM relationships and share buybacks allowing our equity experts to prove their muster as well.  So from all of us here at team Mischler a resounding “thank you.”

 

Ford Motor Credit Co. LLC Believes in and Banks On The Little Engine That Could –

Thanks go out to FMCC’s David Lupu, Head of Global Debt Capital Markets for awarding the nation’s oldest SDVBE today’s Selling Group role on Ford’s $1b two-part 3-year FXD/FRN.

The deal announced with IPTs suggesting the +120 “area before guidance tightened a dime to +110 a +/-5 after which it launched and priced at the tightest side of guidance or T+105.  Relative value pointed directly at the Ford 2.021% due 5/03/209 that were T+100 (G+103) nailing NIC on today’s new FXD/FRN at 2 bps vs. the +105 final pricing.

Order books were split as follows:  $2.1b on the fixed rate tranche for a bid-to-cover rate of 3x and a $750mm FRN book or 2.5-times oversubscribed.

The fixed notes went out 3 bps tighter showing a +102 bid while the FRNs were 1bp improved with bids of 3mL+82.

We thank of course Dave Lupu of Ford, “the Golden ones” as I refer to them at GS Syndicate, who I was asked to liaise with, as well as a very good guy named Mr. Michael Shapiro at Societe Generale.  SocGen served as B&D
Ford Motor Credit Co., LLC – Final Pricing

F $300mm FRNs due 8/12/2019 @ $100.00 or 3mL+83
F $700mm 1.897% due 8/12/2019 @ $100.00 to yield 1.897% or T+105

 

Mischler’s “Give Back” Component

 

Ours are not merely issuer meetings focused solely on renewables, green energy, spreads, the market and new investors rather they go beyond our latest company updates, add-ons and build-outs.  You know what?  That’s exactly how it can and should work folks!  My CEO, Dean Chamberlain, a West Point graduate and Service Disabled Veteran himself – will be carrying around his metal shoulder for the rest of his life as a reminder of his service to our country – and he’s proud of it.  So are we of him!  During our meetings he’s right there to discuss market mechanics, the drill downs, our and out platform but when the question of honoring or helping United States Veterans comes up, meetings take on a whole new meaning.  It’s something to witness.  That “give back” component of Mischler Financial Group, Inc. is more than a feel good for those asking – it’s one of the many rewards for working here.

Mischler-Veterans-Education-Challenge

Avis and Bruce Richards, Founders of VetEdChallenge, MFG Analyst Jonathon Herrick, CEO Dean Chamberlain

 

In 1994, Mischler Financial Group became the securities industry’s first, fully-certified Service Disabled Business Enterprise.   Our original business plan envisioned our filling a void in the financial industry in connection with both mounting legislative initiatives (federal and state) and the increasing focus on the part of public plan sponsors and corporate issuers to broaden diversity and inclusion goals through the mandated inclusion of minority-owned service providers.

Since that time, and through the leadership and inspiration of both our Founder & Chairman Walter Mischler (SDV) a U.S Military Academy at West Point grad (Class of ’69) and CEO Dean Chamberlain (USMA Class of ’85), our firm has grown exponentially.  We now employ approximately 50 financial industry professionals across five major-city offices and we provide aggressively-competitive capital markets services to a discerning institutional community that includes the country’s top Fortune corporations, the leading public plan sponsors and leading investment managers.

However much we’ve grown and benefited from the hard work of our team and the support and trust of those who we do business for and the contemporaries who we work with across the financial services arena, we have remained adamant about our firm’s unwavering dedication to “doing good by giving back” to the disabled military veteran community and their respective families.

Our support of the SDV community includes our taking a lead role in a broad variety of philanthropic programs, advocacy initiatives and mentoring of service-disabled military veterans who are determined to overcome all obstacles.

Since 1994, we have directly and indirectly raised hundreds of thousands of dollars for critical SDV support programs including, among others, The Fisher House Foundation, The Children of Fallen Patriots Foundation, Bob Woodruff Foundation, The Semper Fi Fund, Veterans Education Challenge, Lead the Way Fund and Wounded Warrior Project.

So, when we’re on your deals, we’ll do our best to serve you the right way and you’ll have our promise and commitment that some of those fees will go to one of these funds or others like them, to help those who were prepared to give or gave the ultimate sacrifice. That commitment is part of our shared ethos here at Team Mischler.

 

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

 

IG Corporate New Issuance This Week
8/08-8/12
vs. Current
WTD – $11.80b
August 2016 vs. Current
MTD – $60.75b
Low-End Avg. $21.76b 54.23% $60.48b 100.45%
Midpoint Avg. $22.80b 51.75% $61.13b 99.38%
High-End Avg. $24.93b 47.33% $61.78b 98.33%
The Low $15b 78.67% $45b 135.00%
The High $30b 39.33% $75b 81.00%

 

 

Have a great evening!
Ron

 

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

NICs, Bid-to-Covers, Tenors and Sizes

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
8/01
TUES.
8/02
WED.
8/03
TH.
8/04
FRI.
8/05
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 7/25
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
New Issue Concessions 1.16 bps 2.08 bps 11.28 bps <1> bps N/A 3.17 bps 1.23 bps 3.95 bps 0.82 bps
Oversubscription Rates 2.48x 2.77x 2.61x 3.90x N/A 2.86x 3.63x 3.42x 4.73x
Tenors 15.70 yrs 13.54 yrs 9.17 yrs 5.72 yrs N/A 11.57 yrs 13.45 yrs 7.95 yrs 9.58 yrs
Tranche Sizes $1,671mm $750mm $958mm $528mm N/A $1,020mm $875mm $1,482mm $887mm

 

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
Air Lease Corporation BBB-/A- 3.00% 9/15/2023 750 +low 200s (202.5) +185a (+/-5) +180 +180 BAML/CITI/JPM/MIZ
Ameriprise Financial Inc. A3/A 2.875% 9/15/2026 500 +hi 130s (+137.5) +130-135 +130 +130 CITI/JPM/WFS
Archer-Daniels-Midland Co. A2/A 2.50% 8/11/2026 1,000 +110a +98a (+/-3) +95 +95 BNPP/HSBC
Berkshire Hathaway Finance Aa2/AA FRN 8/15/2019 250 3mL+equiv 3mL+equiv 3mL+26 3mL+26 BAML/GS/JPM/WFS
Berkshire Hathaway Finance Aa2/AA 1.30% 8/15/2019 1,000 +60-65 +50a (+/-2) +48 +43 BAML/GS/JPM/WFS
Berkshire Hathaway Inc. Aa2/AA FRN 8/15/2018 250 3mL+equiv 3mL+equiv 3mL+15 3mL+15 BAML/GS/JPM/WFS
Berkshire Hathaway Inc. Aa2/AA 1.15% 8/15/2018 500 50-55 +45a (+/-2) +43 +43 BAML/GS/JPM/WFS
Boston Properties LP A-/BBB+ 2.75% 10/01/2026 1,000 +140a +125a (+/-2) +125 +125 BAML/DB/JPM/MS/USB
CenterPoint Energy Houston A1/A 2.40% 9/01/2026 300 +100a +85a (+/-2) +83 +83 BAML/DB/RBC
CubeSmart LP Baa2/BBB 3.125% 9/01/2026 300 +hi 100s (+187.5) +165a (+/-5) +160 +160 BARC/JEFF/WFS
Ford Motor Credit Co. LLC Baa2/BBB FRN 8/12/2019 300 3mL+equiv 3mL+equiv 3mL+83 3mL+83 CITI/CA/GS/MS/SG/RBC
Ford Motor Credit Co. LLC Baa2/BBB 1.897% 8/12/2019 700 +120a +110a (+/-5) +105 +105 CITI/CA/GS/MS/SG/RBC
HCA Inc. Ba1/BBB- 4.50% 2/15/2027 1,200 4.625%a 4.625%a 4.50% +294 BAML/BARC/CITI/CS/DB/GS
JPM/GS/RBC/STRH/UBS/WFS
ING Bank A1/A+ FRN 8/15/2019 250 3mL+equiv 3mL+equiv 3mL+61 3mL+61 CS/ING/JPM/MS/WFS
ING Bank A1/A+ 1.65% 8/15/2019 450 +87.5a +85a (+/-2) +83 +83 CS/ING/JPM/MS/WFS
ING Bank A1/A+ FRN 8/15/2021 250 3mL+equiv 3mL+equiv 3mL+88 3mL+88 CS/ING/JPM/MS/WFS
ING Bank A1/A+ 2.05% 8/15/2021 600 +hi 90s (+97.5) +95a (+/-2) +93 +93 CS/ING/JPM/MS/WFS
NXP BX/NXP Funding LLC Ba2/BBB- 3.875% 8/31/2022 1,000 3.875%a N/A 3.875% 3.875% BAML/MS
TransCanada Trust Baa2/BBB 5.875% 8/15/2076 1,200 6.125%a 5.875-6.00%
(5.9375%)
5.875% +428.6 DB/JPM

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
United Mexican States A3/BBB+ 4.125% 1/21/2026 750 +165a +150a (+/-5) +145 +145 BAML/BBVA/CS
United Mexican States A3/BBB+ 4.35% 1/15/2047 2,000 +225a +210a (+/-5) +205 +205 BAML/BBVA/CS

 

Lipper Report/Fund Flows – Week ending August 3rd     

 

  • For the week ended August 3rd, Lipper U.S. Fund Flows reported an inflow of $2.472b into Corporate Investment Grade Funds (2016 YTD net inflow of $23.27b) and a net outflow of $2.464b into High Yield Funds (2016 YTD net inflow of $7.232b).
  • Over the same period, Lipper reported a net inflow of $60.438m from Loan Participation Funds (2016 YTD net outflow of $5.328b).
  • Emerging Market debt funds reported a net inflow of $613.318m (2016 YTD inflow of $4.330b).

(more…)

AAPL 7bil Debt Deal Sweetened By Diversity; Mischler Comment
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07.28.16 – An AAPL A Day…

 

Investment Grade New Issue Re-Cap

Apple Inc. Inks $7b 5-part

Tim Cook Talks About Commitment to D&I
Global Market Recap

IG Primary Market Talking Points

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab-All Eyes on Tokyo

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

It was an active day that finally put to rest all the rumors and chatter of an Apple multi-tranche new issue.  The Cupertino, California-based multinational technology company (NASDAQ:AAPL) priced a $7b 5-part that anchored today’s total of 6 IG Corporate issuers, 10 tranches and $9.625b in new supply.  As a result, the WTD IG Corporate-only volume of $28.00b eclipsed the syndicate midpoint average estimate of $20.48b by 37%.  SSA added one $1b deal bringing the all-in IG day totals to 7 issuers, 11 tranches and $10.625b.  The July MTD all-in IG Corporate only issuance total officially surpassed syndicate estimates for this month by 6% or $96.75b vs. $91.17b.

As for the IC Corporate plus SSA MTD total, we’re at a strong $127.987b.

and now onward we go to THE Deal-of-the-Day!

 

Apple of My Eye – Apple Inks $7b 5-part

All issuers are important to us here at Mischler Financial, the nation’s oldest Service Disabled Veteran broker-dealer.  However, it is really an accomplishment to secure repeat business.  Additionally to secure repeat business from the world’s largest publicly-held company as measured by market capitalization means that much more.  Today Mischler, whose Capital Markets team is on a roll, was honored to have been selected as an active diversity Co-Manager on today’s Apple Inc. $7.00b 5-part 3-year FXD/FRN, 5s, 10s and 30-year Senior Notes new issuance.

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing.  The five tranches posted a cumulative average contraction of 18 bps from start to finish. Here’s a look at how it all evolved:

 

AAPL Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
3yr FRN 3mL+equiv 3mL+equiv 3mL+14 3mL+14 <18> bps +1 N/A N/A
3yr FXD +50a +32-35 +32 +32 <18> bps +1 32/30 flat
5yr +70a +50-53 +50 +50 <20> bps <1> 50/49 flat
10yr +115a +100a (+/-2) +98 +98 <17> bps +3 98/96 flat
30yr +180a +165a (+/-2) +163 +163 <17> bps +2 162/160 <1>

 

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

 

AAPL Issue Tranche Size Books Sizes
At-the-Top
Final Book
Size
Bid-to-Cover
Rate
3yr FRN $350mm $900mm $700mm 2x
3yr FXD $1.15b $2.9b $2.4b 2.09x
5yr $1.25b $4.6b $4.3b 3.44x
10yr $2.25b $6.8b $6.5b 2.89x
30yr $2.0b $7.6b $7.2b 3.6x

 

  • In terms of relative value leads looked at the outstanding AAPL 4.65% due2/23/2046 that was T+161 pegging concession as negative 2 bps on today’s new 30-year that priced at T+163.
  • For 10-year far value, the AAPL 3.25% due 2/23/2026 was T+92 (G+95) pre-announcement versus today’s final 10-year pricing at T+98 landing NIC at 3 bps.
  • The 5-year comps used was the AAPL 2.25% due 2/23/2021 seen T+45 bid or G+51 inferring a negative 1 bp NIC on today’s 5yr pricing at T+50.
  • Finally the 3-year looked at the AAPL 1.70% due 2/22/2019 that was T+27 (G+31) or a 1bp NIC versus today’s new T+32 3-year pricing.

 

Proceeds of today’s offering will be used for general corporate purposes, including repurchases of Apple Inc. common stock and payment of dividends under its program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions, and repayment of debt, according to regulatory filings.

 

Apple Inc. Final Pricing Details

 

AAPL $350m FRNs due 8/02/19 @ $100.00 or 3mL+14

AAPL $1.15bn 1.10% due 8/2/19 @ $99.90 to yield 1.134% or T+32 MW T+10

AAPL $1.25bn 1.55% due 8/4/21 @  $99.861 to yield 1.579% or T+50 MW T+10

AAPL $2.25bn 2.45% due 8/4/26 @ $99.727 to yield 2.481% or T+98 MW T+15

AAPL $2bn 3.85% due 8/4/46 @ $99.735 to yield 3.865% or T+163 MW T+25

 

From the Top Down – Apple Inc.’s Tim Cook Talks About the Company’s Commitment to D&I

With a market cap of $560 billion that’s just too steep even for the guy-in-the-corner to take on in telling the great Diversity and Inclusion story at the world’s most valuable company.  So, instead, I turn to the head chef himself, none other than Tim Cook, CEO of Apple Inc.  It cuts to the heart of what I mean when I consistently write here in the “QC” that “D&I starts from the top down!”  What better company to illustrate that in practice for all of Mischler’s issuer relationships to read than with the world’s largest company.  And “Yes” I own an iPhone and an iPad……my wife owns an iPhone……2 to be exact…….my daughter owns an iTouch and an iPad.  So, we are loyal customers and fans alike.  Stock?  Of course there is also Apple stock in the Quigley family portfolio.  Take it away Tim:

A message from Tim Cook…AAPL-debt-issuance-mischler

Apple has always been different; a different kind of company with a different view of the world. It’s a special place where we have the opportunity to create the best products on earth — products that change lives and help shape the future. It’s a privilege we hold dear.

Diversity is critical to innovation and it is essential to Apple’s future. We aspire to do more than just make our company as diverse as the talent available to hire. We must address the broad underlying challenges, offer new opportunities, and create a future generation of employees as diverse as the world around us. We also aspire to make a difference beyond Apple.

This means fostering diversity not just at Apple but throughout our entire ecosystem, from the customers we welcome in our stores to the suppliers and developers we work with. We are committed to fostering and advancing inclusion and diversity across Apple and all the communities we’re a part of. As one example, we’re proud that our spending on women- and minority-owned businesses exceeded $650 million last year.

We want every person who joins our team, every customer visiting our stores or calling for support to feel welcome. We believe in equality for everyone, regardless of race, age, gender, gender identity, ethnicity, religion, or sexual orientation. That applies throughout our company, around the world with no exceptions.

Last year we reported the demographics of our employees for the first time externally, although we have long prioritized diversity. We promised to improve those numbers and we’re happy to report that we have made progress. In the past year we hired over 11,000 women globally, which is 65 percent more than in the previous year. In the United States, we hired more than 2,200 Black employees — a 50 percent increase over last year — and 2,700 Hispanic employees, a 66 percent increase. In total, this represents the largest group of employees we’ve ever hired from underrepresented groups in a single year. Additionally, in the first 6 months of this year, nearly 50 percent of the people we’ve hired in the United States are women, Black, Hispanic, or Native American.

As you can see, we’re working hard to expand our recruiting efforts so we continue hiring talented people from groups that are currently underrepresented in our industry. We’re supporting education with programs like the Thurgood Marshall College Fund to help students at historically black colleges and universities find opportunities in technology. ConnectED is bringing our technology to some of the most economically disadvantaged schools and communities in the United States, so more people have the opportunity to pursue their dreams. We’re also hosting hundreds of students at our annual developer conference, and we’re setting up new programs to help students learn to code.

We are proud of the progress we’ve made, and our commitment to diversity is unwavering. But we know there is a lot more work to be done.

Some people will read this and see our progress. Others will recognize how much farther we have to go. We see both. And more important than these statistics, we see tens of thousands of Apple employees all over the world, speaking dozens of languages, working together. We celebrate their differences and the many benefits we and our customers enjoy as a result.

Tim Cook

CEO, Apple Inc.

Deals that Open Doors for Diverse Financial Firms

 

Included among Apple’s Diversity Network Associations is Apple Veterans Association.  Apple launched its Supplier Diversity Program in 1988, and it’s been growing and thriving ever since. Through the program, the Company works with a variety of organizations to identify new suppliers whose values match their own. And in just the last year, Apple spent over $3 billion with more than 6000 small and diverse suppliers.  Those suppliers extend to the financial services industry. What transpired on today’s new 5-part Apple transaction was an inflection point for Team Mischler, the nation’s oldest Service Disabled Veteran broker dealer.  We were able to introduce nearly three dozen new accounts to Apple’s investor profile.  We were rewarded with allocations that touched virtually every single account.  That, in turn, creates investor confidence as well as credibility for our broker-dealer.  We take what we do seriously and we strive to be the best with each opportunity that we are given.

Apple works with many of the world’s leading financial institutions, but Apple also wants strong ideas and points of view that can only come from small, diverse firms. The Company feels it lends a broader financial picture and makes the corporation more informed by relying on these firms for some of its most crucial transactions. Today, Mischler Financial Group, Inc. (Service Disabled Veteran-owned); Lebenthal & Co., LLC (woman-owned); and Loop Capital Markets LLC and The Williams Capital Group, L.P. (both African American–owned) were active co-managers on Apple’s $7 billion bond offering.

There are many people to thank for today’s stellar opportunity to serve Apple Inc. First and foremost is Team Apple Inc. Treasury/Funding and that means Mike, Matt and Eric.  As a result, Team Apple is the recipient of Mischler Financial’s Official 5-Star Salute!

As for the joint lead that was appointed by the issuer to liaise with today’s diversity banking group, it was déjà vu all over again folks.  Goldman Sachs once again handled the D&I component of today’s transaction.  Suffice it to say I will hold back on the “kudos”, “good work”, “plaudits”, “hats off” etc, lest someone at Goldman aggressively starts pursuing me to head all public relations for the House of Gold!!  (Haha!) Suffice it to say, congrats and thank you’s to Jonny Fine, Gaurav Mathur, Tony Shan, Dan Miree, Matt Jackson and Salina Lee who I worked with today, via e-mail, phone, Bloomberg and chats.  As the saying goes “Make new friends, but keep the old; those are silver but these are gold.” Thank you Team GS!

Global Market Recap

 

  • S. Treasuries – Mixed & little changed. JGB’s closed mixed & the long end in Europe bid.
  • 3mth Libor – Set at highest yield since May 2009 (0.75650%).
  • Stocks – U.S. stocks mixed. Europe led down by bank stocks. Nikkei struggled.
  • Economic – U.S. data a bit weaker but not a factor.
  • Overseas Economic – Europe data better with higher German CPI.
  • Economic Tomorrow – Big calendars in Japan, Europe & the U.S.
  • Currencies – USD mixed vs. the Big 5 with the DXY Index weaker.
  • Commodities – Crude down while natural gas, gold, silver & copper closed higher.
  • CDX IG: +0.36 to 73.81
  • CDX HY: +4.86 to 401.99
  • CDX EM: +5.44 to 266.42

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

-Tony Farren

 

IG Primary Market Talking Points

 

  • Canadian National Railway Co. upsized its 30-year Senior Notes new issue today to $650mm vs. $500mm at the launch and at the tightest side of guidance.
  • Split-rated Eagle Materials Inc. increased today’s 10-year Senior Notes new issue to $350mm vs. $300mm at a tighter launch and after having skipped guidance.
  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 9 IG Corporate new issues only was 20.06 bps.

 

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

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $28.00b
July 2016 vs. Current
MTD – $96.75b
Low-End Avg. $19.39b 144.40% $90.09b 107.39%
Midpoint Avg. $20.48b 136.72% $91.17b 106.12%
High-End Avg. $21.57b 129.81% $92.26b 104.87%
The Low $10b 280.00% $60b 161.25%
The High $30b 93.33% $125b 77.40%

 

 

Have a great evening!
Ron

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

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

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


Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points

Uncovering Discover Bank’s 10yr Fair Value  

New Issues Priced

Lipper Report/Fund Flows

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Trading Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 


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

Global Market Recap

 

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

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

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

-Tony Farren

 

IG Primary Market Talking Points

 

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

 

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

 

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

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

 

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

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

 

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

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

 

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

 

Have a great evening!
Ron

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

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

To Honor Memorial Day, Mischler Pledges Profits to VetEdChallenge
May 2016      Company News, Giving Back, News and Information   

vetedchallenge-crowdrise-mischlerNewport Beach, CA & Stamford, CT, May 12, 2016–Mischler Financial Group (“MFG”), the financial industry’s oldest minority investment bank and institutional brokerage owned and operated by Service-Disabled Veterans, announced today that in recognition of the upcoming Memorial Day celebration, the firm has pledged a percentage of its entire May profits to Veterans Education Challenge, (“VetEdChallenge”) a donation-based crowdfund campaign. The philanthropic initiative is dedicated to providing need-based college scholarships to ex-military students pursuing higher education so they can get better access to a broad range of career development opportunities.

Veterans Education Challenge was established in November 2015 by investment management industry veteran Bruce Richards and his wife Avis. Mr. Richards is personally matching the first $1million in donations made to the “VetEdChallenge” campaign via crowdfund platform “Crowdrise.” He  is co-founder, CEO and managing partner of Marathon Asset Management, the $12.5 billion investment firm specializing in global credit and fixed income markets.

“This Memorial Day Month we’ve embraced a more contemporary approach to paying it forward via the VetEdChallenge program”, said Mischler Financial Group CEO Dean Chamberlain, a graduate of the U.S. Military Academy at West Point who himself earned his MBA via a work-scholarship program at Northwestern University’s Kellogg School of Management. “Our annual, entire month of May pledge in honor of Memorial Day, as well as our annual Veteran’s Day Month pledge has typically focused on traditional, best-in-class philanthropies and we believe the VetEdCballenge is an ideal vehicle to directly impact the future of returning veterans, as higher education can provide a material lift in the course of pursuing opportunities.”

Added Chamberlain, “Because we are always mentoring returning veterans, we know first-hand about the challenges these men and women face as they assimilate back into the mainstream and find themselves working multiple jobs to put aside funds for educational degrees beyond their pre-military academic background. We’re proud to partner with Bruce Richards and be affiliated with his truly thought-leading program. We encourage our institutional clients to help us support this initiative via our trading desk(s) and/or directly via the Veterans Education Challenge crowdfund program.

Other philanthropic organizations that Mischler Financial Group supports are displayed on the firm’s website via this link.

About Mischler Financial Group

Mischler Financial Group is headquartered in Newport Beach, California with regional offices in major cities throughout the United States. MFG is a federally-certified minority broker-dealer and a Service-Disabled Veterans Business Enterprise (SDVBE). We provide capital markets services across primary debt and equity markets, secondary market agency-only execution within the global equities and fixed income markets and asset management for liquid and alternative investment strategies. Clients of the firm include leading institutional investment managers, Fortune corporate and municipal treasurers, public plan sponsors, endowments, and foundations. The firm’s website is located at http://www.mischlerfinancial.com

#          #          #

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

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

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

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

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

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

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

About Wall Street Letter’s Institutional Trading Awards

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

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