Quigley’s Corner 05.06.19: Utilities Light Up DCM New Issuance; Mischler Memorial Day Month Pledge
Mischler Memorial Day Month Pledge Announcement
Today’s IG Primary & Secondary Market Talking Points
Investment Grade New Issue Re-Cap – Trade Talks Stymie Issuance; Open Door for 3 Defensive Utilities
Today’s IG Primary & Secondary Market Talking Points
Syndicate IG Corporate-only Volume Estimates for This Week and May
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 May 1st
IG Credit Spreads by Rating
IG Credit Spreads by Industry
IG New Issue Pipeline
Mischler Memorial Day Month Pledge Announcement
We are pleased to announce this year’s Mischler Memorial Day Month Pledge includes (3) special philanthropic missions.
In addition to our long-standing commitment to honoring those who have served, those who have been injured in the line of duty, families of fallen veterans and families of service-disabled veterans, we’re also proud to support industry initiatives designed to combat life-threatening disease. We are grateful to each of our Fortune 500 Issuer clients and the broad universe of asset managers who look to and rely on Mischler to help you navigate the primary and secondary markets, and in turn, enable us to make the following philanthropic missions even more impactful.
Tee It Up For the Troops | Century Country Club, Westchester, NY. Tee It Up for the Troops is a 501c3 focused on leveraging golf events to raise funds for local veterans organizations. This organization has hosted over 475 fundraising events in more than 40 states across the USA, delivering over $10,000,000 to local veterans organizations that support our wounded warriors, as well as to national charities such as Fisher House Foundation and Warfighter Sports, a division of Disabled Sports USA. Donations now exceed more than $1 million annually. To learn more about Tee It Up for the Troops, click here
Johnny Mac Soldiers Fund 2019 Dallas Gala. Since 2014, Johnny Mac Soldiers Fund has awarded $7.5 million in scholarships to veterans and military family members, especially children of the fallen or disabled. There now nearly 1000 Johnny Mac Scholars attending schools all over the country. To learn more about Johnny Mac Soldiers Fund, click here
American Cancer Society 14th Annual Financial Services Cares Gala (FSCG). The Financial Services Cares Gala celebrates the financial services industry’s commitment to the fight against cancer, with a portion of the net proceeds going to support Hope & Heroes at Columbia University Medical Center to assist its cutting-edge programs and research for children’s cancer.
Marching Forward with Joint Strike Force GTS-Mischler: Mischler CEO Dean Chamberlain (SDV) will serve as advisor to GTS Veteran Analyst Program, a newly-created student-veteran internship program advanced by Mischler Financial Group strategic partner, Global Trading Systems (“GTS”). The inaugural launch for this program will include a special luncheon at the NYSE on May 21. In addition to Dean, guest speakers presenting at the luncheon will include senior executive officers of NYSE-listed corporations and Navy Reserve Rear Admiral John B. Mustin, former Deputy Commander, U.S. Second Fleet and former Deputy Commander, Naval Surface Force Atlantic.
From the Top: A Special Message From Dean Chamberlain (SDV), Mischler Financial Group CEO and Principal; “Giving Back and Paying Forward is not merely an honor, it is part of our mission statement and a responsibility that remains front and center in the course of every initiative that Team Mischler is involved in.”
On behalf of Team Mischler, many thanks to our corporate, government and municipal Issuer clients, the many investment managers who look to Mischler’s primary and secondary market capital markets desk(s), and to our ECM and DCM Syndicate Desk partners for providing us the opportunity to help you and to help those in need as we pay tribute to Memorial Day.
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Investment Grade New Issue Re-Cap – Trade Talks Stymie Issuance; Open Door for 3 Defensive Utilities
Today the IG dollar DCM hosted 3 issuers – all utilities – across 5 tranches totaling $2.55b. The SSA space was quiet ……….again!
The Prez threatened increased tariffs on $200b of Chinese imports to 25% from 10% adding that he may also levy 25% tariffs on an additional $325b. As noted in the “QC” Geopolitical Risk Monitor, as any two parties approach the final stages of such far-reaching negotiations, tension mounts. Trump is merely reiterating what he’s reminded China and the world from the get-go, that “tariffs will be held in place and could add more to the list so that China lives by the deal.” Negotiations have been involved though slow and a 100-team Chinese delegation was to arrive in DC this Wednesday for what many considered to be the final leg of talks prior to a signing ceremony between Trump and Xi at a later date.
Additionally, for those who were optimistic that a massive 8-part Bristol-Myers Squibb transaction might have appeared (were it not for the Trump tweet), the UK was shuttered today for May Day holiday. Issuing such a large and critically important transaction such as BMY’s (~$20-25b), they would wait until Tuesday when the UK reopens for business. So, no harm, no foul. The DOW recouped 86% of its initial 469 point loss closing down 66 points.
The U.S.-China trade war is obviously serious business. The U.S. came to play hardball.
American Water Capital, ConEd of NY and PSE&G all took advantage of today’s more volatile morning session that gyrated due to Trump’s China tariff tweet. The utility sector is defensive in nature. They earn a profit but are a public service and thereby heavily regulated. When a company offers stable and consistent dividends in addition to less price volatility relative to overall equity markets, today was a prime time to showcase the sector tailored to long-term holders. Needless to say, it was a “GO” day for the utility sector in our fixed income primary market, which wound up owning the leaderboard.
Below please find a snapshot of everything syndicate and secondary that took place in today’s investment grade debt markets, as seen from the perch of Mischler Financial Group’s DCM desk. Have a great evening!
Ron Quigley, Managing Director, Head of Fixed Income Syndicate
Let’s now review the primary market numbers for this week and month:
- The IG Corporate-only WTD total is 6.15% of this week’s syndicate midpoint average forecast or $2.55b vs. $41.43b.
- MTD we’ve priced 7.47% of the syndicate forecast for April IG Corporate-only new issuance or $9.25b vs. $123.83b.
- There is now 7 new issue in the IG credit pipeline.
Today’s IG Primary & Secondary Market Talking Points
- Consolidated Edison Co. of NY (NYSE:ED) upsized today’s 30-year Senior Notes new issue to $700mm 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 5 IG Corporate-only new issues was <15.90> bps.
- ICE BofAML’s IG Index was unchanged at +118. Friday was a holiday. (It’s post-Crisis low is +90 set on 2/01).
- Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +1.12. (1.57 represents the high on 1/03/2019; 0.85 is the post-Crisis low set on 2/01/2018).
- Standard & Poor’s Investment Grade Composite Spread was unchanged at +155. (+125 represents its post-Crisis low set 2/02).
- Investment grade corporate bond trading posted a final Trace count of $13.9b on Friday versus $19.2b on Thursday and $18.1b the previous Friday.
- The 10-DMA stands at $18.9b.
Syndicate IG Corporate-only Volume Estimates for This Week and May
| IG Corporate New Issuance | This Week 5/06-5/10 |
vs. Current WTD – $2.55b |
May 2019 |
vs. Current MTD – $9.25b |
| High-End Avg. | $42.26b | 6.03% | $124.48b | 7.43% |
| Midpoint Avg. | $41.43b | 6.15% | $123.83b | 7.47% |
| Low-End Avg. | $40.59b | 6.28% | $123.19b | 7.51% |
| The High | $51b (1) | 5.00% | $140b (2) | 6.61% |
| The Low | $35b (6) | 7.29% | $100b (2) | 9.25% |
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
Here’s a review of last week’s five key primary market driver averages for IG Corporates-only followed by the averages over the prior six weeks:
| KEY IG CORPORATE NEW ISSUE DRIVERS |
MON. 4/29 |
TUES. 4/30 |
WED. 5/01 |
TH. 5/02 |
FRI. 5/03 |
AVERAGES WEEK 4/29 |
AVERAGES WEEK 4/22 |
AVERAGES WEEK 4/15 |
AVERAGES WEEK 4/08 | AVERAGES WEEK 4/01 |
AVERAGES WEEK 3/25 |
| New Issue Concessions | <2.17> yrs | 0.35 bps | <5.00> bps | 3.20 bps | flat/0.00 bps | <0.40> bps | 1.57 bps | 3.21 bps | <1.18> bps | <1.19> bps | 3.35 bps |
| Oversubscription Rates | 4.26x | 2.90x | 5.00x | 2.74x | N1.50x | 3.36x | 3.12x | 2.64x | 4.21x | 3.26x | 3.70x |
| Tenors | 19.31 yrs | 10.93 yrs | 10.00 yrs | 8.53 yrs | 3.00 yrs | 13.54 yrs | 14.25 yrs | 10.38 yrs | 8.04 yrs | 11. 27 yrs | 12.05 yrs |
| Tranche Sizes | $563mm | $800mm | $500mm | $950mm | $500mm | $713mm | $633mm | $1,338mm | $994mm | $9891mm | $934mm |
| Avg. Spd. Compression IPTs to Launch |
<16.33> yrs | <17.64> bps | <22.00> bps | <18.50> bps | <13.00> bps | <16.24> bps | <18.42> bps | <15.66> bps | <21.53> bps | <21.06> bps | <19.37> bps |
New Issues Priced
Today’s recap of visitors to our IG dollar Corporate and SSA DCM:
I use the better two of Moodys, Fitch or Composite Ratings
IG
| Issuer | Ratings | Coupon | Maturity | Size | IPTs | GUIDANCE | LAUNCH | PRICED | LEADS |
| American Water Capital | Baa1/A- | 3.45% | 6/01/2029 | 550 | +115a | +100a (+/-2) | +98 | +98 | JPM/USB/WFS |
| American Water Capital | Baa1/A- | 4.15% | 6/01/2049 | 550 | +145a | +130a (+/-2) | +128 | +128 | JPM/USB/WFS |
| Consolidated Edison Co. NY | A3/A- | 4.125% | 5/15/2049 | 700 | +130-135/+132.5a | +125a (+/-3) | +122 | +122 | BARC/JPM/SMBC |
| Public Service Electric & Gas | Aa3/A+ | 3.20% | 5/15/2029 | 375 | +90-95/+92.5a | +80a (+/-5) | +75 | +75 | CITI/CS/MIZ/TD |
| Public Service Electric & Gas | Aa3/A+ | 3.85% | 5/01/2049 | 375 | +110-115/+112.5a | +100a (+/-5) | +95 | +95 | CITI/CS/MIZ/TD |
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 | |||
| IG32 | 57.624 | 58.589 | 0.965 | |||
| VIX | 12.87 | 15.44 | 2.57 | |||
| CT10 | 2.526% | 2.471% | <0.055> | |||
| S&P | 2,945 | 2,932 | <13> | |||
| DOW | 26,504 | 26,438 | <66> | |||
| Nasdaq | *8,164 | 8,123 | <41> | |||
| OIL | 61.94 | 62.63 | 0.69 | |||
| GOLD | 1,279.11 | 1,281.10 | 1.99 | |||
|
USD |
IG Corporates |
USD |
Total (IG + SSA) |
|||
| DAY: | $2.55 bn | DAY: | $2.55 bn | |||
| WTD: | $2.55 bn | WTD: | $2.55 bn | |||
| MTD: | $9.25 bn | MTD: | $9.75 bn | |||
| YTD: | $438.519 bn | YTD: | $534.369 bn | |||
Global Market Recap
- USTs: Yields wound up 1.5 to 3.5 bps richer across the curve at 3pm ET with CT10 going out at 2.50% ~2.5 bps tighter led by 5s & 7s. 5s/30s steepened by 2 bps; 10s/30s widened by 1.5 bps. The DOW gained back nearly all of its ~500 dip at the open on Trump’s tariff tweet..
- Overseas 10-year: Italian BTPs and German bunds recouped from the initial FTQ trade on Trump’s trade war tweet. UK market was closed for May Day.
- SOFR: -0.07 to 2.43 vs. 2.50.
- 3mth Libor: -0.006 to 2.559 vs. 2.565.
- Overseas Stocks: Major European exchanges were off an average ~1.10%.
- Currencies: DXY Index +0.02 to 97.54 vs. 97.520.
- CDX HY: -0.237 to 107.437 vs. 107.674.
- CDX EM: +4.541 to 191.638 vs. 187.097.
*Index levels are as of 5:00PM today.
Above is the opening extract from Quigley’s Corner aka “QC” Monday, May 06, 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 deal 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, ITC Markets, Market News International, Prospect News, Stone & McCarthy Research, Refinitiv, 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.
