Quigley’s Corner 02.23.18 – Investment Grade Debt Market Comment Weekend Edition

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

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

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

Syndicate IG Corporate-only Volume Estimates for Next Week

The “QC” Geopolitical Risk Monitor

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

2018 Lipper Report/Fund Flows – Week ending February 21st

IG Credit Spreads by Industry

IG Credit Spreads by Rating

New Issue Pipeline

M&A Pipeline Highlights


Investment Grade New Issue Re-Cap

Well, there were no new issues from either the IG Corporate or the SSA space today. No harm, no fowl and a welcome relief on a Friday! Next week is shaping up to be a nice one with the average syndicate estimate calling for $26.92b to price.  In conducting my Friday morning survey of the top 25 syndicate desks, not only did all respond again but there seemed to be considerable “chatter” away from them on the street that CVS may be sooner than we think.  That could be a significant volume booster to what’s already a hefty week next week.  53.33% of this week’s IG Corporate new issues tightened with 23.33% flat to new issue spread levels for an overall 79% rate which is a very healthy number.

I have this week’s primary market data download below as well as comments and projections from the sagacious, scholarly, sapient sages of syndicate. That’s right they are all here as my personal guests each and every Friday, for which I am grateful to them all, but hustle up before they leave for their weekends. Some key investment grade debt market comment talking points are to keep an eye, more like an ear, on our new Fed head, Jerome Powell’s first Congressional testimony before the House that was rescheduled this morning for next Tuesday, February 27th from Wednesday.  Otherwise known as the Humphrey-Hawkins hearings, this is the first of two such annual appearances the Fed chief makes each year. He is supposed to follow that up with a repeat performance before the Senate on Thursday assuming they don’t shift that schedule as well. His testimony may well have a strong immediate market impact should he elaborate on interest rates and inflation. Expectations are that he will stay the Fed course and not “rock the boat.”  Great tune by the Hues Corporation BTW. Advice to the newbie, ………don’t rock the boat baby……… don’t tip the boat over!

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • The IG Corporate WTD total is 96.65% of this week’s syndicate midpoint average forecast or $18.15b vs. $18.78b.
  • MTD we’ve priced 67.67% of the syndicate forecast for February IG Corporate new issuance or $60.217b vs. $88.98b.
  • There are now 11 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index was unchanged at +98. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.93.  (+85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +133. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $20.1b on Thursday versus $19.4b on Wednesday and $19.2b the previous Thursday.
  • The 10-DMA stands at $18.5b. 

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

IG Corporate New Issuance This Week
vs. Current
WTD – $18.15b
February 2018 vs. Current
MTD – $60.217b
Low-End Avg. $17.74mm 102.31% $88.28b 68.21%
Midpoint Avg. $18.78mm 96.65% $88.98b 67.67%
High-End Avg. $19.82mm 91.57% $89.68b 67.15%
The Low $30mm 60.50% $70b 86.02%
The High $10mm 181.50% $110b 54.74%


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 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 17 of today’s respondents are in the top 18 of the new 2018 League table including 19 of the top 21 according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 82.21% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they are 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 are 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 – 2014, 2015 and 2016 !

The Segue: Here is this week’s geopolitical recap: 

The PyeongChang Winter Olympics will officially come to and this Sunday February 25th, and you know what that means?  North Korea will invariably return to its pre-Olympic nuclear stride. U.S. financial markets will be focused next week on new Fed head Powell’s testimony before the House next Wednesday followed by the Senate on Thursday. Three rate hikes have been solidly forecast for 2018 with many now touting four and murmurings of the possibility of five! With a massive budget, the largest UST auctions on record this week – $258b – and higher rates to pay off, many are worried that our economy, that is running on all cylinders with low unemployment, means inflation is lurking around the corner.  Equity markets proved resilient this week although we are still witnessing extreme intra-day swings as the “correction” finds itself.  Next Friday, March 2nd Germany‘s Social Democrats (Socialist Party) votes to approve or reject the recent grand coalition deal better referred to as a “marriage of convenience” with Merkel’s CDU/CSU party. A “no” vote means new elections for the Hinterland and further political tension and turmoil in the EU’s keystone state and the world’s third-largest economy. A week from Sunday – March 4th – Italy holds its eagerly anticipated election with many projecting Berlusconi’s Forza Party to win and form a coalition government with other Eurosceptic parties. In a nation with 65 governments in 71 post-WWII years, anything can happen. Italy’s national debt is $2.8trillion and its banking sector holds $220bn of bad loans.  It has the world’s third highest debt-to-GDP ratio. So, fun times ahead folks!

Let’s now take a deep dive into the technical data.  Entering this morning’s Friday session –

  • The IG Corporate WTD total stands at $18.15b. We priced $630mm less than the week’s average midpoint estimate of $18.78b or 96.65%.
  • MTD we priced 67.67% of the syndicate projection for February IG Corporates or $60.217b vs. $88.98b.
  • Entering today’s session, the YTD IG Corporate-only volume is $192.602b vs. the $233.533b that priced on Thursday, February 23rd, 2017 or $40.931b (21.25%) less than this time last year.
  • The all-in or IG Corporate plus SSA YTD volume is $267.967b vs. $303.183b on Thursday, February 23rd, 2017 or $35.216b (13.14%) less than the same time year ago total.

Here are the five key primary market driver averages for the 29 IG Corporate-only deals that priced this week.

o   NICS:  1.95 bps

o   Oversubscription Rates: 3.29x

o   Tenors: 11.97 years

o   Tranche Sizes: $626mm

o   Spread Compression from IPTs to the Launch: <16.46> bps

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

  • Week on week, average NICs tightened minutely by 0.67 bps to an average 1.95 bps vs. 2.62 bps across last this week’s 29 IG Corporate-only new issues that displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, increased considerably by 1.33x to an average 3.29x vs. 1.96x.
  • Average tenors reduced dramatically by 6.19 years to an average 11.97 years vs. 18.16 years.
  • Tranche sizes grew by $127mm to $626mm vs. $499mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 29 IG Corporate-only new issues tightened by 3.64 bps to <16.46> bps vs. <12.82> bps.
  • Standard and Poor’s Investment Grade Composite Spread was unchanged at +133.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning was unchanged at 0.93 week-on-week.
  • Investment grade corporate bond trading posted a final Trace count of $20.1b on Thursday versus $19.4b on Wednesday and $19.2b the previous Thursday.
  • The 10-DMA stands at $18.5b.
  • The VIX narrowed 0.74 to 18.72 at yesterday’s close vs. last Friday’s 19.46.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +99 vs. +98.
  • Spreads across the four IG asset classes widened 0.75 bp week-on-week to 8.00 bps vs. 7.25 bps as measured against its cumulative post-Crisis low.
  • Spreads across the 19 major IG industry sectors widened 0.58 bps to an average 8.95 bps vs. 8.37 bps wider as measured against their average cumulative post-Crisis lows!
  • For the week ended February 21st, Lipper U.S. Fund Flows reported a net inflow of $1.572b into Corporate Investment Grade Funds (2018 YTD net inflow of $20.260b) and a net outflow of $335.066m from High Yield Funds (2018 YTD net outflow of $12.499b).
  • Taking a look at the secondary trading performance of this week’s 29 IG Corporate and 1 SSA new issues, of the 30 deals that printed, X tightened versus NIP for a 53.00% improvement rate, 7 widened  (23.50%), 7 were flat (23.50%).

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

  • IG Corps: $18.15b
  • All-in IG (Corps + SSA): $20.65b

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”Thank you, 

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

The “Best and the Brightest” in Their Own Words

Above is the opening extract from Quigley’s Corner aka “QC”  Friday, February 23, 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: rkarr@mischlerfinancial.com 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.