Browsing articles tagged with "geopolitical risks Archives - Mischler Financial Group"
Bearish Flattening, Tax Reform: DCM Unscathed; Rinse Repeat
November 2017      Debt Market Commentary, Recent Deals   

Quigley’s Corner 11.28.17 Bearish Flattening; Tax Reform; US Corporate Debt Capital Markets Unscathed; Rinse Repeat


Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

Syndicate IG Corporate-only Volume Estimates For This Week

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

Rates Trading Lab

New Issues Priced: Synchrony Financial and Deutsche Bank AG New York 

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending Nov 22

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases


Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 8 issuers across 8 tranches totaling $4.25b.  The big story for our nation’s oldest Service Disabled Veteran broker dealer – Mischler Financial Group, Inc., is that we were named a Co-Manager on the day’s two largest issues – Deutsche Bank AG New York Branch’s $1bn 15NC10 fxd-to-fxd Reset Sub Tier 2 Notes and Synchrony Financial’s 10-year Senior Notes new issue.  Those two transactions also just happened to account for 47% of today’s IG Corporate issuance!  You know what that means? Both DB and SYF are today’s Deals-of-the-Day which I will get to in alphabetical order following a review of an incredible day for markets and geopolitical events risk factors that I strongly advise you stay tuned to.

The S&P 500, the DOW and Nasdaq all closed at new all-time highs.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate desk estimates:


  • The IG Corporate WTD total is 47.81% of this week’s syndicate midpoint average forecast or $13.875b vs. $29.02b.
  • MTD we’ve priced 109.03% of the syndicate forecast for October IG Corporate new issuance or $105.079b vs. $96.38b.
  • There are now 11 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

  • IHS Markit Ltd. (Ba1/BBB) bumped up its 8.25-year 144a/REGS Senior Notes new issue this afternoon to $500mm from $400mm at the launch and at the tightest side of guidance.
  • Physicians Realty LP increased today’s 10-year Senior Notes new issue to $350mm from $300mm at the launch and at the tightest side of guidance.
  • Life Storage LP upsized its 10-year Senior Notes new issue today to $450mm from $400mm at the launch and at the tightest side of guidance.
  • BAML’s IG Master Index was unchanged at +104.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.99.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +145.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.9b on Monday versus $1.7b on Friday and $15.7b the previous Monday.
  • The 10-DMA stands at $14b.


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


IG Corporate New Issuance This Week
vs. Current
WTD – $13.875b
November 2017 vs. Current
MTD – $105.079b
Low-End Avg. $27.72b 50.05% $95.28b 110.28%
Midpoint Avg. $29.02b 47.81% $96.38b 109.03%
High-End Avg. $30.32b 45.76% $97.48b 107.80%
The Low $25b 55.50% $75b 140.11%
The High $38b 36.51% $130b 80.83%


Global Market Recap


  • U.S. Treasuries – Unchanged (30yr) to small losses (balance of curve) in a choppy session.
  • Overseas Bonds – JGB’s mixed. EU core & semi core little changed. Peripherals more green.
  • 3mth Libor – Set at the highest level since December 2008 (1.47882%).
  • U.S. Stocks – Big rally to all-time highs.
  • Overseas Stocks – China rallied. Nikkei & HS tiny losses. Winning day in Europe.
  • U.S. Economic – Mixed data today but the strong data was very, very strong.
  • Overseas Economic – Not a factor today but will be tomorrow.
  • Currencies – USD outperformed 4 of the Big 5. Solid rally for the DXY Index.
  • Commodities – Down day from crude oil, gold, cooper, silver, etc. Strong session for natural gas.
  • CDX IG: -0.89 to 52.65
  • CDX HY: -4.71 to 317.68
  • CDX EM: -1.15 to 179.38

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

-Tony Farren


The “QC” Geopolitical Risk Monitor


Risk Level/Main Factor Geopolitical Risks
“North Korea”
11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. This comes 26 days after SOKO’s 11/02 NIS warning of activity at a NOKO nuke facility and expectations of a launch. Situation is “dire” Action needed = “Exclusive “QC” source. SOKO Olympics begin Friday 2/2018 and end Sunday 2/25 = Dates to keep in mind! 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
“Beltway Dysfunction”
11/28 – U.S. Senate Budget Committee advanced the GOP tax reform bill to Senate for debate that could see a vote take place as early as Thursday 11/30. Congress passed the Tax Reform Bill on 11/16 in a 227-205. Strong push to unite all Republicans behind Trump to get tax reform done by year end.

Gaining traction in the Beltway: Atty. Gen. Sessions raised the possibility of special counsel appointment to investigate the Uranium One Deal involving the Clinton Foundation in which a Russian company took control of 20% of entire supply of U.S. uranium supply used to make nuclear weapons in exchange for Clinton Foundation donations. In a decree on March 20, 2020 Russia’s Vladimir Putin, abolished the Federal Agency for Nuclear Power. The public corporation Rosatom (he owns) was vested with the authority to implement on behalf of the Russian Federation the rights of shareholders in the joint-stock companies in the nuclear energy industry. In 2013 Rosatom retained full ownership. Matter of U.S. national security.




11/28Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group.  Beirut, is proving ground for Saudi-Iranian proxy wars. Consolidation of KSA power with Crown Prince Mohammed bin Salman breeds sweeping change in the Kingdom called “Vision 2030” to wean KSA off oil. bin Salman leadership saw more than 50 Saudi inner players arrested in anti-corruption probe including Prince Alwaleed bin Talal, Saleh Kamel & Khalid al-Tuwaijri to show he is clearly in charge.  Trump and House of Saud are close.  Both share strong views on an anti-nuclear Iran. KSA needs oil above $81 to break even. “Tensions” will surely boost the price of a barrel of “black gold.”

Negotiators reached agreement in principle on EU settlement demand or BREXIT “divorce bill.” Amount is heard to be in a €45b to €55b range down from the €60bn that the EU initially demanded. This breaks the deadlock and should promote further Dec. & Jan. negotiations. U.K. withdrawal from EU takes place in 3/2019. Moody’s downgraded the UK on 9/22 to Aa2 from Aa1. Critical that PM Theresa May has shown an ability to effectively.

Spain’s Rajoy announces snap elections on Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Former Catalan Pres. Puigdemont to appear in court 11/17. On 11/02: 8 Catalan gov’t. members jailed in Spain for role in independence rebellion & sedition.

The Caliphate is destroyed but ISIS is now scattered across a wider region including Europe. November MTD Terror Stats a/o 11/27: 39 terrorist attacks; 766+ dead; 705+ wounded. 

China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. National Congress of the Chinese Communists Party confirms Xi Jinping as its most powerful leader since Mao. Xi loyalists make up inner sanctum of Chinese politics into the next decade. 6% GDP in 2018 will be difficult.

Cybercrime, ransomware, viruses & hacking are winning cyber wars. Recent attacks have hit four continents, law firms, food companies, power grids, pharma and governments. 

Italian elections in March 2018.

“2018 US Recession?
Bearish flattening signals danger for the U.S. economy. Recent bullish flattening has completely disregarded the absence of inflation. Jay Powell nominated as new fed Chief. Should provide stability/continuity; positive for GOP if latter gets their act together. The balance sheet or “b/s” normalization program is proceeding and will remain highly incremental. Fed signals 1 more rate hike in 2017 (December12/13 FOMC); 3 in 2018. Dot plots are unchanged for 2017 & ’18; lower for ’19 & longer-term. Shifts/adjustments in monetary policy outweigh chance of a 2018 recession.


Deutsche Bank AG New York Branch 15NC10 fxd-to-fxd Reset Sub Tier 2 Notes Deal Dashboard 

Mischler Financial Group, Inc., the nation’s oldest Service Disabled Veteran broker dealer was honored today to serve on today’s $1b Deutsche Bank AG/New York Branch 15NC10 fixed-to-fixed Reset Subordinated Tier 2 Notes new issue. We thank Team DB for selecting Mischler as a Junior Co-Manager from among the host of diversity firms in our industry.

For the DB fair value study I looked at the outstanding 4.296% 15NC10 Global Sub Notes (5/24/2028) that was 4.63% to call or 4.70 YTM which is equal to T+237 vs. T10.  Adding 9 bps to account for the swap curve from 2028s to 2032s gets you to T+246 pegging NIC on today’s T+255 print at 9 bps. A personal “thank you” to Margaret Szczerbicki!

Use of proceeds from today’s transaction will be used for general corporate purposes.


Trading at
the Break
+280a +260a (+/-5) +255 +255
Reset 5yr
MS +255.3
<25> bps 9 250/247 <5>


………and here’s a snap shot of today’s final book size and oversubscription rate – the measure of investor demand:


DB Issue Tranche Size Final Book
15nc10 ftf
$1bn $2.3b 2.30x


Final Pricing – Deutsche Bank AG New York Branch 15NC10 fixed-to-fixed Reset Subordinated Tier 2 Notes

DB $1bn 4.875% (15nc10) fxd-to-fxd due 12/01/2032 @ $99.968 to yield 4.878% or T+255  Reset 5yr MS +255.3


Synchrony Financial $1bn 10-year Senior Notes Deal Dashboard 

Mischler Financial Group, Inc., is proud to announce that it also served as an active 1.00% Co-Manager on Synchrony Financial’s $1bn 10-year Senior Notes new issue today.  We have enjoyed a longtime partnership with Synchrony.

For the Synchrony Financial relative value study I looked to the outstanding SYF 3.70% Senior Unsecured Global Notes due 8/04/2026 that were T+148 (G+153) pre-announcement. Adding 5 bps for the extension from the SYF 8/2026 to today’s SYF 12/2027 gets us to G+158 landing on today’s +165 print as 7 bps.

Use of proceeds from today’s transaction will be used for general corporate purposes.


Trading at
the Break
SYF 10yr +180a +165 the # +165 +165 <15> bps 7 165 (issue bid) 0/flat


………and here’s a snap shot of today’s final book size and oversubscription rate – the measure of investor demand:


SYF Issue Tranche Size Final Book
SYF 10yr $1bn $2.4b 2.40x


Final Pricing – Synchrony Financial 10-year Senior Notes

SYF $1bn 3.95% due 12/01/2027 @ $99.714 to yield 3.985% or T+165


Beige Book; Geopolitical Risks Revisited-Mischler Debt Market Comment
December 2016      Debt Market Commentary   

Quigley’s Corner 11.30.16 Beige Book; Geopolitical Risks Revisited

Investment Grade New Issue Re-Cap 

Global Market Recap

The Fed’s Beige Book –All You Need to Know

IG Primary & Secondary Market Talking Points

Time to Evaluate Geopolitical Risks – Austria

MENA, IDPs, Refugees and a Graying Europe

European Assimilation – Shopping for New Neighbors

A Look at the EU 14 Months Later – Multicultural Utopia

New Issues Priced

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

Indexes and New Issue Volume

Lipper Funds Flow Report Week-ending Nov 23rd

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar


Rates were certainly under heavy pressure today as crude oil rallied thanks to OPEC’s first supply cut in 8 years.  In the mid-morning session crude was up 3% while USTs were battered with the CT10 off a point and the Long Bond off over 2 points as yields rose 10 and 11 bps respectively.  NYMEX closed up $3.75 (8.29%) and Brent was up $4.12 (8.71%) on the day.  CT5 widened 7 bps; CT10 yields moved out 9 bps and the Long Bond closed down over 1.5 points and is now yielding 3.03% (+9 bps). The move in rates stymied issuance with just over one full week left before the December FOMC Rate Decision.  There were a couple deals that decided to stand down today, no surprise given the fluctuation in rates and especially occurring at month-end and ahead of Sunday’s Italian referendum vote and Austrian elections.


Still, Analog Devices Inc. issued a $2.1b 4-part across 5s/7s/10s/20s.  NAB’s $1b 5-year in the SSA space brought the all-in IG day totals to 2 issuers, 5 tranches and $3.4b.

Global Market Recap

  • S. Treasuries – Poor performance today to end a terrible month for Treasuries.
  • Overseas Bonds – JGB’s had small losses. Bunds & Gilts followed USTs south.
  • Stocks – Mixed heading into close. NASDAQ red. S&P and Dow at all-time highs.
  • Overseas Stocks – Nikkei was unchanged. China closed down. Europe rallied.
  • Economic – Good news with ADP employment, Personal Income & Chicago PMI.
  • Overseas Economic: Japan & Europe with full calendars with more good than bad
  • Currencies – USD was very strong vs. the Yen & outperformed the Euro & AUD.
  • Commodities – Crude oil was the story with a big rally on the OPEC deal. Big rally for the CRB.
  • CDX IG: -1.01 to 72.49
  • CDX HY: -5.80 to 388.03
  • CDX EM: -2.94 to 265.27

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

-Tony Farren


The Fed’s Beige Book –All You Need to Know


  • Fed says U.S. economy continued to expand across most regions.
  • Outlooks were mainly positive, with six regions expecting moderate growth.
  • Three Fed districts saw moderate growth, four saw a modest pace.
  • A majority of districts reported higher retail sales.
  • Districts noted slight upward pressure on overall prices.
  • Strong dollar was cited as a “headwind” in a few districts.
  • Seven districts displayed tightening job market conditions.
  • Banking was largely stable, with some loan-demand improvement.
  • Investment in oil and gas drilling rose slightly.
  • The Beige book included several references to election uncertainty.
  • Demand for manufactured goods was mixed.
  • Report says new auto sales declined in most districts.
  • Philadelphia, Cleveland and Kansas City saw “slight” growth.
  • The Fed’s New York district reported flat activity; Richmond was mixed.
  • Fed beige book was prepared by the Cleveland Fed for the period through Nov. 18th.
  • Federal reserve announces changes to beige book in 2017.
  • Beige book changes will provide a more consistent summary.


IG Primary & Secondary Market Talking Points


  • The average spread compression from IPTs thru the launch/final pricing of today’s 4 IG Corporate-only new issues was <33.125> bps.
  • BAML’s IG Master Index was unchanged at +136.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +130.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +178 vs. +179.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.4b on Tuesday versus $16.9b on Monday and $18.8b the previous Wednesday.
  • The 10-DMA stands at $15.6b.


Syndicate IG Corporate-only Volume Estimates for This Week, November and December Forecast


IG Corporate New Issuance This Week
vs. Current
WTD – $11.47b
November 2016 vs. Current
MTD – $75.981b
December 2016
Low-End Avg. $21.91b 52.35% $90.70b 83.77% $40.87b
Midpoint Avg. $22.89b 50.11% $92.11b 82.49% $41.52b
High-End Avg. $23.87b 48.05% $93.52b 81.25% $42.17b
The Low $15b 76.47% $71b 107.02% $30b
The High $30b 38.23% $110b 69.07% $60b


Time to Evaluate Geopolitical Risks – Austria

Austria’s Presidential election this Sunday is the first in the EU post-Trump victory. The two front runners are Nationalist/Populist Norbert Hofer and a moderate, Alexander Van der Bellen.  Austria’s Populist movement is much more Nationalistic and is fueled by voter discontent with the status quo and establishment as well as being fiercely anti-immigration. I call your attention to a “QC” I wrote here 14 months ago back on September 14th, 2015 and well ahead of the curve. (See “Quigley’s Corner” 09-14-2015).  But many of you who were not yet onboarded for the “QC” here is a full re-print of my geopolitical edition of that particular day.  I’ve included all of it including the very last bit considering Trumps election day victory. 

The boxed in section is the re-print and is then followed by a look at the current state of the EU and the world.


MENA, IDPs, Refugees and a Graying Europe

Syria’s population was 23 million in 2014.  50% of those people or 11.5 million are now officially displaced!  Forced out of their homes taking virtually nothing with them but themselves.  Words used to describe the mass exodus from their respective homelands are “unprecedented”, “emergency situation”, “overwhelming”, “perilous”, “volatile” and “extremely challenging.” IDPs has entered our vernacular as a result.  It stands for “Internally Displaced People”.  They are headed for Europe.  Since we are a numbers oriented society please allow me to put 11.5 million into proper perspective and context.

Here’s what 11.50mm people look like in the United States according to the most recent domestic city populations followed by their respective national rankings:

Los Angeles – 3,928,864 (#2)

Philadelphia – 1,560,297 (#5)

Phoenix – 1,537,058 (#6)

San Diego – 1,507,402 (#8)

Dallas – 1,281, 047 (#9)

Seattle – 668,342 (#20)

Washington, D.C. – 658,893 (#22)

Las Vegas – 613,599 (#29)


Imagine all the people in those cities, fleeing their homes for another country!  There’s some dramatic perspective for you!


Internationally known demographer William Frey, an analyst at the Brookings Institution think tank, predicts that the median age in Europe will increase to 52.3 years old by 2050 from 37.7 years old in 2003 while the median age of Americans will rise to only 35.4 years old.  Frey specializes in urban populations, migration, immigration, race, aging, political demographics and the U.S. Census.  He is also a research professor in population studies at the University of Michigan.  Some factors contributing to that dramatic rise of the European population is a decrease in the fertility rate, a decreasing mortality rate and extended life expectancy.  By 2050 the ratio of retirees to workers in Europe is expected to double from four workers per retiree to two. What all this points to is a dramatic, no an unfathomable decrease in economic output.  The OECD estimates that only 39% of Europeans aged 55-65 work.  The resultant consequences of a “graying” Europe is that there will be considerable labor shortages.  With that comes a call for assimilation.  Simply put Europeans will begin to lose their cultural identity.  Immigrants will flock to the continent as they are now doing out of necessity and the hope that they can take jobs.  Here’s another reality folks – immigration can lead to ethnic conflict in the EU and we all know too well that there is a contagion of European Nationalism sweeping throughout that continent and its happening coincident with the current flood of MENA refugees.

France’s birth rate is 2.08 children per woman with 2.1 needed to grow the population. France’s population will exceed Germany by 2050.  Germany’s birth rate is 1.42 children per woman and represents one of the lowest in the world.  Here are some interesting statistics from the Central Intelligence Agency that cut to the point:

*Italy either has to raise its retirement rate to 77 (yeah right!) or admit 2.2mm immigrants every year to maintain its worker ratio in a country that has had 62 governments since the end of World War II (that’s 70 years or a new government every 1.13 years folks!)  10% of schools in Genoa, Italy’s 11th most populated city with 861,318, closed for lack of children due to the low birth rate! A quarter of Italian women don’t have kids and another quarter have one child.

*Portugal’s fertility rate is 1.45 meaning the population will contract by 7.5mm by 2050.

*Spain’s fertility rate is 1.48

Fact – the Syrian IDP and refugee situation is so critical that people are resorting to harmful coping mechanisms to survive which is a professional way to say they are resorting to crime and violence.  This is what happens and history shows it.  It is not isolated to Syrian refugees, rather it’s a harsh human survival mechanism when there is lack of food.

*Syria – 11.25mm DTPs and Refugees

*Iraq – 1.8mm DTPs

*Yemen – 580k (including 223k Somalis)

*Total – 13.63mm


A Word About European Assimilation – Shopping for New Neighbors


The word “assimilate” means to take in, absorb and integrate people, ideas and cultures into a wider society and understand them fully. Because of Germany’s standing as the EU’s keystone and economic engine combined with the aforementioned statistics, it is being touted in the press and media as being “equipped” to take in refugees along with all the subsequent humanitarian feel good that it brings.  It’s a premature set-up to something much more fragile and highly inaccurate.  Case in point, Grillenburg, Germany a town with a population of 114.  It has no food store, no police station and no public transportation system.  It lies just 20 kilometers southwest of Dresden.  Grillenburg’s forestry school is being converted into a camp to house 80 refugees thereby swelling the villages population by 70%.  Villagers are concerned about the crime rate and adding fuel to the fire of nationalist organizations that, in turn instigates social unrest.  The reason Germany is the preferred point of destination is not because of the prior analysis rather it’s the safety net that Germany’s liberal welfare policy invites.  It’s angering many Germans who are already infuriated by supporting the way of life in bordering France throughout the current ongoing financial/sovereign debt crisis.  (Added 11/29/2016 – The ECB has thrown trillions of euros into the EU to stoke inflation and it’ is still nowhere to be found!) Of the 625,000 refugees coming into the EU in 2014, most were…….. Syrian.  That was a 275,000 increase over 2013.  90,000 refugees sought asylum in Germany from in Q1 2015 and 40,000 crossed into Germany this weekend alone!  Germany, in fact, received more asylum applications in the first half of 2014 than any other country in the world including 42% more (47.500) than the United States.  Digest that statistic for a second.


Isn’t it an easier and much more practical solution to assimilate in Turkey?  Turkey’s census bureau does not ask about people’s religious beliefs but according to the Turkish government 99.8% of Turkey’s population is Muslim.  I hate to be so obviously pragmatic about it but the refugees are dragging themselves through Turkey, Bulgaria, Serbia, Hungary and Austria to reach Germany.  That’s a brutally difficult trek for people with no jobs, no food and no shelter.  Why?  Why not stay along their border across into Turkey so that if and when things settle down in their homeland they can return to their rightful nation, culture and history.  Nope.  They are going straight towards the grand prize which they are going to find challenging.  The Germans know it and Europeans in general know it.  The distance from Aleppo, Syria to Munich, Germany is 3,106 km.  The distance from Aleppo, Syria to Ankara is 759km.  Look at what’s going on in Turkey – it’s lira fell to 3.069 at one point today and ranks as the second worst performance of 24 emerging market currencies besides Brazil that was cut to junk by S&P last week.  So, is the mass exodus from Syria about survival, three squares and a roof or is it about something else?  This story will add to the carnage.

Attempting Assimilation in Austria

Case in point, overnight, 7,000 refugees crossed from the Hungarian border into the beautiful little Austrian town of Nickeldorf – population 1,549.  Now that’s a BIG PROBLEM.

Hungary joined Serbia in constructing a wire border fence to prevent the inflow of immigrants, refugees and asylum seekers.  Hungarian Prime Minister Viktor Orban expressed his nation’s outright  “fear” that European leaders are not capable of controlling the situation.”  He says it’s Germany’s problem because that’s where the displaced people are trying to go.  Meanwhile, earlier today, Germany is trying to stanch the flow of people by installing heavy border controls restricting the former and once highly coveted free flow of movement in Europe.  So much for passport free travel throughout Europe.  Great time for the Fed to raise rates huh?  Think again folks. Stronger dollar, weaker Euro.  Rail systems between Germany, Austria and Hungary have been suspended. Are we having fun yet?  Angela Merkel is already feeling the brunt end of Germans’ resistance to the mass exodus from Syria and into the Hinterland.  I haven’t even broached the subject of terrorist sleeper cells.

Since last year anti-immigration groups and Nationalist organizations have rallied in the tens of thousands against the influx.  In fact, the state had been well-equipped and prepared a year or so ago in advance of the steady flows of asylum seekers to the point that shelters and housing were built specifically for them in advance.  Not so anymore.  Local communities are feeling the overflow and are working with  authorities in Germany to prioritize who they want in their towns and who they least desire?  Are you getting this?  This is what happens.  For example, families with children are the most desirable with single adult males at the bottom of the list.  Townsfolk are bartering with Germany to shop for their desirable refugees!  It’s unreal.  The cloud of radical Muslim extremism is on everyone’s minds here and much more so in Europe.  All the good that Europeans will be able to muster in facing this challenge will be wiped away with those first acts of crime and violence perpetrated by desperate refugees and asylum seekers.  It may very likely fuel European Nationalism and show up at the voting booth.  Is there a solution for our increasingly secular society?  If you write a check, who’s it go to?  Who is managing the money?  How many cents on the dollar/euro find its way to the families?  Mismanagement……misappropriation!  Welcome to more chaos amidst our new world order.

Meanwhile, Where There’s Trouble There’s Antagonism, Spelled: V-L-A-D

It’s common knowledge that Russia led by Vlad-the-Terrible Putin, is embarking upon an unprecedented military build-up in MENA specifically in Syria’s port city of Latakia.  Even Russia’s foreign minister Sergey Lavrov openly acknowledged that military supplies are being flown into the Syrian city by massive Russian condor planes over Iranian and Iraqi airspace.  Our very own powerful and world respected Commander-in-Chief President Barack Obama expressed his displeasure and has his A-Team trying to negotiate with Iraqi leadership to restrict Russian planes from flying over its airspace.  Obama said he is “displeased” with Russia’s continued build-up. So, the U.S. is displeased.  Isn’t displeased such a kind and civilized  non-action word? Like everything else readers, it starts from the top down.  Most of the Russian flights spend much longer flying time over Iranian skies which beckons the question, “since we’ve given away everything but the kitchen sink to Iran in recent nuclear talks, isn’t it about time they did something… thing……..ANYTHING for us?  More of the blind leading the blind folks in our new unraveling and inextricably global-linked new world order.  Get used to it until someone comes along to shake things up!

A Look at the EU 14 Months Later – Multicultural Utopia


Rather than “stoke” inflation following the trillions of euros the ECB has thrown at its financial crisis, about the only thing that has been successfully stoked on that continent is fear and distrust.  We’ve witnessed terror attacks in Belgium, Paris and Nice among many others.  More and more Europeans are shocked at the influx of immigrants in the name of “assimilation” to their countries. People are scared and when people are scared they turn inward. Politically that is expressed as a trend toward Nationalism/Populism which is winning out throughout Europe.  The Schengen Agreement has been suspended throughout much of the continent with borders redefining the once “open” EU.  The single currency itself and the Schengen Accord together represent the two legs on which a the EU stands.  They are foundational to a successful EU.

The ECB’s target inflation rate is 2% but MANY economists feel it should be 3-4%. The higher rate would be to prioritize economic growth and to reduce high unemployment.
EU inflation in September 2015 was <0.1%> vs. 0.6% in November 2016. It’s going down further before it reaches the target.  Economists suggest that won’t happen until maybe 2020-2021……if at all.  Euro Area unemployment is 10%.  EU youth unemployment is 20.3%.
EU immigration in the past year reached a new record of 1.30 million refugees who applied for asylum to the EU’s 28 member nations and including Norway and Switzerland. That’s double the previous record of 700k set in 1992 following the downing of the Berlin Wall and collapse of the former U.S.S.R.

According to Germany’s Körber Foundation that studies among other things demographic change in its commitment to international dialogue, found that two-thirds of Germans feel the EU is not heading in the right direction and 42% wish that Germany would hold a referendum vote on its membership to the EU.  To no one’s surprise European Commission President Jean-Claude Juncker immediately responded by urging Europe’s member nations “not to hold referendums on membership.”  Well, well, well, given BREXIT – does that surprise anyone?  Oh yes, BREXIT happened since the aforementioned piece was written as well!

The Körber survey showed that the current migrant crisis is the greatest challenge for German foreign policy.  82% are against Turkey’s accession; 64% reject expansion; meanwhile Turkey’s President Erdogan intends to flood the EU with 3,000 migrants per day should the EU not include his nation in the Union. Neighboring Greece has been on high naval alert given the deteriorating nature of relations between Turkey and the EU.  Given Greece’s financial state of disarray, it’s the last country that needs or wants the 60,000 migrants that call the Hellenic nation their current home since the Balkan route was unilaterally closed to the mass immigration.

Insofar as France is concerned, today’s most recent political poll conducted by Elabe in the land of wine and cheese shows that conservative party candidate Francois Fallon would defeat Marie le Pen 66% to 34%.  The two look destined to face-off on May 7th, 2017 .  Please keep in mind THAT A 33% showing for the National Front Party in France is an amazingly high number that may only grow should other EU member elections produce Nationalist/Populist victories. Le Pen is fiercely anti-European Union and anti-immigrant. As for the failure of European Socialism, the poll also showed that current Socialist President Francois Hollande would receive 9%. To that extent I turn to Winston Churchill who famously said, “For a nation to try to tax itself into prosperity it’s like a man standing in a bucket and trying to lift himself up by the handle.”

As for the tiny village of Nickelsdorf, Austria, they managed to hold their annual Nova Rock festival from June 9th thru June 12th.  The Festival first started back in 2005.  50,000 heavy metal music fans descended on the town as they do each year to listen to the likes of the Red Hot Chili Peppers, Alice Cooper, Korn, Motorhead, Iron Maiden, Black Sabbath and other hard rock acts.  Not my type of music. Still, it’s a snapshot of the crowd it attracts.  Clean-up was smooth, seamless and painless for the townsfolk.  Contrast that with the local Catholic Church serving the villagers that opened its doors to the refugees who took over the enclave last year.  Here’s what happened – the Church housed the refugees as the church would.  In a matter of a couple of days, the building was evacuated by public health officials and had to be completely disinfected due to amoebic dysentery.  This is something that was NOT reported on national or local TV.  The point, when it comes to open borders – the devil is also in the details.  Europe is NOT happy about the immigration situation at all.

Look at it this way.  When YOU travel to Europe on business or leisure, you are most likely staying at very nice hotels and visiting state-of-the-art corporate headquarters in Europe’s larger cities.  Conversely, when Europeans come to the U.S. most of them are not here visiting rural Americans to get their take on the political state of a local town or county. Yet remember just a few short weeks ago the look of despair at DNC headquarters in the early morning of Wednesday, November 9th when it became quite clear that all the politicians, pollsters and media had it way wrong when it was announced that Donald Trump will become the next president of the United States.  What’s grass roots here is grass roots in Europe.  It’s important to know that.

Making the Right Call
I have aggressively called “lower-for-longer” here in the “QC” every single time the rest of the crowd was calling for a rate hike (of which there were several occasions over the past five years). I was right; I was also very vocal about the rationality and likelihood of the U.K.’s departure from the EU,.yet another unpopular call that I happened to also get right. I then toned things down during our own U.S. Presidential primaries.  Only one time did I announce that Trump would most likely win, but I did say it and he won contrary to virtually everyone’s opinion. Just as I have shouted out that we WILL see a rate hike this December we WILL.  Now for the past few weeks it’s become essentially a foregone conclusion. So, I also believe that that Austria’s Norbert Hofer, the Austrian populist and far right Freedom Party candidate will likely win the Austrian election this Sunday and that Italians will vote “NO” to their referendum.  If elected, Hofer will become the first rightwing populist head of state in Europe World War II.

One thing is clear and certain – we live in an inextricably global-linked world economy folks. I always say that here in the “QC.” The world is trending a certain way. Trends happen when other trends grow stale or fall out of favor. That sentiment is sweeping the globe and is about to show the depth and scope of the disparity between failed European styled Socialism and Nationalism/Populism.  It will most likely continue into France as well, where the once unthinkable prospect of the National Front Party assuming power is actually a conversation. It is happening in Greece; it is happening in Holland; it is happening in Hungary and Germany. “Populist movements” have even landed in New Zealand. The world is full of problems and the unification of the world or “globalization” is in reverse mode.  Nations are looking inward.  Our planet’s advanced nations and industrial powers are doubting and questioning the legitimacy of institutions and principles of governing.  Voters are punishing parties and candidates that grew out of touch with corrupt and ineffective governments.  If it works, we could – and I hope we do – see Europe change for the better.  It could also mean the end of the EU.  If, however, the global trend fails, it could be something much more daunting and dangerous.  Either way “Decentralization” is en vogue.

So, the overwhelming trend WILL continue to be “lower-for-longer” but there will be a hike in December after which we’ll be back to our snail-like pace of incremental rate hikes.

The world is changing readers, and it’s going to be changing real fast.  Geopolitical risk has never been higher in the post war period. In the throes of the Cold War, the world at least had the benefit of knowing the good guys from the bad guys. In today’s world, all of that has to play out.  We still have North Korea; we still have Vlad-the-Terrible Putin in expansion mode; we still have issues in the South China Sea; MENA political uncertainty; currency wars; the slow dismantling of the EU; a new and dramatically different U.S. Presidential Administration; terrorism; the continued battle between global Nationalism and Socialism; Europe’s very fragile recovery etc.

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

Have a great evening!
Ron Quigley


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


Here’s a review of this week’s five key primary market driver averages for IG Corporates only through Tuesday’s session followed by the averages over the prior four weeks:

WEEK 11/21
WEEK 11/14
WEEK 11/07
WEEK 10/31
New Issue Concessions 0.20 bps 1.11 bps 4.5 bps 3.62 bps <3.60> bps <0.87> bps
Oversubscription Rates 3.12x 3.43x 2.99x 2.78x 4.26x 3.32x
Tenors 10. 99 yrs 13.50 yrs 12.14 yrs 11.28 yrs 13.31 yrs 11.33 yrs
Tranche Sizes $538mm $512mm $929mm $1,039mm $692mm $491mm
Avg. Spd. Compression
IPTs to Launch
<14.71> yrs <14.79> yrs <16.07> bps <17.69> bps <22.96> bps <17.87> yrs


Indexes and New Issue Volume

Please note that yesterday’s Constellation Brands 10yr Senior Notes were upsized to $600mm from $500mm. The volume tables below have been updated to reflect the increase. Thanks! -RQ

Index Open Current Change
LUACOAS 1.30 1.30 0
IG27 73.50 72.751 <0.749>
HV27 160.07 153.49 <6.58>
VIX 12.90 13.33 0.43
S&P 2,204 2,198 <6>
DOW 19,121 19,123 2



IG Corporates




Total IG (+SSA)

DAY: $2.10 bn DAY: $3.10 bn
WTD: $11.47 bn WTD: $13.97 bn
MTD: $75.981 bn MTD: $81.181 bn
YTD: $1,244.762 bn YTD: $1,578.746 bn


Lipper Report/Fund Flows – Week ending November 23rd   


  • For the week ended November 23rd, Lipper U.S. Fund Flows reported an inflow of $1.559b into Corporate Investment Grade Funds (2016 YTD net inflow of $42.996b) and a net inflow of $597.5m into High Yield Funds (2016 YTD net inflow of $4.598b).
  • Over the same period, Lipper reported a net inflow of $1.119b into Loan Participation Funds (2016 YTD net inflow of $222.3m).
  • Emerging Market debt funds reported a net outflow of $531.4m (2016 YTD inflow of $5.932b).


Economic Data Releases


MBA Mortgage Applications Nov. 25 —- <9.4%> 5.5% —-
ADP Employment Change November 170k 216k 147k 119k
Personal Income October 0.4% 0.6% 0.3% 0.4%
Personal Spending October 0.5% 0.3% 0.5% 0.7%
Real Personal Spending October 0.3% 0.1% 0.3% 0.5%
PCE Deflator MoM October 0.3% 0.2% 0.2% —-
PCE Deflator YoY October 1.5% 1.4% 1.2% —-
PCE Core MoM October 0.1% 0.1% 0.1% —-
PCE Core YoY October 1.7% 1.7% 1.7% —-
Chicago Purchasing Manager November 52.5 57.6 50.6 —-
Pending Home Sales MoM October 0.1% 0.1% 1.5% 1.4%
Pending Home Sales NSA YoY October —- 0.2% 2.0% —-