Quigley’s Corner 06.19.18: Despite Trade War Saber-Rattling, Bayer AG 15b Bond Issuance is Headache Free

Investment Grade New Issue Re-Cap – Despite Mounting Trade War Fears Bayer Prints Massive $15b 8-Part Jumbo!

Today’s IG Primary & Secondary Market Talking Points

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

Nina Chamberlain Places on USA Cadet National Women’s Water Polo Team

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 June 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

Economic Data Releases

Tomorrow’s Calendar

Investment Grade New Issue Re-Cap – Despite Mounting Trade War Fears Bayer Prints Massive $15b

U.S.-China trade tensions mounted with the latter imposing tariffs on U.S. commodities. Tariffs on U.S. oil alone amount to a $1b monthly clip. This, in response to Trump’s tariffs that took effect last Friday June 15th in the form of 25% on $50b across 900 Chinese imports.  Emerging Markets currencies got hit and their bond yields widened as a result kicking off the session with 200 point loss on the DOW. Trump said last week that if China retaliates the U.S. will pursue additional tariffs. Trump’s tariffs are motivated by property rights violations in addition to new controls and restrictions.

Regardless, Bayer AG (Baa1/A-), as expected issued a blockbuster $15b jumbo transaction thru joint leads Bank of America/Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and J.P. Morgan. The German multinational pharmaceutical and life-sciences company priced the dollar-denominated 144a/REGS eight-tranche transaction across the curve.  Last week’s three days of investor calls wrapped up on Friday the 15th. Bayer AG (Baa3/BBB+) agreed to buy Monsanto Co. (A3/A-) in a deal valued at $66 billion or $128 per share in cash – a 21% premium to Monsanto’s closing price on September 13th, 2017.  It represents the M&A Pipeline’s largest deal of the year and is the single largest takeover by a German company. BAML, CS, GS, HSBC and JPM underwrote the $56.9bacquisition loan.

Meanwhile Walmart Inc. (Aa2/AA) had joint leads Barclays, Citigroup and J.P. Morgan conduct fixed-income investor calls today, Monday, June 18th from 9:30am thru 5:00pm ET. Typically issuers are ready to print the day after.  Walmart will acquire 77% of Flipkart Group, India’s largest e-commerce company for $16b valuing the company at $20.8b. The largest companies need to compete on a scale with Amazon following its acquisition of Whole Foods.  Significant “chatter” from my sources indicates a ~$10b debt transaction across the curve slated for tomorrow.  That volume will only add to what’s expected to be a ~40b week of new IG Corporate supply. So, we may well see a total of at least $26b print between today’s Bayer and Duke Florida combined with tomorrow’s Walmart after just two days and there are 20 other issuers in the pipeline.

Today the IG dollar DCM hosted issuers across 10 tranches totaling $16.00b and representing 42% of this week’s $38.16b midpoint syndicate volume forecast  The SSA space was quiet.

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 41.93% of this week’s syndicate midpoint average forecast or $16.00b vs. $38.16b.
  • MTD we’ve priced 86.89% of the syndicate forecast for June IG Corporate new issuance or $78.58b vs. $90.44b.
  • There are now 21 issuers in the IG credit pipeline.


Today’s IG Primary & Secondary Market Talking Points

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 10 IG Corporate-only new issues was <15.00> bps.
  • BAML’s IG Master Index was unchanged at +121. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.15. (1.16 represents a new high; 0.85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +155 vs. +154. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $13.7b on Friday versus $19.3b on Thursday and $13b the previous Friday.
  • The 10-DMA stands at $17.3b.


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

IG Corporate New Issuance This Week
vs. Current
WTD – $16.00b
June 2018 vs. Current
MTD – $78.58b
Low-End Avg. $37.36b 42.83% $91.24b 86.12%
Midpoint Avg. $38.16b 41.93% $90.44b 86.89%
High-End Avg. $38.96b 41.07% $89.64b 87.66%
The High $30b 53.33% $75b 104.77%
The Low $46b 34.78% $110b 71.44%


Nina Chamberlain Places on USA Cadet National Women’s Water Polo Team

Nina Chamberlain(l) USA Cadet National Women’s Water Polo Team

Every day we here at Team Mischler leave it on the floor. Some days we’re on deals, others we’re not. One thing we NEVER do, however, is fault our resolve or efforts therein because we expect to be the best each and every day and we know what is expected of us  – it’s who we are. It’s contagious here and equally so in our respective home lives – the ones that matter most to us all.

Case in point, our fearless leader and CEO Dean Chamberlain’s daughter Nina achieved some well-deserved national attention and recognition today that I’d like to share with you all.

The center of gravity American water polo is California, but this year Greenwich represented the rest of the country by placing an astonishing three athletes on USA National Teams. This historic achievement continues the recent water polo trend started by the Greenwich YMCA standout Thomas Dunstan, who made the 2016 Olympic team and now plays for USC. Last year, Kayla Yelensky represented the USA in the Youth Pan American games. This year the trend continued for both the boys and girls teams in several age groups.

Out of thousands of players trying out for the USA National Water Polo Age-Group Teams, only 22 players in the country make the various National team (Development, Cadet & Youth).

Gavin West, a 14-year-old 8th grader at Brunswick, was one of only two cadets (15U) outside California to make the team. He will be the first representatives from the Eastern Zone in 7 years. Patrick Mullen, a 13 year old 7th grader at Greenwich Country Day School was the only Eastern representative on the Development team (14U). Nina Chamberlain, a 14-year-old Freshman at Greenwich High School, made the girls cadet team (15U) as the only Eastern representative from the team.

In total, there were more male national team athletes from Greenwich than all non-California states combined. This speaks to the growing participation at young ages and the quality of the local coaching at the Greenwich YMCA under Head Coach Ulmis Lordache.

“All three athletes have worked really hard over the last four years and it is a top honor to be selected for the National team,” said Iordache.” Our entire club is so proud of them.” All three will continue their training with the National Team in California over the summer. *Reprinted from the Greenwich Free Press June 16, 2018

Congratulations Nina! This is a great accomplishment for you as well as for women athletics and our great nation!

Below find a synopsis of everything syndicate and secondary from the day’s IG debt capital markets as seen from the perch of Mischler’s Fixed Income Syndicate Desk. 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

Above is the opening extract from Quigley’s Corner aka “QC”  Tuesday, June 16 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.