Quigley’s Corner 02.16.18 – Best & Brightest Primary IG Syndicate Sound Off
Investment Grade New Issue Re-Cap
Today’s IG Primary & Secondary Market Talking Points
Economic Data Releases
Syndicate IG Corporate-only Volume Estimates For This Week and February
The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week & February
Syndicate IG Corporate-only Volume Estimates for Next Week
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
This Week’s IG New Issues and Where They’re Trading
Indexes and New Issue Volume
Economic Data Releases
2018 Lipper Report/Fund Flows – Week ending February 14th
The “QC” Geopolitical Risk Monitor
IG Credit Spreads by Rating
IG Credit Spreads by Industry
New Issue Pipeline
M&A Pipeline Highlights
Investment Grade New Issue Re-Cap
Today was a welcome no-print Friday ahead of the long three-day weekend! The Best and the Brightest are below with their thoughts and numbers for next week’s IG Corporate new issuance. It appears that with many kids on spring break next week in what will already be a holiday-shortened work week, the midpoint average supply forecast calls for $18.78b to price. But why hear it from me when you can simply scroll down below and read their formidable comments and thoughts along with their numbers and/or ranges? Let’s first run down the recaps for this week and then it’s on to syndicate’s B&B!
Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:
- The IG Corporate WTD total is 50.79% of this week’s syndicate midpoint average forecast or $9.477b vs. $18.66b.
- MTD we’ve priced 47.28% of the syndicate forecast for February IG Corporate new issuance or $42.067b vs. $88.98b.
- There are now 6 issuers in the IG credit pipeline.
Today’s IG Primary & Secondary Market Talking Points
- BAML’s IG Master Index tightened 1 bp to +98 vs. +99. (It’s post-Crisis low is +90 set on 2/01).
- Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.93 vs. 0.94. (+85 is its post-Crisis low set on 1/30).
- Standard & Poor’s Investment Grade Composite Spread was unchanged at +133. (+125 represents its post-Crisis low set 2/02).
- Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
- The 10-DMA stands at $19.4b.
- For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield Funds (2018 YTD net outflow of $12.164b).
- Taking a look at the secondary trading performance of this week’s 19 IG Corporate and 4 SSA new issues, of the 23 deals that printed, 9 tightened versus NIP for a 39.00% improvement rate, 6 widened (26.00%), 8 were flat (35.00%).
Economic Data Releases
| TODAY’S ECONOMIC DATA | PERIOD | SURVEYED ESTIMATES | ACTUAL NUMBER | PRIOR NUMBER | PRIOR REVISED |
| Import Price Index MoM | January | 0.6% | 1.0% | 0.1% | 0.2% |
| Import Price Index ex Petroleum | January | 0.1% | 0.5% | <0.2%> | 0.0% |
| Import Price Index YoY | January | 3.0% | 3.6% | 3.0% | 3.2% |
| Export Price Index MoM | January | 0.3% | 0.8% | <0.1%> | 0.1% |
| Export Price Index YoY | January | —- | 3.4% | 2.6% | 2.8% |
| Housing Starts | January | 1234k | 1326k | 1192k | 1209k |
| Housing Starts MoM | January | 3.5% | 9.7% | <8.2%> | <6.9%> |
| Building Permits | January | 1300k | 1396k | 1302k | 1300k |
| Building Permits MoM | January | 0.0% | 7.4% | <0.1%> | <0.2%> |
| U. of Michigan Sentiment | February | 95.5 | 99.9 | 95.7 | —- |
| U. of Michigan Current Conditions | February | 111.1 | 115.1 | 110.5 | —- |
| U. of Michigan Expectations | February | 87.2 | 90.2 | 86.3 | —- |
| U. of Michigan 1 Year Inflation | February | —- | 2.7% | 2.7% | —- |
| U. of Michigan 5-10 Year Inflation | February | —- | 2.5% | 2.5% | —- |
Syndicate IG Corporate-only Volume Estimates For This Week and February
| IG Corporate New Issuance | This Week 2/12-2/16 |
vs. Current WTD – $9.477b |
February 2018 | vs. Current MTD – $42.067b |
| Low-End Avg. | $17.56mm | 53.97% | $88.28b | 47.65% |
| Midpoint Avg. | $18.66mm | 50.79% | $88.98b | 47.28% |
| High-End Avg. | $19.75mm | 47.98% | $89.68b | 46.91% |
| The Low | $10mm | 94.77% | $70b | 60.10% |
| The High | $26mm | 36.45% | $110b | 38.24% |
The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week & February
I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition! Thank you to all of them. 19 of today’s respondents are in the top 20 of the new 2018 League table including 21 of the top 25 according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates). The participating desks represent 81.93% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they are the ones with visibility. But it’s not only about their volume forecasts, it’s also about their comments! This core syndicate group does it best; they know best; so they are the ones you WANT and NEED to hear from. It’s a great look at the week ahead.
*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.
Here is this week’s geopolitical recap:
North Korea remains the number one ranked geopolitical event risk factor despite niceties during the current Olympics. That ends on Sunday the 25th after which Kim Jong-Un will revert back to his nuclear ambitions. Equity markets seem to be settling in as the U.S. economy is running on all cylinders. U.S. equity markets have enjoyed their finest week since 2011. Interest rates are expected to rise and perhaps more quickly and higher than anticipated creating a steeper curve and rising yields. President Trump broke with the GOP tradition of fiscal prudence with his $4.4 trillion 2019 budget to Congress that is unlikely to be enacted as is. March 2nd looms large for the EU’s anchor state, Germany, as the Socialist SPD party votes to approve or reject Angela Merkel’s grand coalition government which is a “marriage of convenience.” A “no” vote means new elections and further political turmoil for the EU’s keystone nation and largest economy. Prime Minister Theresa May has “let the dogs out” as her cabinet members began laying out the U.K’s. post-BREXIT future beginning with Boris Johnson’s speech on 2/14 while avoiding response to questions of a possible Second Referendum. Italy’s center right party continues to hold the lead heading into the March 4th election. The immigration issue plays a big role in Italian voter sentiment. Italy’s national debt is $2.8 trillion and the banking sector owns $220b of bad loans.
Let’s now take a deep dive into the technical data. Entering this morning’s Friday session –
- The IG Corporate WTD total stands at $18.94b. We priced $6.30b less than the week’s average midpoint estimate of $25.24b or 75.04%.
- MTD we priced 36.63% of the syndicate projection for February IG Corporates or $32.59b vs. $88.98b.
- Entering today’s session, the YTD IG Corporate-only volume is $164.975b vs. the $199.658b that priced on Thursday, February 9th, 2017 or 21.02% less than this time last year.
- The all-in or IG Corporate plus SSA YTD volume is $233.54b vs. $268.558b on Thursday, February 9th, 2017 or $35.02b (14.99%) less than the same time year ago total.
Here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week.
o NICS: 2.62 bps
o Oversubscription Rates: 1.96x
o Tenors: 18.16 years
o Tranche Sizes: $499mm
o Spread Compression from IPTs to the Launch: <12.82> bps
Here’s how this week’s critical primary market data compares against last week’s numbers:
- Week on week, average NICs tightened minutely by 0.05 bps to an average 2.62 bps vs. 2.67 bps across last this week’s 17 IG Corporate-only new issues that displayed relative value.
- Over subscription or bid-to-cover rates, the measure of demand, decreased dramatically by 2.13x to an average 1.96x vs. 4.09x.
- Average tenors widened considerably by 3.31 years to an average 18.16 years vs. 14.85 years.
- Tranche sizes decreased by $324mm to $ 499mm vs. $823mm
- Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 4.20 bps to <12.82> bps vs. <17.02> bps.
- Standard and Poor’s Investment Grade Composite Spread widened 1 bp to +133 vs. +132.
- Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bp to 0.93 vs. 0.94 week-on-week.
- Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
- The 10-DMA stands at $19.4b.
- Week-on-week, BAML’s IG Master Index widened 1 bp to +98 vs. +97.
- Spreads across the four IG asset classes widened 1.00 bp week-on-week to 7.25 bps vs. 6.25 bps as measured against its cumulative post-Crisis low.
- Spreads across the 19 major IG industry sectors widened 0.95 bps to an average 8.37 bps vs. 7.42 bps wider as measured against their average cumulative post-Crisis lows!
- For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield Funds (2018 YTD net outflow of $12.164b).
Entering today’s Friday session here’s how much we issued this week:
- IG Corps: $9.477b
- All-in IG (Corps + SSA): $13.777b
And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”
The “Best and the Brightest” in Their Own Words
……..……and here are their responses:
Above is the opening extract from Quigley’s Corner aka “QC” Friday February 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: [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, 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.
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