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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

(more…)

Investment Grade Corporate Bond DCM Scorecard 06-27-17- Mischler Debt Market Commentary
June 2017      Debt Market Commentary   

Quigley’s Corner 06.27.16    Investment Grade DCM Scorecard; AIG, American Tower, GM Financial, Charter Comm, Enbridge and Regency Centers LP

 

Investment Grade Corporate Bond  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 This Week and June

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report / Fund Flows

IG Credit Spreads by Rating

IG Credit Spreads by Industry

Economic Data Releases

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Tomorrow’s Calendar

 

Today the IG Corporate dollar DCM hosted 6 issuers that priced 12 tranches between them totaling $6.75b.  The SSA space featured a $300mm 5-year Green Bond new issue from KDB bringing the combined IG Corporate and SSA day total to 7 issuers, 13 tranches and $7.05b.

Let’s now take a look at how this week’s IG Corporate volume numbers stack up against the WTD and MTD syndicate estimates: 

  • The IG Corporate WTD total finished having priced only 64.84% of this week’s syndicate midpoint average forecast or $10.40b vs. $16.04b.
  • MTD we’ve now priced 91.42% of the syndicate forecast for June or $83.17b vs. $90.98b.
  • There are now 10 IG Corporate, Yankee and/or SSA new issues 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 issues was <14.04> bps.
  • BAML’s IG Master Index tightened 1 bp to +117 versus +118.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.11 versus 1.12.
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +160.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $15.0b on Monday versus $11.8b on Friday and $13.0b the previous Monday.
  • The 10-DMA stands at $15.8b. 

Global Market Recap 

U.S. Treasuries – followed European bonds south.

Overseas Bonds – 2yr JGB rallied 3 bps. Europe hit very hard on Draghi.

Stocks: NASDAQ having a bad day heading into the close

Overseas Stocks: Asia had small gains. Europe lost ground

Economic: US data took a back seat to the comments from ECB Pres. Draghi

Overseas Economic: Not really a factor

Currencies: USD lost ground vs 4 of Big 5. Great day for the Euro & bad for DX

Commodities: Crude oil had a good day

CDX IG: +1.85 to 61.45

CDX HY: +6.07 to 339.84

CDX EM: +3.46 to 199.55

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH
Asian Political Tensions
·          N. Korea continues missile tests with improving accuracy in defiance of protests in G-Zero world;

Lax China involvement; Recent Otto Warmbier death; Frictional hot spot of the world for “event.”

ELEVATED
BREXIT Fallout
·          U.K. PM May is on the hot seat. Macron-Merkel coalition to squeeze U.K. for all it can. Italian

domestic bank bail-out outside EU “rule of law” concern for EU stability.

CAUTION
“U.S. political gridlock”
Escalating war in Syria
·          Trump financial, healthcare, tax and infrastructure reform challenges & consensus GOP support

to pass legislation questioned/Dems lose 4 consecutive special elections despite media bias.

·          U.S. shoots down Syrian SU-22 that bombed SDF backed-forces; Russia warns that it suspended

cooperation & will track down and shoot coalition planes west of Euphrates. Potential for

escalation between the U.S. & Russia is real. Turkey, Iran, Israel loom large in this scenario.

·          U.S. Senate sanctions Iran for missile testing and supporting terrorism; also expands sanctions

against Russia in 98-2 vote; Russia in expansion mode; meddling in international elections.

·          GCC Crisis as Saudis, UAB, Egypt, Bahrain & 5 others accuse Qatar of backing terrorism/

Yemen, Mauritius, Maldives, Mauritania and Maldives join in severing diplomatic ties.

·          Italian debt-to-GDP ratio is 133% – world’s 3rd highest. €17bn gov’t. bail out of two Italian banks.

·          Closing in on ISIS has also scattered it across wider MENA region and Europe.

MODERATE ·          China hard landing – rising corporate debt have the OECD and IMF concerned.

·          Venezuela – tumbling oil prices could impact ability to repay debt; civil unrest.

MARGINAL
2018 U.S. Recession
·          Increased chance of 2018 U.S. recession in light of recent very hawkish Fed-speak and sights

on one more rate hike in 2017.

 

Syndicate IG Corporate-only Volume Estimates This Week and June

 

IG Corporate New Issuance This Week
6/26-6/30
vs. Current
WTD – $10.40b
June 2017
Forecasts
vs. Current
MTD – $83.17b
Low-End Avg. $15.46b 67.27% $90.04b 92.37%
Midpoint Avg. $16.04b 64.84% $90.98b 91.42%
High-End Avg. $16.62b 62.58% $91.92b 90.48%
The Low $10b 104.00% $75b 110.89%
The High $21b 49.52% $110b 75.61%

 

 

Have a great evening!

Ron Quigley

 

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.

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 Monday’s session followed by the averages over the prior six weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
6/26
AVERAGES
WEEK 6/19
AVERAGES
WEEK 6/12
AVERAGES
WEEK 6/05
AVERAGES
WEEK 5/29
AVERAGES
WEEK 5/22
AVERAGES
WEEK 5/15
New Issue Concessions <3.83> bps <4.3> bps <2.14> bps <0.13> bps <0.15> bps <5.45> bps 1.24 bps
Oversubscription Rates 3.66x 2.85x 3.76x 3.10x 2.87x 3.74x 3.20x
Tenors 8.92 yrs 9.37 yrs 13.02 yrs 10.07 yrs 7.03 yrs 11.37 yrs 8.69 yrs
Tranche Sizes $406mm $820mm $646mm $543mm $798mm $817mm $931mm
Avg. Spd. Compression
IPTs to Launch
<17.50> bps <18.76> bps <19.74> bps <15.95> bps <17.51> bps <20.05> bps <17.81> 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.

  (more…)

The Circus Comes To Town (Hempstead, NY) -Mischler Debt Market Comment
September 2016      Debt Market Commentary   

Quigley’s Corner Weekend Edition 09.23.16- The Circus Comes to Town; Ringling Brothers Barnum and Bailey Presidential debates

 

Investment Grade Corporate Bond New Issue Re-Cap – “The Ronald” Pre-Debate Comment

IG Primary & Secondary Market Talking Points

“The Best and the Brightest”  IG Fixed Income Syndicate Forecasts and Sound Bites for Next Week 

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

Two IG Corporate issuers took advantage to price new prints this afternoon.  5-BBB First Midwest Bancorp issued a 10-year Subordinated Notes deal and Flowers Foods, Inc. brought an upsized $400mm 10-year Senior Notes deal. So, 2 IG Corporate deals, 2 tranches for a total of $550mm.  Additionally, the SSA space featured the Russian Federation that tapped its outstanding 4.75% due 5/27/2026 to the tune of $1.25b bringing its total amount outstanding to $3b and resulting in a Friday all-in IG day total of 3 issuers, 3 tranches and $1.7b.

As we look toward next week, our IG primary markets will slow down a bit from the rabid pace of these last couple of weeks with roughly $20-25b expected.  I am a big fan of the higher end of supply estimates given Central Bank dovishness, the approach of Q3 earnings and the quickly approaching the circus comes to town (of Hempstead, NY, home of Hofstra University where the first round of the Ringling Brothers Barnum and Bailey Presidential debates will be held on Monday, September 26th.  I am personally looking forward to getting back to some good old fashioned comedy, which I’m sure it will be folks.  Election Day is Tuesday, November 8th so, issuers, bankers and syndicate managers have a window open from now through then after which we’ll enter a period of listening defining and second guessing new administration policies beginning in 2017 and cabinet appointments whoever winds up pulling this election off.  As of now it IS very much up in the air and I expect it to be VERY close as in down-to-the-wire and the dark horse could win this one so DO NOT BE SURPRISED.  Take it from…well, Tthe Ronald! Sorry but I couldn’t resist that one!

Anyway, another great week for the IG DCM.  As this is the “QC’s” Friday edition just scroll below to find out what the top syndicate desks have to say about next week’s forecasts.  I personally err to the upside as I said earlier.  I am calling for $30b+ but do the prudent thing and digest the numbers and more importantly read the thoughts of the Best and Brightest that syndicate has to offer in the section named for them just below a bit.

 

IG Primary & Secondary Market Talking Points

 

  • Flowers Foods Inc. upsized today’s 10-year Senior Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 44 deals that printed, 25 tightened versus NIP for a 57.00% improvement rate while only 14 widened (32.00%) 4 were trading flat (9.00%) and 1 was not available or N/A (2.00%).
  • For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 1 IG Corporate-only new issue that posted price evolution was 17.5 bps.
  • BAML’s IG Master Index tightened 1 bp to +141 versus +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to +137 versus +138.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $18.5b on Thursday versus $16.3b Wednesday and $15.9b the previous Thursday.
  • The 10-DMA stands at $15.7b.

 

Syndicate IG Corporate-only Volume Estimates for This Week and September

 

IG Corporate New Issuance This Week
9/19-9/23
vs. Current
WTD – $38.563b
September 2016 vs. Current
MTD – $130.768b
Low-End Avg. $29.09b 132.56% $115.45b 113.27%
Midpoint Avg. $30.28b 127.35% $116.02b 112.71%
High-End Avg. $31.48b 122.50% $116.59b 112.16%
The Low $20b 192.81% $80b 163.46%
The High $40b 96.41% $150b 87.18%

 

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s this week’s day-by-day re-cap of key primary market driver averages for IG Corporates followed by this week’s and the prior three week’s averages:
Please note that this week’s average tenors and tranche sizes are slightly different than what I posted in the aforementioned question to the Best and Brightest as it reflects today’s two new issues for First Midwest Bancorp and Flowers Foods. Those two issues announced after I sent my survey question out. Thanks for understanding! RQ

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
9/19
TUES.
9/20
WED.
9/21
TH.
9/22
FRI.
9/23
THIS WEEK’S
AVERAGES
AVERAGES
WEEK 9/12
AVERAGES
WEEK 9/05
AVERAGES
WEEK 8/29
New Issue Concessions <2.81> bps 4 bps N/A 1.92 bps N/A 0.69 bps 4.66 bps 1.30 bps 5.47 bps
Oversubscription Rates 3.15x 2.40x N/A 3.32 bps N/A 3.23x 3.47x 3.23x 2.18x
Tenors 12.13 yrs 8 yrs N/A 8.05 yrs 10 yrs 9.36 yrs 11.28 yrs 9.42 yrs 4.47 yrs
Tranche Sizes $1,426mm $642mm N/A $852mm $150mm $964mm $710mm $719mm $820mm

 

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

The question posed to the “Best and the Brightest” early this morning was:

“Good morning and a Happy Friday to you!  One heck of a week eh?  We blew right past this week’s syndicate midpoint average forecast by 26% or $38.16 vs. $30.28b. We also surpassed the syndicate estimates for September IG Corporates by 12% or $130.36b vs. $116.02b……with another week to go!  All-in IG supply including SSA issuance is now at $151.96b.  That represents the fourth busiest month of this prolific year. To put that into proper context, $4b more of all-in supply puts this month into 9th place all-time; $27b puts us third place ALL-TIME.

This week hosted more dovishness from the FOMC and BOJ that fueled yesterday’s $17+b corporate supply.    Here are this week’s IG Corporate-only key primary market driver averages:

 

o   NICS:  0.69 bps

o   Oversubscription Rates: 3.23x

o   Tenors:  9.33 years

o   Tranche Sizes: $1,000mm

 

Versus last Friday’s four key primary market driver averages, NICs tightened 3.97 bps to 0.69 vs. 4.66 bps. while oversubscription rates remain strong at 3.23x losing 0.24x vs. last week’s 3.47x bid-to-cover rate.  Average tenors contracted 1.95 years to 9.33 years vs. 11.28 years but tranche sizes swelled significantly by $290mm to an even $1b vs. last week’s average $710mm.   

For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b). 

Week-on-week, BAML’s IG Master Index tightened 2 bps to +141 vs. last Friday’s +143 close.  Spreads across the four IG asset classes tightened 2 bps to 31.50 vs. 33.50. Looking at the 19 major industry sectors, spreads tightened by 1.74 bps to an average 38.00 vs. 39.74 off their post-Crisis lows..
And now I ask the question what are YOUR thoughts and number for next week’s IG new issue volume? 

 (canvass results of fixed income syndicate desks is available exclusively to recipients of the QC Distribution List)

Have a great weekend!
Ron (“The Ronald”) Quigley, Managing Director / Head of Fixed Income Syndicate

(Above canvass results of fixed income syndicate desks is available exclusively to recipients of the QC Distribution List) 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.)  (more…)

US GDP-Big Miss; Rates: Lower For Longer; Mischler Weekend Update
July 2016      Debt Market Commentary   

Quigley’s Corner 07.29.16- U.S. GDP: A Big Miss; Rates: Lower for Longer

 

Investment Grade Corporate Debt New Issue Re-Cap – U.S. Misses GDP Big Time.  You Know What That Means..

Global Market Recap

IG Primary Market Talking Points

Lipper Fund Flows

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

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

Decades’ Worth of August IG Corporate and SSA Issuance-“Knowing the Past for the Future”

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Market Trade Lab

Economic Data Releases

Rates Trading Lab-“Buy Dips; Rinse. Repeat. Rinse. Repeat.”

New Issue Pipeline

M&A Pipeline

 

TGIF folks!  It was a no print Friday readers and it’s been a whale of a week for Team Mischler. We‘d just like to thank Apple (NASDAQ:AAPL), Verizon (NYSE:VZ) and Goldman Sachs (NYSE:GS) once again for working with us this week.  I’d also like to thank the MFG institutional accounts that were responsive to our capital market initiatives this week.  You all know who you are.  None of this would be possible without you.  Trusting, believing; loyal and faithful.  That says it all and with great appreciation for helping pull our program together, we thank you.
lower-for-longer-interest-rates-mischler-
As for next week negative rates in Europe and Japan, Abe announced doubling down on ETF purchases, sorely disappointing the market that knows there is a HUGE stimulus package hovering around Japan. Fear persists in the EU and the world’s engine – the U.S. of A.  missed GDP big time this morning by more than 50% or 1.20% vs. 2.50%! The Mantra became louder today. It’s ….LOWER-for-LONGER. USTs rallied as a result. CT10 is 1.45%. Issuers are blasting out of black-outs and will be ready, willing and able to blow out deals heading into what will be a nice first half of August issuance as we head to a traditionally slow second half of the month.

Look for $25-30b to price next week in IG Corporate-land and $78b in August.  But what the heck, why listen to the guy-in-the-corner when I bring you the top syndicate desks each and every Friday to share their own thoughts and numbers with you.  Stop by Tony’s Global Recap first for a snapshot of today’s global market news (hey there it is right below) and then scroll to the “Best and the Brightest.”  They all checked into the “QC” this morning and afternoon and they are all ready to share their thoughts.  So, read all about it. 

Global Market Recap

 

  • S. Treasuries – Strong session for USTs led by the belly on the weak GDP release.
  • 3mth Libor – Set at highest since May 2009 (0.75910%).
  • Stocks – U.S. stocks mixed (3:30pm). S&P traded at all-time high & NASDAQ YTD high.
  • Overseas Stocks – Bank stocks led Europe higher. Nikkei improved & Shanghai lost.
  • Economic – U.S. GDP laid another egg. Data weak in Japan & Europe.
  • Currencies – Terrible day for the USD. Lost ground vs. all of the Big 5.
  • Yen – Rallied over 3 handles and traded with 5 handles (-3.25 to 102.02).
  • Commodities – Good day for commodities with the weaker USD. Crude higher.
  • CDX IG: -1.22 to 73.08
  • CDX HY: -3.67 to 400.48
  • CDX EM: -5.95 to 259.66

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).

 

Syndicate IG Corporate-only Volume Estimates for This Week and July

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $28.00b
July 2016 vs. Current
MTD – $96.75b
Low-End Avg. $19.39b 144.40% $90.09b 107.39%
Midpoint Avg. $20.48b 136.72% $91.17b 106.12%
High-End Avg. $21.57b 129.81% $92.26b 104.87%
The Low $10b 280.00% $60b 161.25%
The High $30b 93.33% $125b 77.40%

 

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

 

I am happy to announce that, once again, the “QC” received unanimous responses from the 23 syndicate desks surveyed in today’s Best & Brightest poll.  21 of those participants are among 2016’s top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  In fact, all of today’s 23 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table.  The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates).  Today’s cumulative underwriting percentage of the participating desks was 80.99% which simply means they’re 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’re 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 fixed income 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 the third consecutive year! That’s 2014, 2015 and 2016 !!  More importantly, however, you’re helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! -RQ

The question posed to the “Best and the Brightest” early this morning was:

“Good morning!  Question:  The BoJ eased its policy by doubling its ETF purchases amidst its negative rate environment; oil is flirting with below $40 per barrel and this morning, U.S. GDP grew……at a dismal 1.20% less than half the 2.5% expectations.  Europe continues to be in a shambles and well,  what’s it all mean?  LOWER-for-LONGER is remains the market mantra!  We’re entering August on Monday and it’s typically one of the slowest months of the year.  Let’s take a look at what we accomplished this week in our IG rated Corporate primary market:


This week we priced $33.94b of all-in IG Corporate and SSA issuance. IG Corps were $28.00b which eclipsed this week’s syndicate midpoint average forecast of $20.48b by 36.72%.

Here are this week’s IG Corporate-only key primary market driver averages:

 

  • NICS:  1.23 bps
  • Oversubscription Rates: 3.63x
  • Tenors:  13.45 years
  • Tranche Sizes: $875mm

 

Week-on-week demand for IG corporate credit primary paper was off last week but remained strong posting an average bid-to-cover rate of 3.63x vs. 3.42x. Average NICs compressed by 2.72 bps to an average 1.23 bps versus last week’s 3.95 bps.  Average tranche sizes decreased to $875mm versus $1.482b last week.  Average tenors increased to 13.95 years versus last week’s 7.95 years.  For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).

Week-on-week, BAML’s IG Master Index is 2 bps wider or +149 vs. last Friday’s +147 close.  Spreads across the four IG asset classes widened 1.25 bps to 36.00 vs. 34.75. Looking at the 19 major industry sectors, spreads widened 0.47 bps to an average 45.21 bps off their post-Crisis lows versus 44.74 bps versus last Friday’s close.

               

Lastly, after all that, my two-part question is what are your thoughts and numbers for both next week’s and August’s IG Corporate issuance?  Thoughtful comments are always helpful and much appreciated especially by the issuers who YOU cover and who read this!

Many thanks in advance and best wishes for a great weekend! –Ron”

……..……and here are their formidable responses:

 

(more…)

Fixated on FOMC; Debt Markets Waiting On Latest Update-Mischler Comment
July 2016      Debt Market Commentary   

Quigley’s Corner 07.26.16: Managers Fixated on FOMC

 

Investment Grade New Issue Re-Cap

Global Market Recap

 IG Primary Market Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Credit Spreads (by Rating/Industry)

IG Secondary Market Trading Lab

New Issue Pipeline

Economic Data Releases

Rates Trading Lab

M&A Pipeline

 

We had 5 IG Corporate issuers tap the dollar DCM today pricing 6 tranches between them totaling $5.1b.  Today’s big transaction was Citigroup’s $2.5b 2-part 5-year FXD/FRN that priced with no concession.  In the SSA space, NIB added its expected $1b 5-year boosting the all-in day totals to 6 issuers, 7 tranches and $6.1b.

The IG Corporate-only WTD total is now $12.2b or 63% of this week’s syndicate midpoint average forecast calling for $20.48b.

We expect a quiet Wednesday session ahead of tomorrow’s 2:00pm FOMC Rate Decision Statement only.  As our own rates guru, Tony Farren shared with me today, “I expect the FOMC Statement to lean dovish with a message that the Fed is data dependent with an eye on international developments (Brexit, Europe, Japan, China, etc). My call for the FOMC rate hikes in 2016 is zero to one hike. I think the FOMC wants to get in a least one rate hike this year but to do it, the stars really have to align.  Tomorrow is a Statement only meeting.  We’ll have to wait until the September 20/21st meeting for the next Projections and Press Conference.  Following tomorrow’s FOMC, focus will shift to the BOJ Meeting. The BOJ Statement is released Thursday night.”

 

Global Market Recap

 

  • S. Treasuries – Weak 5yr auction. Closed mixed & little changed but had a solid afternoon rally.
  • 3mth Libor – You guessed it another high yield since May 2009 (0.74300%).
  • Stocks – U.S. stocks are mixed & little changed but staged a solid rally off the lows of the day.
  • Overseas Stocks – Europe closed mixed. China had a solid rally & the Nikkei traded poorly.
  • Economic – U.S. economic data was mixed.
  • Currencies – Strong day for the Yen. The Euro & Pound closed little changed.
  • Commodities – Crude down but closed well above the day’s low price. Bad day for wheat.
  • CDX IG: +1.11 to 74.56
  • CDX HY: +5.84 to 401.32
  • CDX EM: +4.91 to 260.97

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate new issues only was 12.2 bps.
  • The spread compression from IPTs to the launch/final pricing across today’s 6 IG new issues – including the split-rated $25 PerpNC5 for Capital One – was 14.125 bps.

 

Syndicate IG Corporate-only Volume Estimates for This Week and July

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $12.20b
July 2016 vs. Current
MTD – $80.95b
Low-End Avg. $19.39b 62.92% $90.09b 89.85%
Midpoint Avg. $20.48b 59.57% $91.17b 88.79%
High-End Avg. $21.57b 56.56% $92.26b 87.74%
The Low $10b 122.00% $60b 134.92%
The High $30b 40.67% $125b 64.76%

 

 

Have a great evening!
Ron

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. (more…)