Quigley’s Corner 05.18.18 Investment Grade Debt Market Commentary:Spotlight On Synchrony Bank

Investment Grade New Issue Re-Cap – Synchrony Bank Owns the Friday Leaderboard

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

The “QC” Geopolitical Risk Monitor

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

2018 Lipper Report/Fund Flows – Week ending May 16^th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

Today Synchrony Bank (wholly-owned subsidiary of Synchrony Financial NYSE:SYF) owned the IG dollar primary market leaderboard with its $750mm 3(a)5 exempt 3-year senior bank notes transaction. What’s more, Mischler Financial, the nation’s oldest Service Disabled Veteran-owned and operated broker dealer was honored to be named as an active 1.00% Co-Manager. Thank you to stalwart Chris Coffey who is no stranger to diversity and inclusion mandates in our DCM. Chris was there from the get-go back in his days at MBNA when during his time he helped steer that issuer to become a founding father of inclusion transactions along with some other large FIGs. That pre-dates Chris’ GECC days! We appreciate SYF’s patronage and our active role today. Thank you as well to both Citigroup and MUFG Syndicate and of course, to the best darn middle markets distribution network on the street for your loyalty and continued belief in and support of the “value-added” proposition. Congrats also to Chris for his first Friday print at SYF and for his efforts in continuing to implement and guide a stellar diversity mandate that saw 7 diversity firms on today’s new 3-year that included a Service Disabled Veteran-owned broker-dealer three African-American-owned BDs a Hispanic-American owned firm, and a Woman-owned firm.

Today’s final Synchrony order book finished at just over $1.8b making the deal 2.40-times oversubscribed.  Concession on today’s deal was negative 2 bps given new 5-year SYF bank paper is +135. Adjusting <35> bps for the 3s/5s curve gets you to +100 against today’s final T+98 pricing pegs NIC as <2> bps.  A nice day for SYF, the leads and congratulations to Chris on a successful first Friday print at Synchrony! Net, net – a VERY GOOD RESULT for all!

Overseas in the EU two new issues were postponed including the first in 2018 for an investment grade rated issuer pointing to investor fatigue following one of the busier weeks of the year. 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 96.86% of this week’s syndicate midpoint average forecast or $32.855b vs. $33.92b.
• MTD we’ve priced 68.69% of the syndicate forecast for April IG Corporate new issuance or $92.625b vs. $134.84b.
• There are now 17 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 1 IG Corporate-only new issue was <14.50> bps.
• BAML’s IG Master Index was unchanged at +114. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.09 vs. at 1.08.  (0.85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread was unchanged at +147. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $19.7b on Thursday versus $20.8b on Wednesday and $19.1b the previous Thursday.
• The 10-DMA stands at $17.9b.
• Taking a look at the secondary trading performance of this week’s 43 IG new issues comprised of 38 IG Corporates and 5 SSAs new issues 25 tightened versus NIP for a 58.25% improvement rate, 13 widened  (30.25%) and 5 were flat (11.50%).
• For the week ended May 16^th, Lipper U.S. Fund Flows reported a net inflow of $3.069b into Corporate Investment Grade Funds (2018 YTD net inflow of $40.444b) and a net outflow of $541.871m from High Yield Funds (2018 YTD net outflow of $15.381b).
  

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

Global Market Recap

• U.S. Treasuries – ended a poor week with a solid rally.
• Overseas Bonds – JGB’s unchanged. Bunds/Gilts rallied. Peripheral bonds were hit.
• SOFR – 1.74% FROM 1.75%.
• 3mth Libor – 2.32938% from 2.33125%.
• Stocks – Mixed as of 3pm.
• Overseas Stocks – Asia closed higher. Europe lost ground.
• Economic – Nothing on the calendar today.
• Overseas Economic- – Japan CPI was very tame. Europe inflation data MoM was higher.
• Currencies – DXY Index traded at a YTD high, Euro YTD low and ADXY Index at a YTD low.
• Commodities – Crude small loss. Gold up and copper down. Wheat saw a big rally.
• CDX IG: +0.82 to 61.73
• CDX HY: +1.60 to 340.22
• CDX EM: +5.30 to 170.73
• VIX: -0.09 to 13.34

*CDX levels are as of 3:30PM ET today.

-Tony Farren, Managing Director, Rates Trading

This Week’s IG New Issues and Where They’re Trading 

Taking a look at the secondary trading performance of this week’s 43 IG new issues comprised of 38 IG Corporates and 5 SSAs new issues 25 tightened versus NIP for a 58.25% improvement rate, 13 widened  (30.25%) and 5 were flat (11.50%).

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

Thanks as always for tuning in to the daily “QC”, enjoy your read in preparation for the week ahead along with my impassioned plea to enjoy a fabulous weekend with you and yours!

Okay, the fixed income syndicate sound test is complete.  I have over 3,500 readers in the audience. Fade out the overture. Lights, camera, action!:

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 desks surveyed for today’s “Best & Brightest” Syndicate edition!  Thank you to all of them. 21 of today’s respondents are in the top 22 syndicate desks including 21 of the top 24 according to today’s Bloomberg 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 (U.S. Investment Grade Corporates).  The participating desks represent 81.00% 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.  

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years – 2014, 2015 and 2016 !  Syndicate Desks: Please Note that we had a Friday print today from “SYF” so I updated the below survey question data to reflect Synchrony Bank’s 3-year new issue. If you notice any differences that’s why. Thanks! -RQ

As always, before we get to the technical data let’s first review this week’s top geopolitical risk factors:

• 5/17 – Kim Jong-un warned that the de-nuclearization summit could be compromised due to John Bolton’s paralleling a NOKO-U.S. de-nuke deal with the Libyan “model of nuclear abandonment.” Bolton is highly qualified but needs to tone down and save the rhetoric for if and when needed – not prior to the historic summit.
• 5/14 – Although Pres. Trump reversed sanctions on China’s ZTE telecom it was done in exchange for China agreeing not to impose tariffs on U.S. agricultural products that had been levied in response to Trump’s earlier steel and aluminum tariffs.
• 5/14 – Tensions mounted in the Middle East as Israeli troops fired on protesting Palestinians along the fenced Gaza strip killing 55 and wounding over 1,700. More violent and armed men were intermingled with the mostly peaceful Palestinian demonstrators including families with children. Once they burst through fencing Israeli snipers began to shoot into the onrushing crowd. The protest happened to coincide with the opening of the U.S. embassy in Jerusalem leaving friction at its highest level in years in the historic conflict.  
• 5/16 – U.S. interest rates: The strong U.S. economy is supporting rising UST yields. T2s & 5s reached highs since 2008; CT10 since 2011 and the LB peaked at 3.10% (2015) a higher yield trading band is established. The sensitivity of EM currencies to higher rates is chronic. Combined with their own additional political risks, EM risks falling out of favor as currencies fall out of bed. 
• 5/17 – Pressure on UK PM Theresa May mounts as Britain’s House of Lords dealt BREXIT its 15^th defeat, this time over environmental protections issues by a 54%-46% margin. In addition, friction intensified between supporters of a post-BREXIT customs partnership with the EU vs. resistance by those who support technology to monitor the critical border between Ireland and Northern Ireland.
• May 2018 Terror Event MTD Casualty Total: 79 terrorist attacks; 618 dead; 781 wounded.
• 5/17 – Italy’s two ant-establishment parties 5-Star and League plan tough immigration reform, lifting all sanctions against Russia, creating 2 tax brackets of 15 and 20%, dropping a previously increased retirement age and a citizen’s income for the poor. Wishful thinking!
  

Now let’s take a look at the critical week-on-week primary market stats: 

• The IG Corporate WTD total stands at $32.855b. We priced $1.065b less than this week’s average midpoint estimate of $33.92b or <3.14%>.
• MTD we priced 68.69% of the syndicate midpoint forecast for IG Corporate new issuance or $92.625b vs. $134.84b.
• Entering today’s session, the YTD IG Corporate-only volume is $557.296b vs. the $574.314b YoY which is <$17.018b> or <2.96%> less than a year ago.
• The all-in or IG Corporate plus SSA YTD volume is $705.361b vs. $717.956b YoY making it  <$12.595b> or <1.75%> less than vs. 2017.
  

Here are the five key primary market driver averages for the 57 IG Corporate-only deals that priced this week: 

• NICS:  4.59 bps  
• Oversubscription Rates: 2.96x
• Tenors: 10.18 years
• Tranche Sizes: $842mm
• Spread Compression from IPTs to the Launch: <15.12> bps
  

Here’s how this week’s critical primary market data compares against last week’s numbers: 

• Week on week, average NICs widened 0.49 bps to an average 4.59 bps vs. 4.10 bps across this week’s 43 IG Corporate-only new issues that displayed relative value.
• Over subscription or bid-to-cover rates, the measure of demand, increased by 0.26x to an average 2.96x vs. 2.70x. 
• Average tenors extended by 3.14 years to an average 10.18 years vs. 7.04 years.
• Tranche sizes increased by $37mm to $842mm vs. $805mm last week.
• Spread compression from IPTs to the launch/final pricing of this week’s 43 IG Corporate-only new issues tightened by 2.21 bps to <15.12> bps vs. <12.91> bps.
• Standard and Poor’s Investment Grade Composite Spread tightened 1 bps to +147  bps vs. +148 week-on-week. 
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 2 bps to 1.09 vs. 1.11 week-on-week.
• Investment grade corporate bond trading posted a final Trace count of $19.7b on Thursday versus $20.8b on Wednesday and $19.1b the previous Thursday.  
• The 10-DMA stands at $17.9b.
• The VIX widened 0.78 or 6.16% to 13.43 at yesterday’s close vs. last Friday’s 12.65 close.

• Week-on-week, BAML’s IG Master Index tightened 2.00 bps to +114 vs. +116 week-on-week.  
• Spreads across the four IG asset classes tightened 2.00 bps week-on-week to 18.75 vs. 20.75 bps as measured against its cumulative post-Crisis low.
• Spreads across the 19 major IG industry sectors tightened 1.89 bps to an average 25.11 vs. 27.00 bps as measured against their average cumulative post-Crisis lows!
• For the week ended May 16^th, Lipper U.S. Fund Flows reported a net inflow of $3.069b into Corporate Investment Grade Funds (2018 YTD net inflow of $40.444b) and a net outflow of $541.871m from High Yield Funds (2018 YTD net outflow of $15.381b).

Entering today’s Friday session here’s a look at this week’s IG issuance volume totals:

• IG Corps: $32.855b
• All-in IG (Corps + SSA): $37.355b

And now it’s time for today’s question posed to the senior members of the Industry’s top 24  fixed income syndicate desks: “What are your thoughts and numbers for next week’s IG Corporate new issue volume?”
 

Please know that on each and every new issue, the guy-in-the-corner is ALWAYS in YOUR corner on deal day! If an issuer asks you who are some of the best diversity firms are, my hope is that you’ll mention Mischler Financial and the guy-in-the-corner.  Our distribution is high quality, prolific and consistent. On deal day, we perform enough to influence your bid-to-cover rates with REAL high quality and unpadded “sticky” investor orders. The “QC” won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years….2014, 2015 and 2016! But most of all we have a great certification-the nation’s oldest Service Disabled Veteran owned and operated broker dealer.

Wishing you and yours a wonderful weekend!
Ron Quigley, Managing Director, Head of Fixed Income Syndicate

The “Best and the Brightest” in Their Own Words

(more…)

Quigley’s Corner 05.16.18 – Financial Markets Rating Impact of Higher Interest Rates: Trading at the Corner of Wall Street & Hollywood Blvd.

Investment Grade New Issue Re-Cap – Wall Street & Hollywood; Reality & Illusion

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

New Issues Priced

2018 Lipper Report/Fund Flows – Week ending May 9^th       

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

Today the suddenly subdued IG dollar DCM hosted one $800mm two-part deal from Harley-Davidson Financial Services in the form of a 2-year FRN and a 3-year fixed rate senior unsecured transaction. In fact, the SSA space outperformed on the volume front thanks to Kommuninvest’s $1b 3-year bringing the all-in IG day total to 2 issuers, 3 tranches and a mere $1.8b…………What gives?  Well, look at the CT10-year that closed out yesterday’s session yielding 3.07% and 3.10% today. U.S. interest rates are going up, though they’ve been tame thus far as they begin their trajectory.

In speaking with Mischler’s resident Treasury guru Tony Farren about the subject of rising rates today, the very first week of 2018 (Jan. 2-5) saw the 2yr (1.891%), 5yr (2.213%), 10yr (2.416%) and the 30yr (2.749%) all trading at their 2018 YTD low yields. Fast forward to today – both the 2yr (2.589%) and 5yr (2.941%) are at the highest yields since 2008; the 10yr (3.10%) is at its highest yield dating back to 2011 while the CT30yr (3.22%) came to within 1 bp of its YTD high which was the highest yield since 2015. The market IS and always has been ahead of the curve, while the Fed has ALWAYS and will forever be a market laggard. It’s the nature of the beast we call “the market.”  Rates are finding a new level and that level is HIGHER folks!

Things could certainly be changing especially after S.F. Fed Chief Williams’ comments yesterday in which he said he’s “very positive” on the domestic economic outlook and shared his view that we can sustain 3 to 4 rate hikes in 2018!  The statement has more impact than it typically would, especially considering that Mr Williams will soon upgrade to a much more powerful role as the NY Fed Chief. There is a large contingent of people and market participants who would like to see Fed-speak banned (other than post-FOMC Press Conferences and Q&A). Still, rates are going up folks. Just have a look at the emboldened U.S. dollar for evidence. Look at Emerging Markets, especially Argentina and Turkey. They are signals not only of their own domestic issue,s but also the rising rate environment.  Sprinkle on some powerful geopolitical risk factors like the bubbling Middle East, Iran vs. the unlikely Dynamic Duo that is quickly becoming Saudi Arabia and Israel, and Kim Jong-un’s recent comments threatening to un-schedule the June 12^th denuclearization talks.  China, Italy, Washington dysfunction – they are all among the starring players in an endlessly rewritten historical epic scenario that beckons a script doctor’s skills to fill in the holes, add some character arcs and tie all the plots and subplots together to achieve a nice, neat denouement.  Guess what? That happy ending is not coming; after all, this is the reality, not illusion and we, readers are realists.  This is Wall Street, not Hollywood. At least I think and hope so.

So, the 3.095% CT10yr yield was the wake-up call that gave pause for today.  We are also running $7b shy of this week’s syndicate estimate, but tomorrow’s another day!

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 79.32% of this week’s syndicate midpoint average forecast or $26.905b vs. $33.92b.
• MTD we’ve priced 64.28% of the syndicate forecast for April IG Corporate new issuance or $86.675b vs. $134.84b.
• There are now 15 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 2 IG Corporate-only new issues was <15.00> bps.
• BAML’s IG Master Index was unchanged at +114. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.09 vs. at 1.08.  (0.85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +145 vs. +146. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $19.9b on Tuesday versus $16b on Monday and $17.4b the previous Tuesday.
• The 10-DMA stands at $17.4b.

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

 Global Market Recap

• U.S. Treasuries – Small losses. 2yr reached its highest yield since 2008.
• Overseas Bonds – JGB’s mixed. Bunds/Gilts better. Italy/Greece hit very hard.
• SOFR – 1.79% from 1.70%.
• 3mth Libor – 2.32563% from 2.32063%.
• Stocks – Solid gains at 3pm with the NASDAQ leading the way.
• Overseas Stocks – Asia closed down. Europe more green than red. Italy hit hard.
• Economic – Mixed U.S. data with more good than bad.
• Overseas Economic – Japan GDP was negative. EU, Germany and Italy CPI’s were tame.
• Currencies – DXY Index traded at its YTD high and the Euro its YTD low.
• Commodities – Small gains. Gold hit its YTD low. Gasoline reached its high since 2014.
• CDX IG: -0.59 to 60.68
• CDX HY: -2.45 to 338.22
• CDX EM: -2.13 to 158.88
• VIX: -1.19 to 13.44

*CDX levels are as of 3:30PM ET today.

-Tony Farren

The “QC” Geopolitical Risk Monitor

(more…)

Quigley’s Corner 05.08.18: Iran Deal Scuttled; IG Debt Market Recap: Dynamite Deal Day for General Dynamics  

Investment Grade New Issue Re-Cap – Big Time Volume But Stuck at“The Number” Again. NYSE:GD, NYSE:VZ

Today’s IG Primary & Secondary Market Talking Points

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

Vaya Con Dios to Bloomberg Bob, a Great Man and a Dear Friend

Global Market Recap

The “QC” Geopolitical Risk Monitor

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

New Issues Priced

Indexes and New Issue Volume

2018 Lipper Report/Fund Flows – Week ending May 2^nd      

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

Investment Grade New Issue Re-Cap – Big Time Volume But Stuck at“The Number” Again. NYSE:GD, NYSE:VZ
Today the IG dollar DCM hosted 7 issuers across 18 tranches totalling $15.539b. 48.3% of that total came in the form of the General Dynamics (NYSE:GD) 7-part transaction –which totalled $7.5b, and runner-up award to Verizon Communications (NYSE:VZ), which brought $1.788b to the corporate treasury. The SSA space was inactive again. Although the deals are clearing for issuers 10 of today’s 17 IG Corporate tranches were guided “at the number!”  Something to keep an eye on. 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 74.35% of this week’s syndicate midpoint average forecast or $23.389b vs. $31.46b.
• MTD we’ve priced 27.64% of the syndicate forecast for April IG Corporate new issuance or $37.264b vs. $134.84b.
• There are now 9 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 17 IG Corporate-only new issues was <11.09> bps.
• BAML’s IG Master Index was unchanged at +117. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +1.12.  (0.85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread was unchanged at +149. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $14.1b on Monday versus $13.9b on Friday and $20.9b the previous Monday.
• The 10-DMA stands at $18.1b. 

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

Vaya Con Dios to Bloomberg Bob, a Great Man and a Dear Friend

You have all read in the QC about how I frequently turn the lights off and lock the door behind me here at our nation’s oldest Service Disabled Veteran owned & operated broker-dealer. We always leave it on the floor, driven by a desire to be the best we can be and to always be allegiant to our value-added reputation as providing best in class debt capital market coverage and distribution.  It’s all about delivering high-quality work for our issuers and joint leads while building a sustainable and lasting company. We take great pride in that for we know that one day all we ever really take with us is our reputation.  It’s also what people will most remember us by.  Well, this evening, I got your attention with Bloomberg’s logo above but it’s about the manifestation of a mandate at a world-class company that has a culture unique to itself.  If one were to do a case study of corporate cultures, the names, IBM, GE, Apple, Disney and Bloomberg come to mind.  Each company has its family of employees while others are legendary for their work environments and commitment to make “lifers” out of their personnel. Tonight’s story is about Bloomberg’s commitment to veterans and a tribute/send-off to one veteran, in particular, Bob Elson who many of my 3,501 readers have also come to know.

This is not a deal drill-down day, during which I typically help promote an issuer’s diversity mandate and often more specifically, our veteran and service-disabled veteran certification. So, instead of going granular re General Dynamics’ massive debt issuance, tonight I’ve decided to do something different. Tonight I want to pay tribute to a business news industry legend.

I remember working at Merrill when I sat next to Mac Barnes on our trading floor. Mac was a legendary original Bloomberg programmer and techno-wizard who started with Michael Bloomberg way back when. He was also a super good guy.  Michael had been offered a nascent technology position by Merrill well before tech was remotely considered en vogue. In fact, it was anything but. It meant “the writing was on the wall.”  What emerged from that experiment is the Bloomberg we know today.  When the going gets tough, the tough get going, as they say.  Michael Bloomberg never looked back. His net worth is, as of today $51.2b………... Quite an achievement!

Mike Bloomberg may be a multi-billionaire, but he also knows that mandates at any company start from the top down.  Which brings me to veterans at Bloomberg.

In Mike’s own words, “Veterans have just the kind of leadership, discipline, and work ethic you need to launch a successful business and create jobs and we’re determined to help more veterans succeed.” The businessman, engineer, author, politician and philanthropist knows that both the military and Bloomberg embody a common spirit: the mission comes first. Teamwork. Communication. Adaptability. Integrity. Those are just some of the skills and characteristics that transfer well from military service to a career at Bloomberg.  Mike upped his game by recruiting veterans in software development, sales, data analysis, customer service and network support as well as in the newsroom to showcase the places at his company where veterans should look to work. He knew early on those employees who have served or currently serve in the military, military families and supporters who promote and maintain Bloomberg as a military-friendly work environment stay connected through the Bloomberg Military & Veterans Community. We here at Mischler embrace and endorse that kind of thinking.

Bob Elson, US Army Spec 5; Bloomberg LP

However, I’d like to go one further by highlighting one of those veterans whose last day is coming at Bloomberg next Tuesday, May 15^th – Robert “Bob” Elson formerly the Bob from the now defunct but legendary Ed and Bob Show that was Bloomberg’s First Word new issue team.  I’ve known Bob since he joined Bloomberg and enjoyed our daily rapport.  He is the consummate professional, all about journalistic integrity, checking data sources multiple times before going out with anything on the tapes and a legend on Wall Street. Along with having logged 47 years working in our financial services industry comes a Yoda-like wisdom about and sense of our global financial markets. For all those millennials out there who have logged their first 10 years and are only now starting to see what an interest rate hike looks like, it’s critical to latch onto the knowledge that market professionals such as Bob Elson possess.  It’s invaluable. Bob certainly deserves his reputation as “Bond Salesman to the Stars Since 1971.”

When my Dad passed away last December, while the family gathered at his wake, Bob was the first person to sign in to pay his respects to our family.  That is the kind of person he is and friend he has become.

As I mentioned Bob’s last day will be next Tuesday, May 15^th.  I wanted to scribe something in Bob’s honour BEFORE his last day. This way, you can reach out to Bob prior to his departure. Bob has left an indelible mark in the Bloomberg newsroom. I will personally miss his professional expertise, his unmatched experience although I look forward to more frequent lunches as they’ll be easier to come by given our proximity here in Stamford, Connecticut to his home in Westport. The Bloomberg chat room that both Ed and Bob years ago named “Quigmeister” will be a less active one. When in the throes of covering over 120 accounts, running order books and writing relative value and D&I stories I could always rely on Bob’s comic relief that would get me through the realization that I’d once again be sending my “QC” with an obscenely late time stamp. People come and go in this business and the ones you keep around long after are more than just good minds, great journalists, and experienced market professionals. They become friends.

For those who may not have known, Bob also proudly served his nation in Vietnam joining the U.S. Army in 1968. Following basic training at the Fort Eustis installation near Newport News, Virginia, Bob served in the First Infantry Division (The Big Red One) seeing action in Lai Khe, Vietnam. For those who may not know, Lai Khe was probably the most rocketed base camp in Vietnam except for Khe Sanh during the siege. Bob humbly recalls the sign that hung prominently at the camp’s entry that read, “Welcome to Rocket City.” Bob may well have cultivated his keen sense of humour and comic relief from the legendary Bob Hope who visited the base for his Christmas show. Hope greeted the crowd saying “Here we are in Lai Khe. I’ve been here five minutes and I don’t Like Kaye!  Bob was then off to 1^st Field Force Headquarters in Nha Trang returning home in 1970 as a Spec 5 having earned a Bronze Star with Oak Leaf Cluster for service.

It is comforting to know that there’s a place like Bloomberg that gave our veteran a home in his later years. I must say, however, I wish it was longer stay though.

To my good friend, journalist and veteran, it is NEVER fun to see someone ride off into the sunset but as they say, old soldiers never die they simply…………and I choose not to finish that quote, folks!

Thank you for your friendship, professionalism, foresight, advice and market wisdom all these years. Having served on no deals today you Bob Elson are the reason why I’m, turning off the lights and locking the front door here at Mischler Financial this evening.  I’d like you and all 3,501 “QC” readers to know that this edition has been my privilege and honour to write.

Vaya Con Dios my friend! Please reach out to Bob Elson on your Bloomberg terminals to give our military veteran and financial services veteran the send-off he truly deserves.

Thank you all and as always, have a great evening!

Below please find a complete synopsis of the day’s debt capital market activity as seen from the perch of the nation’s oldest investment bank / institutional brokerage owned & operated by Service-Disabled Veterans.

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

(more…)

Quigley’s Corner 05.04.18 Debt Market Comment Week in Review and Looking Ahead

Mischler 2018 Memorial Day Month Pledge Dedicated To…

Today’s IG Primary & Secondary Market Talking Points : Reprieve

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

The Best & Brightest Fixed Income Syndicate Forecasts and Sound Bites

QC Geopolitical Monitor

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

This Week’s New Issues and Where They’re Trading

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending May 2^nd      

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Mischler 2018 Memorial Day Month Pledge Dedicated To…

Those not familiar with the financial industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans should know that our capital market desk(s) work with more than 135 Fortune corporation treasury teams, each of Wall Street’s lead underwriter investment banks, dozens of municipal debt issuers and a discrete spectrum of the industry’s most demanding investment managers and public plan sponsors. Of equal importance, our ethos is driven by giving back and paying forward to those members of the US military service-disabled veteran community and their families who simply do not have the depth of resources and access to advanced education programs and private sector job opportunities that so many of us take for granted.

Throughout the year, Mischler Financial Group advocates on behalf of the SDV community through sponsorship of mentoring programs and direct financial assistance to veteran-centric philanthropic organizations. During the months of May and November, we dedicate a percentage of the firm’s profits to honor Memorial Day and Veterans Day respectively. In our recognition of Memorial Day 2018, we have made our annual Memorial Day Month pledge to the Semper Fi Fund, one of the highest rated non-profit organizations. A full release of this announcement was made May 1 and we thank our clients and partners in advance for working with our primary DCM and ECM teams and our secondary market trading desks to make this Memorial Day month memorable for the veterans and their family members who have sacrificed so much to make our lives safer.

Debt Market Comment |Investment Grade New Issue Re-Cap 

It was a great day for a goose egg with nothing having priced in our IG dollar DCM heading into the weekend and given the recent soft primary market tone in anticipation of a potentially much busier week ahead.  That’s right, I’ve spoken with the top 24 syndicate desks with some interesting sound bites. Most prominently, volume ahead can be heavily influenced by any one or a combination of anticipated M&A related financings among which are United Technologies Corp., Dr. Pepper Snapple Group, Bayer AG and General Dynamics Corp. Also, “if” HSBC decides to print a massive transaction, it too can upward skew the numbers. The big assumption, as one person in the know expressed, is, “it’s going to be busy if the market doesn’t completely melt down!”

 But why listen to me when you can read it direct from the 24 syndicate desks who price over 80% of the IG debt deals in Corporate America? That’s what the Friday “QC” brings you every week and that’s why this edition is called the “Best and the Brightest!” They are all waiting patiently below with their numbers and meaningful comments but as always let’s first run through this week’s recaps before I set the table for you for next week.

Get informed and enjoy the read but most of all…

Have a great weekend!

Ron Quigley, Managing Director & Head of Fixed Income Syndicate

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 85.00% of this week’s syndicate midpoint average forecast or $22.05b vs. $25.94b.
• MTD we’ve priced 10.29% of the syndicate forecast for April IG Corporate new issuance or $13.875b vs. $134.84b.
• There are now 12 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

• BAML’s IG Master Index widened 1 bp to +116 vs. +115. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to +111 vs. 1.10.  (0.85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +150 vs. +149. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $16.4b on Thursday versus $19.3b on Wednesday and $22b the previous Thursday.
• The 10-DMA stands at $18.8b.
• Taking a look at the secondary trading performance of this week’s 35 IG Corporate and 1 SSA new issues, of the 36 IG deals that priced, 22 tightened versus NIP for a 61.00% improvement rate, 7 widened  (19.50%) and 7 were flat (19.50%).
• For the week ended May 2^nd, Lipper U.S. Fund Flows reported a net inflow of $996.495m into Corporate Investment Grade Funds (2018 YTD net inflow of $36.571b) and a net inflow of $526.111m into High Yield Funds (2018 YTD net outflow of $14.084b) which was the largest HY inflow since December 2016.
  

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

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 desks surveyed for today’s “Best & Brightest” Syndicate edition!  Thank you to all of them. 20 of today’s respondents are in the top 21 including 21 of the top 24 according to today’s Bloomberg 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 (U.S. Investment Grade Corporates).  The participating desks represent 80.25% 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.  

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among Wall Street’s most widely read debt market commentaries. 

Before we get to the technical data, let’s first review this week’s top geopolitical risk factors:

Kim Jong-Un offered to readjust North Korea’s “Pyongyang” time zone that runs 30 minutes behind South Korea to match its southern neighbor as a symbol of his commitment to peace. The heads of North and South Korea met on 4/27 in the demilitarized zone to begin negotiations and mutual commitments to completely denuclearize the Korean peninsula. The meeting was historic and made for great photo ops, but was devoid of details. Still, some are holding on to hope this meeting could be the start of one of the great foreign affairs coups of the past century. Meanwhile, U.S. Treasury Secretary Steve Mnuchin is “cautiously optimistic” about negotiations with China over trade tariffs and regulations in the aftermath of Trump’s $50b tariffs in retaliation for China’s stealing of corporate America’s intellectual property. Markets are fearful of a full blown trade war. Talks could reduce tensions, and perhaps even the playing field. China will NOT change its economic policies and was vocal when saying it won’t be “bullied” by the U.S. If talks do bear fruit, it could result in Trump backing off tariff threats. Members of the U.S. delegation include Peter Navarro, Larry Kudlow, Wilbur Ross, Robert Lighthizer and Ambassador Terry Branstad.   

In the Middle East, Israeli PM Netanyahu held a televised address last Monday, revealing 50k+ documents and 180+ CDs of data proving Iran’s secret nuclear weapons program is underway in violation of the 2015 deal that Trump wants to renegotiate or abandon. Netanyahu said the docs were moved to a secret Tehran locale post deal. The IAEA, however, sees no “credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009.”    

Italian President Sergio Mattarella prefers to resolve the coalition deadlock by ruling with a short-term gov’t. rather than new national elections. On 4/30, Italy’s leftist 5-Star Movement head, Luigi Di Maio acknowledged his failure to form a coalition gov’t, calling for new elections. 5SM approached the center-left Democratic Party (“PD”) to enter into exploratory talks after it refused to negotiate with the right alliance lest ties with Berlusconi are severed. The nation has had no government for 58 days, or 24 days less than the record 82 set in 1992. Italy had 70 post WWII gov’ts in 72 post-WWII years – one every 1.02 years! – and it is the EU’s 3^rd largest economy, the world’s 3^rd highest debt-to-GDP ratio at 132.5% and a $2.8 trillion (equiv.) national debt. It’s the EU’s biggest economic risk. Italy’s banking sector holds $220bn of bad loans. 

Soft market tone prevails in our IG dollar DCM. In terms of primary markets, of the last 69 IG Corporate deals that priced, 32 saw guidance stagnate “at the number” while 3 of those deals launched at the widest side of guidance. That’s 46.4% of all deals priced in the past 9 sessions!  What’s more, many have traded in the gray wider to much wider and with 4 bps average NIC across that period, that’s going in the wrong direction.  This week should have been a table setter for what’s expected to be a much bigger week next week in a month that is historically robust.  

Now let’s take a look at the critical week-on-week primary market stats: 

• The IG Corporate WTD total stands at $22.05b. We priced $3.89b less than this week’s average midpoint estimate of $25.94b or <15.00%>.
• MTD we priced 10.29% of the syndicate midpoint forecast for IG Corporate new issuance or $13.875b vs. $134.84b.
• Entering today’s session, the YTD IG Corporate-only volume is $478.546b vs. the $515.420b YoY which is <$36.874b> or <7.15%> less than a year ago.
• The all-in or IG Corporate plus SSA YTD volume is $622.111b vs. $647.736b YoY making it  <$25.625b> or <3.96%> less than vs. 2017.
  

Here are the five key primary market driver averages for the 35 IG Corporate-only deals that priced this week.   

o   NICS:  5.92 bps  

o   Oversubscription Rates: 2.16x

o   Tenors: 13.17 years

o   Tranche Sizes: $630mm

o   Spread Compression from IPTs to the Launch: <12.54> bps 

Here’s how this week’s critical primary market data compares against last week’s numbers: 

• Week on week, average NICs widened 2.29 bps to an average 5.92 bps vs.  3.63 bps across this week’s 35 IG Corporate-only new issues that displayed relative value.
• Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.37x to an average 2.16x vs. 2.53x. 
• Average tenors extended by 3.98 years to an average 13. 17 years vs. 9.19 years.
• Tranche sizes decreased by $156mm to $630mm vs. $786mm last week.
• Spread compression from IPTs to the launch/final pricing of this week’s 35 IG Corporate-only new issues widened by 1.31 bps to <12.54> bps vs. <13.85> bps.
• Standard and Poor’s Investment Grade Composite Spread widened 4 bps to +150 vs. +146 week-on-week. 
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 3 bps to 1.11 vs. 1.08 week-on-week.
• Investment grade corporate bond trading posted a final Trace count of $16.4b on Thursday versus $19.3b on Wednesday and $22b the previous Thursday.  
• The 10-DMA stands at $18.8b.
• The VIX widened 0.49 or 3.18% to 15.90 at yesterday’s close vs. last Friday’s 15.41 close.

• Week-on-week, BAML’s IG Master Index widened 4 bps to +116 vs. +112.  
• Spreads across the four IG asset classes widened 3.50 bps week-on-week to 22.00 vs. 18.50 bps as measured against its cumulative post-Crisis low.
• Spreads across the 19 major IG industry sectors widened 4.84 bps to an average 27.05 vs. 22.21 bps as measured against their average cumulative post-Crisis lows!
• For the week ended May 2^nd, Lipper U.S. Fund Flows reported a net inflow of $996.495m into Corporate Investment Grade Funds (2018 YTD net inflow of $36.571b) and a net inflow of $526.111m into High Yield Funds (2018 YTD net outflow of $14.084b) which was the largest HY inflow since December 2016.

Entering today’s Friday session, here’s a look at this week’s IG issuance volume totals:

• IG Corps: $22.05b
• All-in IG (Corps + SSA): $22.60b

And now it’s time for today’s question posed  to the industry’s leading investment grade debt syndicate desks:  “What are your thoughts and numbers for next week’s IG Corporate new issue volume?”
Wishing you and yours a wonderful weekend!
Ron

The “Best and the Brightest” in Their Own Words

(more…)

Quigley’s Corner 04.30.18- Widening Warning Investment Grade Debt

Investment Grade New Issue Re-Cap – “Warning! Warning! Danger Will Robinson! Haggard IG Primary Markets!”

Today’s IG Primary & Secondary Market Talking Points : Daimler Finance Guidance: “at the number”

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

Global Market Recap

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

QC Geopolitical Risk Monitor

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending April 25^th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

Well, despite the primary market respite given last Thursday’s light calendar (2 issues across 5 tranches) followed by a no-print Friday, the IG dollar DCM’s primary marketplace continued to struggle along.  Although today’s IG dollar DCM hosted 6 issuers across 13 tranches totalling $8.175b – with a quiet SSA space – all 7 of Daimler’s tranches were guided “at the number.” Somewhat more disconcerting was the fact that two issues – Indiana Michigan Power Co. (power) and Kansas City Southern (rail) – both launched at the widest side of guidance. That’s not a sector-specific event either! That’s atypical spread compression. It is concerning given the duration of syndicate price evolution mechanics across the past week. Additionally, most of today’s new issues broke an average of 2-3 bps wider………what’s more – the average concession across today’s 13 new issues was 4 bps.  That’s what I call trending in the wrong direction folks! Not encouraging as syndicate desks expect a much busier calendar beginning next week and a focused $135b month of May.

On a geopolitical note, just when Korean peninsula denuclearization negotiations are about to begin, Israeli President Benjamin Netanyahu revealed physical evidence today in the form of over 55,000 documents and 183 CDs taken from Iranian nuclear archives proving that Iran has been pursuing its nuclear ambitions in violation of the horrible treaty signed in 2015.  As Gilda Radner’s SNL character Rosanna Danna would say, “There’s always something…..if it’s not one thing, it’s another.”

Having said that I will also point out that we crushed the syndicate midpoint estimate for April IG Corporate new issuance by $26.212b having closed out the month today with a total of $117.612b versus $91.40b estimates or 128.68%.

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 31.52% of this week’s syndicate midpoint average forecast or $8.175b vs. $25.94b.
• MTD we’ve priced 128.68% of the syndicate forecast for April IG Corporate new issuance or $117.612b vs. $91.40b.
• There are now 9 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

• Kansas City Southern upsized today’s 30-year Senior Notes new issue $500mm from $450mm at the launch although at the widest side of guidance.
• The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 13 IG Corporate-only new issues was <14.54> bps.
• BAML’s IG Master Index was unchanged at +112. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +1.08.  (0.85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread was unchanged at +146. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $14.2b on Friday versus $22b on Thursday and $16.2b the previous Friday.
• The 10-DMA stands at $18.6b.

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

Global Market Recap

• U.S. Treasuries – Better bid except 2yr. Supported by month end buying and Iran nuke news.
• Overseas Bonds – JGB’s closed. Bunds and Gilts better bid. Peripheral’s mostly red.
• SOFR – Unchanged at 1.72%.
• 3mth Libor – Set at 2.36294% from 2.35805%.
• Stocks – Started with gains but rolled over and traded poorly into the close.
• Overseas Stocks – HS strong rally. China/Japan closed. Europe closed with gains.
• Economic – PCE Deflator and PCE Core tame MoM but jumped higher YoY.
• Overseas Economic – German CPI was tame and Retail Sales were weak.
• Currencies – USD better bid vs. all of the Big 5.
• Commodities – Crude was under pressure and then rallied on the Iran/Israel news.
• CDX IG: +0.73 to 60.89
• CDX HY: +1.98 to 339.77
• CDX EM: +2.40 to 142.59
• VIX: +0.38 to 15.79

*CDX levels are as of 3:30PM ET today.

-Tony Farren

Have a great evening!
Ron Quigley

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

(more…)

Quigley’s Corner 04.16.18 : Bank Earnings Bolster Bond Issuance; Citi &JPM Float $6.5b

Investment Grade Corporate Bond New Issue Re-Cap
Today’s IG Primary & Secondary Market Talking Points
Syndicate IG Corporate-only Volume Estimates For This Week and March
Global Market Recap
The “QC” Geopolitical Risk Monitor
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
New Issues Priced
Indexes and New Issue Volume
2018 Lipper Report/Fund Flows – Week ending April 11^th

IG Credit Spreads by Rating
IG Credit Spreads by Industry
New Issue Pipeline
M&A Pipeline
Economic Data Releases
Rates Trading Lab

 

Investment Grade New Issue Re-Cap – Citi & JPM Ride Strong Earnings to Print $6.5b

Today the IG dollar DCM hosted 6 issuers across 12 tranches totalling $12.05b.  Investors bought on earnings today with both Citigroup and J.P. Morgan Chase & Co. leading the way.  The two six-pack banks represented $6.50b or 54% of today’s issuance on the heels of last Friday’s earnings beats. Citigroup topped estimates posting $1.68 EPS vs. $1.61 forecasts. JPM delivered $2.37 vs. $2.28. 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:

• MTD we’ve priced 51.92% of the syndicate forecast for February IG Corporate new issuance or $47.454b vs. $91.40b.
• There are now 19 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 12 IG Corporate-only new issue was <18.92> bps.
• BAML’s IG Master Index tightened 1 bp to +111 vs. +112. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.06.  (0.85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +142 vs. +141. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $15.5b on Friday versus $17.3b on Thursday and $13.8b the previous Friday.
• The 10-DMA stands at $17b.

Syndicate IG Corporate-only Volume Estimates for April

Global Market Recap

• U.S. Treasuries – Closed red except the 30yr. Nice bounce back during NY trading hours.
• Overseas Bonds – JGB’s, Bunds and Gilts all lost ground.
• SOFR – Set at 1.72%.
• 3mth Libor – Set at the highest yield since November 2008 (2.35509%).
• Stocks – Strong gains heading into the close.
• Overseas Stocks – Nikkei up. China and Hong Kong hit. Europe more red than green.
• Economic – Best reading for retail sales in the last 4 months.
• Overseas Economic – German wholesale price index was tame.
• Currencies – USD was weaker vs. all of the Big 5.
• Commodities – Energy struggled today after rallying last week.
• CDX IG: -1.89 to 59.45
• CDX HY: -7.84 to 331.95
• CDX EM: -0.62 to 138.91
• VIX: -0.65 to 16.76

*CDX levels are as of 3:30PM ET today.

-Tony Farren

Below please find a synopsis of the day’s primary investment grade corporate bond market issuance activity, along with the full view of the debt capital markets from the perch of Mischler Financial Group’s Fixed Income Syndicate desk. Have a great evening!
Ron Quigley, Managing Director

New Issues Priced

…..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:

  (more…)

Quigley’s Corner 03.26.18: Sizing Up CenterPoint Energy Debt Issuance

Investment Grade Corporate Bond New Issue Re-Cap
Today’s IG Primary & Secondary Market Talking Points
Syndicate IG Corporate-only Volume Estimates For This Week and March
Global Market Recap
CenterPoint Energy Resources Corp. Lands on Point with Two-Part 5- and 10-Year Transaction
CenterPoint Energy Resources Corp. – Commitment to Our Nation’s Veterans
The “QC” Geopolitical Risk Monitor
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
New Issues Priced
Indexes and New Issue Volume
2018 Lipper Report/Fund Flows – Week ending March 21st
IG Credit Spreads by Rating
IG Credit Spreads by Industry
New Issue Pipeline
M&A Pipeline
Economic Data Releases
Rates Trading Lab

Today the IG dollar DCM hosted 7 issuers across 13 tranches totaling $5.60b. The SSA space was quiet.
Mischler Financial was honored to serve as an active Co-Manager on today’s $600mm two-part transaction for CenterPoint Energy Resources Corp. It is today’s Deal-of-the-Day. But before we get to that deal drill down and the good things that CNP does for our nation’s veterans, let’s first take a look at the recaps.

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 37.18% of this week’s syndicate midpoint average forecast or $5.60b vs. $15.06b.
• MTD we’ve priced 85.57% of the syndicate forecast for February IG Corporate new issuance or $114.444b vs. $133.74b.
• There are now 18 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points
o Allstate Corp. increased its $25 par PerpNC5 non-cumulative Preferred, Series “G” to $500mm from $200mm at the launch and at the tightest side of guidance.
o Valero Energy Partners LP upsized today’s 10-year Senior Notes new issue to $500mm from $400mm at the launch.
o The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 12 IG Corporate-only new issues was <12.71> bps.
o BAML’s IG Master Index widened 1 bp to +115 vs. +114. (It’s post-Crisis low is +90 set on 2/01).
o Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.10 vs. 1.09. (0.85 is its post-Crisis low set on 1/30).
o Standard & Poor’s Investment Grade Composite Spread was unchanged at +147. (+125 represents its post-Crisis low set 2/02).
o Investment grade corporate bond trading posted a final Trace count of $16.4b on Friday versus $20.5b on Thursday and $16.2b the previous Friday.
o The 10-DMA stands at $18.2b.

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

Global Market Recap

• U.S. Treasuries – In the red except the 30yr. UST supply and higher stocks were the catalyst.
• Overseas Bonds – JGB’s, Bonds and Gilts were little changed. Peripherals were mixed.
• 3mth Libor – Set at 2.29496% the highest yield since November 2008.
• Stocks – Huge gains at 3pm.
• Overseas Stocks – Nikkei/HS up. China mixed. Europe traded poorly during NY time.
• Economic – Regional data was mixed.
• Overseas Economic – France’s GDP was solid as expected.
• Currencies – USD was weaker vs. 4 of the Big 5. The DXY Index struggled.
• Commodities – Could not rally despite higher stocks and weaker USD.
• CDX IG: -3.15 to 65.83
• CDX HY: -13.53 to 341.80
• CDX EM: -2.29 to 143.54
• VIX: -3.21 to 21.65

*CDX levels are as of 3:30PM ET today.

-Tony Farren

 CenterPoint Energy Resources Corp. Lands on Point with Two-Part 5- and 10-Year Transaction 

It was “risk on” this morning with global equity markets well in the black, DOW futures pointing to a +300 point open and the CT10-year at 2.85%  Given the very stable backdrop we expected many of last week’s stand downs to announce this morning so, CenterPoint wasted no time to act aggressively being the first IG Corporate to announce thereby taking full advantage of the strong and stable market backdrop. Levels quoted last week for today’s print were still good if not even more stable with the sheer volume of deals expected in this holiday-shortened week. The green light was given and CenterPoint Energy Resources Corp. announced a two-part $600mm “will not grow” SEC-registered Senior Notes transaction comprised of a $300mm 5-year due 4/01/2023 and a $300mm 10-year due 4/01/2028 at 8:20am ET. As mentioned on last week’s due diligence call “tariffs are a benefit to utilities. As one moves onshore to the U.S. whether tariffs or tax reform, it is helpful to CNP’s and any utility’s everyday business.”

When the big book went subject, the guidance call was postponed for an additional 10 minutes to allow for a large Tier I investor to complete their evaluation which was a great recommendation. That extra anchor order helped propel the 5yr order book to launch at the tightest side of guidance on both. Although spread compression was <3> bps on each of the 5s and 10s the issuer did secure tighter funding levels.  A good day for CenterPoint, securing their funding needs, a good day for their rate payers and a nice execution on a relatively busy day by the joint leads of Bank of America/Merrill Lynch, Citigroup, Credit Suisse and MUFG.

Now let’s look at two very different approaches to valuation on today’s two-part:  

5-year Relative Value – the Centerpoint Resources 4.50% due 1/15/2021 was T+80 this morning (G+87).  The 3s/5s curve should be 10 bps getting us to G+97 nailing NIC on today’s new 5-year as flat or “0”.  The 5s/10s curve is worth between 15-20 bps, let’s call it 17.5 gets you to T+114.5 pegging NIC on today’s new 10-year as 2.5 bps versus T+117 final pricing.

There is another way to approach fair value. Let’s check out scenario #2:

10-year Fair Value – the outstanding CNP (“CenterPoint Energy Resources Corp.”) 4.10% due 9/01/2047 was T+115 pre-announcement this morning. The 10s/30 curve is worth 15-20 bps so, let’s call it 17.5, pegging fair value as T+97.5 vs. today’s T+117 final pricing for a 19.5 bps NIC. The 5s/10s curve is also worth 15-20 bps so, let’s also take the midpoint of 17.5 bps on that as well.  97.5 <17.5> = T+80 landing concession on the 5-year as 17 bps.

I elect to take the mid-point of the two studies calling NIC on today’s 5-year in scenario one (flat or “0”) and 17bps in the latter. So, 17 / 2 = 8.5 bp NIC on the 5yr tranche.

The 10yr is either 2.5 or 19.5 so add them together to getting 22 bps / 2 = 11 bps NIC.

By no coincidence, the average NIC across every IG Corporate new issue that priced last week was 11.82 bps.  So, I’d argue that CNP secured nice executions today in light of the new market norm in here.  The deal got done and tomorrow is another day!

Relative value, as they say, is part art and …………part science!

CenterPoint Energy Resources Corp. Deal Dashboard

Use of proceeds from today’s transaction will be used for general corporate purposes, including the repayment of a portion of borrowing under the CenterPoint Energy money pool and commercial paper.

………and here’s a snapshot of today’s final CenterPoint Energy Resources Corp. book sizes and oversubscription rates – the measure of investor demand:

Today’s cumulative $600mm order book total finished at $1.4b making the two-part transaction 2.33x-times oversubscribed with each tranche split as follows:

Use of proceeds from today’s transaction is for general corporate purposes including prepayment of commercial paper and the money pool.

Final Pricing – CenterPoint Energy Resources Corp.
CNP $300mm 3.55% due 4/01/2023 @ $ @ $99.782 to yield 3.598% or T+97  MW+15
CNP $300mm 4.00% due 4/01/2028 @ $99.942 to yield 4.007% or T+117  MW+20

CenterPoint Energy Resources Corp. – Commitment to Our Nation’s Veterans 

A Military-Friendly Employer – Always There

If you’ve served our country in the military, CenterPoint Energy knows that you understand the level of commitment it takes to get the job done which is why the Company developed formidable initiatives for veterans, reservists and those in the transition from military to civilian life. Candidates who have military experience will readily identify with CenterPoint’s corporate core values of safety, integrity, accountability, initiative and respect for fellow employees, customers and the communities that it serves.

Veterans can view  “Job Openings” on the company’s website to find out what kind of opportunities CenterPoint Energy currently has available for veterans, reservists and those in the transition from military to civilian life. 

Additionally, U. S. Veteran Magazine  recently named CenterPoint Energy one of its “Top Veteran-Friendly Companies.” The company was recognized for its hiring practices, as well as participation in military job fairs and accessible hiring practices for those with disabilities.

Mischler Financial also does its part to give back to our veteran community by donating 10% of its profits to heavily vetted military non-profit organizations throughout the year.  By selecting Mischler to serve as an active Co-Manager on today’s two-part 5- and 10-year transaction it clearly illustrates CNP’s veteran/diversity initiative at work.  The entire team here at Mischler sends its five-star salute to the Treasury/Funding Team at CenterPoint Energy who I worked with today on the transaction specifically Carla, Robert and Erik. You’ve once again helped to move our platform forward in a sustainable way by granting us the opportunity to actively participate in your transaction.  We also thank the Captain at the helm of CNP Treasury/Funding – William “Buck” Rogers, Executive Vice President & Chief Financial Officer. Bill is a distinguished graduate of the U.S. Military Academy with a bachelor’s degree in engineering and economics. Prior to his financial career, he served as a captain in the Army Corps of Engineers for five years. During his service in the Army, he was a master parachutist. So, you see, he’s not only a CFO but he really is THE Captain! We appreciate the meaningful way that you included Mischler on all the transaction calls from initial diligence and market update calls last week through today’s bookbuild.  It also meant a lot that Treasury/Funding reached out this morning with a number where the Treasury/Funding team could be reached during the offering.

Thank you also to team Citigroup Syndicate’s K.O. – Kevin O’Sullivan, and his support crew.  Their data exchanges were seamless and there were constant contact and info flow throughout the book build which I always greatly appreciate from lead left book runners. All three of them were accessible to me, updated me in a timely and efficient way and have always been a pleasure to work with. They are consummate professionals.  So, once again Team Citi Syndicate gets an “A+” from this guy!

And of course, a thank you to our formidable high-quality middle markets distribution network.  I appreciate the loyalty and patronage of all the accounts that participated today!  You know who you are.

The “QC” Geopolitical Risk Monitor

Updates are highlighted and in BOLD print!

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:

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

Please Note: for ratings I use the better two of Moody’s, S&P or Fitch.

IG

Indexes and New Issue Volume              

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new high or tight.
  Please note that the below levels are as of 2:30pm ET. Thanks! –RQ

2018 Lipper Report/Fund Flows – Week ending March 21^st   

• For the week ended March 21^st, Lipper U.S. Fund Flows reported a net inflow of $3.484b into Corporate Investment Grade Funds (2018 YTD net inflow of $26.692b) and a net outflow of $1.174b from High Yield Funds (2018 YTD net outflow of $14.889b).

• Over the same period, Lipper reported a net inflow of $513.286m from Loan Participation Funds (2018 YTD net inflow of $2.630b).

• Emerging Market debt funds reported a net inflow of $51.470m(2018 YTD inflow of $2.204b).

IG Credit Spreads by Rating

(more…)

Quigley’s Corner 03.02.18 – Weekend Edition: Trump Tries Trade War Saber Rattling; March IG Issuance Madness

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

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

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week; CVS Getting Set?

“Knowing the Past for the Future” – A Look at a Decade’s Worth of March IG Corporate and SSA Issuance

Syndicate IG Corporate-only Volume Estimates for Next Week

The “QC” Geopolitical Risk Monitor

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

2018 Lipper Report/Fund Flows – Week ending February 28^th  

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

Economic Data Releases

Rates Trading Lab

Investment Grade New Issue Re-Cap

What with poor market tone, widening spreads, “chatter” of trade wars from Trump Twitter account, a major Northeast storm on the way and CVS heard rumbling into position for next week’s M&A related financing, it was indeed VERY WISE for the IG dollar DCM to stand down today.  I am once again honoured to have received 100% participation for my Friday “QC” edition, from Wall Street’s Best and Brightest Investment Grade Fixed Income Syndicate sophisticates  I surveyed all of them for next week’s forecast and for March IG Corporate volume.  Strap yourselves in for a humdinger of a week next week and what looks like March IG Issuance Madness. Their thoughtful comments, which add color to their forecast numbers are in-depth and formidable, especially in today’s edition.

Here’s a look at the WTD IG Corporate new issue volume as measured against syndicate desk estimates:

• The IG Corporate WTD total is 136.89% of this week’s syndicate midpoint average forecast or $36.85b vs. $26.92b.
• There are now 11 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

• BAML’s IG Master Index widened 3 bps to +104 vs. +101. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS widened 3 bps to 0.99 vs. 0.96.  (0.85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread widened 3 bps to +138 vs. +135. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $17b on Thursday versus $23b on Wednesday and $20.1b the previous Thursday.
• The 10-DMA stands at $18.9b.

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

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

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. 17 of today’s respondents are in the top 18 of the new 2018 League table including 19 of the top 21 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 82.87% 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.

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read!

“Happy Friday. You can almost hear the rumble of CVS getting into position! I am looking for forecasts for BOTH MARCH and NEXT WEEK today!

All the data you need to know is here. There’s lots to talk about so let’s run through this week’s key geopolitical risk recapas a segue to the big question: What does Wall Street’s Biggest Syndicate Desks Expect re: Next Week’s IG DCM?

NORTH KOREA
The U.S. imposed new sanctions against 28 NOKO ships registered under changing names and under different national flags including China. The ships funnel banned exports into NOKO. The action is another step the U.S. has taken toward a full NOKO blockade. With diplomacy the strongly favored path to resolution, the Trump Administration will agree to a diplomatic resolution to tensions only if NOKO agrees to put denuclearization on the table which it refuses to do. In the interim, the U.S. DoD conducted classified military exercises in Hawaii last weekend and the U.S. is pre-staging equipment and supplies in the Pacific. I reiterate that sources continue to tell me to “watch” mid-March thru April as NOKO will be back to its old tricks and the game will ratchet up with newly announced war games along with a much larger allied force participating together.

TRUMP TO LAUNCH A TRADE WAR?
Sighting unfair trade practices and bad policy on the U.S. steel and aluminium industries, Pres. Trump invited sector CEOs to the White House on Thursday and when they departed, the current president declared he will impose trade tariffs/quotas on imports amounting to 25% on steel and 10% on aluminium. The announcement, which apparently did not include his sending any advance memos to key White House advisors such as Gary Cohn or TreasSec Mnuchin, was made in the name of “national security,” setting off the fear and tenor of new “trade wars.” The move, coupled with unrelated comments from newly-appointed Fed Chair Powell, weighed heavily on the DOW, which lost 550 points on Thursday and extended declines into Friday’s early trading.

THE FED
New Fed Chief Jay Powell delivered his testimony before the Senate Thursday. Powell sent jitters across markets on Tuesday following his House testimony and Q&A when he said, “my outlook for the economy has strengthened since December” albeit in the midst of the recent historic though transparent, healthy market correction. The market always likes to be ahead of the curve and is concerned over a tighter monetary policy stance with participants repricing in higher inflation and interests rates. Yesterday Powell said 4 hikes “would be gradual” and sighted that aggressive tightening is challenged with inflation so low.

GERMANY
A poll released today showed that 56% of Germans favor the SPD joining Merkel’s grand coalition or “marriage of convenience” to avoid another vote and further turmoil in the EU’s keystone nation. The SPD Party formally votes therein tomorrow March 2^nd. The caveat is the poll surveyed a much wider group of voters whereas the Friday vote includes the actual hardcore Socialist members.

U.K. & BREXIT
Theresa May delivers a speech on Friday, March 2nd outlining her vision for the U.K.’s future relationship with the EU. Key points were hammered out at the PM’s country manor Chequers with her cabinet ministers on Feb. 22^nd. After having drawn so many red lines pre-negotiations with the EU, May & Co. have backed themselves into a corner. Now Ireland and Wales are pushing back on May regarding her hard stance on the customs union. N. Ireland wants to remain under EU customs rules with a UK/EU border demarcation zone in the Irish Sea. Wales subsequently fears reduced trade as a result of EU and Irish ships avoiding British ports. Wales voted to leave the EU but favors some EU alignment.

ITALY

Italy’s Sunday March 4^th election shows the combined right-wing alliance parties running around 37% likely enough for victory. Silvio Berlusconi’s Forza Italia has a narrow lead. The centre-right coalition is projecting sufficient votes to govern without a second ballot.

CHINA

China’s ruling Communist Party proposed lifting limits on presidential terms, a first step to assuring President Xi remains in power interminably. A vote on the proposal is slated for next month and is expected to pass marking a major departure from rules in place for decades. Power has never been as centralized since the days of Mao. Maybe Xi should contemplate a little red book a la Mao and call it “Xi’s Little Red Book Volume II.”

SPAIN

With no compromise in sight, Spain’s PM Rajoy is challenged by efforts to impose order on the Catalan region. It is highly improbable that self-exiled leader Carles Puigdemont governs de facto from Brussels. Meanwhile, PM Rajoy cannot pass a national budget having lost the support of the Basque party that backs Catalonian independence. This could force new elections. Nationalist parties are subsequently securing more support foretelling new tensions in a nation that was ravaged by civil war from 1936-1939.

Let’s now take a deep dive into the technical data.  Entering this morning’s Friday session – 

• The IG Corporate WTD total stands at $36.85b. We priced $9.93b more than the week’s average midpoint estimate of $26.92b or +36.89%.
• February finished the month having priced 105.77% of the syndicate midpoint forecast for IG Corporates new issuance or $94.117b vs. $88.98b.
• Entering today’s session, the YTD IG Corporate-only volume is $229.452b vs. the $272.358b YoY or <$42.906b> / <18.70%> less than a year ago.
• The all-in or IG Corporate plus SSA YTD volume is $311.067b vs. $354.608b YoY <$43.541b> or <14.00%> less than vs. 2017. 

Here are the five key primary market driver averages for the 29 IG Corporate-only deals that priced this week.   

o   NICS:  5.36 bps  

o   Oversubscription Rates: 2.52x

o   Tenors: 13.49 years

o   Tranche Sizes: $768mm

o   Spread Compression from IPTs to the Launch: <14.42> bps 

Here’s how this week’s critical primary market data compares against last week’s numbers: 

• Week on week, average NICs widened considerably by 3.41 bps to an average 5.36 bps vs. 1.95 bps across this week’s IG Corporate-only new issues that displayed relative value.
• Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.77x to an average 2.52x vs. 3.29x. 
• Average tenors extended by 1.52 years to an average 13.49 years vs. 11.97 years.
• Tranche sizes grew by $142mm to $768mm vs. $626mm.
• Spread compression from IPTs to the launch/final pricing of this week’s 48 IG Corporate-only new issues widened by 2.04 bps to <14.42> bps vs. <16.46> bps.
• Standard and Poor’s Investment Grade Composite Spread widened 5 bps to +138 vs. +133 week-on-week. 
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 6 bps to 0.99 vs 0.93 week-on-week.
• Investment grade corporate bond trading posted a final Trace count of $17b on Thursday versus $23b on Wednesday and $20.1b the previous Thursday.
• The 10-DMA stands at $18.9b.
• The VIX widened 5.98 or 36.26% to 22.47 at yesterday’s close vs. last Friday’s 16.49.

• Week-on-week, BAML’s IG Master Index widened 5 bps to +104 vs. +99.  
• Spreads across the four IG asset classes widened 4.75 bp week-on-week to 12.75 bps vs. 8.00 bps as measured against its cumulative post-Crisis low.
• Spreads across the 19 major IG industry sectors gapped out 4.73 bps to an average 13.68 bps vs. 8.95 bps as measured against their average cumulative post-Crisis lows!
• For the week ended February 28^th, Lipper U.S. Fund Flows reported a net inflow of $1.372b into Corporate Investment Grade Funds (2018 YTD net inflow of $20.632b) and a net outflow of $702.879m from High Yield Funds (2018 YTD net outflow of $13.202b).
• Taking a look at the secondary trading performance of this week’s 48 IG Corporate and 5 SSA new issues, of the 53 deals that printed, 11 tightened versus NIP for a 20.75% improvement rate, 33 widened  (62.25%), 9 were flat (17.00%).  

Entering today’s Friday session here’s how much we issued this week:

• IG Corps: $36.85b
• All-in IG (Corps + SSA): $43.10b

And now it’s time for today’s question “what are your thoughts and numbers for MARCH and next week’s IG Corporate new issue volume?”
Thank you in advance for your time and contribution!

Please know that on each and every new issue, the guy-in-the-corner is ALWAYS be in YOUR corner on deal day! If an issuer asks you who some of the best diversity firms are, my hope is that you’ll mention Mischler Financial and the guy-in-the-corner.  Our distribution is high quality, prolific and consistent. On deal day, we perform enough to influence your bid-to-cover rates with REAL high quality and unpadded “sticky” account orders.    

Have a great weekend!

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

The “Best and the Brightest” in Their Own Words

(more…)

Quigley’s Corner 02.23.18 – Investment Grade Debt Market Comment Weekend Edition

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

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

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

Syndicate IG Corporate-only Volume Estimates for Next Week

The “QC” Geopolitical Risk Monitor

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

2018 Lipper Report/Fund Flows – Week ending February 21^st

IG Credit Spreads by Industry

IG Credit Spreads by Rating

New Issue Pipeline

M&A Pipeline Highlights

Investment Grade New Issue Re-Cap

Well, there were no new issues from either the IG Corporate or the SSA space today. No harm, no fowl and a welcome relief on a Friday! Next week is shaping up to be a nice one with the average syndicate estimate calling for $26.92b to price.  In conducting my Friday morning survey of the top 25 syndicate desks, not only did all respond again but there seemed to be considerable “chatter” away from them on the street that CVS may be sooner than we think.  That could be a significant volume booster to what’s already a hefty week next week.  53.33% of this week’s IG Corporate new issues tightened with 23.33% flat to new issue spread levels for an overall 79% rate which is a very healthy number.

I have this week’s primary market data download below as well as comments and projections from the sagacious, scholarly, sapient sages of syndicate. That’s right they are all here as my personal guests each and every Friday, for which I am grateful to them all, but hustle up before they leave for their weekends. Some key investment grade debt market comment talking points are to keep an eye, more like an ear, on our new Fed head, Jerome Powell’s first Congressional testimony before the House that was rescheduled this morning for next Tuesday, February 27^th from Wednesday.  Otherwise known as the Humphrey-Hawkins hearings, this is the first of two such annual appearances the Fed chief makes each year. He is supposed to follow that up with a repeat performance before the Senate on Thursday assuming they don’t shift that schedule as well. His testimony may well have a strong immediate market impact should he elaborate on interest rates and inflation. Expectations are that he will stay the Fed course and not “rock the boat.”  Great tune by the Hues Corporation BTW. Advice to the newbie, ………don’t rock the boat baby……… don’t tip the boat over!

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

• The IG Corporate WTD total is 96.65% of this week’s syndicate midpoint average forecast or $18.15b vs. $18.78b.
• MTD we’ve priced 67.67% of the syndicate forecast for February IG Corporate new issuance or $60.217b vs. $88.98b.
• There are now 11 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

• BAML’s IG Master Index was unchanged at +98. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.93.  (+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 $20.1b on Thursday versus $19.4b on Wednesday and $19.2b the previous Thursday.
• The 10-DMA stands at $18.5b. 

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

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

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. 17 of today’s respondents are in the top 18 of the new 2018 League table including 19 of the top 21 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 82.21% 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. 

As always “thank you” to all the syndicate desks that participated in today’s survey.  I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker-Dealer Research in our financial services industry for three consecutive years – 2014, 2015 and 2016 ! 

The Segue: Here is this week’s geopolitical recap:

The PyeongChang Winter Olympics will officially come to and this Sunday February 25^th, and you know what that means?  North Korea will invariably return to its pre-Olympic nuclear stride. U.S. financial markets will be focused next week on new Fed head Powell’s testimony before the House next Wednesday followed by the Senate on Thursday. Three rate hikes have been solidly forecast for 2018 with many now touting four and murmurings of the possibility of five! With a massive budget, the largest UST auctions on record this week – $258b – and higher rates to pay off, many are worried that our economy, that is running on all cylinders with low unemployment, means inflation is lurking around the corner.  Equity markets proved resilient this week although we are still witnessing extreme intra-day swings as the “correction” finds itself.  Next Friday, March 2^nd Germany‘s Social Democrats (Socialist Party) votes to approve or reject the recent grand coalition deal better referred to as a “marriage of convenience” with Merkel’s CDU/CSU party. A “no” vote means new elections for the Hinterland and further political tension and turmoil in the EU’s keystone state and the world’s third-largest economy. A week from Sunday – March 4^th – Italy holds its eagerly anticipated election with many projecting Berlusconi’s Forza Party to win and form a coalition government with other Eurosceptic parties. In a nation with 65 governments in 71 post-WWII years, anything can happen. Italy’s national debt is $2.8trillion and its banking sector holds $220bn of bad loans.  It has the world’s third highest debt-to-GDP ratio. So, fun times ahead folks!

Let’s now take a deep dive into the technical data.  Entering this morning’s Friday session – 

• The IG Corporate WTD total stands at $18.15b. We priced $630mm less than the week’s average midpoint estimate of $18.78b or 96.65%.
• MTD we priced 67.67% of the syndicate projection for February IG Corporates or $60.217b vs. $88.98b.
• Entering today’s session, the YTD IG Corporate-only volume is $192.602b vs. the $233.533b that priced on Thursday, February 23^rd, 2017 or $40.931b (21.25%) less than this time last year.
• The all-in or IG Corporate plus SSA YTD volume is $267.967b vs. $303.183b on Thursday, February 23^rd, 2017 or $35.216b (13.14%) less than the same time year ago total.

 Here are the five key primary market driver averages for the 29 IG Corporate-only deals that priced this week.   

o   NICS:  1.95 bps  

o   Oversubscription Rates: 3.29x

o   Tenors: 11.97 years

o   Tranche Sizes: $626mm

o   Spread Compression from IPTs to the Launch: <16.46> 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 0.67 bps to an average 1.95 bps vs. 2.62 bps across last this week’s 29 IG Corporate-only new issues that displayed relative value.
• Over subscription or bid-to-cover rates, the measure of demand, increased considerably by 1.33x to an average 3.29x vs. 1.96x. 
• Average tenors reduced dramatically by 6.19 years to an average 11.97 years vs. 18.16 years.
• Tranche sizes grew by $127mm to $626mm vs. $499mm.
• Spread compression from IPTs to the launch/final pricing of this week’s 29 IG Corporate-only new issues tightened by 3.64 bps to <16.46> bps vs. <12.82> bps.
• Standard and Poor’s Investment Grade Composite Spread was unchanged at +133. 
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning was unchanged at 0.93 week-on-week.
• Investment grade corporate bond trading posted a final Trace count of $20.1b on Thursday versus $19.4b on Wednesday and $19.2b the previous Thursday.
• The 10-DMA stands at $18.5b.
• The VIX narrowed 0.74 to 18.72 at yesterday’s close vs. last Friday’s 19.46.

• Week-on-week, BAML’s IG Master Index widened 1 bp to +99 vs. +98.  
• Spreads across the four IG asset classes widened 0.75 bp week-on-week to 8.00 bps vs. 7.25 bps as measured against its cumulative post-Crisis low.
• Spreads across the 19 major IG industry sectors widened 0.58 bps to an average 8.95 bps vs. 8.37 bps wider as measured against their average cumulative post-Crisis lows!
• For the week ended February 21^st, Lipper U.S. Fund Flows reported a net inflow of $1.572b into Corporate Investment Grade Funds (2018 YTD net inflow of $20.260b) and a net outflow of $335.066m from High Yield Funds (2018 YTD net outflow of $12.499b).
• Taking a look at the secondary trading performance of this week’s 29 IG Corporate and 1 SSA new issues, of the 30 deals that printed, X tightened versus NIP for a 53.00% improvement rate, 7 widened  (23.50%), 7 were flat (23.50%).  

Entering today’s Friday session here’s how much we issued this week:

• IG Corps: $18.15b
• All-in IG (Corps + SSA): $20.65b

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”Thank you, 

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

The “Best and the Brightest” in Their Own Words

(more…)

Quigley’s Corner 02-20-18 Corporate Bonds Slightly Bruised as 30yr Nears 3%. More Important: Ban The Bump Stock!

Before I begin the daily drill down, and according to a Bloomberg report written by Jennifer Epstein at 4:08pm ET today, “President Donald Trump ordered a ban on gun accessories known as “bump stocks” that allow semiautomatic rifles to be fired more rapidly.”  Here’s something about me you might not know: I am a gun owner. I shoot skeet, trap and target. A number of my compatriots here at the sell-side’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans are equally-responsible gun owners and share a similar interest in skeet, trap and target shooting.  Having said that, the notion of enabling citizens of our free democracy in this day and age with easy access (or any access) to weapons of war is preposterous. We need to stop the gun violence in our schools, in places where we gather to celebrate and places we go to be entertained.  I am not sorry to say to my fellow gun owners that however justified the spirited debate with regard to the 2^nd Amendment is and will likely continue to be, we certainly do not need or want bump stocks to make AR-15s automatic. I do not blame violence on gun ownership and [controlled] availability, but there is NO need for machine guns to be in the hands of citizens! It’s about the kids and it’s about our safety to live in a free democracy without fear of being gunned down.  #BanBumpStocks! Mic Drop.  

Investment Grade New Issue Re-Cap- Three’s Company!

Today’s IG Primary & Secondary Market Talking Points – Two Deals Get Upsized

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

Global Market Recap

NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches

New Issues Priced

Indexes and New Issue Volume

Economic Data Releases           

2018 Lipper Report/Fund Flows – Week ending February 14^th

The “QC” Geopolitical Risk Monitor     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Investment Grade New Issue Re-Cap – Three’s Company!

With inflation picking up slightly in a more hawkish rate environment, the U.S. government kicked off its highest volume week of treasury auctions in history this week, an estimated $258bn in new paper. With Trump’s tax plan comes massive funding and as a result, there’s more risk in owning bills, notes and bonds backed by the full faith and guarantee of the U.S. of A.  CT10 is edging closer to a 3.00% yield and so, UST prices have slid while yields have risen making it more expensive for the government to fund itself. There were four to five issuers looking this morning but only Snap-On Inc. which hit the tapes first at 9:36a.m. followed by Vulcan Materials at 9:45 being the only two announced IG Corporate new issues. A third deal materialized from Daimler Finance North America that printed a $750mm tap of its outstanding FRNs due 2/22/2021 but that was not announced. In total 4 to 5 names were looking earlier in the morning with a couple deciding to stand down.

Today the IG dollar DCM hosted 3 issuers across 4 tranches totaling $2.00b.  The SSA space was inactive with one deal announced for BNG for tomorrow’s pricing.

Here’s a look at MTD IG Corporate new issue volume as measured against syndicate desk estimates:

• The IG Corporate WTD total is 10.65% of this week’s syndicate midpoint average forecast or $2.00b vs. $18.78b.
• MTD we’ve priced 49.52% of the syndicate forecast for February IG Corporate new issuance or $44.067b vs. $88.98b.
• There are now 10 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points – Two Deals Get Upsized!

• Snap-On Inc. increased its 30-year Senior Notes new issue to $400mm from $350mm at the launch and at the tightest side of guidance.
• Vulcan Materials Co., upsized today’s 3NCL FRN tranche to $500mm from $300mm at the launch and at the tightest side of guidance brining the two-part deal size to $850mm from $650mm.
• The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 3 IG Corporate-only new issues was <15.00> bps.
• BAML’s IG Master Index was unchanged at +98. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.93.  (+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 $14.2b on Friday versus $19.2b on Thursday and $17.9b the previous Friday.
• The 10-DMA stands at $19b. 

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

Global Market Recap

• U.S. Treasuries – Another losing day as the UST market could not handle the massive supply.
• Overseas Bonds – JGB’s, Bunds and Gilts little changed. EU Peripherals unchanged to red.
• 3mth Libor – Set at 1.90394% the highest yield since December 2008.
• Stocks – Mixed at 2:30pm: Dow and NASDAQ heading in opposite directions.
• Overseas Stocks – Asia closed red. China was closed. Europe closed with gains.
• Economic – No economic data in the U.S. today.
• Overseas Economic – Japan data solid. Europe data weaker.
• Currencies – Very good day for the USD and DXY Index.
• Commodities – Poor day for gold, copper and silver. Small gain for crude oil.
• CDX IG: +1.95 to 53.33
• CDX HY: +5.39 to 324.97
• CDX EM: +3.32 to 123.21
• VIX: +0.35 to 19.81

*CDX levels are as of 3:30PM ET today.

-Tony Farren

Below is the complete story of today’s investment grade corporate debt market activity as seen from the perch of Mischler Financial Group’s Fixed Income Syndicate perch. Have a great evening!

Ron Quigley, Managing Director and Head of Fixed Income Syndicate

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:

New Issues Priced

(more…)