Browsing articles tagged with "spread compression Archives - Mischler Financial Group"
Bearish Flattening, Tax Reform: DCM Unscathed; Rinse Repeat
November 2017      Debt Market Commentary, Recent Deals   

Quigley’s Corner 11.28.17 Bearish Flattening; Tax Reform; US Corporate Debt Capital Markets Unscathed; Rinse Repeat

 

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates For This Week

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

Rates Trading Lab

New Issues Priced: Synchrony Financial and Deutsche Bank AG New York 

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending Nov 22

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 8 issuers across 8 tranches totaling $4.25b.  The big story for our nation’s oldest Service Disabled Veteran broker dealer – Mischler Financial Group, Inc., is that we were named a Co-Manager on the day’s two largest issues – Deutsche Bank AG New York Branch’s $1bn 15NC10 fxd-to-fxd Reset Sub Tier 2 Notes and Synchrony Financial’s 10-year Senior Notes new issue.  Those two transactions also just happened to account for 47% of today’s IG Corporate issuance!  You know what that means? Both DB and SYF are today’s Deals-of-the-Day which I will get to in alphabetical order following a review of an incredible day for markets and geopolitical events risk factors that I strongly advise you stay tuned to.

The S&P 500, the DOW and Nasdaq all closed at new all-time highs.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate desk estimates:

 

  • The IG Corporate WTD total is 47.81% of this week’s syndicate midpoint average forecast or $13.875b vs. $29.02b.
  • MTD we’ve priced 109.03% of the syndicate forecast for October IG Corporate new issuance or $105.079b vs. $96.38b.
  • There are now 11 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • IHS Markit Ltd. (Ba1/BBB) bumped up its 8.25-year 144a/REGS Senior Notes new issue this afternoon to $500mm from $400mm at the launch and at the tightest side of guidance.
  • Physicians Realty LP increased today’s 10-year Senior Notes new issue to $350mm from $300mm at the launch and at the tightest side of guidance.
  • Life Storage LP upsized its 10-year Senior Notes new issue today to $450mm from $400mm at the launch and at the tightest side of guidance.
  • BAML’s IG Master Index was unchanged at +104.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.99.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +145.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.9b on Monday versus $1.7b on Friday and $15.7b the previous Monday.
  • The 10-DMA stands at $14b.

 

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

 

IG Corporate New Issuance This Week
11/27-12/01
vs. Current
WTD – $13.875b
November 2017 vs. Current
MTD – $105.079b
Low-End Avg. $27.72b 50.05% $95.28b 110.28%
Midpoint Avg. $29.02b 47.81% $96.38b 109.03%
High-End Avg. $30.32b 45.76% $97.48b 107.80%
The Low $25b 55.50% $75b 140.11%
The High $38b 36.51% $130b 80.83%

 

Global Market Recap

 

  • U.S. Treasuries – Unchanged (30yr) to small losses (balance of curve) in a choppy session.
  • Overseas Bonds – JGB’s mixed. EU core & semi core little changed. Peripherals more green.
  • 3mth Libor – Set at the highest level since December 2008 (1.47882%).
  • U.S. Stocks – Big rally to all-time highs.
  • Overseas Stocks – China rallied. Nikkei & HS tiny losses. Winning day in Europe.
  • U.S. Economic – Mixed data today but the strong data was very, very strong.
  • Overseas Economic – Not a factor today but will be tomorrow.
  • Currencies – USD outperformed 4 of the Big 5. Solid rally for the DXY Index.
  • Commodities – Down day from crude oil, gold, cooper, silver, etc. Strong session for natural gas.
  • CDX IG: -0.89 to 52.65
  • CDX HY: -4.71 to 317.68
  • CDX EM: -1.15 to 179.38

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
“North Korea”
11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. This comes 26 days after SOKO’s 11/02 NIS warning of activity at a NOKO nuke facility and expectations of a launch. Situation is “dire” Action needed = “Exclusive “QC” source. SOKO Olympics begin Friday 2/2018 and end Sunday 2/25 = Dates to keep in mind! 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
ELEVATED
“Beltway Dysfunction”
11/28 – U.S. Senate Budget Committee advanced the GOP tax reform bill to Senate for debate that could see a vote take place as early as Thursday 11/30. Congress passed the Tax Reform Bill on 11/16 in a 227-205. Strong push to unite all Republicans behind Trump to get tax reform done by year end.

Gaining traction in the Beltway: Atty. Gen. Sessions raised the possibility of special counsel appointment to investigate the Uranium One Deal involving the Clinton Foundation in which a Russian company took control of 20% of entire supply of U.S. uranium supply used to make nuclear weapons in exchange for Clinton Foundation donations. In a decree on March 20, 2020 Russia’s Vladimir Putin, abolished the Federal Agency for Nuclear Power. The public corporation Rosatom (he owns) was vested with the authority to implement on behalf of the Russian Federation the rights of shareholders in the joint-stock companies in the nuclear energy industry. In 2013 Rosatom retained full ownership. Matter of U.S. national security.

 

CAUTION

MENA & EU

11/28Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group.  Beirut, is proving ground for Saudi-Iranian proxy wars. Consolidation of KSA power with Crown Prince Mohammed bin Salman breeds sweeping change in the Kingdom called “Vision 2030” to wean KSA off oil. bin Salman leadership saw more than 50 Saudi inner players arrested in anti-corruption probe including Prince Alwaleed bin Talal, Saleh Kamel & Khalid al-Tuwaijri to show he is clearly in charge.  Trump and House of Saud are close.  Both share strong views on an anti-nuclear Iran. KSA needs oil above $81 to break even. “Tensions” will surely boost the price of a barrel of “black gold.”

Negotiators reached agreement in principle on EU settlement demand or BREXIT “divorce bill.” Amount is heard to be in a €45b to €55b range down from the €60bn that the EU initially demanded. This breaks the deadlock and should promote further Dec. & Jan. negotiations. U.K. withdrawal from EU takes place in 3/2019. Moody’s downgraded the UK on 9/22 to Aa2 from Aa1. Critical that PM Theresa May has shown an ability to effectively.

Spain’s Rajoy announces snap elections on Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Former Catalan Pres. Puigdemont to appear in court 11/17. On 11/02: 8 Catalan gov’t. members jailed in Spain for role in independence rebellion & sedition.

The Caliphate is destroyed but ISIS is now scattered across a wider region including Europe. November MTD Terror Stats a/o 11/27: 39 terrorist attacks; 766+ dead; 705+ wounded. 

MODERATE
“China”
China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. National Congress of the Chinese Communists Party confirms Xi Jinping as its most powerful leader since Mao. Xi loyalists make up inner sanctum of Chinese politics into the next decade. 6% GDP in 2018 will be difficult.

Cybercrime, ransomware, viruses & hacking are winning cyber wars. Recent attacks have hit four continents, law firms, food companies, power grids, pharma and governments. 

Italian elections in March 2018.

MARGINAL
“2018 US Recession?
Bearish flattening signals danger for the U.S. economy. Recent bullish flattening has completely disregarded the absence of inflation. Jay Powell nominated as new fed Chief. Should provide stability/continuity; positive for GOP if latter gets their act together. The balance sheet or “b/s” normalization program is proceeding and will remain highly incremental. Fed signals 1 more rate hike in 2017 (December12/13 FOMC); 3 in 2018. Dot plots are unchanged for 2017 & ’18; lower for ’19 & longer-term. Shifts/adjustments in monetary policy outweigh chance of a 2018 recession.

 

Deutsche Bank AG New York Branch 15NC10 fxd-to-fxd Reset Sub Tier 2 Notes Deal Dashboard 

Mischler Financial Group, Inc., the nation’s oldest Service Disabled Veteran broker dealer was honored today to serve on today’s $1b Deutsche Bank AG/New York Branch 15NC10 fixed-to-fixed Reset Subordinated Tier 2 Notes new issue. We thank Team DB for selecting Mischler as a Junior Co-Manager from among the host of diversity firms in our industry.

For the DB fair value study I looked at the outstanding 4.296% 15NC10 Global Sub Notes (5/24/2028) that was 4.63% to call or 4.70 YTM which is equal to T+237 vs. T10.  Adding 9 bps to account for the swap curve from 2028s to 2032s gets you to T+246 pegging NIC on today’s T+255 print at 9 bps. A personal “thank you” to Margaret Szczerbicki!

Use of proceeds from today’s transaction will be used for general corporate purposes.

 

DB Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
15nc10
fxd-to-fxd
12/01/2032
+280a +260a (+/-5) +255 +255
Reset 5yr
MS +255.3
<25> bps 9 250/247 <5>

 

………and here’s a snap shot of today’s final book size and oversubscription rate – the measure of investor demand:

 

DB Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
15nc10 ftf
12/01/2032
$1bn $2.3b 2.30x

 

Final Pricing – Deutsche Bank AG New York Branch 15NC10 fixed-to-fixed Reset Subordinated Tier 2 Notes

DB $1bn 4.875% (15nc10) fxd-to-fxd due 12/01/2032 @ $99.968 to yield 4.878% or T+255  Reset 5yr MS +255.3

 

Synchrony Financial $1bn 10-year Senior Notes Deal Dashboard 

Mischler Financial Group, Inc., is proud to announce that it also served as an active 1.00% Co-Manager on Synchrony Financial’s $1bn 10-year Senior Notes new issue today.  We have enjoyed a longtime partnership with Synchrony.

For the Synchrony Financial relative value study I looked to the outstanding SYF 3.70% Senior Unsecured Global Notes due 8/04/2026 that were T+148 (G+153) pre-announcement. Adding 5 bps for the extension from the SYF 8/2026 to today’s SYF 12/2027 gets us to G+158 landing on today’s +165 print as 7 bps.

Use of proceeds from today’s transaction will be used for general corporate purposes.

 

SYF Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
SYF 10yr +180a +165 the # +165 +165 <15> bps 7 165 (issue bid) 0/flat

 

………and here’s a snap shot of today’s final book size and oversubscription rate – the measure of investor demand:

 

SYF Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
SYF 10yr $1bn $2.4b 2.40x

 

Final Pricing – Synchrony Financial 10-year Senior Notes

SYF $1bn 3.95% due 12/01/2027 @ $99.714 to yield 3.985% or T+165

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