Browsing articles tagged with "veteran-owned broker-dealer Archives - Mischler Financial Group"
Philip Morris Smokes DCM with 5-part Debt Deal-Mischler Comment
February 2017      Debt Market Commentary   

Quigley’s Corner 02.15.17-Philip Morris Deal “Smokes” Primary DCM with $2.5bil 5-part

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

Global Market Recap

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 8th    

IG Credit Spreads by Rating     

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

4 IG Corporate issuers priced 9 tranches between them totaling $5.65b.  The SSA space, however, remained quiet.

The WTD IG Corporate total is now $22.25b or 4% more than this week’s syndicate midpoint average estimate calling for $21.33b. In fact, WTD we priced 85.50% of the highest projection in my survey which was $26b.

 

The S&P, Dow and Nasdaq all reached new all-time highs again today!

 

IG Primary & Secondary Market Talking Points

 

  • The average spread from IPTs thru the launch/final pricing of today’s 9 IG Corporate-only new issues was <20.78> bps.
  • BAML’s IG Master Index tightened 2 bps to +124 vs. +126.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.19 vs. +120 marking a new tight..  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +166 vs. +167.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $23.8b on Tuesday versus $16.7b on Monday and $22.1b the previous Tuesday.
  • The 10-DMA stands at $19.8b.

 

Global Market Recap

 

  • U.S. Treasuries – registered its 5th losing session in a row.
  • Overseas Bonds – JGB’s & Europe mixed & little changed except for Greece (weak).
  • Stocks – U.S. stocks traded at all-time highs for the 5th session in a row.
  • Overseas Stocks – Nikkei, Hang Seng & Europe rallied while China was red.
  • Economic – Full calendar was mixed. Data that counted most was negative for USTs.
  • Currencies – USD gave up overnight gains during the NY session.
  • Commodities – Gold & wheat were better. Crude oil small lose (bearish inventory).
  • CDX IG: +0.08 to 62.88
  • CDX HY: +0.41 to 317.36
  • CDX EM: +8.48 to 218.63

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
2/13-2/17
vs. Current
WTD – $22.25b
February 2017
Forecasts
vs. Current
MTD – $49.225b
Low-End Avg. $20.71b 107.44% $90.65b 54.30%
Midpoint Avg. $21.33b 104.31% $91.96b 53.53%
High-End Avg. $21.96b 101.32% $93.26b 52.78%
The Low $15b 148.33% $85b 57.91%
The High $26b 85.58% $120b 41.02%

 

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

Have a great evening!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS

 

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
Consumers Energy Co. A1/A+ 3.95% 7/15/2047 350 +110a +90a (+/-2.5) +87.5 +87.5 BAML/CITI/GS/SCOT/WFS
Mitsubishi UFJ Finc’l. Grp. Inc. A1/A FRN 2/22/2022 500 3mL+equiv 3mL +equiv 3mL+92 3mL +92 MUFG/MS
Mitsubishi UFJ Finc’l. Grp. Inc. A1/A 2.998% 2/22/2022 1,000 REV. GUID: +120a
+120-125
+100-105 +100 +100 MUFG/MS
Mitsubishi UFJ Finc’l. Grp. Inc. A1/A 3.677% 2/22/2027 1,000 REV. GUID: +135a
+135-140
+120a (+/-2) +118 +118 MUFG/MS
Philip Morris Int’l. Inc. A2/A 1.625% 2/21/2019 700 +70a +55a (+/-5) +50 +50 CITI/CS/DB (a) BNPP/ING (p)
Philip Morris Int’l. Inc. A2/A FRN 2/21/2020 300 3mL +57a 3mL +equiv 3mL+42 3mL+42 CITI/CS/DB (a) BNPP/ING (p)
Philip Morris Int’l. Inc. A2/A 2.00% 2/21/2020 1,000 +80a +70a (+/-5) +65 +65 CITI/CS/DB (a) BNPP/ING (p)
Philip Morris Int’l. Inc. A2/A 2.625% 2/18/2022 500 +90a +80a (+/-5) +75 +75 CITI/CS/DB (a) BNPP/ING (p)
Snap-On Incorporated A2/A 3.25% 3/01/2027 300 +110a +85a (+/-5) +75 +75 CITI/JPM

 

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

 

Index Open Current Change  
IG27 *62.80 62.979 0.179
HV27 134.645 132.445 <2.20>
VIX 10.74 11.94 1.20  
S&P 2,337 *2,349 12
DOW 20,504 *20,611 107  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $5.65 bn DAY: $5.65 bn
WTD: $22.25 bn WTD: $24.25 bn
MTD: $49.225 bn MTD: $61.475 bn
YTD: $221.608 bn YTD: $288.758 bn

 

Lipper Report/Fund Flows – Week ending February 8th    

     

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

 

IG Credit Spreads by Rating (more…)

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

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

 

Investment Grade New Issue Re-Cap

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

IG Primary & Secondary Market Talking Points

Global Market Recap

Key Talking Points of Fed Testimony

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

Next Up – Greece, Grexit, France & Frexit

Tony’s Take on Today’s Fed Testimony

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

The Boeing Company $300mm 30-year Deal Dashboard

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Tomorrow’s Calendar

 

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

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

 

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


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

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

IG Primary & Secondary Market Talking Points

 

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

 

Global Market Recap

 

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

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

-Tony Farren


Key Talking Points of Fed Testimony

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

Here are the key takeaways:

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

 

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


Three Rates Hikes in 2017? .HIGHLY Improbable

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

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

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

Next Up – GreeceA Global Macro View

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

 

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

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

 

Tony’s Take on Today’s Fed Testimony

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

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

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

 

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

 

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

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

 

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

 

Have a great evening!

Ron Quigley

 

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

 

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

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

 

New Issues Priced

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

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

 

IG          

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

 

SSA

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

 

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

 

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

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

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

 

Lipper Report/Fund Flows – Week ending February 8th    

     

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

IG Credit Spreads by Rating (more…)

Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest
February 2017      Debt Market Commentary   

Quigley’s Corner – 02.10.17 Weekend Edition | Outlook from Best & Brightest

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending February 8th    

IG Credit Spreads by Rating

IG Credit Spreads by Industry

Economic Data Releases

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Tomorrow’s Calendar

It was another no-print Friday today and a welcome one at that.  I am happy to announce that one additional syndicate desk earned its way into the “Best and the Brightest” so, my survey now includes 24 desks. They are the ones you want and need to hear from. They are very patiently lined up and waiting below with their numbers and thoughts for next week’s IG dollar DCM supply. So, kick back, relax, have a cup of coffee, knock back a beer or enjoy glass of wine or perhaps just sit by the fireplace and read what you need to know.  Let’s recap things first and on with the show!

 

IG Primary & Secondary Market Talking Points

 

  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 26 deals that printed, 14 tightened versus NIP for a 00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +121 vs. 1.22.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +167.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.4b on Thursday versus $22.1b on Wednesday and $22.5b the previous Thursday.
  • The 10-DMA stands at $20.3b.

 

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

 

IG Corporate New Issuance This Week
2/06-2/10
vs. Current
WTD – $14.70b
February 2017
Forecasts
vs. Current
MTD – $27.275b
Low-End Avg. $23.74b 61.92% $90.65b 30.09%
Midpoint Avg. $24.72b 59.47% $91.96b 29.66%
High-End Avg. $25.70b 57.20% $93.26b 29.25%
The Low $15b 98.00% $85b 32.09%
The High $35b 42.00% $120b 22.73%

 

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

 

I am happy to announce that I’ve added a new top syndicate desk to the “QC’s” “Best & Brightest” survey!  As they are in the top 25 they are a most welcome addition.  Once again, the “QC” received unanimous responses from the 24 syndicate desks surveyed in today’s Best & Brightest poll.  22 of those participants are among 2017’s YTD top 25 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 21 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 86.61% of all IG dollar-denominated new issue underwriting as of today’s table share percentage 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.

 

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for the third consecutive year! That’s 2014, 2015 and 2016 !!  More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! -RQ

 

The question posed to the “Best and the Brightest” early this morning framed with the following:
Here are this week’s numbers:

  • WTD, we missed this week’s IG Corporate syndicate midpoint average forecast by over 40% having priced only $14.70b vs. $24.72b.
  • Thus far in February we priced 30% of the monthly syndicate projection or $27.275b vs. $91.96b.
  • All-in YTD IG Corporate and SSA issuance stands at $268.558b! 

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

  • NICS:  <3.44> bps
  • Oversubscription Rates: 3.92x
  • Tenors:  12.04 years
  • Tranche Sizes: $735mm
  • Spread Compression from IPTs to the Launch: <19.60> bps


Here’s how this week’s performance data compares against last week’s:

 

  • NICs tightened 2.57 bps to <3.44> bps vs. <0.87> bps.
  • Over subscription or bid-to-cover rates increased by 0.80x to 3.92x vs. 3.12x.. 
  • Average tenors extended by 0.44 years to 12.04 years vs. 11.60 years.
  • Tranche sizes declined dramatically by $576mm to $735mm vs. $1,311mm, the result of last week’s hefty jumbo deal tranche sizes from MSFT, AT&T and AAPL.
  • Spread compression from IPTs to the launch/final pricing of this week’s 20 IG Corporate-only new issues widened ever so slightly by <0.17> bps to <19.60> vs. <19.77> bps.
  • Standard and Poor’s Investment Grade Composite Spreads widened 1 bp to +167 vs. +166.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +128 vs. +127. 
  • Spreads across the four IG asset classes tightened 0.50 bps to 20.50 vs. 21.00 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.46 bps to 24.74 vs. 25.20 bps also against their post-Crisis lows.
  • For the week ended February 8th, Lipper U.S. Fund Flows reported an inflow of $4.932b into Corporate Investment Grade Funds (2016 YTD net inflow of $17.286b) and a net inflow of $441.718m into High Yield Funds (2016 YTD net inflow of $732.780m).

 

Corporate America has posted earnings.  Most issuers have exited blackouts.  Thursday’s storm may have hampered a bit of issuance this week and next week is expected to be sizeable. Chair Yellen testifies before the U.S. Senate Banking Panel on Tuesday the 14th. This represents Yellen’s first appearance since raising rates last month. All eyes and ears will be tuned into that especially since the January FOMC meeting was not followed by a Press Conference. Meanwhile Japan’s Prime Minister Abe arrives today for his first official summit with President Trump through the weekend.    

My approach to the “Quig” Pro Quo is to give something first and then ask.  So, it’s now time for the question, – “what are your thoughts and numbers for next week’s IG Corporate new issue volume?” 

Thank you very much and a have a great weekend! -Ron”

 

The “Best and the Brightest” in Their Own Words*

 

*Responses the QC Best & Brightest are available exclusively to QC email subscribers

 

Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
2/13-2/17
Low-End Avg. $20.71b
Midpoint Avg. $21.33b
High-End Avg. $21.96b
The Low $15b
The High $26b

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

 

Next Week
2/13-2/17
1: 15b
2: 15-20b
10: 20b
1: 21b
4: 20-25b
5: 25b
1: 26b

 

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 weekend!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/06
TUES.
2/07
WED.
2/08
TH.
2/09
FRI.
2/10
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
New Issue Concessions <3.62> bps <7.5> bps 5.25 bps N/A N/A <3.44> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps
Oversubscription Rates 4.25x 4.56x 2.18x 7.33 N/A 3.92x 3.12x 3.29x 2.40x 2.85x 2.45x
Tenors 12.83 yrs 16.65 yrs 6.40 yrs 10 yrs N/A 12.04 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs
Tranche Sizes $744mm $850mm $690mm $300mm N/A $735mm $1,311 yrs $845mm $1,123mm $927mm $859mm
Avg. Spd. Compression
IPTs to Launch
<19.17> bps <25.40> bps <11.5> bps <35> bps N/A <19.60> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps

 

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 26 deals that printed, 14 tightened versus NIP for a 54.00% improvement rate while 8 widened (30.75%) and 4 were flat (15.25%).

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
H.B. Fuller Co. Baa3/BBB 4.00% 2/15/2027 300 +200a +170a (+/-5) +165 +165 156/153
ADB Aaa/AAA 2.00% 2/16/2022 3,750 MS +19a MS +19a MS +18 +26.95 25/24
BP Capital Markets PLC A2/A- FRN 8/14/2018 500 N/A 3mL+40a (+/-5) 3mL+35 3mL+35 3mL+29.5/26.5
BP Capital Markets PLC
(tap) New Total: $1.75b
A2/A- 2.315% 2/13/2020 500 +85a +70a (+/-5) +65 +65 63/60
BP Capital Markets PLC A2/A- 3.224% 4/14/2024 1,000 +120a +115a (+/-5) +110 +110 108/105
BP Capital Markets PLC A2/A- 3.588% 4/14/2027 850 +130a +125 the # +125 +125 121/118
CMS Energy Corp. Baa2/BBB 3.45% 8/15/2027 350 +125-130 +115a (+/-5) +110 +110 111/109
BNG Aaa/AAA 1.50% 2/15/2019 2,250 MS +13a MS +13a MS +13 +44.25 44/42
Citigroup Inc.
(tap) New Total: $1.75b
Baa3/A- 4.75% 5/18/2046 750 +185a +175a (+/-2) +173 +173 176/173
Fondo Mivivienda S.A.
(tap) New Total: $650mm
BBB+/BBB+ 3.50% 1/31/2023 150 +180a +175a (+/-5) +170 +170 170/167
MPLX LP Baa3/BBB- 4.125% 3/01/2027 1,250 very high 100s +193.75a +180a (+/-5) +175 +175 175/171
MPLX LP Baa3/BBB- 5.20% 3/01/2047 1,000 +50 bps curve
243.75
+225a (+/-5) +220 +220 215/212
Symantec Corp. Baa3/BB+ 5.00% 8NC3 1,100 +mid to hi 5.00%
or 5.625%a
5.25-5.30%
or 5.375%a
5.00% +271 277/272
Dexia Capital Local Aa3/AA- FRN 2/15/2019 500 3mL+50 N/A N/A 3mL+50 3mL+50/47
EIB Aaa/AAA 1.75% 5/15/2020 3,000 MS +14a MS +14a MS +12 +42.5 41/40
KfW Aaa/AAA 1.25% 9/13/2018 1,000 MS <4>a MS <4>a MS <4> +17.45 17.6/17.4
TVA Aaa/AAA 2.875% 2/01/2027 1,000 +low 50s / +52.5a +50a (+/-2) +48 +48 48/46
Discover Financial Services BBB-/BBB+` 4.10% 2/09/2027 1,000 +190a +175a (+/-5) +170 +170 171/167
Estee Lauder Cos. Inc. A2/A+ 1.80% 2/07/2020 500 +55-60 +45a (+/-5) +40 +40 38/36
Estee Lauder Cos. Inc. A2/A+ 3.15% 3/15/2027 500 +90-95 +80 (+/-5) +75 +75 77/74
Estee Lauder Cos. Inc. A2/A+ 4.15% 3/15/2047 500 +125-130 +115a (+/-5) +110 +110 113/111
First Republic Bank Baa1/BBB+ 4.625% 2/13/2047 400 +high 100s
+187.5a
RG: +170a (+/-5)
+175a (+/-5)
+165 +165 164/160
GATX Corp. Baa2/BBB 3.85% 3/30/2027 300 +170a +150a (+/-3) +147 +147 149/146
IHS Markit Ltd. BB+/BBB 4.75% 2/15/2025 500 5.00% 4.75%a 4.75% +244 219/217
Vale Overseas Ltd.
(tap) New Total: $2bn
BBB-/BBB 6.25% 8/10/2026 1,000 5.45%a 5.20-5.25% 5.20% +278.3 269/265
Wells Fargo & Co. A2/AA- FRN 2/11/2022 2,000 3mL+95-100 3mL+93 the # 3mL+93 3mL+93 3mL+89/86

 

Indexes and New Issue Volume

Index levels are as of 12:00 noon ET.
*Denotes new record high

Index Open Current Change  
IG27 64.712 65.024 0.312
HV27 138.575 137.87 <0.705>
VIX 10.88 10.72 <0.16>  
S&P 2,307 *2,313 6
DOW 20,172 *20,242 70  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $14.40 bn WTD: $22.15 bn
MTD: $26.975 bn MTD: $37.225 bn
YTD: $199.358 bn YTD: $264.508 bn

 

Lipper Report/Fund Flows – Week ending February 8th    

     

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

 

IG Credit Spreads by Rating

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 20.50 bps wider versus their post-Crisis lows!

 

ASSET CLASS 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
IG Avg. 128 128 128 127 127 128 128 128 126 126 0 +2 106
“AAA” 75 76 75 75 74 75 76 77 75 71 <1> +4 50
“AA” 79 80 79 79 79 80 80 79 78 78 <1> +1 63
“A” 103 104 103 103 103 104 104 104 103 103 <1> 0 81
“BBB” 161 162 161 161 160 161 161 161 159 160 <1> +1 142
IG vs. HY 265 270 265 264 259 265 267 272 270 267 <5> <2> 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 24.74 bps wider versus their post-Crisis lows!

 

INDUSTRY 2/09 2/08 2/07 2/06 2/03 2/02 2/01 1/31 1/30 1/27 1-Day Change 10-Day Trend PC
low
Automotive 112 112 112 112 113 115 116 117 116 117 0 <5> 67
Banking 119 120 119 119 118 120 121 121 119 120 <1> <1> 98
Basic Industry 155 157 156 156 155 156 156 157 156 156 <2> <1> 143
Cap Goods 94 95 95 95 95 95 95 95 95 95 <1> <1> 84
Cons. Prod. 106 106 106 105 105 105 106 106 105 105 0 +1 85
Energy 157 159 157 157 156 157 157 157 154 154 <2> +3 133
Financials 139 141 141 142 141 143 144 144 142 143 <2> <4> 97
Healthcare 115 115 114 114 113 114 114 114 112 112 0 +3 83
Industrials 130 130 129 129 129 129 130 129 128 128 0 +2 109
Insurance 138 139 139 139 138 139 139 139 138 139 <1> <1> 120
Leisure 127 128 127 128 128 129 129 128 129 129 <1> <2> 115
Media 156 157 156 156 155 156 156 155 154 153 <1> +3 113
Real Estate 140 141 141 141 140 141 141 141 139 140 <1> 0 112
Retail 115 115 115 114 114 115 115 114 112 112 0 +3 92
Services 123 123 123 123 123 123 123 122 121 121 0 +2 120
Technology 104 105 104 104 103 105 105 105 103 101 <1> +3 76
Telecom 168 168 166 166 165 165 166 164 161 161 0 +7 122
Transportation 127 128 128 128 127 128 129 128 126 126 <1> +1 109
Utility 127 128 128 128 127 127 127 127 126 127 <1> 0 104

                                  

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Import Price Index MoM January 0.3% 0.4% 0.4% 0.5%
Import Price Index ex Petroleum MoM January —- 0.0% <0.2%> <0.1%>
Import Price Index YoY January 3.4% 3.7% 1.8% 2.0%
U. of Michigan Sentiment February 98.0 95.7 98.5 —-
U. of Michigan Current Conditions February —- 111.2 111.3 —-
U. of Michigan Expectations February —- 85.7 90.3 —-
U. of Michigan 1 Year Inflation February —- 2.8% 2.6% —-
U. of Michigan 5-10 Year Inflation February —- 2.5% 2.6% —-
Monthly Budget Statement (2:00pm ET) January $45.0b —- <$27.5b> —-

 

*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones

 

New Issue Pipeline (more…)

Grexit, Brexit and Frexit-Mischler Debt Capital Markets Comment
February 2017      Debt Market Commentary   

Quigley’s Corner 02.08.17- First Grexit, Then Brexit and Now..Frexit? Mischler Debt Market Comment

 

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points – A Citigroup tap

Global Market Recap

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

The Critically Important French Elections

The EU: It’s All Greek to Me

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 25th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

 

2 IG Corporate issuers priced 5 tranches between them totaling $3.45b.  Additionally, 1 SSA issuer, BNG, priced a $2.25b 2-year for an all-in IG day total of $5.7b.

The WTD IG Corporate total is now $14.40b or 58% of this week’s syndicate midpoint average calling for $24.72b.

 

IG Primary & Secondary Market Talking Points – Mischler Serves as “passive” Jr. Co-Manager on Citigroup tap.

 

  • BP Capital Markets PLC added a fourth tranche, a $TBD 18-month FRN, to today’s earlier announced three-part 3-year tap, new 7s and 10s. 
  • The average spread from IPTs thru the launch/final pricing of today’s 5 IG Corporate-only new issues was <11.50> bps.
  • BAML’s IG Master Index tightened 1 bp to +127 vs. +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.21.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +166 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.7b on Friday versus $22.5b on Thursday and $18.9b the previous Friday.
  • The 10-DMA stands at $20.6b.

 

Global Market Recap

 

  • U.S. Treasuries – rallied into supply for the second day. Curve flatter for second day.
  • Overseas Bonds – Big rally in Europe led by the long end despite heavy supply.
  • Stocks – mixed & little changed heading into the close.
  • Overseas Stocks – Europe mixed with slightly more green. Asia closed higher.
  • Economic – Non-event in U.S. & Europe. Weaker data in Japan.
  • Currencies – USD had small losses vs. all of the Big 5.
  • Commodities – Crude oil had a small gain despite very bearish inventory data.
  • CDX IG: +1.11 to 66.65
  • CDX HY: +3.07 to 331.64
  • CDX EM: -0.18 to 226.81

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
2/06-2/10
vs. Current
WTD – $14.40b
February 2017
Forecasts
vs. Current
MTD – $26.975b
Low-End Avg. $23.74b 60.66% $90.65b 29.76%
Midpoint Avg. $24.72b 58.25% $91.96b 29.33%
High-End Avg. $25.70b 56.03% $93.26b 28.92%
The Low $15b 96.00% $85b 31.74%
The High $35b 41.14% $120b 22.48%

 

The Critically Important French Elections

mischler-frexit-french-election-

Okay so, we all understand that the first round of the French Presidential Elections are held on Sunday, April 23rd.  The most recent election polls show National Front leader Marine Le Pen ahead 26% versus 20.5% for Emmanuel Macron and 18.5% for a fast-sinking Francois Fillon whose fizzling campaign is embroiled in corruption charges. But then there is the run-off Presidential election that is held two weeks later on Sunday on May 7th.  Now, many of you may be very familiar with the concept of the run-off or second election but many are not. In the first April election it is clear that no Presidential candidate will win with the required number of votes or an absolute majority 40-45% with a winning margin of 5-15%.  As a result a run-off election is held between the two candidates with the most votes.  It’s that simple.

There is a history in France of moderate and even conservative parties capturing the liberal votes in an effort to thwart what was once a notoriously nationalistic leaning National Front founded and headed by Marine Le  Pen’s father Jean-Marie.  That is no more.  Marine re-shaped and re-branded the National Front party catapulting it into modern times making it more appealing for contemporary sensibilities while capturing its widest support in its history – thanks to an unlikely strategist named Florian Phillipot.  The first task on the docket toward reinvention of the NF was for Marine to oust her father as the party’s leader.  That was no small task for anyone let alone the daughter of the man at the top of the National Front.  He simply could not remain at the helm with his dated and nationalistic and often times offensive views on certain subjects.  Marine took over and has changed the perception of the NF in France and around the world to make it more palatable and at a critical juncture in history for France. 

 

What has emerged since 2009 when Marine took charge and Phillipot became the NF’s chief strategist, was to tap into France’s silent majority of working class people fed up with the bureaucracy of the European Union.  Having lived in France for five formative years from the ages of 11 thru 16 I know a bit more about French culture and society than the next person.  Make no mistake about it – the French invented the word B-U-R-E-A-U-C-R-A-C-Y.  I saw it at play during my tenure as head of syndicate at BNP Paribas before, during and after that painful merger.  I had seven reporting lines between New York, London and Paris.  It took 6 months to have ideas even considered.  “Bureaucracy” is my point.  French bureaucracy however, is the worst kind.

When I visited with my wife’s Uncle Jean who had been the long-time Police Commissioner of Lyon, France’s second largest city, and de factor gastronomic capital of the world, I sensed his frustration. Here was a man who was an active member of La Resistance during World War II and who saw society at the street level thru his long and respected career in law enforcement.  He was comparable to George Simenon’s Inspector Maigret.  He was very dedicated and hard-working guy.  He always carries an Opinel knife, eats fresh-baked baguette with cheese accompanied by the obligatory glass of Bordeaux.  The French culture wore him well and vice versa but he epitomizes today’s disgruntled, frustrated and concerned Frenchman.  He takes nothing for granted unlike the stigma associated with France that has been enjoying a quality of life for over a decade thanks to neighboring Germany.  He is distraught at the current direction and future of his country and relayed that his former “brothers in arms” the French gendarme are all equally disappointed and concerned. Does this sound familiar?


In 2002 when Le Pen senior made it to the second round of French elections, virtually all of France pooled together to oust him by showing support for Jacques Chirac.  It was more of a vote against Jean-Marie than a vote for Chirac. But today’s National Front, though conservative, is much more inclusive than people think. It would serve at this critical juncture to learn more about its reinvention since Le Pen and Phillipot took the reins. As Phillipot himself has said, “ I didn’t come into this party saying I’m going to go to war against Jean-Marie Le Pen……but he was increasingly out to provoke and his behavior became untenable.  Subsequent to Le Pen’s ouster he in turn said in a nationally broadcast interview “that he wished his daughter no longer bore his name.”

Le Pen and Phillipot took care of business. That business started in the home. They ousted Jean-Marie from his throne of leadership and created a veritable powerhouse National Front party that has been leading in all the polls in France. She is currently projected to win the April election. Meanwhile the conservative party’s candidate M. Fillon had become embroiled in a mess surrounding his having paid his wife hundreds of thousands of dollar (equivalent) over years in a position she never showed up to work for.  Once his public relations handlers attempted to manage that fiasco, it was then revealed that he did the same for his two sons.  The result? He is now running in third place.


The NF has appealed to a similar type of populist movement in France analogous to what we saw here in the U.S. It’s somewhat of a silent majority that feels it needs to restrain open support of Le Pen for fear of being ostracized, criticized and labeled.  But once again, come election day, people will cast their ballot in private. It will be between themselves and the man upstairs.  That’s when voices will once again be heard and reverberate throughout the world.

Should Le Pen becomes France’s next president it will be thanks to our rapidly changing world.  What happened here in the United States is playing out across Europe as well. We saw BREXIT first.  Be prepared for FREXIT next.  It can very likely happen and the EU, which according to many, was destined for failure from the beginning, will be focused on putting all its energies into as orderly an unwind as can be orchestrated.  There have and always will be too many borders, too many cultures, too many histories, too many languages and for that matter too many cuisines in Europe for it to function as a quasi-United States of Europe.  It’s coming so, be prepared as the world reconfigures its alliances, it defense strategies and its economies.  Change is something that NEVER comes easy to any one person let alone countries, continents and hemispheres.  Get ready. If you don’t have the financial stomach for it well, continue buying into the full trust and faith of the United States of America – it’s called BUY TREASURIES.  Yields will tumble despite the Fed’s hawkish tone that will continue when Chair Yellen speaks on February 14th.  If you are a corporate treasury/funding team operative get ready to take full advantage.  As I pointed out yesterday after a relatively long silence for me and being more focused on the Microsoft, AT&T and Apple deals that Mischler was involved in last week, black-outs are upon us and you and your companies will look brilliant when you issue debt in here.  The CT10 closed today 6 bps tighter versus yesterday’s closing yield.  That’s now 26 bps tighter in the last 8 weeks. It’s going lower…….Rates will continue to rally and rates will continue to go lower……..much lower.

 

As Charles de Gaulle once famously said, “Once upon a time there was an old country, wrapped up in habit and caution.  We have to transform our old France into a new country and marry it to its time.”  That time is now.  The National Front would agree that if not at this juncture in time, well, France will likely continue along the same do nothing bureaucratic path more humorously captured by the late great General Norman Schwarzkopf who said “Going to war without France is like going hunting without an accordion.”

 

The EU: It’s All Greek to Me

  eu-faces-collapse-mischler-commentary

To say “Greece is back” would be a gross misrepresentation.  Greece never went away.  The disaster was always there it’s just that so many other EU issues have stolen it’s spotlight……BREXIT, immigration, French elections, etc.  Well, Greece has returned to the proscenium.  Today the IMF effectively announced that Grexit concerns are back on the table. Okay, so what do I mean by “effectively?”  Well, a senior IMF staff member said “Greece cannot grow out of its debt problem.”  Let’s go straight to the numbers here shall we?  “Greek debt will reach 175% of GDP in 3 years…….275% of GDP by 2060.”  Shall I continue?  Sure, why not?  The IMF report just out today also says “our analysis suggests that Greece’s public debt is highly unsustainable…….Even with full implementation of policies agreed under the European Stability Mechanism or ESM program, public debt and financing needs will become EXPLOSIVE!” (caps are mine!)  The National Front, to use an example, isn’t taking a “jump ship” policy approach toward the EU because of this.  The National Front foresaw this year’s and years ago and never wanted to be part of the EU to begin with. That WILL resonate with French voters in April and May elections.  The problems are literally just beginning in Europe.  National Front knows it and wants to take the precautions necessary with their nation to take more control of the French Revolution’s motto of Liberté, égalité, fraternité ……… (translated – freedom, equality and fraternity)……while it still has the chance. Trouble + Concern = Flight-to-Quality folks. You’ll be seeing that clearly illustrated very shortly.  OOPAH!!!!

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

 

Have a great evening!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/06
TUES.
2/07
WED.
2/08
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
New Issue Concessions <3.62> bps <7.5> bps 5.25 bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps N/A
Oversubscription Rates 4.25x 4.56x 2.18x 3.12x 3.29x 2.40x 2.85x 2.45x N/A
Tenors 12.83 yrs 16.65 yrs 6.40 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs N/A
Tranche Sizes $744mm $850mm $690mm $1,311 yrs $845mm $1,123mm $927mm $859mm N/A
Avg. Spd. Compression
IPTs to Launch
<19.17> bps <25.40> bps <11.5> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps N/A

 

New Issues Priced (more…)

Debt & Equity Markets-Suspended Animation?
February 2017      Debt Market Commentary   

Quigley’s Corner 02.07.17 Debt & Equity Financial Markets: Suspended Animation

 

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points –Citigroup tap.

Global Market Recap

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

In Our Fast Changing World, Markets Remain in Suspended Animation

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

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 25th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Tomorrow’s Calendar


4 IG Corporate issuers priced 5 tranches between them totaling $4.25b.  Additionally, 4 SSA issuers contributed 4 tranches boosted the all-in day total by $5.5b for an all-n IG tally of $9.75b.

The WTD IG Corporate total is now $10.95b or 44% of this week’s syndicate midpoint average forecast of $24.72b.

 

IG Primary & Secondary Market Talking Points – Mischler Serves as “passive” Jr. Co-Manager on Citigroup tap.

 

  • Mischler Financial served as a “passive” Jr. Co-Manager on today’s tap of the Citigroup 4.75% due 5/18/2046. Book size finished at $1.9b for a 2.53x bid-to-cover rate.  The outstanding was seen T+173 bid pre-announcement this morning meaning NIC was flat or “0” on today’s tap.  Thanks to Team Citi Treasury/Funding and Syndicate and Origination.  Shout out to Citi’s Jeff Hopsicker for today’s deal download! Always appreciated!
  • The average spread from IPTs thru the launch/final pricing of today’s 5 IG Corporate-only new issues was <25.40> bps.
  • BAML’s IG Master Index tightened 1 bp to +127 vs. +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.21.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +166 vs. +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.7b on Friday versus $22.5b on Thursday and $18.9b the previous Friday.
  • The 10-DMA stands at $20.6b.

 

Global Market Recap

  • U.S. Treasuries – closed mixed with a flatter curve. The 30yr was the top performer.
  • Overseas Bonds – JGB’s little changed. EU core & semi core better & Peripherals mixed.
  • Stocks – U.S. stocks higher heading into close. Record highs for the Dow & NASDAQ.
  • Overseas Stocks – Europe closed mixed. FTSE 250 record high close. Asia red.
  • Economic – Trade balance close to expectations & JOLTS weaker than expected.
  • Overseas Economic – Better data in Japan and weaker data in Germany & the U.K.
  • Currencies – Solid day for USD despite giving up some o/n gains during NY hours.
  • Commodities – CRB, crude oil & copper down while gold & wheat up.
  • CDX IG: +0.59 to 65.35
  • CDX HY: +2.20 to 327.68
  • CDX EM: +2.41 to 226.99

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

-Tony Farren

 

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

 

IG Corporate New Issuance This Week
2/06-2/10
vs. Current
WTD – $10.95b
February 2017
Forecasts
vs. Current
MTD – $23.525b
Low-End Avg. $23.74b 46.12% $90.65b 25.95%
Midpoint Avg. $24.72b 44.30% $91.96b 25.58%
High-End Avg. $25.70b 42.61% $93.26b 25.23%
The Low $15b 73.00% $85b 27.68%
The High $35b 31.29% $120b 19.60%

 

In Our Fast Changing World, Markets Remain in Suspended Animation

financial-markets-suspended-animation-mischler-comment

There is nothing more intimidating than staring at the white or empty background of my daily “QC” each and every day and wondering how to fill it with something meaningful for YOU!

But, I do it every day.  It’s been a while – given last week’s Microsoft (NASDAQ:MSFT), AT&T (NYSE:ATT) and Apple Inc. (NASDAQ:AAPL)jumbo deals that we were on, since I’ve scribed anything geopolitical in nature. One reason is that scratching the surface of any of today’s myriad current event risk factors poses a challenge to opining either way.

There is no middle ground any more.  (Not that that’s ever been an issue with me!) What I have extolled here for years is the incredibly rapid pace of change coming to our inextricably-linked new world order, or “disorder” if I may.  The changes seem to be happening faster and faster.  Trading markets historically embrace change because it breeds volatility and volatility, in turn, begets profitability.  Here’s the catch though – we’re not seeing that kind of volatility.  Take U.S. Treasury markets for example.  I spoke at length with my Rates Team today and they agree – they cannot remember the last time the world changed so fast, yet markets seem to be held in suspended animation. Technically, suspended animation is the slowing or stopping of life processes by exogenous or endogenous means without termination.  Breathing, heartbeat and other involuntary functions may still occur, but they can only be detected by artificial means.  What’s different about the current global environment is that the changes are happening so fast that real-time, second-by-second market traders don’t really know what to do.

The market is waiting for such things as a tax reform package that would have necessary support.  Speaker of the House, Paul Ryan says that may not happen until the Fall!  Oh my!  Meanwhile, there are elections coming to France in April and the run-off election in May.  National Front leader Marine Le Pen will win the election.  When she does, France will have finally pulled up its big boy pants with a woman at the helm and proceed to depart the EU.  What Italy does really doesn’t matter given it’s 70-off post-war governments.  Angela Merkel’s legacy will be remembered as a failure and the EU could even split into a Northern Euro and leave the others on their own.  Whatever happens, change is coming fast to that continent as it is all over the world.  Traders today are like the elderly; change does not and will not come easy.

Buy or sell. Investors are so confused as to what to do they are content – as opposed to “happy” – to sideline themselves, remain inactive and let the noise be the noise.  Levered accounts however are doing all the business.  Black box trades, hedge funds, etc are all going the same direction and then suddenly BOOM the ground falls out beneath them.…..and that’s never a good thing.

It all has to do with P-O-L-I-T-C-S folks.  Traders and investors are perplexed and therefore sidelined to avoid a fall of monumental proportions. We will see a continued progressive flight into safe havens like U.S. Treasuries. Speaking of which, the CT10 has tightened 20 bps in the last eight weeks.  It is no coincidence that within that same time frame we have priced the highest volume month in investment grade new issue history as UST’s slowly but surely rally as yields continue southbound.  YTD we have amassed a staggering all-in IG Corporate and SSA total volume or $258 billion!  That’s a quarter trillion in five-and-a-half weeks! Black out exits bode very well for investors looking for the perfect balance between lower risk and higher yields in the investment grade debt capital markets.  Get ready because there is plenty of business coming very soon.

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

 

Have a great evening!

Ron Quigley

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
2/06
AVERAGES
WEEK 1/30
AVERAGES
WEEK 1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
New Issue Concessions <3.62> bps <0.87> bps 1.13b bps 3.42 bps 0.85 bps 2.25 bps N/A
Oversubscription Rates 4.25x 3.12x 3.29x 2.40x 2.85x 2.45x N/A
Tenors 12.83 yrs 11.60 yrs 6.67 yrs 12 yrs 7.83 yrs 6.52 yrs N/A
Tranche Sizes $744mm $1,311 yrs $845mm $1,123mm $927mm $859mm N/A
Avg. Spd. Compression
IPTs to Launch
<19.17> bps <19.77> bps <18.20> bps <14.69> bps <18.77> bps <15.27> bps N/A

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Trade Balance December <$45.00b> <$44.3b> <$45.2b> <$45.7b>
JOLTS Job Openings December 5580 5501 5522 5505
Consumer Credit December $20.000b $14.160b $24.532b $25.205b

 

Rates Trading Lab

In the short run, there is a lot of supply overnight in Europe. Greece bills, German 10yr, Portugal 2022 & 2024, Sweden 2022 & 2026, Denmark 2021 & 2027, Switzerland 2030 & 2049, Czech Rep 2020 & 2027, a Finland syndicated 5yr & 30yr (timing TBD), Russia 2022 & 2031, not to mention our 10yr tomorrow. BOE does have a buyback in the belly of the curve, for what it’s worth. Therefore, going home short for a trade is not a crazy concept to me. However, reading the tea leaves, judging from the price action and looking at how TIPS trade is telling me that there is money coming off the sidelines, destined for our long end. Narrowing break-evens tell me that there have been flows into nominals to get some convexity on the books. You don’t do that if you think rates are rising. To me it’s all part of the reality check we are in the midst of. Timing of fiscal and tax policies and the FOMC all play havoc with market expectations. It does not mean we are not in a bear bond market. In fact, the price action we are seeing is more consistent with that of a bear market. But as I have said time and again, bear trap rallies are vicious and merciless, and all the more difficult when it comes amidst a supply event.

-Jim Levenson       

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 100-012 100-13 100-31 97-07 98-07
RESISTANCE LEVEL 99-31+ 100-10 100-26 96-31+ 97-31
RESISTANCE LEVEL 99-30+ 100-086 100-22+ 96-25+ 97-15
           
SUPPORT LEVEL 99-27 100-00 100-08+ 96-08 96-25
SUPPORT LEVEL 99-266 99-28+ 100-03+ 96-01+ 96-04
SUPPORT LEVEL 99-252 99-246 99-30+ 95-27 95-25

New Issues Priced (more…)

Mischler Muni Market Issuance Calendar Week of Jan 30
January 2017      Muni Market   

Mischler Muni-bond Market Outlook for the week commencing 01.30.17 looks back to last week’s metrics and provides a lens focused on the Muni Market Issuance Calendar for this week. As always, the Mischler Muni Market snapshot provides public finance investment managers, institutional investors focused on municipal debt and municipal bond market participants a summary of prior week’s municipal debt activity, including credit spreads, money flows and a curated view of pending municipal finance offerings scheduled for this week’s issuance.

Last week muni volume was about $6.2 billion. This week volume is expected to be $4.0 billion. The negotiated market is led by $478.5 million for the Oklahoma Turnpike Authority. The competitive market is led by $167.3 million for University System of Maryland on Tuesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

For reading ease, please click on image below

mischler muni market outlook week jan 30

Mischler Financial Group debt capital market expertise, inclusive of Debt Origination, Distribution, Primary Market Access and Secondary Market trading across the full spectrum of fixed income markets is courtesy of our 18-member team of debt market veterans is what makes MFG’s Fixed Income Group a compelling partner to Fortune issuers, corporate treasurers, municipal debt market issuers and the world’s leading institutional investors.

To illustrate our presence within the Debt Capital Markets space: since 2014 alone,  Mischler has led, co-managed and/or served as selling group member for more than $500 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, new companies via IPO, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is a federally-certified Service-Disabled Veteran Owned Business Enterprise (SDVOBE) and a recognized minority broker-dealer. Mischler Muni Market updates are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

(more…)

Mischler IG Debt Market Comment: Knowing Past for the Future; Eye on AEP
January 2017      Debt Market Commentary   

Quigley’s Corner 01.27.17 – Investment Grade Corporate Debt Outlook; Eye on AEP

 

Investment Grade New Issue Re-Cap 

Utility Update re: American Electric Power (NYSE:AEP)

IG Primary & Secondary Market Talking Points

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

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

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

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

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 25th     

IG Credits by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

It was a no-print Friday.  There were a couple filings for Seagate and McKesson, meaning they could be on the short-term horizon for issuance.  Blackouts may prevent a monster week next week, but I am hearing the week after next things should start to build up again for our IG Corporate primary markets (barring a black swan fly over!)
Let’s recap things: first up front and then it’s onto those people who pitch, price and print YOUR deals.  They’re all waiting for you to scroll down below and greet them. That’s right, Friday means it’s time for the “Best & and the Brightest” that syndicate has to offerThey’re all here again to share their numbers, ranges and thoughts on both next week AND February projected new issuance of U.S. investment grade corporate debt. So, pull up a chair, sit down, relax and allow me to inform you through the manifestation of their gracious time and patronage!
Utility Update re: American Electric Power

It’s been in my M&A Pipeline near page bottom of the “QC” every day now for over 4 months – “On Wednesday, September 14th, American Electric Power (“AEP) (Baa1/BBB+) agreed to sell four power plants in the Midwest for a total of $2.17b to a private equity firm created by Blackstone Group and ArcLight Capital Partners. AEP is divesting of many wholesale power markets focusing instead more on its regulated utility businesses.  The closing of the transaction is expected sometime in Q1 2017.”

Well, that was then and this is now.  AEP is expected to close that $2.17b sale “very soon.” On the heels of very strong 2016 earnings that saw EPS beat $3.94 vs. $3.81 estimates and $3.69 the prior year, combined with successful rate base investments and rate increases, AEP looks to be in a very strong position warranting recent S&P upgrades across its corporate structure while keeping them all on a “positive” credit watch. It’s a utility to watch folks.

IG Primary & Secondary Market Talking Points

  • Market tone was incredibly strong today. Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 32 deals that printed, 28 tightened versus new issue pricing for a 50% improvement rate while 2 widened (6.25%) and 2 were flat (6.25%). It sets things up nicely for further issuance ahead!
  • For the week ended January 25th, Lipper U.S. Fund Flows reported an inflow of $1.589b into Corporate Investment Grade Funds (2016 YTD net inflow of $9.697b) and a net outflow of $532.417m from High Yield Funds (2016 YTD net outflow of $121.533m).
  • BAML’s IG Master Index tightened 1 bp to +126 vs. +127.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +120.  The “LUACOAS” wide since 2012 is +215.  +120 is the new tight.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +164.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $21.2b on Thursday versus $23.0b on Wednesday and $23.5b the previous Thursday.
  • The 10-DMA stands at $19.3b.

 

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

 

IG Corporate New Issuance This Week
1/23-1/27
vs. Current
WTD – $23.65b
January 2017
Forecasts
vs. Current
MTD – $140.383b
Low-End Avg. $19.09b 123.89% $107.87b 130.14%
Midpoint Avg. $20.46b 115.59% $108.41b 129.49%
High-End Avg. $21.83b 108.34% $108.96b 128.84%
The Low $15b 1157.67% $80b 175.48%
The High $26b 90.96% $145b 96.82%

 

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 2017’s YTD top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, 22 of today’s 23 participants finished in the top 25 of last year’s 2016 final IG Corporate Bloomberg league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 87.97% of all IG dollar-denominated new issue underwriting as of today’s table share percentage 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.

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for the third consecutive year! That’s 2014, 2015 and 2016. 

We framed the following background info for our 23 fixed income syndicate peers throughout the top Wall Street banks…folks who are in the know..
Will January 2017 break the all-time monthly volume record?

  • WTD, we surpassed the syndicate midpoint average forecast by over 23% or $23.65b vs. $20.46b.
  • MTD we priced over 29% more than the January average forecast or $140.383b vs. $108.41b.
  • All-in YTD IG Corporate and SSA issuance stands at $195.133b making it the 2nd highest monthly volume of all-time. We have $18.267b to break the record set in May 2016 of $213.40b. Will we get there?

Here are this week’s five IG Corporate-only key primary market driver averages after the close of yesterday’s:

  • NICS:  1.13 bps
  • Oversubscription Rates: 3.29x
  • Tenors:  6.67 years
  • Tranche Sizes: $845mm
  • Spread Compression from IPTs to the Launch: <18.20> bps

Here’s how this week’s performance data compares against last week’s:

  • NICs tightened 2.29 bps to 1.13 bps vs. 3.42 bps last week.
  • Over subscription or bid-to-cover rates grew by 0.89x to 3.29x vs. 2.40x. 
  • Average tenors dramatically compressed by 5.33 years to 6.67 years vs. 12 years.
  • Tranche sizes reduced $278mm to $845mm vs. $1,123.
  • Spread compression from IPTs to the launch/final pricing of this week’s 28 IG Corporate-only new issues tightened by <3.51> bps to <18.20> vs. <14.69> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 1 bp to +164 vs. +165.
  • Week-on-week, BAML’s IG Master Index tightened 2 bps to +126 vs. +128. 
  • Spreads across the four IG asset classes tightened 1.50 bps to 19.00 vs. 20.50 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors tightened 0.95 bps to 24.00 vs. 24.95 bps also against their post-Crisis lows.

As more and more major corporations exit blackouts, we increase the chances of further issuance ahead.  Thus far in his first week as our new President, Donald Trump has been true to his word – he has disrupted D.C. (as well as airports) through an assortment of measures including but not limited to: (i) issuing an executive order to roll back Obamacare, (ii) froze new federal agency regulations for review, (iii) claims to be re-negotiating NAFTA,(iv) pulled the U.S. out of the TPP, (v) met or spoken with U.K., Canadian and Mexican leaders while encouraging U.S. companies to grow jobs in America by closing their foreign plants.  He has taken action on his campaign promise to build a wall along our southern border with Mexico and restricting immigration laws. Those latter steps have also created mass protests throughout the country and in many other countries. On Election Day November 8th, 2016 the DOW closed at 18,332.  Today the Dow sits at an all-time high of 20,100. That’s up 1,768 points or 9.64% making it the number one ranked Post-Election gain since 1900 eclipsing the 7.75% gain of Calvin Coolidge’s Presidency in the Roaring Twenties. Reminding those of us across the financial industry to advance the caveat: “Past performance is not to be considered an indication of future performance.”

The “Best and the Brightest” in Their Own Words

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

Trump’s Tweet-Driven Policy Approach Propels Stock Prices; Can This Continue?
January 2017      Equities Market Commentary   

Peruzzi’s Perch – Jan 26 2017- Forget About Fed Policy and Rates- Equities Markets Are All About Trump Tweets (Still?!)

larry-peruzzi-mischler-equitiies

Larry Peruzzi

U.S. equity markets close the week in record territory, as the Dow Jones finally crosses the 20,000 Maginot line on Wednesday. Fueled by business friendly policy and rhetoric out of Washington, relatively inexpensive energy, improving corporate earnings and low rates the Dow recorded 2nd fastest 1,000-point move in history (42 days). What was a FED/rate driven market, which was preceded by the Oil driven market, has been replaced by a Presidential policy/tweet-driven market.

This week we saw rallies in cement and steel stocks when President Trump signaled he was forging on with his boarder wall as well as rallies in energy stocks when the Keystone and Dakota XL pipelines were reopened. Across the border Mexican stocks even lost 1.4% on Thursday after Mexican President Enrique Peña Nieto canceled a scheduled meeting at the White House. Fed watching has been replaced by Tweet watching and so far, the equity markets like what it is seeing. Historically when markets cross into record territory we normally see a brief pause while analyst access valuations. Additional positive news was received after the close on Thursday as earning from Microsoft, Intel and Alphabet beat estimates. As of Thursday 161 of the S&P 500 names have reported with 120 (74.5%) reporting a positive surprise and 38 (23.6%) reporting a negative surprise.

Next week 24 S&P 500 companies are scheduled to report earnings. The reporting firms are dominated by retailers.  It will also be an important week economically with Dallas Fed activity on Monday, Chicago Purchasing managers on Tuesday, a FOMC rate decision on Wednesday (no change expected), productivity and labor cost on Wednesday and the ever important January employment report closing out the week on Friday. The FED Funds rate, despite Chairwoman Yellen calls for increased magnitudes of rate increases, is not expected to change. Fed funds are only pricing a 14.5% probability of a rate hike for Wednesday’s FOMC meeting. Friday’s employment reported should see a lot of attention. A positive report is sure to be met by the suddenly customary round of tweets and promotion.  It may however be a tad bit early to put much emphasis on the report. The April, May and June reports should be much better harbinger of the effectiveness of the Trump agenda toward job creation. With the Dow Jones now over the 20,000 level, after 6 failed attempts in December and January, we will be looking for signals on the strength and sustainability of the bullish sentiment. There are some concerns over Trump’s protectionism and the recent decline in the U.S dollar has made some foreign investors nervous. Global markets are in rally mode but with European referendums this spring, trade agreements being rewritten and rising political tension there is uneasiness about it.

Asian Markets are expected to be quite as the Lunar New Year holiday commences Friday. Chinese markets will remain closed until next Friday. 2017 is the year of the Rooster. The Rooster is almost the epitome of fidelity and punctuality. Investors would be well served by being loyal to facts and details on their trades and in being punctual, as we have entered a market environment never seen before.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch January 26 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group.

To receive Peruzzi’s Perch, please contact Larry Peruzzi, Managing Director, International Equities via email: lperuzzi@mischlerfinancial.com or via phone.

(more…)

European Corporate Debt Issuance Mkt: Fill ‘Yer Boots Mode
January 2017      Debt Market Commentary   

Quigley’s Corner 01.24.17 Eye on European Corporate Debt Issuance: Fill Yer Boots

“..Today’s all-in US Investment Grade day total issuance makes January issuance $182.433b; the 3rd busiest month on record..”

 

Investment Grade Corporate Debt New Issue Re-Cap – January 2017 Now 3rd Highest Volume Month on Record!
Global Market Recap

IG Primary & Secondary Market Talking Points

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 18th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

It was perhaps a rather subdued IG primary market today in the U.S. but we did wind up featuring 3 IG Corporate issuers that priced 8 tranches between them totaling $4.65.  SSA also assisted in boosting the volume totals as 2 issuers priced 2 tranches amounting to $3.25b.  Today’s all-in IG day total is now $182.433b making it as the 3rd busiest month on record.

However, allow me to tell you about London’s European issuance where the primary market remains “hot.”  What’s that mean?  How about this – today, according to friend, former BNP Paribas colleague and Bloomberg Editorial Primary Market Strategist, Paul Cohen, “Europe remains in a “fill yer boots” mode across the pond.  Notably, of the 151 YTD syndicated transactions, 100 of them (66%) have trended tighter vs. launch/final pricing.  Despite that Europe was expecting a busy week this week they certainly did not anticipate the €32b priced in the in first two sessions.  It’s staggering! Today in particular saw 10 issuers price 11 tranches totaling €27.68b making it the third largest issuance day in Europe in 3 years according to his Bloomberg records. Today’s U.K. 40-year gilt transaction amassed a record £23b in investor order interest while total demand for 3 sovereign bond new issues eclipsed €80b equivalent.  Paul said the reason is that “the latest rise in underlying rates, fueled by improving macro sentiment, appears to be buoying risk appetite.” It sure does.

 

Global Market Recap

 

  • U.S. Treasuries – Bad day for USTs & bonds in Europe. JGB’s closed mixed. Supply a factor.
  • Stocks – Good day for U.S. stocks with record highs for the S&P and NASDAQ.
  • Overseas Stocks – Europe had a good day (not Ireland), Japan red and China mixed.
  • Economic – Markit manufacturing improved. Low inventory holding back existing home sales.
  • Overseas Economic – Solid data in Japan & Europe.
  • Currencies – USD outperformed all of the Big 5. Yesterday was the opposite.
  • Commodities – Big day for copper. Crude oil higher & gold lower.
  • CDX IG: -1.32 to 65.12
  • CDX HY: -5.52 to 346.69
  • CDX EM: -0.81 to 236.23

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Mischler Financial served as a passive underwriter on Morgan Stanley’s $1b (40mm share) 5.85% PerpNC10 fixed-to-floating rate non-cumulative $25 par preferred Series “K” today.  Thank you to MS Preferred Syndicate’s Michael “Captain Morgan” Borut for selecting Mischler as an underwriter from among the many diversity broker-dealers to choose from. It is always appreciated Mike! The transaction rated (Ba1/BB/BB+) started with IPT’s in the 6.125% “area” before tightening 25 bps to revised 5.875% “area” guidance and 2.5 bps tighter into the 5.85% launch for an impressive <27.5> of spread compression throughout price evolution.
    The average spread compression from IPTs thru the launch/final pricing of today’s 8 IG Corporate-only new issues was 18.12 bps.
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +122.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $17.1b on Monday versus $15.2b on Friday.
  • The 10-DMA stands at $18.7b.

 

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

 

IG Corporate New Issuance This Week
1/23-1/27
vs. Current
WTD – $13.70b
January 2017
Forecasts
vs. Current
MTD – $130.433b
Low-End Avg. $19.09b 71.77% $107.87b 120.92%
Midpoint Avg. $20.46b 66.96% $108.41b 120.31%
High-End Avg. $21.83b 62.76% $108.96b 119.71%
The Low $15b 91.33% $80b 163.04%
The High $26b 52.69% $145b 89.95%

 

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

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/23
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
AVERAGES
WEEK 12/19
AVERAGES
WEEK 12/12
New Issue Concessions 0.94 bps 3.42 bps 0.85 bps 2.25 bps N/A N/A <0.50> bps
Oversubscription Rates 2.60x 2.40x 2.85x 2.45x N/A N/A 2.41x
Tenors 8.54 yrs 12 yrs 7.83 yrs 6.52 yrs N/A N/A 10.67 yrs
Tranche Sizes $1,006mm $1,123mm $927mm $859mm N/A N/A $708mm
Avg. Spd. Compression
IPTs to Launch
<15.61> yrs <14.69> bps <18.77> bps <15.27> bps N/A N/A <17.17> bps

 

New Issues Priced

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

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

 

IG          

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
IBM Aa3/AA- FRN 1/27/2020 500 3mL+equib 3mL+equiv 3mL+23 3mL+23 BNPP/CS/HSBC/MIZ/RBC
IBM Aa3/AA- 1.90% 1/27/2020 750 +60a +45-50 +45 +45 BNPP/CS/HSBC/MIZ/RBC
IBM Aa3/AA- 2.50% 1/27/2022 1,000 +75a +60-65 +60 +60 BNPP/CS/HSBC/MIZ/RBC
IBM Aa3/AA- 3.30% 1/27/2027 500 +100a +90-95 +90 +90 BNPP/CS/HSBC/MIZ/RBC
Jackson Nat’l. Life Glbl. Fdg. AA/AA 2.20% 1/30/2020 400 +85a +75 the # +75 +75 BARC/CS/DB/MS
Jackson Nat’l. Life Glbl. Fdg. AA/AA 3.25% 1/30/2024 500 +110a +100 the # +100 +100 BARC/CS/DB/MS
Tech Data Corporation Baa3/BBB- 3.70% 2/15/2022 500 +low 200s
+212.5a
+185a (+/-5) +180 +180 BAML/CITI/JPM
Tech Data Corporation Baa3/BBB- 4.95% 2/15/2027 500 +high 200s +287.5a +255a (+/-5) +250 +250 BAML/CITI/JPM

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Nordic Investment Bank Aaa/AAA 2.125% 2/01/2022 1,250 MS +19a MS +18a MS +17 +23.5 CITI/JPM/RBC/TD
Province of Quebec Aa2/AA- 2.375% 1/31/2022 2,000 MS +46a MS +44a MS +43 +49.15 BAML/BMO/DB/SCOT

 

Indexes and New Issue Volume

Please note that below levels are as of 3:45pm ET.

 

Index Open Current Change  
IG27 66.447 65.188 <1.259>
HV27 140.44 138.89 <1.55>
VIX 11.77 11.28 <0.49>  
S&P 2,265 2,282 17
DOW 19,800 19,919 119  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $4.65 bn DAY: $7.90 bn
WTD: $13.70 bn WTD: $16.95 bn
MTD: $130.433 bn MTD: $182.433 bn
YTD: $130.433 bn YTD: $182.433 bn

 

Lipper Report/Fund Flows – Week ending January 18th     

     

  • For the week ended January 18th, Lipper U.S. Fund Flows reported an inflow of $1.893b into Corporate Investment Grade Funds (2016 YTD net inflow of $8.108b) and a net outflow of $887.116m from High Yield Funds (2016 YTD net inflow of $410.884m).
  • Over the same period, Lipper reported a net inflow of $548.36m into Loan Participation Funds (2016 YTD net inflow of $2.745b).
  • Emerging Market debt funds reported a net inflow of $77.439m (2016 YTD inflow of $314.867m).

 

IG Credit Spreads by Rating (more…)

FIGs in Favor Despite Market Caution Caused by Trump TPP Move
January 2017      Debt Market Commentary   

Quigley’s Corner 01.23.17 FIGS in Favor Despite Market Caution re:Trump TPP Move

 

Investment Grade Corporate Bond New Issue Re-Cap
Global Market Recap

IG Primary & Secondary Market Talking Points

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

The Goldman Sachs Group, Inc. $5b 3-part 5NC4 FXD/FRN and 10nc9r Deal Dashboard

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

Goldman’s Lloyd Blankfein Appears in the “QC”

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending January 18th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar


President Trump today pulled the U.S. out of the Trans-Pacific Partnership or “TPP” the trade agreement between twelve Pacific Rim countries including China causing some to fear a protectionist U.S. Administration.  Having said that, and refraining from any political commentary therein, it set the stage for a rather “cautious” day in today’s IG dollar DCM.  However, those who could pull off a great deal on the heels of incredible Q4 earnings like The Goldman Sachs Group, Inc. did just that.  Today’s IG primary market featured 4 issuers, 9 tranches and a total of $9.05bn. 55.25% of the day total came in the form of Goldman Sachs’ $5b 3-part 5NC4 FXD/FRN and 10NC9.  Mischler Financial served as an active Co-Manager on the 10NC9 tranche today making it today’s “Deal-of-the-Day.”  There was no activity from the SSA space.

 

Today’s MTD all-in IG Corporate plus SSA new issue total of $174.533b represents the sixth highest volume month on record. We are a mere $3.882b away from third place all-time.
WTD we have priced over 44% of this week’s midpoint average syndicate forecast and we’re now over 16% above the syndicate projection for January with 6 business days to go!

Let’s first briefly run thru the daily recaps before I get into the GS deal drill-down and a feature with GS Chairman Lloyd Blankfein! That’s right, he’s here and waiting for you so let’s get to it. 

Global Market Recap

 

  • U.S. Treasuries – Rally for USTs and bonds in Europe. JGB’s were mixed and little changed.
  • Stocks – Little changed heading into the close and had a nice comeback today.
  • Overseas Bonds – Europe and Japan closed down while China closed higher.
  • Economic – Not a factor today in the U.S. or across the globe.
  • Currencies – USD had a poor day and lost ground vs. all of the Big 5.
  • Commodities – Crude oil was lower and the metals closed with gains.
  • CDX IG: +0.74 to 66.61
  • CDX HY: +2.58 to 352.66
  • CDX EM: +0.19 to 237.39

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

-Tony Farren

 

IG Primary & Secondary Market Talking Points

 

  • Aercap Ireland CDAC/Aercap Global Aviation Trust not only upsized today’s new 5.25ye Senior Notes new issue to $600mm from $500mm but they did so at the T+170 launch that was 5 bps tighter than +180 “area” guidance (+/-5).
  • Branch Bank and Trust Company dropped the 5-year FRN tranche at guidance from today’s initially announced 4-part 3- and 5-year FXD/FRN.
  • The average spread compression from IPTs thru the launch/final pricing of today’s 9 IG Corporate-only new issues was <15.61> bps.
  • BAML’s IG Master Index was unchanged at +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +122.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +165.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.2b on Friday versus $23.5b on Thursday and $13.7b the previous Friday.

 

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

 

IG Corporate New Issuance This Week
1/23-1/27
vs. Current
WTD – $9.05b
January 2017
Forecasts
vs. Current
MTD – $125.783b
Low-End Avg. $19.09b 47.41% $107.87b 116.61%
Midpoint Avg. $20.46b 44.23% $108.41b 116.03%
High-End Avg. $21.83b 41.46% $108.96b 115.44%
The Low $15b 60.33% $80b 157.23%
The High $26b 34.81% $145b 86.75%

 

The Goldman Sachs Group, Inc. (NYSE:GS)$5b 3-part 5NC4 FXD/FRN and 10nc9r Deal Dashboard

 

I typically only write a relative value study on tranches we are involved in but given the size, scope and impact of this deal – not to mention it was a “Golden” deal – I’m breaking my protocol for the full magilla.  All three tranches right here, right now for YOU!

This morning prior to the market open, the Goldman Sachs Group, Inc. riding high on last week’s blow away Q4 earnings announcement took full advantage today to hit the tapes and price a $5b 3-part 5NC4 FXD/FRN and a new 10NC9 with proceeds used for general corporate purposes. Goldman’s Q4 ’16 bond trading revenues surged to $3.60b against $3.45b expectations.  Goldman Sachs’ Q4 reported diluted EPS of $4.88 against $3.88 forecasts came on $8.17b in total revenues or 10% more than $7.41b projections.   Timing is everything folks!

Mischler served as an active 0.50% Co-Manager on Goldman’s 41.75b 10NC9 tranche and we saw accounts clamoring for new Goldman paper so much so that the high quality order book went subject at 9:00 am to make allocations more manageable.

For 10NC5 fair value I looked at the outstanding GS 3.50% due 11/16/2026 that was T+145 bid (G+145) pre-announcement landing NIC as 3 bps against today’s T+148 10NC9 final pricing.

The new 5NC4 Iooked to the outstanding GS 2.35 due 11/15/2021 that was T+107 bid pre-announcement or G+108 pegging NIC on today’s new 5NC4 FXD/FRNs as 12bps.

However, curve adjusting for the longer 4/26/22 final maturity date compressed the concession significantly.  The value differential from the GS 11/2021 to the GS 4/2022 is about 8-and- a-third or 8.33 bps. Check the 5s/6s curve set by both JPM and WFC. They added 8.33 bps to G108 to get to T+116-117bp fair value and therefore a 3-4 bps new issue concession versus today’s final T+120 final pricing. Conclusion: strong pricing on great news and congratulations all around to Team Goldman Sachs!

Clearly accounts have a strong appetite for big FIGs in what is anticipated to be a more favorable environment for financial services under our new Administration.

 

GS Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5NC4 FRN 3mL+equiv 3mL+equiv 3mL+111 3mL+111 <15> bps 3.5 bps 3mL+110/108 <1>
5NC4 FXD +135a +120 the # +120 +120 <15> bps 3.5 bps 119/118 <1>
10NC9 +165a +150a (+/-2) +148 +148 <17> bps 3 bps 147/145 <1>

 

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

 

GS  Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
5NC4 FRN $1b $1.6n 1.60x
5NC4 FXD $2.25b $4.3b 1.91x
10NC9 $1.75b $4.3b 2.46x

 

Final Pricing – The Goldman Sachs group, Inc.
GS $1b 3mL+111 due 4/26/2022 5NC4 FRN at $100.00

GS $2.25b 3.00% 5NC4 due 4/26/2022 @ $99.680 to yield 3.067% or T+120  MW+20

GS $1.75b 3.85% 10NC9 due 1/26/2027 @ $99.720 to yield 3.884% or T+148  MW+25

 

Now Let’s Do a Deep Dive Into Goldman Sachs’ D&I Initiative

 

Goldman Sachs strives to provide a full spectrum of businesses with the opportunity to compete on a fair and equal basis for its business and, ideally, to expand and grow while working with them. Team Goldman understands and embraces that having a diverse and inclusive supply chain is a social and economic imperative and they look for vendors that share this commitment in a value-added way.

 

To do this, Goldman Sachs encourages the use of qualified businesses where opportunities exist, promote strategic partnerships and engage a number of external stakeholders in support of their efforts.  Goldman continues to make progress expanding the global reach of its vendor diversity and inclusion efforts. Its program began in North America in 2000, expanded to Europe in 2005 and then to Asia Pacific in 2009.  Currently Team GS has diversity and inclusion definitions for over 20 countries where it operates, which include the following categories, where applicable:

 

  • Ethnic Minority Owned
  • Indigenous Owned
  • Locally Owned or Locally Owned and Small and Medium Enterprise
  • Disability Owned
  • Service Disabled Veteran Owned Small Business
  • Social Enterprise Business
  • Small and Medium Enterprise or Small Business
  • Supported Business
  • Veteran Owned Small Business
  • Women Owned

 

When constructing its global headquarters in New York, more than $300 million was awarded to women and minority-owned businesses – making it the most successful project in the history of New York State’s Minority and Women Owned Business Enterprise program upon completion. Nontraditional Employment for Women (NEW), a New York nonprofit that works with unions to bring women into higher-paying jobs in construction trades, recognized Goldman Sachs with its Equity Leadership award for its diversity efforts in the construction of its headquarters building. This is just one example of Goldman’s commitment to vendor diversity and inclusion.

As a firm, The Goldman Sachs Group, Inc. takes its reputation for excellence seriously and seeks to align with business partners who share their commitment to quality. In selecting its vendors, GS considers businesses that can supply its organization with the most cost-effective, reliable products and services. Prospective vendors are evaluated on several criteria, including:

  • Quality of their products and services
  • Customer service
  • Pricing
  • Ability to assist us in meeting our business goals
  • Environmental, Social and Governance commitments

 

Goldman’s Lloyd Blankfein Appears in the “QC” and I Explain Why He Has Good Reason to Smile

Goldman Sachs has a passion for achieving results – for our clients, our employees and the communities where we work around the globe. We understand that one way to improve our results is to capitalize on the broad range of experience, skill and perspective that people from different backgrounds possess.

Through our Vendor Diversity Program, Goldman Sachs seeks to cultivate relationships with diverse businesses that share our commitment to achieving excellent results. Vendor diversity not only increases competition and the potential for economic savings, but also provides a means to build the economic foundation of the communities in which we operate around the world. Through the unique expertise of diverse businesses, Goldman Sachs benefits from innovative ideas, a broader customer base and better service for our clients. Our goal is for the firm to have access to the highest quality products and services at the best possible price. We look forward to the prospect of working with you.

Lloyd C. Blankfein
Chairman and Chief Executive Officer

Despite recently losing some of Goldman’s top guns to appointments in our nation’s new Presidential Administration, Goldman Sachs’ leadership call to Diversity and Inclusion has not missed a beat. Today’s transaction exemplifies what it means to sculpt and mold a best-in-class initiative predicated on a win-win value-added proposition. That means when presented with an opportunity to serve GS, you are expected to deliver the goods, according to Goldman Sachs’ highest standards.  Today, from the top down in Syndicate and Treasury/Funding every single solitary one of the 10 operatives I liaised with were at the ready to address their Chairman’s call and mandate.  It’s one thing for me to thank them each – which I do every time – but entirely another thing when the boss of bosses hears it directly from the diversity firm itself.  So, a five-star salute goes off to Team GS and the capo di tutt’i Wall Street capis, Mr. Lloyd Blankfein.
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, Sizes and Average Spread Compression from IPTs thru Launches

 

…..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 six week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
1/16
TUES.
1/17
WED.
1/18
TH.
1/19
FRI.
1/20
AVERAGES
WEEK 1/16
AVERAGES
WEEK 1/09
AVERAGES
WEEK 1/02
AVERAGES
WEEK 12/26
AVERAGES
WEEK 12/19
AVERAGES
WEEK 12/12
New Issue Concessions Holiday 3.15 bps 6.56 bps <2> bps N/A 3.42 bps 0.85 bps 2.25 bps N/A N/A <0.50> bps
Oversubscription Rates Holiday 2.37x 2.73x 1.76x N/A 2.40x 2.85x 2.45x N/A N/A 2.41x
Tenors Holiday 18 yrs 6.89 yrs 4 yrs N/A 12 yrs 7.83 yrs 6.52 yrs N/A N/A 10.67 yrs
Tranche Sizes Holiday $1,596mm $606mm $750mm N/A $1,123mm $927mm $859mm N/A N/A $708mm
Avg. Spd. Compression
IPTs to Launch
Holiday <14.04> bps <16.03> bps <13.75> bps N/A <14.69> bps <18.77> bps <15.27> bps N/A N/A <17.17> bps

 

New Issues Priced

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

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

 

IG          

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Aercap Ireland CDAC/
Aercap Global Aviation
BBB-/BBB- 3.50% 5/26/2022 600 +200a +180a (+/-5) +170 +170 BAML/CITI/GS/JPM
Branch Banking & Trust Co. A1/A+ FRN 1/15/2020 600 3mL+equiv 3mL+equiv 3mL+45 3mL+45 BARC/BBT/MS/RBC
Branch Banking & Trust Co. A1/A+ 2.10% 1/15/2020 1,000 +high 70s/+77.5 +70a (+/-2) +68 +68 BARC/BBT/MS/RBC
Branch Banking & Trust Co. A1/A+ 2.625% 1/15/2022 1,000 +high 80s/+87.5 +80a (+/-2) +78 +78 BARC/BBT/MS/RBC
Goldman Sachs Group, Inc. A3/A FRN 4/26/2022 1,000 3mL+equiv 3mL+equiv 3mL+111   GS-sole
Goldman Sachs Group, Inc. A3/A X.XX% 4/26/2022 2,250 +135a +120 the # +120   GS-sole
Goldman Sachs Group, Inc. A3/A X.XX% 1/26/2027 1,750 +165a +150a (+/-2) +148   GS-sole
MidAmerican Energy Co. Aa2/A+ 3.10% 5/01/2027 375 +85-90/+87.5a +75a (+/-5) +70 +70 BNPP/BARC/CITI/MIZ/USB
MidAmerican Energy Co. Aa2/A+ 3.95% 8/01/2047 475 +110-115/+112.5a +100a (+/-5) +95 +95 BNPP/BARC/CITI/MIZ/USB

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