Weekend Edition Mischler Debt Market Comment: SecDef Soundoff
December 2, 2016   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner 12.02.16 –DCM Weekend Edition-Debt Market Outlook; SecDef Soundoff


Investment Grade New Issue Re-Cap – Next Week and “DONE” for the Year!

Global Market Recap

IG Corporate Bond Primary & Secondary Market Talking Points

Citigroup, Inc. Deal Dashboard – Thursday’s FRN Prints Flat and 5yr Fixed Prices with Nickel NIC

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

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

On James “Mad Dog” Mattis as SecDef, Veteran Marine, Jonathan Herrick’s Scope

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

New Issues Priced

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

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 30th    

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:

IG Credit Spreads by Industry

Snapshot of the major investment grade sector credit spreads for the past ten sessions

New Issue Pipeline

M&A Pipeline – $301.04 Billion in Cumulative Enterprise Value!

Economic Data Releases

Rates  Trading Lab

Tomorrow’s Calendar

I have a lot for you this evening beginning with the Primary and Global Market Re-caps followed by IG Primary/Secondary Market Talking Points and a review of the WTD and MTD new issue volume performance against respective syndicate estimates.  Then of course, like every Friday, the “Best and the Brightest” that IG syndicate has to offer have all unanimously chimed in once more to let you know what to expect for next week’s IG Corporate issuance.  I think most all of us in the world of new issues feel next week is the last “GO” week of the year.  We have history to back that up, an FOMC Rate Decision meeting on Tuesday the 13th and well, a nice and well-deserved slow down for us all.  It’s also time to re-energize for January when we’re all “back-to-zero” to start it all over again.

I also bring to you this evening a nice piece written by our own Marine Veteran Jonathan Herrick – in his own words – on last evening’s President-elect Donald Trump’s nomination of General James “Mad Dog” Mattis as Secretary of Defense.  Please do take the time to read that piece.

Without further ado, let’s get to it…………

Investment Grade New Issue Re-Cap – Next Week and “DONE” for the Year!

Timing is everything as they say.  2 issuers braved the market today as NFP met expectations while the Unemployment Rate beat big time delivering a 4.60% vs. 4.90% though wages surprised to the downside.  Rates rallied, yields compressed and 2 deals got done totaling $1.1b.  We’ve now priced 15% more than this week’s syndicate midpoint average forecast or $26.40b vs. $22.89b.  Already, one third of the entire December IG Corporate new issue estimate has been achieved ($14.93b vs. $41.52b).

Please note that yesterday’s $3b Citigroup, Inc. 5-year FXD/FRN priced with a 5 bp concession.  As I wrote, “The comparable used for relative value is the outstanding Citigroup 2.35% Senior Unsecured 5-year due 8/02/2021 that opened in the morning pre-announcement T+93 (G+100) pegging NIC on the new 5-year two-part FXD/FRN transaction at 5 bps.”  However, I had a typo in my “Deal Dashboard” that showed 8 bps.  So, to be clear, both the FXD/FRN printed with a nickel or 5 bps NIC.  Thanks! –RQ.

Revised Citigroup, Inc. Deal Dashboard – Thursday’s FRN Prints Flat and 5yr Fixed Prices with Nickel NIC


Trading at
the Break
5yr FRN 3mL+equiv 3mL+equiv 3mL+107 3mL+107 <15> bps 5 bps 3mL+105/103 <2>
5yr FXD +120a +105 the # +105 +105 <15> bps 5 bps 105/103 0/flat


Global Market Recap


  • S. Treasuries – had a strong rally on the mixed U.S. Employment Report.
  • Overseas Bonds – Bonds in Europe had a big time rally into the Italy referendum.
  • 3mth Libor – Set at its highest yield since May 2009 (0.94639%).
  • Stocks – U.S. stocks were little changed 3:30pm. Stocks overseas closed in the red.
  • Economic – U.S. Employment Report was a mixed bag. Higher EU PPI than expected/last.
  • Currencies – USD underperformed 4 of the Big 5 & was unchanged vs. the Euro.
  • Commodities – Crude oil was higher again. Gold up and big gains for silver/wheat.
  • CDX IG: -0.74 to 72.77
  • CDX HY: -4.23 to 388.23
  • CDX EM: -2.77 to 270.30

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

-Tony Farren


IG Primary & Secondary Market Talking Points


  • Nabors Industries Inc. upsized today’s new 6yr NCL Senior Notes transaction to $600mm from $500m .
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 44 deals that printed, 28 tightened versus NIP for a 50% improvement rate while 8 widened (18.25%) and 6 were flat (13.75%) and 2 was not available or “N/A” (4.50%).
  • For the week ended November 30th, Lipper U.S. Fund Flows reported an outflow of $1.302b from Corporate Investment Grade Funds (2016 YTD net inflow of $41.464b) and a net inflow of $341.7m into High Yield Funds (2016 YTD net inflow of $4.939b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 2 IG Corporate-only new issues was <37.5> bps.
  • BAML’s IG Master Index tightened 1 bp to +135 vs. +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +128 vs. +129.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 2 bp2 to +175 vs. +177.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $23.3b on Thursday versus $25.2b on Wednesday.

The last two trading sessions represent the #1 and #2 ranked high volume sessions since record keeping began in December 2005.

  • The 10-DMA stands at $16.5b.


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


IG Corporate New Issuance This Week
vs. Current
WTD – $26.40b
December 2016
vs. Current
MTD – $14.93b
Low-End Avg. $21.91b 120.49% $40.87b 36.53%
Midpoint Avg. $22.89b 115.33% $41.52b 35.96%
High-End Avg. $23.87b 110.60% $42.17b 35.40%
The Low $15b 176.00% $30b 49.77%
The High $30b 88.00% $60b 24.88%


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


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 81.55% 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.

The question posed to the “Best and the Brightest” early this morning was framed as follows:

Entering today, we’ve produced $25.30b in new IG Corporate volume or over 10% more than the $22.89b syndicate midpoint average estimate. We have the big FIGs to thank for yesterday’s incredible volume.  For the most part we have next week and the following Monday before the FOMC meeting closes the door on any meaningful 2016 issuance. Given today’s payroll pickup and dramatic unemployment rate decline to 4.6% from 4.9% it’s now more than ever a foregone conclusion that a rate hike will take place on Tuesday December13th.
Here are this week’s five IG Corporate-only key primary market driver averages entering this morning’s session:

  • NICS:  3.53 bps
  • Oversubscription Rates: 3.56x
  • Tenors:  10.97 years
  • Tranche Sizes: $723mm
  • Spread Compression from IPTs to the Launch: <16.46> bps
  • Versus last Friday’s key primary market driver averages, NICs widened 0.97 bps to 3.53 bps vs. 4.50 bps.
  • Over subscription or bid-to-cover rates increased 0.57x to 3.56x vs. 2.99x vs. 2.78x vs. last week. 
  • Average tenors narrowed out by 1.17 years to 10.97 years vs. 12.14 years.
  • Tranche sizes decreased by $206mm to $723mm vs. $929mm.  
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate new issues compressed +0.39 bps to <16.46> bps vs. <16.07> bps last week.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +175 vs. +179.
  • Week-on-week, BAML’s IG Master Index tightened 1 bp to +135 vs. last Friday’s +136 close. 
  • Spreads across the four IG asset classes tightened by 2 bps to 25.75 vs. 27.75 bps as measured against their post-Crisis lows. 
  • Looking at the 19 major industry sectors, spreads tightened 1.63 bps to 32.05 vs. 33.68 bps also against their post-Crisis lows.
  • Of interesting note Investment grade corporate bond trading posted a final Trace count of $23.3b on Thursday versus $25.2b on Wednesday.

Those two trading sessions represent the #1 and #2 ranked IG Corporate high volume sessions since record keeping began in December 2005! Please let me know your thoughts and numbers for next week.

Thanks as always for your time and enjoy a wonderful weekend!  -Ron”


The “Best and the Brightest” in Their Own Words

This section available exclusively to QC distribution list recipients


Syndicate IG Corporate-only Volume Estimates for Next Week

IG Corporate New Issuance Next Week
Low-End Avg. $16.78b
Midpoint Avg. $17.87b
High-End Avg. $18.96b
The Low $10b
The High $25b

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


Next Week
2: 10-15b
4: 15b
1: 16b
1: 17b
5: 15-20b
1: 18b
6: 20b



SecDef designate James Mattis

On the Nomination of James “Mad Dog” Mattis as Secretary of Defense, in the Words of Mischler’s very own Veteran Marine, Jonathan Herrick


“Demonstrate to the world there is ‘No better friend – No worse enemy’ than a U.S. Marine.”

-General James “Mad Dog” Mattis


Last evening I watched on the overhead office flat screen television, President-elect Donald Trump’s announcement that “We are going to appoint “Mad Dog” Mattis as our Secretary of Defense.  But we’re not announcing it until Monday so don’t tell anybody.”  That was a great nomination and also a lighthearted and very funny Trump-ism that I personally thought was a great moment.  Trump continued with, “They say he’s the closest thing to General George Patton that we have and it’s about time.”  That definitely makes me feel good about America.  But since Mischler is our great nation’s oldest Service Disabled Veteran broker dealer, why not hear about who he is from our very own veteran Marine, Jonathan Herrick, who signed on as fixed income desk analyst six months ago.  Jonathan is an 8-year veteran Marine who served multiple tours of duty in the mid-East and was honorably discharged from the U.S. Marine Corps as a Sergeant 1st Battalion, 8th Marine Regiment, 2nd Division.  His is a great story and he’s made an immediate impact supporting our capital markets team.  For a photo of Jonathan, please see the “QC” dated July 5th, 2016 when I featured a piece on a VOWS event or” Veterans on Wall Street” in which Jonathan and a team of other veterans rang the bell to close the Nasdaq exchange. 

Given Donald Trump’s SecDef nomination of James “Mad Dog” Mattis, Jonathan took the time to write his thoughts on the Secretary of Defense nominee from his perspective as a former Marine who served two tours in Afghanistan and one tour in Iraq. Take it away, Jon!


Veteran US Marine Jon Herrick (l) Khaki Bridge” Afghanistan in 2012.

I am proud and honored to have it featured in the “QC” for your reading pleasure: Take it away, Jon!

Our current nominee for Secretary of Defense, General James Mattis, is a legend amongst Marines of the Global War on Terror era.  One of the most respected generals of our time, Mattis is known for his aggressive “can-do” attitude, emphasis on the mental and intellectual aspects of war, and his leadership and care for the Marines he commanded.  He led the 1st Marine Division during the invasion of Iraq on the march to Baghdad and worked with General Petraeus to develop the counterinsurgency tactics that helped pacify the Anbar Province to the point that when I arrived there in 2009, our battalion took fire on only a small handful occasions over a seven month deployment.


A life-long bachelor, he is known in military circles as the Warrior Monk due to his focus on the military arts and emphasis on the value of education.  He would often encourage his subordinate commanders to further their own education, and that of their Marines, as he believed that lessons learned from the past can “light what is often a dark path ahead.”  Famously, he stated that “the most important six inches on the battlefield are between your ears.”  Known as an aggressive leader, he earned the nickname “Mad Dog” and went by the call sign “Chaos” during the war.  As a testament to his ability to understand the complexities of a counterinsurgency environment, he coined the term “First, do no harm” as a guideline for Marines deployed in the war zone.

Another story that is shared widely in military circles, that I first heard when I spent Christmas in Boot Camp on Parris Island in 2007, is when General Mattis took over the duty of a young married Marine on Christmas Day.  On every Marine facility, from Baghdad to Washington, there is a Marine on duty at all times.  While reading at the duty roster, he noticed that the officer scheduled to have duty on that day was married.  General Mattis, being a bachelor, sent the married Marine home to spend Christmas with his family while General Mattis himself took over the duty.  He displayed that same kind of caring leadership for his Marines both during combat deployments in Iraq and Afghanistan, and back home in the United States.

Mattis is also known to speak his mind when he disagrees with decisions that are being made and is perhaps better known for his rather blunt quotes.  One of the mantras we learned as we were moving into theater was “Be polite, be professional, but have a plan to kill everyone you meet” which on the surface may seem uncivilized, but was key to overcoming threats and working with the population in an environment where the enemy was hiding amongst civilians and using suicide bomber tactics.  Mattis’ tactics, I am convinced, prevented immeasurable loss of life on all sides of the conflict.

I believe I speak for all veterans when I say that I am incredibly excited to see what he can do for the Department of Defense.  A free thinker with a winning mindset he is just what our military needs in these uncertain times.  I will leave you with a copy of his letter to the 1st Marine Division on the eve of the invasion in 2003, and this Mattis quote; “I don’t lose any sleep at night over the potential for failure. I cannot even spell the word.”

Gen. Mattis requires a supermajority to garner Senate confirmation. Thus far he is the only Trump nominee who the Democratic Party can unilaterally block. The reason is that there is a mandated seven year “seasoning period” for military personnel post-retirement before being able to serve in a cabinet post.  Five-star General Omar Bradley is the lone exception to this rule following World War II.  As a result, Congress needs to pass legislation that would waive the 7-year requirement in order for Mattis to be confirmed.  So, perhaps we’re a bit ahead of ourselves although I personally would love to see “Mad Dog” as our “Doctor of Defense.”  Professional pundits typically frame their opinions with “most likely” and/or approaches such as “despite the prevailing view from this perch leads me to believe that the outcome will be…….” Rather than presenting future outcomes with unabashed certainty. So, now that that’s crystal clear for everyone please allow me to say “Mattis will be confirmed as our next Secretary of Defense!” There, that felt good!   I’ve never been one to leave room to invent excuses on the spot or simply switch my narrative to a different topic altogether and squirm out of something.  The record shows that and what’s more the ”QC” is still waiting to be wrong on the big calls.  I will, one day, and when I am I’ll say “ I was wrong!”  Italy will vote “NO” on the referendum this weekend and I do believe Austria’s Norbert Hofer will become the first Nationalist head of state in Europe since WWII.  It speaks volumes as to the volatility coming to Europe and a continued dismantling of the EU as we know.


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

Above is the opening extract from Quigley’s Corner aka “QC”  Friday Dec 2, 2016 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC observations is one of three distinctive research content pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline.

To receive Quigley’s Corner, please contact Ron Quigley, Managing Director and Head of Fixed Income Syndicate via email: rquigley@mischlerfinancial.com or via phone.

*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones Newswire, IFR, Informa Global Markets, Internal Mischler, LCDNews, Market News International, Prospect News, Standard & Poor’s Ratings Services, S, Thomson Reuters and of course, a career of sources, contacts, movers and shakers from syndicate desks to accounts; from issuers to originators; from academicians to heads of research, and a host of financial journalists, et al.

Mischler Financial Group’s “U.S. Syndicate Closing Commentary”  is produced weekly by Mischler Financial Group. No part of this document may be reproduced in any manner without the permission of Mischler Financial Group. Although the statements of fact have been obtained from and are based upon sources Mischler Financial Group believes reliable, we do not guarantee their accuracy, and any such information may be incomplete.  All opinions and estimates included in this report are subject to change without notice.  This report is for informational purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security.   Mischler Financial Group, its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation of this report, may from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as market-makers or advisors or brokers in relation to the securities (or related securities, financial products, options, warrants, rights, or derivatives), of companies mentioned in this report or be represented on the board of such companies. Neither Mischler Financial Group nor any officer or employee of Mischler Financial Group or any affiliate thereof accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.  “Mischler Financial” Group and the Mischler Financial Group.

Quigley’s Corner 12.02.16 –DCM Weekend Edition-Debt Market Outlook; SecDef Soundoff