VIX-ated by Market Data, Sep Payroll Numbers – IG Corporate Debt Issuer Outlook
October 6, 2017   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner 10.06.17 – Weekend Edition; VIX is Vexing vs. Sep Payroll Numbers; IG Corporate Debt Issuance Outlook

Investment Grade US Corporate Debt New Issue Re-Cap – VIX

Today’s IG Primary & Secondary Market Talking Points

The “QC” Geopolitical Risk Monitor

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

Rates Trading Lab-Mischler’s Tony Farren Reports In re Sep Payroll Numbers Surprise

Best & Brightest-Fixed Income Syndicate Desks Opine on Next Week Issuance

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 October 4th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab


Investment Grade New Issue Re-Cap


Today was a no print Friday in our IG dollar DCM.

Although next week is a holiday shortened one, credit spreads are tightening, the VIX set a new low yesterday and equity markets continue setting new all-time highs.  The CT10 is yielding 2.35% at mid-day today so post-Q3 earnings I expect to see a nice rush to print through the end of the year amidst future rate hike sentiment.  I have maintained that rates will increase at the top of 2018, which means at the January 31st FOMC meeting, however, that’s my take. “If” the meeting was held today, the chances of a Fed hike are currently 86%. Remember folks there is a LOT playing out in our new world order.  So, why is the VIX so low?  First, the VIX is a street standard index so I will continue to post it here in the “QC” until perhaps one day it loses its prestige with market participants.  Having said that, it IS the index most akin to gambling with one’s emotions.  Unlike a basket of stocks or an index in which we can strip out good apples from bad apples, reverse engineer etc., the VIX volatility index gages market sentiment more than other indices. It’s an indication that the market believes everything is good in the world of finance when in fact, the world is far from that. With myriad highly volatile global event risk factors playing out each and every day think about this – the Fed has NEVER had to unwind a $4.5 trillion balance sheet.  Europe has NEVER dealt with a BREXIT.  We have NEVER experienced the current high level threat of nuclear rhetoric and rapid development as exists with North Korea and that includes the throes of the Cold War during the early ‘60s. Scroll down to my “QC” Geopolitical Risk Monitor just below for some other developing items.  When one of the major events turns south the VIX will spike!

As for our IG dollar DCM, we do have some big news for next week namely – Citigroup and J.P. Morgan announce Q3 earnings on Thursday, October 12th and Bank of America and Wells Fargo release earnings on Friday the 13th.  Goldman Sachs and Morgan Stanley follow on Tuesday the 17th.  They are the smart money and they lead the way for issuance each quarter.  They have more to do before 2017 is a wrap and I strongly suspect we’ll see hefty cumulative issuance from the six-pack.  The average estimate for next week’s IG Corporate only new issue volume is $20.875b. The high estimate was $26b from one desk and five others said $15b either flat out or as part of a range.

All 24 syndicate desks in my weekly “QC” survey responded once again and they are waiting below to make an early exit ahead of traffic on this start of a welcome three-day weekend.  Please scan through the below recaps and I promise you they’ll wait for you with their comments and numbers for next week before the well-deserved Columbus Day weekend!  So, sit back, relax and enjoy this Best & Brightest edition of the “QC.”

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

  • The IG Corporate WTD total is 77.22% of this week’s syndicate midpoint average forecast or $14.595b vs. $18.90b.
  • MTD we’ve priced 15.92% of the syndicate forecast for October IG Corporate new issuance or $14.595b vs. $91.68b.
  • There are now 10 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index was unchanged at +104 tying its post-Crisis set on Wednesday and that previously dated back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.98 vs. 0.99.
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bps to +147 vs. +148.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.9b on Thursday versus $20.3b on Wednesday and $18.9b the previous Thursday.
  • The 10-DMA stands at $17.6b.


The “QC” Geopolitical Risk Monitor


Risk Level/Main Factor Geopolitical Risks
North Korea
10/6 – Russian news announces NOKO is preparing to test fire a missile capable of reaching the U.S. Coast. Recall Trump’s “calm before the storm” comment.  NOKO rumored to reach out to GOP to help “figure out Trump.” On 9/24 Trump warns NOKO leadership that if rhetorical threats continue its leaders “won’t be around much longer.” NOKO claims comment is an “Act of War” and that it now has the right to shoot down U.S. bombers “even outside of NOKO air space.” Beijing calls situation “grave.” On 9/19 Trump spoke before UN referring to Kim as “Rocket Man on a suicide mission.” Trump says “if Kim continues to threaten the U.S., allies and the world, we will have no choice but to totally destroy North Korea.”
“The EU”
-Regional parliament meets 10/9 defying a Spanish Constitutional Court suspension.  Results of Catalonia’s Oct. 1st independence referendum vote posted 90% support for secession from Spain. National riot police cracked down at the voting booths injuring nearly 900 voters in what is the EU nation’s worst territorial crisis since turning to democracy 40+ years ago. Catalan leadership is divided on rush to independence given potential civil unrest and economic consequences. Germany’s Angela Merkel re-elected to her 4th term but nationalist Alternative for Germany (AfD) party & other right wing parties gain to force a 6-party coalition government.  Worst performance for Merkel’s CDU and Christian Social Union party since 1949.  Immigration a source of tension. Right wing has a seat in German decision-making.

-EU and Macron-Merkel coalition to squeeze U.K. re: BREXIT “divorce” bill. Companies prepping for hard BREXIT & 2 years of weak growth. PM May wants rolling series of meetings with EU.  UK withdrawal from EU takes place in March, 2019. Moody’s downgraded the U.K. to Aa2 from Aa1.

“U.S. political gridlock”
GOP tax overhaul plan would, in their view, double deduction and create 3 tax brackets vs. 7. Bringing Corporate rate to 20% might return trillions of dollars to the U.S. that corps are keeping overseas.  Consensus GOP support to pass legislation still in doubt. Partisan politics. Trump recently bypassed GOP to close a deal w/Dems to extend debt limit to December.

-Central banks shrinking balance sheets/higher volatility; low rates persist; slow inflation pick-up. On 9/26 Yellen admitted Fed inflation model may have been “mispecified” & “misguided.”

-GCC Crisis continues as Saudis, UAB, Egypt, Bahrain & 5 others cut diplomatic ties with Qatar; Land, air and sea blockade. Demands include closing its Al Jazeera network & a Turkish military base, severing ties w/Muslim Brotherhood, Hezbollah, al-Qaeda & ISIS.

-Las Vegas mass shooting on Sunday 10/01 is the worst in U.S. history killing 58 and 515 injured.

-October MTD Terror Stats: Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. October MTD there were 13 terrorist attacks. Killing 64 people and wounding 72.

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

-Venezuela – civil unrest continues against Maduro dictatorship. U.S. Tsy freezes Maduro family assets. Risk of VZ default.  4th largest exporter of oil to U.S. behind Canada (#1), Saudi Arabia (#2) & Mexico (#3). Economy sliding into abyss. Regional immigration issue w/many fleeing elsewhere.

-On July 28th Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. The Brookings Institute calls Pakistan “the world’s most dangerous country.” Democracy in nuclear-armed country with 205m population at risk.

-Mueller’s continuing FBI probe into Trump.

-China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. National Congress of the Chinese Communists Party held on Oct. 18th. Most decisions are made prior to it but it’s historically pivotal regarding leadership changes & reshuffling as elders retire.
“2018 U.S. Recession”
-Fed signals 1 more rate hike in 2017; 3 in 2018. Dot plots unchanged for 2017 & ’18; lower for ’19 & longer-term. Hurricane’s Harvey, Irma and Maria not yet reflected in economic data; “could” push hike to 2018. $4.5 trln b/s unwind begins at Oct. 31st mtg & absence of inflation are concerns.


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


IG Corporate New Issuance This Week
vs. Current
WTD – $14.595b
October 2017 vs. Current
WTD – $14.595b
Low-End Avg. $17.54b 83.21% $90.96b 16.05%
Midpoint Avg. $18.90b 77.22% $91.68b 15.92%
High-End Avg. $20.25b 72.07% $92.42b 15.79%
The Low $10b 145.95% $110b 13.27%
The High $26b 56.13% $75b 19.46%


Rates Trading Lab- Mischler’s Tony Farren Reports In

Economic data this week, outside of payrolls, has been very good (details below). Treasuries have traded poorly over the last four weeks. The 10yr is currently trading at 2.40% (98-22) the level where buyers are expected to step in. The 2yr (1.524%) traded at a yield not seen since 2008. Considering the sell off over the last four weeks in USTs it makes sense for the shorts to start to cover some of their positions at current levels. Remember the longs basically did not exist in this week’s JPM Survey. I expect the 2.40% in 10’s to hold today before the long weekend (Columbus Day on Monday).

Looking ahead at factors that could impact the Treasury market –

  • What did President Trump’s comment last night “calm before the storm” mean? (North Korea?)
  • What happens between Madrid and Catalonia?
  • Does the GOP deliver on Tax Reform?
  • Do the U.S. and Global stock market rallies continue or take a breather?
  • Who does President Trump select as Chair of the FOMC?
  • Fed-speak will be active again next week
  • The FOMC Minutes from the Sept 19-20 Meeting will be released on Wednesday.
  • Next week’s Treasury supply will be a challenge for the UST market.

        ($56 billion in 3’s, 10’s & 30’s next Wednesday & Thursday)

  • PPI will be released on Thursday.
  • CPI will be released on Friday.
  • Retail sales will be released on Friday.
  • Tropical Storm Nate could impact the U.S. on Sunday as a hurricane.

As for recent economic data, it seems too good to be true with Payrolls the exception. Is the theory that hurricanes are a short term negative for the economy wrong? This week’s data makes that a fair question to ask –

  • ISM manufacturing the strongest since 2004 (Mon).
  • ISM non-manufacturing the strongest since 2005 (Weds).
  • Vehicle sales this month were very strong (Tues).
  • Unemployment Rate has not been lower since Dec 2000.
  • The U6 rate has not been lower since May 2007.
  • Average hourly earnings MoM has not been higher since June 2007.
  • Average hourly earnings YoY has not been higher since 2009.
  • The Participation Rate has not been higher since September 2013.
  • Household employment and labor force both had sizeable gains.

Here are the negatives from this morning’s Employment Report –

  • Payrolls were negative for the first time since August 2010.
  • The two-month revision for payrolls was <38k>.
  • Average weekly hours was unchanged.

-Tony Farren


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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 20 of those participants are among 2017’s YTD top 21 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 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 three consecutive years! That’s 2014, 2015 and 2016 !!  More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! -RQ

Let’s dive right into this week’s primary market recap and data downloads as a segue to our syndicate desk canvass as to what is in expected next week i.e. DCM market and new investment grade corporate debt issuance.

North Korea remains global event risk factor number 1 with Kim Jong-Un’s regime making no progress this week toward negotiating with the U.S.  When NOKO is dormant it  means something is brewing and/or amiss.  Stay thirsty my friends!! Spanish Catalonia adds more EU suspense to the mix with 90% support for secession from Spain. The independence referendum, in defiance of the Spanish Constitutional Court, erupted in violence with Spanish National police injuring over 900 voters in attempts to prevent citizens from voting. Catalonia’s regional parliament meets on Monday, October 9th in defiance of the Spanish Court’s suspension.  GOP hopes of tax reform legislation may not appear until early in 2018 and it remains to be seen what support it has with opposition coming from within the party. Earlier this week we saw the impact of hurricanes Harvey, Irma and Maria on Vehicle Sales while this morning’s numbers confirm how skewed they will be going forward.  Clearly the hurricanes reduced the NFP number this morning as unemployment fell while the labor force participation rate rose. Any weak number is chalked up to storms while strength is attributed to a resilient economy. Go figure!

Entering this morning’s Friday session –   

  • The IG Corporate WTD total stands at $14.595b. We priced $4.305b less than this week’s average estimate of $18.90b or 77.22%.
  • MTD we have now priced 15.92% of the syndicate projection for October IG Corporates or $14.595b vs. $91.68b.
  • Entering today’s session, the YTD IG Corporate-only volume is $1,089.746b vs. $1,088.336b on October 6th, 2016 or 0.13% more than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $1,349.204b vs. $1,374.92b on October 29th, 2016 or 1.91% less than the year ago total.

Entering this morning’s session, here are the five key primary market driver averages from the 28 IG Corporate-only deals that priced this week.  

  • NICS:  1.18 bps
  • Oversubscription Rates: 3.50x
  • Tenors: 12.00 years
  • Tranche Sizes: $608mm
  • Spread Compression from IPTs to the Launch: <18.40> bps


Here’s how this week’s critical primary market data compares against last week’s numbers entering this morning’s session: 

  • Average NICs widened 0.20 bps to an average 1.18 bps vs. 1.38 bps across this week’s 28 IG Corporate-only new issues.
  • Over subscription or bid-to-cover rates, the measure of demand, increased by 0.19-times to 3.50x vs. 3.31x. 
  • Average tenors extended by 3.50 years to an average 12.00 years vs. 8.50 years.
  • Tranche sizes reduced by $37mm to $608mm vs. $645mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 28 IG Corporate-only new issues widened by 1.79 bps to <18.40> bps vs. <20.19> bps.
  • Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +147 vs. +151 bps.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 5 bps to 0.98 vs. 1.03 bps. 
  • Week-on-week, BAML’s IG Master Index tightened 4 bps to +104 vs. +108 setting a new post-Crisis low dating back to July 2007. 
  • Spreads across the four IG asset classes tightened 2.50 bps to 1.75 bps vs. 4.25 bps as measured against their post-Crisis lows. 
  • The 19 major industry sectors also tightened 4.21 bps to 5.32 vs. 9.53 bps also as measured against their post-Crisis lows.
  • For the week ended October 4th, Lipper U.S. Fund Flows reported an inflow of $3.770b into Corporate Investment Grade Funds (2017 YTD net inflow of $96.388b) and a net inflow of $645.473m into High Yield Funds (2017 YTD net outflow of $7.331b).
  • Taking a look at the secondary trading performance of this week’s 24 IG Corporate and 4 SSA new issues, of the 28 deals that printed, 20 tightened versus NIP for a 50% improvement rate, 3 widened (10.50%) and 5 were flat (18.00%).
  • The VIX closed yesterday at a new low of 9.17 (Amazing!) while issuance is running neck and neck with last year’s record pace given low rates and tightening spreads.  7 of the 19 IG sector spreads set or equaled post Crisis lows this week and 2 of the 4 IG asset classes did the same!

Entering today’s Friday session here’s how much we issued this week:

  • IG Corps: $14.595b
  • All-in IG (Corps + SSA): $26.475b

And now ladies and gentlemen, as honored members of the “B&B” Club it’s time for the guy-in-the corner to ask today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?” 

As always, I hope the daily “QC” and my data downloads are helpful and informative to you.  Without your participation this widely read “QC” survey edition can’t get done.  I greatly appreciate your meaningful sound bites that bring your numbers and ranges to life. A LOT of Fortune Tsy teams read this every day and they love it!  I consistently receive positive feedback about the “QC” from them directly.  Wall Street fixed income syndicates desks that contribute to this column are directly contributing to a much bigger picture, while also helping the nation’s oldest Service Disabled Veteran broker-dealer build in a more meaningful and sustainable way.

Please know that on each and every new issue, the guy-in-the-corner is ALWAYS be in YOUR corner on deal day! If an issuer asks you who some of the best diversity firms are, my hope is that you’ll mention Mischler Financial and the guy-in-the-corner.  Our distribution is high quality, prolific and consistent. On deal day, we perform enough to influence your bid-to-cover rates with REAL unpadded orders. Besides where else can you get an award winning daily fixed income DCM piece for FREE? But most of all, we have a great certification as the nation’s oldest Service Disabled Veteran broker-dealer. We demonstrate remarkable authenticity here at Team Mischler. Our commitment to our demographic is our foundation. We donate 10% of our earnings to heavily-vetted veteran foundations and non-profits to help our active and veteran service men and women and their families. It’s all well worth it and I hope you think so too!

Thank you and wishing you and yours a great long Columbus Day weekend! -Ron”

The “Best and the Brightest” in Their Own Words


……..……and here are their responses:

Above is the opening extract from Quigley’s Corner aka “QC”  Friday, Oct 62017 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest 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 is one of three distinctive market comment 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 email: or via phone 203.276.6646

*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 daily 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.   Veteran-owned broker-dealer 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.

 Quigley’s Corner 10.06.17 – Weekend Edition; VIX is Vexing vs. Sep Payroll Numbers; IG Corporate Debt Issuance Outlook