Debt Markets Remember D-Day: Normandy 1944; Mischler Financial Comment
June 6, 2018   //   by Mischler MarCom   //   Debt Market Commentary  

Quigley’s Corner 06.06.18 – 17 Issuers, 29 Tranches $11b in New Issuance; Mischler Financial Tribute to D-Day

Investment Grade New Issue Re-Cap – WTD IG & SSA Issuance Matches 2018 High as 54 Tranches Price in 3 Sessions!

Today’s IG Primary & Secondary Market Talking Points

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

Remembering D-Day

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

The “QC” Geopolitical Risk Monitor

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

New Issues Priced

Indexes and New Issue Volume 

Global Market Recap

2018 Lipper Report/Fund Flows – Week ending May 30th        

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     

Today the IG dollar DCM continued rolling along hosting 8 issuers across 14 tranches totaling $7.20b.  The SSA space added KfW’s $4b 2-year Global Notes new issue bringing the all-in IG day totals to 9 issuers, 15 tranches and $11.20b. Week to date we have now priced 54 tranches matching the 2018 weekly high after only three sessions and including 2 IG rated preferreds and 2 SSA issues.

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

  • The IG Corporate WTD total is 132.53% of this week’s syndicate midpoint average forecast or $33.45b vs. $25.24b.
  • MTD we’ve priced 37.65% of the syndicate forecast for April IG Corporate new issuance or $34.055b vs. $90.44b.
  • There are now 14 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • NiSource Inc. upsized today’s 144a/REGS $1,000 par PerpNC5 transaction to $400mm from $350mm at the launch and at the tightest side of guidance.
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 14 IG Corporate and Preferred-only new issues was <14.07> bps.
  • BAML’s IG Master Index widened 1 bp to +121 vs. +120. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.15 vs. +1.14 thereby tying its high. (0.85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +153 vs. +152. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $18.3b on Tuesday versus $16b on Wednesday and $21.9b the previous Tuesday.
  • The 10-DMA stands at $17.4b. 

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

 

IG Corporate New Issuance This Week
6/04-6/08
vs. Current
WTD – $33.45mm
June 2018 vs. Current
MTD – $34.055b
Low-End Avg. $24.44b 136.87% $91.24b 37.32%
Midpoint Avg. $25.24b 132.53% $90.44b 37.65%
High-End Avg. $26.04b 128.46% $89.64b 37.99%
The High $20b 167.25% $75b 45.41%
The Low $35b 95.57% $110b 30.96%

Remembering D-Day and the Greatest Generation: 74 years Ago Today

Today marks the 74th anniversary of Operation Overlord, the Allied invasion of Normandy, most commonly known as D-Day. An epic multinational amphibious and airborne operation, D-Day forged partnerships and reinforced trans-Atlantic bonds that remain strong to this day. U.S. service members from 20 units in Europe and the United States have commemorated the D-Day anniversary over the past week in almost 40 locations throughout the Normandy region.

remember-D-Day-Normandy-Mischler-Financial

Never forget!

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

 

 

 

*Normandy – American Cemetery

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’s session followed by the averages over the prior six weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
6/04
TUES.
6/05
AVERAGES
WEEK 5/28
AVERAGES
WEEK 5/21
AVERAGES
WEEK 5/14
AVERAGES
WEEK 5/07
AVERAGES
WEEK 4/30
AVERAGES
WEEK 4/23
New Issue Concessions 6.33 bps 6.61 bps 9.00 bps 9.67 bps 4.59 bps 4.10 bps 5.92 bps 3.63 bps
Oversubscription Rates 2.77x 2.77x 2.73x 2.93x 2.96x 2.70x 2.16x 2.53x
Tenors 7.92 bps 10.40 bps 9.69 yrs 7.70 yrs 10.18 yrs 7.04 yrs 13.17 yrs 9.19 yrs
Tranche Sizes $622mm $741mm $467mm $952mm $842mm $805mm $630mm $786mm
Avg. Spd. Compression
IPTs to Launch
<13.38> bps <13.51> bps <8.23> bps <18.71> yrs <15.12> bps <12.91> bps <12.54> bps <13.85> 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
Alliant Energy Finance Baa1/A- 3.75% 6/15/2023 400 +115a +100a (+/-5) +95 +95 BAML/JPM/MIZ
Alliant Energy Finance Baa1/A- 4.25% 6/15/2028 300 +145a +135a (+/-5) +130 +130 BAML/JPM/MIZ
Compass Bank Baa2/BBB+ FRN 6/11/2021 450 3mL+equiv 3mL+73 the # 3mL+73 3mL+73 BBVA/CITI/GS/MS
Compass Bank Baa2/BBB+ 3.50% 6/11/2021 700 +110a +95 the # +95 +95 BBVA/CITI/GS/MS
Credit Suisse Group AG BBB+/A- FRN 6NC5
6/12/2024
750 3mL+equiv N/A 3mL+124 3mL+124 CS-sole
Credit Suisse Group AG BBB+/A- 4.207% 6NC5
6/12/2024
1,250 +150a N/A +140 +140
Reset:
3mL+124
CS-sole
Edwards Life Sciences Baa2/BBB- 4.30% 6/15/2028 600 +150-155/+152.5a +140a (+/-5) +135 +135 BAML/JPM (a) + 4 (p)
Jackson Na’l. Life Glbl. Fdg. A1/AA- FRN 6/11/2021 500 3mL+equiv 3mL+48-50 3mL+48 3mL+48 BAML/DB/GS/JPM
Jackson Na’l. Life Glbl. Fdg. A1/AA- 3.30% 6/11/2021 300 +80-85/+82.5a +70-72 +70 +70 BAML/DB/GS/JPM
Jackson Na’l. Life Glbl. Fdg. A1/AA- 3.875% 6/11/2025 400 +110a +98-100 +98 +98 BAML/DB/GS/JPM
KeyBank NA/Cleveland, OH A3/A- 3.35% 6/15/2021 500 +85a +72a (+/-2) +70 +70 GS/JPM/KEY/MS
NiSource Inc. Baa2/BBB+ 3.65% 6/15/2023 350 +105-110/+107.5a +90a (+/-2.5) +87.5 +87.5 CS/JPM/MS/MUFG
NiSource Inc. BBB-/BB+ 5.65% PerpNC5 400 5.875%a 5.70%a (+/-5) 5.65% $1000 par CS/JPM/MS/MUFG
Western Union Co. Baa2/BBB+ 4.25% 6/09/2023 300 +145a N/A +145 +145 BAML/BARC

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
KfW Aaa/AAA 2.75% 7/15/2020 4,000 MS<2>a MS<2>a MS<3> +23.8 BARC/HSBC/RBC

 

Indexes and New Issue Volume              

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new high or tight.

 

Index Open Current Change  
IG30 64.169 63.742 <0.427>
VIX 12.40 11.64 <0.76>
CT10 2.929% 2.973% 0.044
S&P 2,749 2,772 23  
DOW 24,800 25,146 346
Nasdaq 7,638 *7,689 51
OIL 65.52 65.01 <0.51>  
GOLD 1,296 1,296 0  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $7.20 bn DAY: $11.20 bn
WTD: $33.45 bn WTD: $37.95 bn
MTD: $34.055 bn MTD: $38.555 bn
YTD: $618.251 bn YTD: $772.816 bn

 

Global Market Recap

 

  • USTs were sold; the yield curve steepened – T2 +2, T5 +4, T10 +4, T30 +4.
  • Overseas Bonds: EU, Gilts & Peripherals sold.  Asia flat.
  • SOFR: -0.05 to 1.75 vs. 1.80.
  • 3mth Libor: +0.006 to 2.319 vs. 2.313%.
  • Overseas Stocks: Asia up Europe mostly red except the CAC.
  • Currencies: DXY Index -0.241 to 93.635 vs. 93.876.
  • CDX HY: -3.363 to 338.194 vs. 341.557.
  • CDX EM: -0.287 to 171.909 vs. 172.196.

*Index levels are as of 5:00PM ET today.

2018 Lipper Report/Fund Flows – Week ending May 30th             

  • For the week ended May 30th, Lipper U.S. Fund Flows reported a net inflow of $848.978m into Corporate Investment Grade Funds (2018 YTD net inflow of $43.822b) and a net outflow of $17.869m from High Yield Funds (2018 YTD net outflow of $15.138b).
  • Over the same period, Lipper reported a net inflow of $274.880m from Loan Participation Funds (2018 YTD net inflow of $7.156b).
  • Emerging Market debt funds reported a net inflow of $27.322m (2018 YTD inflow of $1.990b). 

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 24.50 bps wider versus their new post-Crisis lows

*Denotes new post-Crisis low

 

ASSET CLASS 6/05 6/04 6/01 5/31 5/30 5/29 5/28 5/25 5/24 5/23 1-Day Change 10-Day Trend PC
low
IG Avg. 121 120 121 122 120 120 116 116 115 115 +1 +6 90 (2/01/18)
“AAA” 62 62 62 63 63 63 60 60 60 60 0 +2 48 (2/02/18)
“AA” 72 71 71 72 70 69 67 67 67 67 +1 +5 51 (2/02/18)
“A” 97 96 97 98 97 96 92 92 92 92 +1 +5 71 (2/01/18)
“BBB” 152 152 153 154 152 151 147 147 146 146 0 +6 115 (2/02/18)
IG vs. HY 229 229 234 241 244 255 237 237 234 233 0 <5> 222 (5/15/18)

 

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 31.42 bps wider versus their post-Crisis lows!
*Denotes new post-Crisis low!

INDUSTRY 6/05 6/04 6/01 5/31 5/30 5/29 5/28 5/25 5/24 5/23 1-Day Change 10-Day Trend PC
low
Automotive 106 105 106 107 106 104 102 102 102 102 +1 +4 67
Banking 109 109 110 111 110 109 103 103 102 102 0 +7 75 (2/02/18)
Basic Industry 154 153 154 155 153 154 148 148 147 147 +1 +7 110 (2/02/2018)
Cap Goods 99 98 99 99 99 98 96 96 95 95 +1 +4 75 (1/12/18)
Cons. Prod. 109 108 110 110 108 107 105 105 105 105 +1 +4 78 (2/01/18)
Energy 154 152 153 154 150 150 146 146 145 145 +2 +9 115 (2/02/18)
Financials 124 124 124 125 122 121 119 119 119 118 0 +6 97
Healthcare 105 105 105 106 104 103 102 102 101 101 0 +4 77 (2/02/2018)
Industrials 124 123 124 125 123 122 119 119 119 119 +1 +5 93 (2/02/18)
Insurance 130 130 130 132 130 130 127 127 126 125 0 +5 100 (2/02/18)
Leisure 129 127 128 127 126 125 125 125 125 123 +2 +6 98 (2/01/18)
Media 156 156 157 157 155 154 150 150 150 148 0 +8 113
Real Estate 129 129 129 130 129 129 128 128 127 127 0 +2 100 (2/01/18)
Retail 111 111 112 112 112 111 109 109 108 108 0 +3 82 (2/02/18)
Services 111 111 112 112 110 109 108 108 107 107 0 +4 94  (1/31/18)
Technology 90 89 91 91 90 90 86 86 86 86 +1 +4 71 (2/02/18)
Telecom 159 159 160 162 161 160 155 155 154 153 0 +6 122
Transportation 128 124 127 127 125 124 122 122 121 121 +4 +7 91 (2/02/2018)
Utility 124 127 124 125 123 123 119 119 119 119 <3> +5 96 (2/02/2018)

                                   

New Issue Pipeline

Above is the opening extract from Quigley’s Corner aka “QC”  Wednesday, June 6, 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.

Quigley’s Corner 06.06.18: Debt Markets Remember D-Day: Normandy 1944; Mischler Financial Comment