Quigley’s Corner 01.17.18 – FIGs Float Just Fine (CITI, DB, PNC, WBK)
“Neither the depth of despondency nor the height of euphoria tells you how long either will last.” Thomas Sowell
Investment Grade New Issue Re-Cap
Today’s IG Primary & Secondary Market Talking Points: FIGs in Focus
Syndicate IG Corporate-only Volume Estimates For January
Global Market Recap
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
The “QC” Geopolitical Risk Monitor
New Issues Priced
Indexes and New Issue Volume
Lipper Report/Fund Flows – Week ending January 11th
IG Credit Spreads by Rating
IG Credit Spreads by Industry
New Issue Pipeline
M&A Pipeline Highlights
Rates Trading Lab
Economic Data Releases
Tomorrow’s Calendar
Investment Grade New Issue Re-Cap
Today the IG dollar DCM hosted 7 issuers across 13 tranches totaling $10.70b. The SSA space added 3 issuers and 3 tranches for $3.75b bringing the all-in IG day totals to 10 issuers, 16 tranches and $14.45b.
Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:
- The IG Corporate WTD total is 81.98% of this week’s syndicate midpoint average forecast or $23.15b vs. $28.24b.
- MTD we’ve priced 64.06% of the syndicate forecast for January IG Corporate new issuance or $82.825b vs. $129.29b.
- There are now 10 issuers in the IG credit pipeline.
Today’s IG Primary & Secondary Market Talking Points
- Mischler Financial served as a Junior Co-Manager on today’s Citigroup Inc. $1b 21nc20 Senior Unsecured Notes tranche. Thanks and appreciation to Citi Team Treasury/Funding and Syndicate for working with me today. Today’s 21nc20 tranche finished with a $1.9b book for a 1.90x bid-to-cover rate.
- Mischler Financial also served as a Junior Co-Manager on today’s Deutsche Bank AG/New York Branch$2.15b two-part 3-year Fixed and FRN Senior Notes new issue. Thank you to Team DB Treasury/Funding and Syndicate for their patronage. Today’s DB 2-part finished with a cumulative 3.375b order book total for an overall oversubscription rate of 1.57x. The book splits were as follows – FRN: $875mm or 1.35x and the Fixed tranche was $2.5b (1.67x). NIC was about one nickel or 5 bps on both.
- TPG Specialty Lending Inc. upsized today’s 5-year Senior Notes new issue to $150mm from $100mm at the launch and after skipping guidance.
- The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 13 IG Corporate-only new issues was <15.52> bps.
- The “BBB” (+121) asset class set new post-Crisis low.
- The IG Average (+94), “AA” (+53) and “A” (+73) asset classes all tied their post-Crisis lows.
- 13 of the 19 major investment grade sector credit spreads (68.4%) either set or tied post-Crisis.
- These 6 sectors set new post-Crisis lows: Basic Industry (+118), Energy (+122), Leisure (+104), Services(+96), Transportation (+96) and Utility (+100).
- These 7 Sectors tied their lows: Banking (+79), Consumer Products (+80), Healthcare (+80), Industrials (+98), Insurance (+105), Real Estate (+106) and Retail (+86),
- BAML’s IG Master Index was unchanged at +94 tying its post-Crisis low.
- Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.89 vs. 0.90.
- Standard & Poor’s Investment Grade Composite Spread was unchanged at +131 tying its new post-Crisis low.
- Investment grade corporate bond trading posted a final Trace count of $19.7b on Tuesday versus $16.2b on Friday and $20.7b the previous Tuesday.
- The 10-DMA stands at $17.3b.
Syndicate IG Corporate-only Volume Estimates For This Week and January
| IG Corporate New Issuance | This Week 1/16-1/19 |
vs. Current WTD – $23.15b |
January 2018 | vs. Current MTD – $82.825b |
| Low-End Avg. | $27.24mm | 84.99% | $128.54b | 64.44% |
| Midpoint Avg. | $28.24mm | 81.98% | $129.29b | 64.06% |
| High-End Avg. | $29.24mm | 79.17% | $130.04b | 63.69% |
| The Low | $15mm | 154.33% | $100b | 82.82% |
| The High | $36mm | 64.31% | $150b | 55.22% |
Global Market Recap
- U.S. Treasuries – 7yr leads USTs south. 2yr, 3yr and 5yr traded at high yields in years.
- Overseas Bonds – JGB’s weaker. Bunds and Gilts little changed. Peripherals mixed.
- 3mth Libor – Set at 1.73918% the highest yield since December 2008.
- Stocks – Big rally at 3pm. Dow traded at its all-time high.
- Overseas Stocks – Asia closed mixed. Europe had a losing day.
- Economic – Mixed data favoring the upside. Cap U the highest since January 2015.
- Overseas Economic – Japan core machine orders strong. EU CPI YoY very tame.
- Currencies – DXY Index hit its low since January 2015.
- Commodities – CRB traded at its high since November 2015.
- CDX IG: -0.21 to 47.80
- CDX HY: -0.54 to 298.76
- CDX EM: -0.48 to 109.88
- VIX: -0.16 to 11.50
*CDX levels are as of 3:30PM ET today.
-Tony Farren
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 Tuesday’ssession followed by the averages over the prior six weeks:
| KEY IG CORPORATE NEW ISSUE DRIVERS |
MON. 1/15 |
TUES. 1/16 |
AVERAGES WEEK 1/08 |
AVERAGES WEEK 1/01 |
AVERAGES WEEK 12/25 |
AVERAGES WEEK 12/18 |
AVERAGES WEEK 12/11 |
AVERAGES WEEK 12/04 |
| New Issue Concessions | 1.20 bps | 2.35 bps | <0.725> bps | <0.79> bp | N/A | N/A | <1.46> bps | 1.62 bps |
| Oversubscription Rates | 2.29x | 2.97x | 3.75x | 2.85x | N/A | N/A | 4.64x | 3.18x |
| Tenors | 5.30 yrs | 7.55 yrs | 8.12 yrs | 7.80 yrs | N/A | N/A | 11.63 yrs | 10.69 yrs |
| Tranche Sizes | $603mm | $1,131mm | $747mm | $787mm | N/A | N/A | $398mm | $576mm |
| Avg. Spd. Compression IPTs to Launch |
<15.80> bps | <13.41> bps | <19.12> bps | <17.01> bps | N/A | N/A | <18.18> bps | <16.34> bps |
New Issues Priced
Today’s recap of visitors to our IG dollar Corporate and SSA DCM:
Please Note: 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 |
| Citigroup Inc | Baa1/A | 3.142% | 5NC4 F-t-F 1/24/2023 |
2,000 | +87.5 | N/A | +75 | +75 | CITI-sole |
| Citigroup Inc | Baa1/A | 3.878% | 21NC20 F-t-F 1/24/2039 |
1,000 | +110a | N/A | +102 | +102 | CITI-s |
| Deutsche Bank AG/NY | Baa2/BBB- | FRN | 1/22/2021 | 650 | 3mL+equiv | 3mL+83.5a (+/-2) | 3mL+81.5 | 3mL+81.5 | DB-sole |
| Deutsche Bank AG/NY | Baa2/BBB- | 3.15% | 1/22/2021 | 1,500 | +115 | +102a (+/-2) | +100 | +100 | DB-sole |
| PhosAgro | Ba1/BBB- | 3.949% | 4/24/2023 | 500 | 4.375%a | 4.125a (+/-12.5) | 3.95% | +156.8 | BAML/CITI/JPM/RAFF/REN/SG SBER/UBS/UNI/VTB |
| PNC Bank NA | A2/A+ | FRN | 1/22/2021 | 400 | 3mL+equiv | 3mL+equiv | 3mL+25 | 3ml+25 | CITI/GS/JPM |
| PNC Bank NA | A2/A+ | 2.50% | 1/22/2021 | 900 | +55a | +45a (+/-2) | +43 | +43 | CITI/GS/JPM/PNC |
| PNC Bank NA | A2/A+ | 3.25% | 1/22/2028 | 700 | +85a | +75a (+/-2) | +73 | +73 | CITI/GS/JPM/PNC |
| Toll Brothers Finance Corp. | Ba1/BBB- | 4.35% | 2/15/2028 | 400 | 4.50%-4.625% | 4.40%a (+/-5) | 4.35% | $100.00 | CITI/DB/MIZ/STRH/WFS |
| TPG Specialty Lending Inc. | BBB-/BBB- | 4.50% | 1/22/2023 | 150 | +225a | N/A | +212.5 | +212.5 | BAML/CITI/HSBC/JPM/STRH |
| Westpac Banking Corp. | Aa3/AA- | FRN | 1/25/2021 | 500 | 3mL+equiv | 3mL+equiv | 3mL+34 | 3mL+34 | BAML/GS/MS/WSTP |
| Westpac Banking Corp. | Aa3/AA- | 2.65% | 1/25/2021 | 1,000 | +65a | +55a (+/-3) | +52 | +52 | BAML/GS/MS/WSTP |
| Westpac Banking Corp. | Aa3/AA- | 3.40% | 1/25/2028 | 1,000 | +100a | +90a (+/-3) | +87 | +87 | BAML/GS/MS/WSTP |
SSA
| Issuer | Ratings | Coupon | Maturity | Size | IPTs | GUIDANCE | LAUNCH | PRICED | LEADS |
| Dexia Crédit Local | Aa3/AA | 2.50% | 1/25/2021 | 1,500 | MS +low 30s +32.5a |
MS +29a | MS +27a | +45.90 | BARC/CITI/GS/HSBC/SG |
| EDC | Aaa/AAA | 2.50% | 1/24/2023 | 1,250 | MS +11a | MS +10a (/-1) | MS +10 | +15.55 | BAML/BMO/CACIB/JPM |
| Kommuninvest | Aaa/AAA | 2.375% | 4/22/2021 | 1,000 | MS +6a | MS +5a | MS +4 | +24.35 | CITI/NOM/NORD/TD |
Indexes and New Issue Volume
Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.
*Denotes new all-time high or tight.
| Index | Open | Current | Change | |||
| IG29 | 48.007 | 47.998 | <0.009> | |||
| VIX | 11.66 | 11.91 | 0.25 | |||
| CT10 | 2.538% | 2.591% | 0.053% | |||
| S&P | 2,776 | *2,802 | 26 | |||
| DOW | 25,792 | *26,115 | 323 | |||
| Nasdaq | 7,223 | *7,298 | 75 | |||
| OIL | 63.73 | 64.09 | 0.36 | |||
| GOLD | 1,326 | 1,327 | 1 | |||
| USD | IG Corporates | USD | Total (IG + SSA) | |||
| DAY: | $10.70 bn | DAY: | $14.45 bn | |||
| WTD: | $23.15 bn | WTD: | $26.90 bn | |||
| MTD: | $82.825 bn | MTD: | $121.675 bn | |||
| YTD: | $82.825 bn | YTD: | $121.675 bn | |||
2018 Lipper Report/Fund Flows – Week ending January 11th
- For the week ended January 11th, Lipper U.S. Fund Flows reported an inflow of $4.186b into Corporate Investment Grade Funds (2018 YTD net inflow of $5.151b) and a net inflow of $2.651b from High Yield Funds (2018 YTD net inflow of $2.837b).
- Over the same period, Lipper reported a net outflow of $12.514m from Loan Participation Funds (2018 YTD net outflow of $209.799m).
- Emerging Market debt funds reported a net inflow of $1.532b (2018 YTD inflow of $2.005b).
IG Credit Spreads by Rating
Above is the opening extract from Quigley’s Corner aka “QC” Wednesday January 17 2018 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: [email protected] 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.
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