Quigley’s Corner 02.11.19: Week’s New Corporate Bond Issuance Starts Strong
Below is the opening extract from Quigley’s Corner aka “QC” Monday, February 10, 2019 edition distributed via email to institutional investment managers, lead underwriter syndicate desks and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of Mischler’s primary debt capital markets desk. Commentary 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. Further insight re: rates trading is
Investment Grade New Issue Re-Cap – Week Kicks Off with $10.52b IG Corp Supply – Mischler Serves on 3 Deals
Today’s IG Primary & Secondary Market Talking Points
Syndicate IG Corporate-only Volume Estimates for This Week & February
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
2019 Lipper Report/Fund Flows – Week Ending February 6th
IG Credit Spreads by Rating
IG Credit Spreads by Industry
IG New Issue Pipeline
IG M&A Pipeline
Rates Trading Lab
Economic Data Releases
Tomorrow’s Calendar
Geo-Political Risk Monitor
Investment Grade New Issue Re-Cap – Week Kicks Off with $10.52b IG Corp Supply – Mischler Serves on 3 Deals
Today the IG dollar DCM hosted 9 issuers across 15 tranches totaling $10.52b. The SSA space was quiet with Bank of England announcing a deal slated for tomorrow. It was a very busy day for our nation’s oldest Service Disabled Veteran broker dealer. Mischler found itself serving as an active Co-Manager on three separate issuer transactions today – Commonwealth Edison Co’s. SEC registered 30-year First Mortgage Bonds due 3/01/2049, Citibank NA’s 3(a)2 exempt 2-part Senior Secured Notes and Deutsche Bank AG/New York’s 3-year Senior Non-Preferred (“SNP” Notes due 2/14/2022. Whew! Somebody wiped out!
Team Mischler’s special operations unit thanks the respective treasury/funding operatives for selecting Mischler to work with you today. Also, for their respective highly influential parts therein, thank you also to the three Best and Brightest lead left book runners who I worked with today. It was a very hectic day for sure, and I would be remiss without thanking our myriad accounts who helped contribute to our book builds. Nothing happens without an order.
Let’s now review the primary market numbers for this week and month:
- The IG Corporate-only WTD total is 37.34% of this week’s syndicate midpoint average forecast or $10.52b vs. $28.17b.
- MTD we’ve priced 24.51% of the syndicate forecast for February IG Corporate-only new issuance or $22.75b vs. $92.83b.
- There are now 26 issuers in the IG credit pipeline.
Today’s IG Primary & Secondary Market Talking Points
- F.N.B. Corp. increased today’s $1,000 par10NC5 Fixed-to-floating Sub Notes new issue to $120mm from $100mm at the launch after skipping guidance.
- DTE Electric Co. upsized today’s 30-year Green and Refunding Mortgage Bond new issue to $650mm from $500mm at the launch
- The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 15 IG Corporate-only new issues was <19.67> bps.
- ICE BofAML’s IG Index was unchanged at +134. (It’s post-Crisis low is +90 set on 2/01).
- Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +126. (1.57 represents the high on 1/03; 0.85 is the post-Crisis low set on 1/30).
- Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +174 vs. +173. (+125 represents its post-Crisis low set 2/02).
- Investment grade corporate bond trading posted a final Trace count of $19.9b on Friday versus $23.6b on Friday and $21.2b the previous Friday.
- The 10-DMA stands at $25.3b.
Syndicate IG Corporate-only Volume Estimates for This Week & February
| IG Corporate New Issuance | This Week
2/11-2/15 |
vs. Current WTD – $10.52b |
February 2019 |
vs. Current MTD – $22.75b |
| High-End Avg. | $29.23b | 35.99% | $93.87b | 24.24% |
| Midpoint Avg. | $28.17b | 37.34% | $92.83b | 24.51% |
| Low-End Avg. | $27.12b | 38.79% | $91.80b | 24.78% |
| The High | $35b (5) | 30.06% | $120b (1) | 18.96% |
| The Low | $20b (2) | 52.60% | $80b (2) | 28.44% |
Below please find a synopsis of everything Syndicate and Secondary as seen from the perch of Mischler Financial Group’s debt capital markets desk. Have a great evening!
Ron Quigley, Managing Director, Head of Fixed Income Syndicate & Sales
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
…..and here’s another look at last week’s day-by-day re-cap of key primary market driver averages for IG Corporates only followed by the prior six week’s averages:
| KEY IG CORPORATE NEW ISSUE DRIVERS |
MON. 2/04 |
TUES. 2/05 |
WED. 2/06 |
TH. 2/07 |
FRI. 2/08 |
AVERAGES WEEK 2/04 |
AVERAGES WEEK 1/28 |
AVERAGES WEEK 1/21 |
AVERAGES WEEK 1/14 |
AVERAGES WEEK 1/07 |
AVERAGES WEEK 12/31 |
| New Issue Concessions | 4.33 bps | <4.50> bps | 2.87 bps | N/A | N/A | <1.72> bps | 3.94 bps | <0.21> bps | 2.48 bps | 9.54 bps | 20.00 |
| Oversubscription Rates | 4.79x | 5.33x | 2.35x | N/A | N/A | 4.00x | 2.75x | 3.55x | 3.80x | 3.40x | 2.19x |
| Tenors | 8.67 yrs | 8.50 yrs | 6.75 yrs | N/A | N/A | 7.90 yrs | 9.22 yrs | 5.87 yrs | 10.05 yrs | 15.69 yrs | 8.53 yrs |
| Tranche Sizes | $950mm | $700mm | $1,026mm | N/A | N/A | $941mm | $737mm | $697mm | $1,198mm | $1,141mm | $644mm |
| Avg. Spd. Compression IPTs to Launch |
<33.33> bps | <21.25> bps | <17.05> bps | N/A | N/A | <25.21> bps | <19.11> bps | <21.37> bps | <19.90> bps | <20.26> bps | <10.22> bps |
New Issues Priced
Today’s recap of visitors to our IG dollar Corporate and SSA DCM:
For ratings I use the better two of Moody’s, S&P* (*public domain data) or Fitch.
IG
| Issuer | Ratings | Coupon | Maturity | Size | IPTs | GUIDANCE | LAUNCH | PRICED | LEADS |
| Citibank NA | A1/A+ | FRN | 3nc2 2/19/2022 | 500 | 3mL+equiv | 3mL+equiv | 3mL+ | 3mL+53 | CITI-sole |
| Citibank NA | A1/A+ | 3.165% | 3nc2 F-t-F 2/19/2022 |
1,250 | +80a | +68 # | +68 | +68 | CITI-sole |
| Citizens Bank NA/Prov. R.I. | Baa1/A- | FRN | 2/14/2022 | 300 | 3mL+equiv | 3mL+equiv | 3mL+72 | +72 | BARC/CFG/CS/CITI/MS |
| Citizens Bank NA/Prov. R.I. | Baa1/A- | 3.25% | 2/14/2022 | 700 | +105a | +85a (+/-3) | +82 | +82 | BARC/CFG/CS/CITI/MS |
| Citizens Bank NA/Prov. R.I. | Baa1/A- | 3.75% | 2/18/2026 | 500 | +140a | +125a (+/-5) | +120 | +120 | BARC/CFG/CS/CITI/MS |
| Commonwealth Edison Co. | A1/A | 4.00% | 3/01/2049 | 400 | +125a | +110a (+/-5) | +105 | +105 | BARC/MUFG/USB |
| Deutsche Bank AG/NY, NY | Baa3/BBB+ | 5.00% | 2/14/2022 | 1,250 | +275a | +260a (+/-5) | +255 | +255 | DB-sole |
| DTE Electric Co. | Aa3/A+ | 3.95% | 3/01/2049 | 650 | +120a | +105a (+/-5) | +100 | +100 | BAML/BARC/BNY/JPM |
| F.N.B. Corporation/PA. | Baa3/NR | 4.95% | 10nc5 F-t-F 2/14/2029 |
120 | 5.00-5.25% 5.125%a |
N/A | 4.95% | +229.8 Back-end: 3mL+240 |
MS/SON |
| Mondolez International Inc. | Baa1/BBB | 3.625% | 2/13/2026 | 600 | +140a | +120a (+/-5) | +115 | +115 | BAML/DB |
| Total Capital International | Aa3/A+ | 3.455% | 2/19/2029 | 1,250 | +90-95/+92.5a | +80 # | +80 | +80 | GS/MS/MUFG/SG + 2 (p) |
| Union Pacific Corp. | Baa1/A- | 2.95% | 3/01/2022 | 500 | +70-75/+72.5a | +55a (+/-5) | +50 | +50 | BARC/CS/JPM/MS |
| Union Pacific Corp. | Baa1/A- | 3.15% | 3/01/2024 | 500 | +90-95/+92.5a | +75a (+/-5) | +70 | +70 | BARC/CS/JPM/MS |
| Union Pacific Corp. | Baa1/A- | 3.70% | 3/01/2029 | 1,000 | +125-130/+127.5a | +110a (+/-5) | +105 | +105 | BARC/CS/JPM/MS |
| Union Pacific Corp. | Baa1/A- | 4.30% | 3/01/2049 | 1,000 | +155-160/+157.5a | +140a (+/-5) | +135 | +135 | BARC/CS/JPM/MS |
Indexes and New Issue Volume
Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.
*Denotes new high or low.
| Index | Open | Current | Change | |||
| IG30 | 60.559 | 60.824 | 0.265 | |||
| VIX | 15.72 | 15.97 | 0.25 | |||
| CT10 | 2.636% | 2.655% | 0.019% | |||
| S&P | 2,707 | 2,709 | 2 | |||
| DOW | 25,106 | 25,053 | <53> | |||
| Nasdaq | 7,298 | 7,307 | 9 | |||
| OIL | 52.72 | 52.45 | <0.27> | |||
| GOLD | 1,314.29 | 1,308.12 | <6.17 | |||
|
USD |
IG Corporates |
USD |
Total (IG + SSA) |
|||
| DAY: | $10.520 bn | DAY: | $10.520 bn | |||
| WTD: | $10.520 bn | WTD: | $10.520 bn | |||
| MTD: | $22.75 bn | MTD: | $24.00 bn | |||
| YTD: | $135.274 bn | YTD: | $184.624 bn
|
|||
Global Market Recap
- USTs: Treasuries were pressured lower for most the U.S. session after an 9 issuers across 15 tranches priced $10.52b, kicking off a week expected to total $28b in IG Corporate issuance. Altria Group priced a €4.25b deal. Altria’s is expected to issue dollar-denominated debt as early as tomorrow’s Tuesday’ session. Weakness was led by the belly of the curve, flattening 5s/30s by around 1bp; 5- to 7-year sector cheapened by around 2.7bp around the cash settlement, while 10-year yields cheapened by 2.3bp at ~2.655%.
- Overseas 10-year: sell-off.
- SOFR: -0.01 to 2.37 vs. 2.38.
- 3mth Libor: +0.001 to 2.698 vs. 2.697.
- Overseas Stocks: Global rally with equities up throughout Europe; Brazil down 1%.
- Currencies: DXY Index +0.407 to 97.044 vs. 96.637.
- CDX HY: +0.342 to 333.817 vs. 333.475.
- CDX EM: +1.782 to 178.933 vs. 177.151.
*Index levels are as of 5:00PM ET today.
2019 Lipper Report/Fund Flows – Week Ending February 6th
- For the week ended February 6th, Lipper U.S. Fund Flows reported an inflow of $2.668b from Corporate Investment Grade Funds (2019 net outflow of $2.197b) and inflows of $3.859b from High Yield Funds (2019 net inflow of $7.372b).
- Over the same period, Lipper reported outflows of $742.421m from Loan Participation Funds (2019 net outflow of $6.217b).
- Emerging Market debt funds reported a net inflow of $1.465b (2019 YTD inflow of $2.74b).
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 closed 0.25 bps wider on Friday vs. Thursday and are an average 30.25 bps wider versus their new post-Crisis lows.
*Denotes new post-Crisis low!
*Denotes tied post-Crisis low!
| ASSET CLASS | 2/08 | 2/07 | 2/06 | 2/05 | 2/04 | 2/01 | 1/31 | 1/30 | 1/29 | 1/28 | 1-Day Change | 10-Day Trend | PC low |
| IG Avg. | 134 | 134 | 132 | 133 | 134 | 136 | 138 | 139 | 139 | 140 | 0 | <6> | 90 (2/01/18) |
| “AAA” | 62 | 60 | 58 | 59 | 59 | 61 | 62 | 63 | 63 | 62 | +2 | 0 | 48 (2/02/18) |
| “AA” | 68 | 69 | 67 | 68 | 68 | 69 | 70 | 71 | 71 | 72 | <1> | <4> | 51 (2/02/18) |
| “A” | 102 | 102 | 101 | 101 | 102 | 102 | 105 | 105 | 105 | 106 | 0 | <4> | 71 (2/01/18) |
| “BBB” | 174 | 174 | 171 | 172 | 174 | 176 | 179 | 181 | 181 | 181 | 0 | <7> | 115 (2/02/18) |
| IG vs. HY | 298 | 295 | 281 | 282 | 291 | 293 | 299 | 297 | 301 | 301 | +3 | <3> | 222 (5/15/18) |
Above is the opening extract from Quigley’s Corner aka “QC” Monday, February 10, 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: rquigley@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* (*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.
