Quigley’s Corner 01.03.19 – IG Corporate Debt Issuers Start New Year With Show of Confidence In Face of Equity Market Volatility
Investment Grade New Issue Re-Cap – Big Day $10.10 Billion Priced As Issuers Navigate “Tricky” Market
Today’s IG Primary & Secondary Market Talking Points – Utilities, Autos and Berkshire and a Bank
Syndicate IG Corporate-only Volume Estimates for January
TMCC Prices Maximum $2b 4-part 2yr FXD/FRNS, 5- and 10-year Senior Notes
Toyota’s Diversity and Inclusion Commitment to Our Veterans
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
The “QC” 2019 Geopolitical Risk Monitor
2019 Lipper Report/Fund Flows – Week Ending January 2nd – Outflows Continue Across Credit
IG Credit Spreads by Rating
IG Credit Spreads by Industry
IG New Issue Pipeline
IG M&A Pipeline Highlights – $316.75 Billion
Economic Data Releases
Rates Trading Lab
Tomorrow’s Calendar
As I wrote in last evening’s ‘QC’ “we’re about to see a decoupling between credit and equities” which certainly showed up today. The DOW opened up down 350 points and closed the session down 660 but that did not stop 6 issuers from pricing 15 tranches totaling $10.10b in our IG dollar DCM. The SSA space was quiet. Let’s review the monthly primary market numbers:
- MTD we’ve priced 8.85% of the syndicate forecast for December IG Corporate new issuance or $10.10b vs. $114.15b.
- There are now 28 issuers in the IG credit pipeline.
Today’s IG Primary & Secondary Market Talking Points – Utilities, Autos and Berkshire and a Bank
- Duke Energy Ohio Inc. upsized today’s two-part 10s/30s Global Secured Notes new issue to $800mm from $600mm 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 15 IG Corporate-only new issues was <10.16> bps.
- ICE of BofAML’s IG Index widened 1 bp to +160 vs. +159. (It’s post-Crisis low is +90 set on 2/01).
- Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +154 vs. 1.53. (1.54 represents the high on 12/31; 0.85 is the post-Crisis low set on 1/30).
- Standard & Poor’s Investment Grade Composite Spread was unchanged at +190. (+125 represents its post-Crisis low set 2/02).
- Investment grade corporate bond trading posted a final Trace count of $15.1b on Wednesday versus $3.7b on Monday and $5.3b the previous Wednesday. Tuesday was a holiday.
- The 10-DMA stands at $10.2b.
- For the week ended January 2nd, Lipper U.S. Fund Flows reported an outflow of $4.517b from Corporate Investment Grade Funds (2019 net inflow of $4.517b) and outflows of $627.989m from High Yield Funds (2019 net outflow of $627.989m). (see more on 2019 Lipper Report/Fund Flows by scrolling to that subsection below).
Syndicate IG Corporate-only Volume Estimates for January
| IG Corporate New Issuance | January 2019 |
vs. Current MTD – $10.10b |
| High-End Avg. | $112.11b | 9.01% |
| Midpoint Avg. | $114.15b | 8.85% |
| Low-End Avg. | $116.19b | 8.69% |
| The High | $150b | 6.73% |
| The Low | $100b | 10.10% |
TMCC Prices Maximum $2b 4-part 2yr FXD/FRNS, 5- and 10-year Senior Notes
……..and if I’m writing about it you know it means that Mischler was involved! Mischler Financial Group, Inc. our nation’s oldest Service Disabled Veteran broker dealer was honored to be named an active 1.00% Co-Manager on today’s TMCC transaction. Our five-star salute goes out to a slew of those involved today beginning with Toyota’s capital markets team, along with the fixed income syndicate team leaders at BAML and JPM. Talk about a great group of talented market players right there!
In my fixed income daily “Quigley’s Corner” update last night, “many market participants who I spoke with suggested that credit and equities may decouple from each other based on the simple reality that issuers just have to issue. The 10-year closed at 2.62% after having tightened 62 bps versus 3.24% on November 8th.” It was quite a compelling talking point for Corporate treasurers. The 10yr was yielding ~2.57% at the time of pricing so, waiting for today helped by another nickel! So, congrats therein! As such, however, many investors stood down today despite that a total of 6 issuers announced 15 tranches between them on a day in which the DOW opened up down ~350 points and closed the session down 660 points which may be a sign of that “decoupling” between credit and equities has in fact begun. For today at least “the left hand doesn’t know what the right hand is doing.”
Having said that Toyota (Aa3/AA-) was focused on printing between $1.5b to as much as $2b dependent on the book build. They didn’t have to worry though as the cumulative book size wound up being $4.525b or 2.26x oversubscribed. Landing levels pegged concession as ~10-15 bps across each of the four tranches according to one joint lead.
| TMCC Issue | IPTs | GUIDANCE | LAUNCH | PRICED | Spread Compression |
NIC (bps) |
Trading at the Break |
+/- (bps) |
| 2yr FRNs | 3mL+equiv | 3mL+equiv | 3mL+54 | 3mL+54 | <15> bps | 12.5 | 3mL+54/ | 0/flat |
| 2yr FXD | +85a | +70-75 | +70 | +70 | <15> bps | 12.5 | +69/ | <1> |
| 5yr FXD | +110a | +100-105 | +100 | +100 | <10> bps | 12.5 | +100/ | 0/flat |
| 10yr FXD | +125a | +115-120 | +115 | +115 | <10> bps | 12.5 | +115/ | 0/flat |
………and here’s a snap shot of today’s 4-part TMCC transaction book sizes and over-subscription rates – the measure of investor demand:
| TMCC Issue | Tranche Size | Final Book Size |
Bid-to-Cover Rate |
| 2yr FRNs | $300mm | $925mm | 3.08x |
| 2yr FXD | $700mm | $2bn | 2.86x |
| 5yr FXD | $500mm | $900mm | 1.80x |
| 10yr FXD | $500mm | $700mm | 1.40x |
Final Pricing – Toyota Motor Credit Corp. 2yr FXD/FRN, 5s and 10s
TOYOTA $300mm FRNs due 1/08/21 FRN @3mL+54 at $100.00
TOYOTA $700mm 3.05% due 1/08/21 @$99.940 to yield 3.081% or T+70
TOYOTA $500mm 3.35% due 1/08/24 @99.973 to yield3.356% or T+100 MW+15.
TOYOTA $500mm 3.65% due 1/08/29 @99.627 to yield 3.695% or T+115 MW+20
Toyota’s Diversity and Inclusion Commitment to Our Veterans
It’s a good time to also extol the virtues of Toyota’s diversity and inclusion procurement initiatives as they pertain to the military and our men and women in uniform.
Toyota has been in the business of making great cars and trucks for 75 years. The Company also works each and every day to apply and share its know-how in ways that benefit people, the communities it serves and our planet, to contribute to building a better tomorrow for us all. Toyota is proud to build its vehicles in the United States, investing in America, and the people who make our nation great. As a partner with the U.S. Chamber of Commerce Foundation and their Hiring Our Heroes program, Toyota is also investing in our U.S. veteran men and women by helping them find work after their valued service to our country. That’s all about making our world a better place.
Toyota provides advocacy and support for Toyota veterans and active military servicemen and women by educating company associates on the many important contributions and sacrifices made by veterans. This includes coordinating corporate celebrations and national recognition of veteran’s service to our nation, facilitating associate contributions in support of the needs or causes of our veterans, and collaborating with other veterans support organizations in the interest of the rights and needs of veterans. That’s just one example of how and why Toyota has enjoyed 10 consecutive years in the Top 50 Companies for Diversity.
Thanks again Team Toyota. It is honor for us to receive that morning call on deal day when you ask team Mischler, “Let’s Go Places”. We are privileged to work for you as a key member of your diversity and inclusion repertoire and as a trusted member of your designated investment bank underwriting group. Thanks also to our high quality account base who participated today in the face of market volatility. Thanks again to BAML and JPM Syndicate for bringing out the best in us as well. We know what you expect and we always work on delivering and contributing our best each and every transaction that we participate on with you. We want all of us to be the best we can be.
Below please find a synopsis of everything syndicate and secondary as seen from the perch of the Mischler Financial Group debt capital markets 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” Thursday, January 03, 2019 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 primary 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* (*public domain information), Stone & McCarthy Research, 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.
