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Debt Market Comment Week in Review and Looking Ahead -Mischler Viewpoint
May 2018      Debt Market Commentary   

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 2nd      

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 2nd, 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

 

IG Corporate New Issuance This Week
4/30-5/04
vs. Current
WTD – $22.05b
May 2018 vs. Current
MTD – $13.875b
Low-End Avg. $25.24b 87.36% $133.64b 10.38%
Midpoint Avg. $25.94b 85.00% $134.84b 10.29%
High-End Avg. $26.64b 82.77% $136.04b 10.20%
The High $20b 110.25% $110b 12.61%
The Low $35b 63.00% $150b 9.25%

 

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 3rd largest economy, the world’s 3rd 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 2nd, 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

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Debt Capital Market Comment: Sizing Up CenterPoint Energy
March 2018      Debt Market Commentary   

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

 

IG Corporate New Issuance This Week
3/26-3/30
vs. Current
WTD – $5.60b
March 2018 vs. Current
MTD – $114.444b
Low-End Avg. $14.16b 39.55% $133.24b 85.89%
Midpoint Avg. $15.06b 37.18% $133.74b 85.57%
High-End Avg. $15.96b 35.09% $134.24 85.25%
The High $10b 56.00% $150b 76.30%
The Low $25b 22.40% $100b 114.44%

 

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 Valuethe 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.

 

CNP Issue RATING IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NIC
(bps)
Trading at
the Break
+/-
(bps)
5yr FXD Baa2(s)/A-(s) +100a +100a (+/-3) +97 +97 <3> bps 8.5 97/95 0
10yr FXD Baa2(s)/A-(s) +120a +120a (+/-3) +117 +117 <3> bps 11 116/114 <1>

 

………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:

CNP Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
5yr FXD $300mm $700mm 2.33x
10yr FXD $300mm $700mm 2.33x

 

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

centerpoint energy

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!

Risk Level/Main Factor Geopolitical Risks
HIGH ·        N/A
ELEVATED
“North Korea”
·        3/19 – Representatives from the U.S., North and South Korea agreed to meet in Finland to begin talks on the denuclearization of the Korean Peninsula. Sweden meanwhile is involved in talks with NOKO to discuss the fate of three Americans held in the North.  In a major global development on 3/14 and following his full court press against North Korea, President Trump said he would agree to meet with NOKO’s dictator Kim Jong Un under the precondition of a total denuclearization of the Korean Peninsula.
CAUTION
Trade Wars,
Trumponomics
& The Beltway;
BREXIT;
Terror
·        3/23 Trade Wars – China responded to Trump’s planned $50b in tariffs by countering with reciprocal tariffs on 128 U.S. products with more behind that should an agreement not be reached. The PROC also announced it will ease its pace of U.S. Treasury purchases. China owns nearly 20% of all foreign holdings of Treasury securities. Pres. Xi recently had term limits recently lifted. He will now serve for life and so, time is on his side vs. Trump’s 4-year term and elections.

·        3/23 – President Trump replaced national his national Security Advisor H.R. McMaster with John Bolton one day after Trump’s top lawyer John Dowd resigned signaling a more aggressive stance with FBI Director Mueller’s investigation.

·        3/19 the U.K. and EU agreed on a transitional BREXIT arrangement, the first big step toward an orderly withdrawal. Agreement was reached on just about all issues though the question of the Irish border remains to be solved. 3/14 – PM Theresa May announced the expulsion of 23 Russian diplomats from U.K. the most since the Cold War in response to Russia’s state attempted murders of a former spy defector and his daughter on U.K. soil.

·        March 2018 Terror Events and Casualty Total: 86 terrorist attacks; 510 dead; 692 wounded

MODERATE

China, Russia, Italy
& CyberCime
·        3/19 – China threatened military action if the U.S. goes ahead with its Taiwan Travel Act encouraging high level contact with Taiwanese officials that Pres. Trump signed on Friday 3/16. China considers the island nation a province, the U.S. sees it an independent nation. On 3/11 China’s ruling National People’s Congress voted to lift all Presidential term limits assuring President Xi remains in power for life. He is now as powerful as Mao.

·        3/26 President Trump expelled 60 Russian diplomats/spies from the U.S. in response to Russia’s attempted murder of a former agent and his daughter who were granted asylum in London.  Additionally, over 100 Russia spies were sent back to Russia from a coalition of 18 countries. 

·        3/05 – Italy’s anti-establishment parties gained widespread support in elections. Its center-right coalition has 37%. 5-Star Movement (left) has most single party support (32%). Nationalist Northern League is the dominant conservative party. Both right & left are anti-immigration, anti-austerity and support leaving the EU. Italy will have a hung Parliament, however. The result hurts French/German plan for more EU integration. Italy is the EU’s 3rd largest economy, has the world’s 3rd highest debt-to-GDP ratio at 132.5% and a national debt of $2.8 trillion (equiv.) It’s the EU’s biggest economic risk. Italy’s banking sector holds $220bn of bad loans.

·        Cyber Crime: Crypto-jacking, PowerShell-based attacks, cybercriminal underground, ransomware, viruses, hacking, worms and malware estimated to cost the world $6 trillion by 2021. Watch Russia’s involvement.

MARGINAL ·        N/A

 

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

 

…..and here’s another look at last week’s day-by-day re-cap of key primary market driver averages for IG Corporates only followed by the prior six week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
3/19
TUES.
3/20
WED.
3/21
TH.
3/22
FRI.
3/23
AVERAGES
WEEK 3/19
AVERAGES
WEEK 3/12
AVERAGES
WEEK 3/05
AVERAGES
WEEK 2/26
AVERAGES
WEEK 2/19
AVERAGES
WEEK 2/12
New Issue Concessions 18.75 bps 12.78 bps N/A 15.13 bps 15.80 bps N/A 9.16 bps 5.05 bps 5.36 bps 1.95 bps 2.62 bps
Oversubscription Rates 2.26x 2.91x N/A 3.42x 2.86x N/A 2.16x 2.88x 2.52x 3.29x 1.96x
Tenors 10.36 yrs 16.32 yrs N/A 9.58 yrs 11.82 yrs N/A 9.49 yrs 10.43 yrs 13.49 yrs 11.97 yrs 18.16 yrs
Tranche Sizes $788mm $1,173mm N/A $450mm $784mm N/A $568mm $1,559mm $768mm $626mm $499mm
Avg. Spd. Compression
IPTs to Launch
<10.75> bps <13.80> bps N/A <18.00> bps <13.78> bps N/A <7.92> bps <15.63> bps <14.42> bps <16.46> bps <12.82> bps

 

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

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
ABB Finance (USA) Inc A2/A 2.80% 4/03/2020 300 +70a +60a (+/-5) +55 +55 CITI/CS/JPM
ABB Finance (USA) Inc. A2/A 3.375% 4/03/2023 450 +85a +80a (+/-5) +75 +75 CITI/CS/JPM
ABB Finance (USA) Inc. A2/A 3.80% 4/03/2028 750 +110-115/+112.5a +100a (+/-5) +95 +95 CITI/CS/JPM
Allstate Corporation A3/A- FRN 3/29/2021 250 3mL+62.5a 3mL+45a (+/-2) 3mL+43 3mL+43 BAML/JPM/MS/WFS
Allstate Corporation A3/A- FRN 3/29/2023 250 3mL+80a 3mL+65a (+/-2) 3mL+63 3mL+63 BAML/JPM/MS/WFS
Allstate Corporation Baa3/BBB- 5.625% PerpNC5
4/15/2023
500 N/A 5.625-5.75%
5.6875%a
5.625% $25 Pfd MS (Phys)BAML/UBS/WFS
Bell Canada Inc. Baa1/BBB+ 4.464% 4/01/2048 750 +160a +145a (+/-5) +140 +140 BAML/BARC/CITI/RBC/TD
CenterPoint Energy ResourceCorp. Baa2/A- 3.55% 4/01/2023 300 +100a +100a (+/-3) +97 +97 BAML/CITI/CS/MUFG
CenterPoint Energy ResourcesCorp. Baa2/A- 4.00% 4/01/2028 300 +120a +120a (+/-3) +117 +117 BAML/CITI/CS/MUFG
Citizens Bank NA
Providence RI
Baa1/A- FRN 3/29/2023 250 3mL+equiv 3mL+equiv 3mL+95 3mL+95 CITI/CS/MS/WFS
Citizens Bank NA
Providence RI
Baa1/A- 3.70% 3/29/2023 500 +115-120/+117.5a +110 the # +110 +110 CITI/CS/MS/WFS
Dollar General Corp. Baa2/BBB 4.125% 5/01/2028 500 +150a +135a (+/-5) +130 +130 BAML/GS/WFS
Valero Energy Partners LP Baa3/BBB- 4.50% 3/15/2028 500 +180-185/+182.5a +170 the # +170 +170 BARC/CS/MIZ/MUFG

                                                             

 

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

                                                                                                                                         

Index Open Current Change  
IG29 61.007 57.208 <3.799>
VIX 24.87 21.03 <3.84>
CT10 2.814% 2.853% 0.039
S&P 2,588 2,658 70  
DOW 23,533 24,202 669
Nasdaq 6,992 7,220 228
OIL 65.88 65.49 <0.39>  
GOLD 1,347 1,353 6  
 

USD

 

IG Corporates

 

USD

 

Total (IG + SSA)

DAY: $5.60 bn DAY: $5.60 bn
WTD: $5.60 bn WTD: $5.60 bn
MTD: $114.444 bn MTD: $133.544 bn
YTD: $340.946 bn YTD: $441.411 bn

 

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

     

  • For the week ended March 21st, 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

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