Browsing articles tagged with "veteran-owned broker-dealer Archives - Page 3 of 4 - Mischler Financial Group"
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…)

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…)

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…)

Mischler Muni-bond Market Outlook Week of Jan 23
January 2017      Muni Market   

Mischler Muni-bond Market Outlook for the week commencing 01.23.17 looks back to last week’s metrics and provides a lens focused on municipal debt market schedule 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 muni bond activity, including credit spreads, money flows and a curated view of pending municipal finance offerings scheduled for this week’s issuance.

This week volume is expected to be $6.8 billion.  The negotiated market is led by $486 million water and wastewater revenue bonds for the Mayor and City Council of Baltimore, Maryland and $450 million for Bay Area Toll Authority, California.  The competitive market is led by $457.3 million for The Metropolitan Government of Nashville & Davidson County, Tennessee on Tuesday and $455.7 million for Los Angeles County Metropolitan Transportation Authority, California on Wednesday.

muni-bond-schedule-week-jan-23-2017

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.

Municipal Debt Market Schedule Week of Jan 17 2017
January 2017      Muni Market   

Mischler Municipal Bond Offering Outlook for the week commencing 01.17.17 looks back to last week’s metrics and provides a lens focused on municipal debt market schedule 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 muni bond 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 $8.2 billion.  This week volume is expected to be $8.9 billion.  The negotiated market is led by $1,162.5 million tax-exempt and taxable general obligation bonds for City of Chicago, IL.  The competitive market is led by $356.7 million of tax-exempt and taxable bonds for the Board of Regents of the University of Houston, Texas on Thursday.

mischler-muni-outlook-week-jan-17-2017

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 Muni Debt Market: 8bil in Deals Scheduled This Week
January 2017      Muni Market   

Mischler Municipal Bond Offering Outlook for the week commencing 01.09.17 looks back to last week’s metrics and provides a lens focused on selected municipal bond offerings 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 muni bond activity, including credit spreads, money flows and a curated view of pending municipal finance offerings scheduled for this week’s issuance.

This week volume is expected to be $8.7 billion.  The negotiated market is led by $665.0 million for Triborough Bridge and Tunnel Authority, NY.  The competitive market Is led by $612.4 million general obligation bonds for the State of Washington in 3 bids on Tuesday.

mischler-municipal-debt-calendar-010917

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…)
Corporate Bond New Issuance Elasticity: Get It While Its Hot
January 2017      Debt Market Commentary   

Quigley’s Corner 01.06.17 Weekend Edition: Investment Grade Corpoate Bond New Issuance & Spread Elasticity: Get It While It’s Hot

 

Investment Grade New Issue Re-Cap 

My Thoughts re: Next Week’s Issuance

IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for January 

The Best and the Brightest” – Investment Grade New Issuance Forecasts 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

Lipper Report/Fund Flows – Week ending January 4th     

IG Credit Spreads by Rating / Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

It was a no-print Friday today and a well-deserved one at that considering yesterday was the 4th busiest ever in our dollar IG DCM. We priced $53.233b in new IG Corporate-only product this week in just three days and $65.233b including SSA issuance!  What a heck of a start to the New Year!  This morning’s NFP number was another very strong one posting a 156k payroll increase versus 175k estimates or 17% better than expected.  You know what that means…….with labor shortages expected throughout 2017, wages will increase and when wages increase people spend more money and when people spend more money the Fed is more likely to raise rates!  But let’s not get ahead of ourselves.  We have a big January 20th inauguration ahead of us that should make for great TV before Trump & Co. institute rapid change with a Republican controlled Beltway. But before that our U.S. six-pack big FIGs release earnings beginning on January 13th thru the 18th which leaves next week open prior to that deluge.  In speaking to the “Best and the Brightest” in the world of syndicate this morning it’s looking like we drop off a lot from this week but then again $30b, $35b, $40b speaks volumes about just how incredible this week was.  Allow me to opine therein and then let’s re-cap things first before I invite you all to join me as we visit with each of the top 23 syndicate desks in our IG dollar DCM to hear their thoughts, numbers and ranges for next week.

 

My Thoughts re: Next Week’s Issuance

Tuesday’s deals were tighter, and Wednesday’s deals were tighter BUT some widened while yesterday’s deals were 48% wider? What’s it mean? It means “get it while it’s hot,” and the hotter it gets, the more they compress spreads and the more they compress spreads the more likely they are to leak out. So, with the U.S. six-pack banks set to release earnings beginning on January 13th thru the 18th, we have a bit before that money center bank deluge happens. In the interim, next week will seem like a drop off in issuance but why wouldn’t it? We priced the 4th busiest day in history for both IG Corporate AND for IG Corporates and SSA yesterday ($53.233b and $65.233b respectively). By those standards any other week will pale in comparison. However, I believe things hold in and we get $40bn-plus of all-in Corp + SSA issuance next week. Call IG Corporates $35b.

 

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 67 deals that printed, 38 tightened versus NIP for a 56.50% improvement rate while 16 widened (24.00%) and 13 were flat (19.50%).
  • For the week ended January 4th, Lipper U.S. Fund Flows reported an inflow of $2.186b into Corporate Investment Grade Funds (2016 YTD net inflow of $2.186b) and a net inflow of $734.107 into High Yield Funds (2016 YTD net inflow of $734.107b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s XX IG Corporate-only new issues was XX.XX bps.
  • BAML’s IG Master Index widened 1 bp to +129 vs. +128.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +122 vs. +121.  The “LUACOAS” wide since 2012 is +215. The tight is +122.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +167 vs. +166.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $22b on Thursday (7th highest day since 2006) versus $22.4b on Wednesday (6th highest volume day) and $4.1b the previous Thursday.
  • The 10-DMA stands at $9.6b.

 

Syndicate IG Corporate-only Volume Estimates for January 

 

IG Corporate New Issuance January 2017
Forecasts
vs. Current
MTD – $53.233b
Low-End Avg. $107.87b 49.35%
Midpoint Avg. $108.41b 49.10%
High-End Avg. $108.96b 48.86%
The Low $80b 66.54%
The High $145b 36.71%

 

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.  22 of those participants are among 2016’s top 24 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  The participating desks represent 81.59% 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 !!   

To best frame our weekly poll i.e.  projected new issue activity, we posed the following to our  Best & Brightest”respondents:

This week’s $53.233b of IG Corporate only new issue volume ranks as the 4th largest of all-time.

  • This week’s $65.233b of all-in (IG Corporate and SSA) issuance also ranks as the 4th highest of all-time. 
  • This week’s IG Corporate only volume total ($53.233b) represents just over 49% of the syndicate midpoint average forecast for all of January ($108.41) after only 3 sessions!  

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

o   NICS:  2.25 bps

o   Oversubscription Rates: 2.45x

o   Tenors:  6.52 years

o   Tranche Sizes: $859mm

o   Spread Compression from IPTs to the Launch: <15.27> bps


Here’s the performance data comparing this week’s averages versus those of the week ending December 15th:

 

  • NICs widened 1.75 bps to 2.25 bps vs. <0.50> bps..
  • Over subscription or bid-to-cover rates increased marginally by 0.04x to 2.45x vs. 2.41x. 
  • Average tenors shortened dramatically by 4.15 years to 6.52 years vs. 10.67 years.
  • Tranche sizes increased noticeably by $151mm to $859mm vs. $708mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 62 IG Corporate new issues widened by <1.90> bps to <15.27> vs. <17.17>.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +167 vs. +169.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +129 versus +130 on Thursday, December 15th
  • Spreads across the four IG asset classes tightened by 0.75 bps to 20.00 vs. 22.00 bps on Thursday, December 15th and as measured against their post-Crisis lows. 
  • Looking at the 19 major industry sectors, spreads tightened 1.57 bps to 26.32 vs. 27.89 on Thursday, December 15th, also against their post-Crisis lows.

 

……and now for the first time of 2017, I’d like to know your thoughts and your numbers for next week’s IG Corporate new issue volume. You all know that I greatly appreciate your participation week in and week out.
Thanks very much, Ron!

 

The “Best and the Brightest” in Their Own Words

 

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

Mischler Muni Market Outlook; Pending Deals Week of 01-03-17
January 2017      Muni Market   

Mischler Municipal Debt Market Outlook for the week commencing 01.03.17 looks back to last week’s metrics and provides a lens focused on selected municipal bond offerings 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 muni bond activity, including credit spreads, money flows and a curated view of pending municipal finance offerings scheduled for this week’s issuance.

This week volume is expected to be $3.0 billion. The negotiated market is led by $570.0 million for the Board of Regents, Texas State University System. The competitive market has no sales in excess of $100 million except for $375.0 million TRAN’s for the State of Colorado on Thursday.

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

mischler-muni-market-outlook-010317

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.

Mischler Muni Market Outlook; Pending Deals Week of 01-03-17
Distilling Yellen Comments; Mischler ROTC Cadet Thought-Leadership Sound Off
December 2016      Debt Market Commentary   

Quigley’s Corner 12.14.16 FOMC  Talking Points; UCLA ROTC Cadet Chamberlain On Leadership

 

Investment Grade New Issue Re-Cap – Fed Raises Rates 0.25bps to a Range of 0.50% to 0.75

Global Market Recap

FOMC Statement Key Talking Points

The FOMC Statement Comparison – December 14th vs. November 2nd

IG Primary & Secondary Market Talking Points

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

“At What Point Do Rising Rates Derail the New Issue Market?”

Mischler’s Favorite Army Cadet On Leadership ; UCLA ROTC Rachel Chamberlain Sounds Off

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending December 7th     

IG Credit Spreads by Rating & Industry

 Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

New Issue Pipeline

M&A Pipeline    

 

As expected issuers stood down today in the face of the session’s all-important FOMC Rate Decision combined with the quiet holiday period we are in.  That’s not to say we don’t see some very limited issuance tomorrow however, before markets truly shut-down for the holidays.

I have a LOT for all of you today. Up top are the New Issue Re-Cap followed by Tony’s Global Market Re-Cap.  Then the fun starts. Trust me it’s good.

First up are today’s FOMC Talking Points or the things you want and need to know. Then we transition into Janet Yellen’s comments titled “In Yellen’s Own Words” as made in the post decision Q&A.  It is in depth and highlights those key points.  In order to present a bit more granularity I have the FOMC statement strikethrough comparison versus last November’s statement.  It’s the best way to illustrate what new language was added in – highlighted in yellow – and what old language was dropped – strikethroughs in red.  It takes time to put that into this format but it’s well worth it for you.

Always saving the best for last, I have a special piece for you all this evening that speaks to Mischler, it’s SDVBE certification and the wonderful story of our CEO’s daughter, Rachel who accepted an Army ROTC scholarship to UCLA.  It’s an essay on “Leadership” written in her own words and I would appreciate it if all you loyal readers give it particular attention that this evening.  It’s very reassuring folks.

 

Global Market Recap

 

  • FOMC Day – I am shocked the FOMC is already drinking the Trump Kool-Aid.
  • S. Treasuries USTs were hammered after the FOMC was more hawkish than expected.
  • Overseas Bonds – Long end led rallies in JGB’s, Bunds, Gilts & EU semi core.
  • 3mth Libor – Set at highest yield (0.97039%) since May 2009.
  • Stocks – U.S. stocks did not react well to the FOMC.
  • Overseas Stocks – Europe closed in the loss column. Nikkei unchanged & China red.
  • Economic – Weaker U.S. data with higher inflation but the FOMC was the story.
  • Currencies – Big rally for the USD after the FOMC.
  • Commodities – headed south after the FOMC.
  • CDX IG: +0.88 to 68.71
  • CDX HY: +4.81 to 360.60
  • CDX EM: -0.99 to 242.65

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

-Tony Farren

 

FOMC Statement Key Talking Points

 

  • Fed raises rates by 25 bps, repeats gradual policy path plan.
  • Increases Federal Funds rate target range to 0.5%-0.75%.
  • Raises Discount Rate to 1.25% from 1.0%.
  • Repeats “risks to the outlook appear roughly balanced.”
  • FOMC’s policy is supporting “some further strengthening” on goals.
  • Says labor markets continued to strengthen, growth moderate.
  • Market-based inflation compensation gauges are up considerably.
  • Repeats survey-based inflation expectations are little changed.
  • Says spending is rising moderately, investment stayed soft.
  • Maintains its balance sheet reinvestment policy.
  • Says FOMC vote was “unanimous.”
  • Officials see three 2017 rate hikes vs. two in September dots.
  • Officials see three 2018 rate hikes, unchanged vs. September dots.
  • The New York FED expects around $2 trillion in Treasuries are available for reverse repurchase operations.

 

In Yellen’s Own Words:

 

fed-awakens-FOMC-mischler-comment

Janet Yellen

 

  • Yellen: “Rate hike is a reflection of confidence in economic progress.”
  • I do not judge that we are behind the curve.
  • Says the FOMC is recognizing the considerable progress of the economy.
  • Changes in fiscal policy could impact the economic outlook.
  • Not trying to provide advice to the new administration.
  • Fed staff have been in touch with the Trump transition team.
  • Some participants included changes in fiscal policy.
  • Declines to say how Fed policy is impacted by fiscal change.
  • Don’t want to speculate until we know more details.
  • Investors anticipate expansionary fiscal policy.
  • Never said that I favor running a high-pressure economy.
  • Fiscal boost not obviously needed for full employment.
  • FOMC judged the course of the U.S. economy to be strong.
  • Policy remains accommodative to a moderate degree.
  • Economic outlook is highly uncertain.
  • Repeats that Fed policy isn’t on a pre-set course.
  • Shift in the dot plot is a “very modest adjustment.”
  • Shift involves changes by only some Fed participants.
  • Expect economy will warrant only gradual rate increases.
  • Fed funds rate is only modestly below neutral rate.
  • Neutral rate is quite low by historic standards.
  • Fed officials see moderate growth over the next few years.
  • Inflation has moved closer to our longer-term goal.
  • Expect overall inflation to rise to 2% over a couple of years.
  • We remain committed to our 2% inflation objective.
  • We will carefully monitor actual/expected inflation progress.
  • Says broader measures of labor slack have moved lower.
  • Expects job conditions will strengthen somewhat further.
  • Tax policy changes could boost productivity and investment.
  • Repeats that the Fed will shrink its balance sheet over time
  • Will take several years to allow its balance sheet to run off.
  • Don’t want to comment on level of stock prices.
  • Must take the debt-to-GDP ratio into account.
  • Important to reduce the regulatory burden on smaller banks.
  • Broad agreement that we should end “too big to fail.”
  • Don’t roll back progress made on making banks safer.
  • I intend to serve out my four-year term.

 

The FOMC Statement Comparison – December 14th vs. November 2nd

 

On Wednesday, November 2nd, the date of the last FOMC I wrote here in the “QC” that the key takeaway was that the Fed WILL raise rates in December “IF” things remain relatively stable over the next 6 weeks.  The major support for that November statement was:

“Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further.”  …………..Remember the Fed’s all-important 2% inflation target! It is pretty clearly laid out for us right there!

Well today, true to the projection, the Fed raised both its upper and lower bound rates 0.25% to 0.75% and 0.50% respectively. The FOMC also noted that it likely sees three rate hikes in 2017 vs. the consensus two.  However, projecting a year’s worth of rate hikes in a year in advance is like forecasting new issue volume for the year. There are simply way too many global event risk factors that can and will influence rate decisions, let alone across the span of one full year.  So, take the three hike statement with a massive grain of salt. We have a new Administration taking over the Beltway on January 20th that certainly leans aggressively on the economic front but the Fed may be playing on the projected success of Trump’s plans to “Make America Great Again.”  Time will tell.

 
Strikethrough Comparison of today’s FOMC Statement

Here it is.  Red crossed out represent deletions and yellow highlights reflect today’s new added language.

Information received since the Federal Open Market Committee met in September November indicates that the labor market has continued to strengthen and growth of that economic activity has picked up from the modest been expanding at a moderate pace seen in the first half of this since mid-year. Job gains have been solid in recent months and the unemployment rate has declined. Household spending has been rising moderately but business fixed investment has remained soft. Inflation has increased somewhat since earlier this year but is still below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation have moved up considerably but remain still are low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

 

Against this backdrop In view of realized and expected labor market conditions and inflation, the Committee decided to maintain raise the target range for the federal funds rate at 1/4 to 1/2 to 3/4 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting some further improvement strengthening in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action were: Esther L. George and Loretta J. Mester, each of whom preferred at this meeting to raise the target range for the federal funds rate to ½ to ¾ percent.

[Implementation Note issued November 2 December 14, 2016]

 

IG Primary & Secondary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s X IG Corporate-only new issues was XX.XX bps.
  • BAML’s IG Master Index tightened 1 bp to +131 vs. +132.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.25 vs. 1.26.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +171 vs. +172.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $19.3b on Tuesday versus $16.5b on Monday and $20.1b the previous Tuesday.

 

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

 

IG Corporate New Issuance This Week
12/12-12/16
vs. Current
WTD – $2.75b
December 2016
Forecasts
vs. Current
MTD – $38.955b
Low-End Avg. $4.74b 2.75% $40.87b 95.31%
Midpoint Avg. $6.00b 45.83% $41.52b 93.82%
High-End Avg. $7.26b 37.88% $42.17b 92.38%
The Low $0.1b/”0” 2,750.00% $30b 129.85%
The High $10b 27.5% $60b 64.92%

 

“At What Point Do Rising Rates Derail the New Issue Market?”

 

fed-funds-rate-history-image-credit-bob-rich-hedgeye-mischler

image courtesy of Bob Rich, Hedgeye Risk Mgt

 

I was asked that very question from a buy side account late last week.  We had a nice weekend conversation about it.  The account in question pointed out that “Disney has issued 10-year notes at 1.85% and CSX at 2.35%…..municipalities are going to cut down on refinancings and while the 10-year is hovering at key support levels, 5s and 2s are at 5-year highs.   Meanwhile we have a President-elect talking about 3-4% GDP.”

 

Here’s my take –

Rates are at historically low levels and after today they will still remain there.  January is always a robust issuance month and January 2017 will be no different. In fact, including SSA issuance we may likely see $150b-160b next month.  Near term rates, propelled by Trump’s surprise victory, got some smaller issuers off the fence who did not want to contend with the crowd and rush to print in January – which again, is historically busy. Long-term, however, there are growing material problems and global event risk factors in the world.  Some are BIG and some are potentially very BAD.  The EU will likely dismantle and have recently returned to their “kick-the-can” mentality. Following today’s Fed rate hike, the FOMC will immediately return to the snail’s pace of interest rate hikes with the present consensus calling for 2 hikes in 2017 which is a defacto return to “lower-for-longer” in a historical context.  There will be many speed bumps in the road ahead but Trump’s first 200 days will implement change quickly. I personally think we continue to see very robust issuance in 2017.  I do not like and am not a fan of taking annual projections. Next week?  Of course!  Next month?  Also a good reason to project. But for an entire year? I mean who really knows?  There are too many events in the world that can dampen issuance.

Assuming the incoming Administration succeeds in implementing change, markets will reflect that.  We live in an inextricably linked global economy in which what happens in the South China Seas, or in MENA, or in Europe, for example and to name a mere few events, has impact here in the U.S.  European investors and high net worth for example, are beginning to disregard exchange rate risk with the dollar that is closing in on parity with the Euro. That European money has consistently displayed quick flight into better rated dollar-denominated credit products and equities.  To say it is an immense amount of money is an understatement.  The more the EU “kicks-the-can” the more it is postponing the inevitable and the quicker we’ll see that money invested here.  That alone will help keep a lid on rates to a degree…….and that’s just one way of the many ways a return to our nation’s historically low interest rate environment will manifest itself in 2017.

 

If a picture is worth a thousand words well, this best captures the 2017 interest rate environment:

rate-hike-mischler-hedgeye

image courtesy of Bob Rich for Hedgeye

image courtesy of Bob Rich for Hedgeye Risk Management

 

Relax!……..I mean really c’mon folks. Pull yourselves together!

 

 

 

Mischler’s Favorite Army Cadet On Leadership

Rachel Chamberlain is a 2016 graduate of Greenwich High School, and was one of two graduates to accept an Army ROTC scholarship. Rachel is currently pursuing a pre-medical neuroscience major at the University of California, Los Angeles. She was awarded a 3.5 year Army ROTC scholarship. Rachel is an Army cadet in the “Bruin Batallion”.

During her first semester as an Army ROTC cadet, Rachel, like all of her battalion buddies, was asked to write about leadership qualities that she observes and experiences throughout her initial cadet training. I thought it a wonderful value-added piece for you.  It’s insightful while dually addressing Mischler’s commitment to bring you yet another innovative piece on diversity and inclusion.  Not only is Mischler the nation’s oldest Service Disabled Veteran broker dealer but it’s CEO and certified SDV, Dean Chamberlain has a very bright daughter carrying on a wonderful family military tradition. So, I proudly present for your reading pleasure Rachel Chamberlain’s essay on leadership.

 

“Leadership” by Rachel Chamberlain

 

Brisk wind screamed in my ears as they were filled with the sound of panting and sneakers thumping on the ground. I wiped sweat from my forehead with the back of my hand, then moved my arms back into the brisk rhythm of my strides. It was the middle of our 2nd perimeter, and I was hurtling down Hilgard Avenue alongside my two battle buddies. “Halfway done- keep it up guys!” yelled one buddy. We all pushed through the run together, encouraging each other whenever one of us started to fall back. The run was draining, and as the final steep uphill came into sight, all energy and drive left my body- my legs came to a crawling jog and my posture slumped as I tried to make it up the hill. Had I been running on my own, I would have continued my steady tread up the slope. However, my cadet peers knew that I could do better; I was letting myself off easy because I was exhausted but I would ultimately benefit more both mentally and physically if I could dig up the energy for a strong finish. “Rachel, you’ve got this”, “You’re faster than this, come on push it! Almost there.”, “We’ve got this.” I absolutely did not want to “push it” at this moment, but their words triggered a burst of energy in me and we picked it up until we reached Drake Stadium.

“Ultimately, leadership is not about glorious crowning acts. It’s about keeping your team focused on a goal and motivated to do their best to achieve it, especially when the stakes are high and the consequences really matter. It is about laying the groundwork for others’ success, and then standing back and letting them shine.” (an excerpt from Chris Hadfield’s, retired Astronaut, ‘An Astronaut’s Guide to Life on Earth’). Instead of using all their energy to sprint independently to the stadium, my buddies stayed back and made sure that I was doing my “best to achieve” my potential; they displayed leadership the moment that they “stood back” and let me “shine”. The workout wasn’t significantly important, yet the temporary display of selfless leadership indicated the beginning of the fulfillment of cadet responsibility.

UCLA-ROTC-Cadet-Chamberlain

Team Mischler’s Favorite Army Cadet Rachel Chamberlain (front row left) with the rest of “Bruin Battalion”

 

 

rotc-cadet-rachel-chamberlain

Mischler’s Very Own ROTC Cadet Rachel “Private Benjamin” Chamberlain (left)

Now those are some UCLA Bruins who make it easy for this USC Trojan to salute.

Fight On!

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

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

 

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

 

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

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
12/12
TUES.
12/13
WED.
12/14
AVERAGES
WEEK 12/05
AVERAGES
WEEK 11/28
AVERAGES
WEEK 11/21
AVERAGES
WEEK 11/14
New Issue Concessions <1.83> bps N/A N/A 4.26 bps 3.53 bps 4.5 bps 3.62 bps
Oversubscription Rates 2.15x N/A N/A 3.68x 3.38x 2.99x 2.78x
Tenors 6 yrs N/A N/A 9.21 yrs 10.84 yrs 12.14 yrs 11.28 yrs
Tranche Sizes $688mm N/A N/A $760mm $711mm $929mm $1,039mm
Avg. Spd. Compression
IPTs to Launch
<15.75> bps N/A N/A <22.24> bps <17.60> bps <16.07> bps <17.69> bps

 

Indexes and New Issue Volume

 

Index Open Current Change
LUACOAS 1.25 1.25 0
IG27 67.827 69.43 1.603
HV27 136.56 139.86 3.30
VIX 12.72 13.19 0.47
S&P 2,271 2,253 <18>
DOW 19,911 19,792 <119>
 

USD

 

IG Corporates

 

USD

 

Total IG (+SSA)

DAY: $0.00 bn DAY: $0.00 bn
WTD: $2.75 bn WTD: $2.75 bn
MTD: $38.955 bn MTD: $44.905 bn
YTD: $1,283.717 bn YTD: $1,623.651 bn

 

Lipper Report/Fund Flows – Week ending December 7th     

     

  • For the week ended December 7th, Lipper U.S. Fund Flows reported an inflow of $2.583b into Corporate Investment Grade Funds (2016 YTD net inflow of $41.047b) and a net inflow of $2.034bm into High Yield Funds (2016 YTD net inflow of $6.973b).
  • Over the same period, Lipper reported a net inflow of $1.761b into Loan Participation Funds (2016 YTD net inflow of $2.322b).
  • Emerging Market debt funds reported a net outflow of $1.005b (2016 YTD inflow of $4.738b).

 

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 23.00 bps wider versus their post-Crisis lows!

 

ASSET CLASS 12/13 12/12 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 1-Day Change 10-Day Trend PC
low
IG Avg. 131 132 133 133 134 134 135 135 135 136 <1> <5> 106
“AAA” 74 75 75 75 75 75 75 75 75 75 <1> <1> 50
“AA” 81 82 81 82 82 82 82 83 83 84 <1> <3> 63
“A” 105 106 106 106 106 107 107 107 107 108 <1> <3> 81
“BBB” 168 170 170 171 172 172 173 174 174 175 <2> <7> 142
IG vs. HY 289 293 295 305 308 316 323 329 327 331 <4> <42> 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 28.95 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 12/13 12/12 12/09 12/08 12/07 12/06 12/05 12/02 12/01 11/30 1-Day Change 10-Day Trend PC
low
Automotive 121 121 121 121 121 121 121 122 122 123 0 <2> 67
Banking 122 124 123 124 124 125 125 126 125 125 <2> <3> 98
Basic Industry 169 170 170 172 173 174 175 176 175 177 <1> <8> 143
Cap Goods 99 99 99 99 100 100 100 101 101 102 0 <3> 84
Cons. Prod. 107 108 109 109 109 109 109 110 109 110 <1> <3> 85
Energy 166 168 170 172 173 174 175 177 177 180 <2> <14> 133
Financials 152 153 152 153 154 154 155 155 154 155 <1> <3> 97
Healthcare 117 117 117 117 117 117 118 118 118 119 0 <2> 83
Industrials 133 134 135 135 136 136 137 137 137 139 <1> <6> 109
Insurance 144 145 145 146 146 146 146 147 146 147 <1> <3> 120
Leisure 134 135 135 135 134 134 135 135 135 135 <1> <1> 115
Media 158 159 157 158 158 159 159 160 159 161 <1> <3> 113
Real Estate 143 144 143 143 143 143 144 144 144 144 <1> <1> 112
Retail 112 114 114 115 115 116 116 116 116 117 <2> <5> 92
Services 125 127 127 127 127 128 128 128 128 128 <2> <3> 120
Technology 107 108 108 109 109 110 110 110 110 112 <1> <5> 76
Telecom 161 163 163 163 164 165 165 166 165 166 <2> <5> 122
Transportation 130 131 131 132 133 135 135 135 135 136 <1> <6> 109
Utility 132 133 133 134 135 135 135 136 135 135 <1> <3> 104

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications Dec. 9 —- <0.4%> <0.7%> —-
Retail Sales Advance MoM November 0.3% 0.1% 0.8% 0.6%
Retail Sales Ex Auto MoM November 0.4% 0.2% 0.8% 0.6%
Retail Sales Ex Auto MoM and Gas November 0.4% 0.2% 0.6% 0.5%
Retail Sales Control Group November 0.3% 0.1% 0.8% 0.6%
PPI Final Demand MoM November 0.1% 0.4% 0.0% —-
PPI Ex Food and Energy MoM November 0.2% 0.4% <0.2%> —-
PPI Ex Food, Energy and Trade MoM November 0.2% 0.2% <0.1%> —-
PPI Final Demand YoY November 0.9% 1.3% 0.8% —-
PPI Ex Food and Energy YoY November 1.3% 1.6% 1.2% —-
PPI Ex Food, Energy, Trade NSA YoY November 1.7% 1.8% 1.6% —-
Industrial Production MoM November <0.3%> <0.4%> 0.0% 0.1%
Manufacturing (SIC) Production November <0.2%> <0.1%> 0.2% 0.3%
Capacity Utilization November 75.1% 75.0% 75.3% 75.4%
                   Business Inventories                   October <0.1%> <0.2%> 0.1% 0.0%
FOMC Rate Decision (Upper Bound) Dec. 14 0.75% 0.75% 0.50% —-
FOMC Decision (Lower Bound) Dec. 14 0.50% 0.50% 0.25% —-

 

Rates Trading Lab

 

If you were concerned that the markets were too complacent about the Fed, today proved you right. The Eurodollar curve steepened sharply (edh7/edh8 was 12bp steeper) reflecting the steeper projected path of removal of policy accommodation. I must admit that Yellen’s history of dovishness lulled me as well. But when she said “I believe my predecessor and I called for fiscal stimulus when the unemployment rate was substantially higher than it is now,” the market took it as a sign that the times, they are a changin’. That was pretty hawkish as it implies (to me) that fiscal policy, if/when it is enacted could provide the excess economic stimulus that necessitates a more aggressive Fed. More than a few people out there were looking/hoping for a bounce, but the dots and Yellen got them. Looking forward, I would be looking to put some money to work in the 3yr sector. However, though the 2017 voters (Evans, Kashkari, Harker, Kaplan) are less hawkish than the 2016 group, Yellen still calls the shots and recall that many established doves have crossed into the hawkish camp in the past year. As I say every time I advocate buying the market, it is in the context of a bond bear market. As of today, there is less doubt about that, at least.
-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-182 99-01 98-29+ 95-28+ 96-05
RESISTANCE LEVEL 99-16+ 98-29 98-25+ 95-22 95-21
RESISTANCE LEVEL 99-15 98-26 98-22 95-16 95-00
         
SUPPORT LEVEL 99-12 98-19 98-10 94-28 93-16
SUPPORT LEVEL 99-10 98-14+ 98-05+ 94-18+ 92-27
SUPPORT LEVEL 99-08 98-11 98-00 94-10 92-08

 

Tomorrow’s Calendar

 

  • China Data: Nothing Scheduled
  • Japan Data: Japan Foreign Bond Buying, Nikkei Japan PMI Mfg, Machine Tool Orders
  • Australia: Consumer Inflation Expectation, Employment, RBA FX Transactions
  • EU Data: EU-Markit Eurozone Manufacturing/Services/Composite PMI GE- Markit Manufacturing/Services/Composite U.K. Retail Sales
  • S. Data: Current Account Balance, Empire Manufacturing, CPI, Real Avg Weekly Earnings, Initial Jobless Claims, Philadelphia Fed Business Outlook, Markit U.S. Manufacturing PMI, NAHB Housing Market Index, Total Net TIC Flows
  • Supply: Japan 20yr / Ireland bills / Spain 2021 & 2026 / Romania 2019 / Poland auctions TBD
  • Events: Bank of England Bank Rate
  • Speeches: Nothing Scheduled

(more…)

Pages:«1234»