Browsing articles tagged with " investment grade debt"
Despite Trade War Saber-Rattling-Bayer’s 15b Bond Issuance is Headache Free
June 2018      Debt Market Commentary   

Quigley’s Corner 06.19.18: Despite Trade War Saber-Rattling, Bayer AG 15b Bond Issuance is Headache Free

 

Investment Grade New Issue Re-Cap – Despite Mounting Trade War Fears Bayer Prints Massive $15b 8-Part Jumbo!

Today’s IG Primary & Secondary Market Talking Points

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

Nina Chamberlain Places on USA Cadet National Women’s Water Polo Team

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

New Issues Priced

Indexes and New Issue Volume              

Global Market Recap

2018 Lipper Report/Fund Flows – Week ending June 13th        

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

Economic Data Releases

Tomorrow’s Calendar

 

Investment Grade New Issue Re-Cap – Despite Mounting Trade War Fears Bayer Prints Massive $15b

U.S.-China trade tensions mounted with the latter imposing tariffs on U.S. commodities. Tariffs on U.S. oil alone amount to a $1b monthly clip. This, in response to Trump’s tariffs that took effect last Friday June 15th in the form of 25% on $50b across 900 Chinese imports.  Emerging Markets currencies got hit and their bond yields widened as a result kicking off the session with 200 point loss on the DOW. Trump said last week that if China retaliates the U.S. will pursue additional tariffs. Trump’s tariffs are motivated by property rights violations in addition to new controls and restrictions.

Regardless, Bayer AG (Baa1/A-), as expected issued a blockbuster $15b jumbo transaction thru joint leads Bank of America/Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and J.P. Morgan. The German multinational pharmaceutical and life-sciences company priced the dollar-denominated 144a/REGS eight-tranche transaction across the curve.  Last week’s three days of investor calls wrapped up on Friday the 15th. Bayer AG (Baa3/BBB+) agreed to buy Monsanto Co. (A3/A-) in a deal valued at $66 billion or $128 per share in cash – a 21% premium to Monsanto’s closing price on September 13th, 2017.  It represents the M&A Pipeline’s largest deal of the year and is the single largest takeover by a German company. BAML, CS, GS, HSBC and JPM underwrote the $56.9b acquisition loan.

Meanwhile Walmart Inc. (Aa2/AA) had joint leads Barclays, Citigroup and J.P. Morgan conduct fixed-income investor calls today, Monday, June 18th from 9:30am thru 5:00pm ET. Typically issuers are ready to print the day after.  Walmart will acquire 77% of Flipkart Group, India’s largest e-commerce company for $16b valuing the company at $20.8b. The largest companies need to compete on a scale with Amazon following its acquisition of Whole Foods.  Significant “chatter” from my sources indicates a ~$10b debt transaction across the curve slated for tomorrow.  That volume will only add to what’s expected to be a ~40b week of new IG Corporate supply. So, we may well see a total of at least $26b print between today’s Bayer and Duke Florida combined with tomorrow’s Walmart after just two days and there are 20 other issuers in the pipeline.

Today the IG dollar DCM hosted 2 issuers across 10 tranches totaling $16.00b and representing 42% of this week’s $38.16b midpoint syndicate volume forecast  The SSA space was quiet.

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

  • The IG Corporate WTD total is 41.93% of this week’s syndicate midpoint average forecast or $16.00b vs. $38.16b.
  • MTD we’ve priced 86.89% of the syndicate forecast for June IG Corporate new issuance or $78.58b vs. $90.44b.
  • There are now 21 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 10 IG Corporate-only new issues was <15.00> bps.
  • BAML’s IG Master Index was unchanged at +121. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.15. (1.16 represents a new high; 0.85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +155 vs. +154. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $13.7b on Friday versus $19.3b on Thursday and $13b the previous Friday.
  • The 10-DMA stands at $17.3b.

 

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

 

IG Corporate New Issuance This Week
6/18-6/22
vs. Current
WTD – $16.00b
June 2018 vs. Current
MTD – $78.58b
Low-End Avg. $37.36b 42.83% $91.24b 86.12%
Midpoint Avg. $38.16b 41.93% $90.44b 86.89%
High-End Avg. $38.96b 41.07% $89.64b 87.66%
The High $30b 53.33% $75b 104.77%
The Low $46b 34.78% $110b 71.44%

 

Congratulations!
Nina Chamberlain Places on USA Cadet National Women’s Water Polo Team

Nina Chamberlain(l) USA Cadet National Women’s Water Polo Team

Every day we here at Team Mischler leave it on the floor. Some days we’re on deals, others we’re not. One thing we NEVER do, however, is fault our resolve or efforts therein because we expect to be the best each and every day and we know what is expected of us  – it’s who we are. It’s contagious here and equally so in our respective home lives – the ones that matter most to us all.

Case in point, our fearless leader and CEO Dean Chamberlain’s daughter Nina achieved some well-deserved national attention and recognition today that I’d like to share with you all.

The center of gravity American water polo is California, but this year Greenwich represented the rest of the country by placing an astonishing three athletes on USA National Teams. This historic achievement continues the recent water polo trend started by the Greenwich YMCA standout Thomas Dunstan, who made the 2016 Olympic team and now plays for USC. Last year, Kayla Yelensky represented the USA in the Youth Pan American games. This year the trend continued for both the boys and girls teams in several age groups.

Out of thousands of players trying out for the USA National Water Polo Age-Group Teams, only 22 players in the country make the various National team (Development, Cadet & Youth).

Gavin West, a 14-year-old 8th grader at Brunswick, was one of only two cadets (15U) outside California to make the team. He will be the first representatives from the Eastern Zone in 7 years.  Patrick Mullen,a 13 year old 7th grader at Greenwich Country Day School was the only Eastern representative on the Development team (14U).  Nina Chamberlain, a 14-year-old Freshman at Greenwich High School, made the girls cadet team (15U) as the only Eastern representative from the team.

In total, there were more male national team athletes from Greenwich than all non-California states combined. This speaks to the growing participation at young ages and the quality of the local coaching at the Greenwich YMCA under Head Coach Ulmis Lordache.

“All three athletes have worked really hard over the last four years and it is a top honor to be selected for the National team,” said Iordache. ” Our entire club is so proud of them.” All three will continue their training with the National Team in California over the summer. *Reprinted from the Greenwich Free Press June 16, 2018

Congratulations Nina! This is a great accomplishment for you as well as for women athletics and our great nation!

Below find a synopsis of everything syndicate and secondary from the day’s IG debt capital markets as seen from the perch of Mischler’s Fixed Income Syndicate Desk. Have a great evening!

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

 

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

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IG Debt Market Weekend Update: Citi in Sync With Synchrony
May 2018      Debt Market Commentary, Recent Deals   

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

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

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

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

The “QC” Geopolitical Risk Monitor

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

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

Indexes and New Issue Volume

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

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

UST Resistance/Support Table

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

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

Overseas in the EU two new issues were postponed including the first in 2018 for an investment grade rated issuer pointing to investor fatigue following one of the busier weeks of the year. Here’s a look at the WTD and MTD IG Corporate new issue volume as measured against syndicate desk estimates:

  • The IG Corporate WTD total is 96.86% of this week’s syndicate midpoint average forecast or $32.855b vs. $33.92b.
  • MTD we’ve priced 68.69% of the syndicate forecast for April IG Corporate new issuance or $92.625b vs. $134.84b.
  • There are now 17 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 1 IG Corporate-only new issue was <14.50> bps.
  • BAML’s IG Master Index was unchanged at +114. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.09 vs. at 1.08.  (0.85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +147. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $19.7b on Thursday versus $20.8b on Wednesday and $19.1b the previous Thursday.
  • The 10-DMA stands at $17.9b.
  • Taking a look at the secondary trading performance of this week’s 43 IG new issues comprised of 38 IG Corporates and 5 SSAs new issues 25 tightened versus NIP for a 58.25% improvement rate, 13 widened  (30.25%) and 5 were flat (11.50%).
  • For the week ended May 16th, Lipper U.S. Fund Flows reported a net inflow of $3.069b into Corporate Investment Grade Funds (2018 YTD net inflow of $40.444b) and a net outflow of $541.871m from High Yield Funds (2018 YTD net outflow of $15.381b).

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

 

IG Corporate New Issuance This Week
5/14-5/18
vs. Current
WTD – $32.855b
May 2018 vs. Current
MTD – $92.625b
Low-End Avg. $32.52b 101.03% $133.64b 69.31%
Midpoint Avg. $33.92b 96.86% $134.84b 68.69%
High-End Avg. $35.32b 93.02% $136.04b 68.09%
The High $20b 164.28% $110b 84.20%
The Low $40b 82.14% $150b 61.75%

 

Global Market Recap

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

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

-Tony Farren, Managing Director, Rates Trading

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

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

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED TRADING
Synchrony Bank BBB/BBB- 3.65% 5/24/2021 750 +112.5a +100a (+/-2) +98 +98 97/96
Charles Schwab Corp. A2/A FRN 5/21/2021 600 3mL+equiv 3mL+equiv 3mL+32 3mL+32 3mL+33/30
Charles Schwab Corp. A2/A 3.25% 5/21/2021 600 +65a +50 the # +50 +50 50/47
Charles Schwab Corp. A2/A 3.85% 5/21/2025 750 +95a +80 the # +80 +80 80/77
Svenska Handelsbanken Aa2/AA FRN 5/24/2021 1,250 3mL+equiv 3mL+47 the # 3mL+47 3mL+47 3mL+44/41
Svenska Handelsbanken Aa2/AA 3.35% 5/24/2021 1,250 +80a +65 the # +65 +65 65/62
Valero Energy Corp. Baa2/BBB 4.35% 6/01/2028 750 +137.5a N/A +125 +125 124/121
Province of New Brunswick Aa2/A+ 3.625% 2/24/2028 500 MS +50a MS +50a MS +50 +53.3 53/52
Harley-Davidson Finc’l Svcs. A3/A FRN 5/1/2020 450 3mL+65a 3mL+53 (+/-3) 3mL+50 3mL+50 3mL+43/41
Harley-Davidson Finc’l Svcs. A3/A 3.55% 5/21/2021 350 +95a +83 (+/-3) +80 +80 79/76
Kommuninvest Aaa/AAA 2.875% 3/01/2021 1,000 MS +8a MS +8 MS +6 +20.7 21/19
Avista Corp. A2/A- 4.35% 6/01/2048 375 +125a +115 the # +115 +115 114/111
Citigroup Inc. Baa1/A FRN 6NC5
6/01/2024
1,000 3mL+equiv 3mL+equiv 3mL+102.3 3mL+102.3 3mL+98/94
Citigroup Inc. Baa1/A 4.044% 6NC5
6/01/2024
1,250 +115-120/+117.5a +112.5 the # +112.5 +112.5
Back-end:
3mL+102.3
109/106
Citigroup Inc.
(tap) New Total: $3.85b
Baa3/A- 4.45% 9/29/2027 350
WNG
+high 160a
+167.50a
+163 the # +163 +163 163/161
Diageo Capital plc A3/A- FRN 5/18/2020 500 3mL+equiv 3mL+equiv 3mL+24 3mL+24 3mL+21/18
Diageo Capital plc A3/A- 3.00% 5/18/2020 500 +60-65/+62.5a +47a (+/-2) +45 +45 40/37
Diageo Capital plc A3/A- 3.50% 9/18/2023 500 +75-80/+77.5a +65a (+/-2) +63 +63 62/59
Diageo Capital plc A3/A- 3.875% 5/18/2028 500 +95-100/+97.5a +87a (+/-2) +85 +85 82/79
Perusahaan Listrik Negara
PT Persero
Baa2/BBB 5.45% 5/21/2028 1,000 5.80%a 5.50% the # 5.50% +241.4 236/232
Perusahaan Listrik Negara
PT Persero
Baa2/BBB 6.15% 5/21/2048 1,000 6.50%a 6.20% the # 6.20% +299.6 292/288
Royal Bank of Scotland Baa3/BBB+ 4.892% 11NC10 F-t-F
5/18/2029
1,750 +200a +185a (+/-3) +182 +182
Back-end:
3mL+175.4
185/181
Republic of South Africa Baa3/BB+ 5.875% 6/22/2030 1,400 6.00%a 5.875% the # 5.875% +280.5 285/280
Republic of South Africa Baa3/BB+ 6.30% 6/22/2048 600 6.375%a 6.30% the # 6.30% +310.1 315/312
Swedish Export Credit Corp. Aa1/AA+ 2.875% 5/22/2021 1,000 MS +12a MS +10a (+/-1) MS +9 +24.8 25/24
AEP Texas Inc. Baa1/A- 3.95% 6/01/2028 500 +110a +100-105 +100 +100 96/93
Ameren Illinois Co. A1/A 3.80% 5/15/2028 430 +95a +85a (+/-3) +82 +82 78/75
American Express Co. A3/A FRN 5/17/2021 800 3mL+equiv 3mL+equiv 3mL+52.5 3mL+52.5 3mL+46/
American Express Co. A3/A 3.375% 5/17/2021 1,200 +low 80s/+82.5a +70a (+/-2) +68 +68 68/63
Bank of America Corp. A3/A 3.499% 5/17/2022 2,250 +100a N/A N/A +80
Back-end:
3mL+63
81/78
Canadian Pacific Railroad Baa1/BBB+ 4.00% 6/01/2028 500 +120a +105a (+/-3) +102 +102 99/96
Dr. Pepper Snapple/Keurig
Maple Escrow Subsidiary Inc
Baa2/BBB 3.551% 5/25/2021 1,750

 

+105a +90a (+/-5) +85 +85 83/80
Dr. Pepper Snapple/Keurig
Maple Escrow Subsidiary Inc
Baa2/BBB 4.057% 5/25/2023 2,000 +135a +125a (+/-5) +120 +120 116/114
Dr. Pepper Snapple/Keurig
Maple Escrow Subsidiary Inc
Baa2/BBB 4.417% 5/25/2025 1,000 +160a +150a (+/-5) +145 +145 141/137
Dr. Pepper Snapple/Keurig
Maple Escrow Subsidiary Inc
Baa2/BBB 4.597% 5/25/2028 2,000 +175a +165a (+/-5) +160 +160 162/158
Dr. Pepper Snapple/Keurig
Maple Escrow Subsidiary Inc
Baa2/BBB 4.985% 5/25/2038 500 +205a +190a (+/-5) +185 +185 190/185
Dr. Pepper Snapple/Keurig
Maple Escrow Subsidiary Inc
Baa2/BBB 5.085% 5/25/2048 750 +215a +200a (+/-5) +195 +195 202/197
Fidelity Nat’l. Info. Systems Baa2/BBB 4.25% 5/15/2028 400 +145 +135a (+/ (+/-5)-5) +130 +130 131/127
Fidelity Nat’l. Info. Systems Baa2/BBB 4.75% 5/15/2048 600 +190 +180a (+/-5) +175 +175 178/174
Goldman Sachs Group, Inc. A3/A FRN 8NC7
5/15/2026
1,500 3mL+125a 3mL+120a (+/-3) 3mL+117 3mL+117 3mL+121/118
Great-West Lifeco Finance A+/A 4.047% 5/17/2028 300 +130a +110a (+/-5) +105 +105 103/99
Great-West Lifeco Finance A+/A 4.581% 5/17/2048 500 +160a +145 the # +145 +145 143/141
San Diego Gas & Electric Co. Aa2/AA- 4.15% 5/15/2048 400 +110a +105 the # +105 +105 102/100

 

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

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

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 desks surveyed for today’s “Best & Brightest” Syndicate edition!  Thank you to all of them. 21 of today’s respondents are in the top 22 syndicate desks including 21 of the top 24 according to today’s Bloomberg U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (U.S. Investment Grade Corporates).  The participating desks represent 81.00% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they are the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they are the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.  

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

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

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

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

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

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

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

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

  • Week on week, average NICs widened 0.49 bps to an average 4.59 bps vs. 4.10 bps across this week’s 43 IG Corporate-only new issues that displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, increased by 0.26x to an average 2.96x vs. 2.70x. 
  • Average tenors extended by 3.14 years to an average 10.18 years vs. 7.04 years.
  • Tranche sizes increased by $37mm to $842mm vs. $805mm last week.
  • Spread compression from IPTs to the launch/final pricing of this week’s 43 IG Corporate-only new issues tightened by 2.21 bps to <15.12> bps vs. <12.91> bps.
  • Standard and Poor’s Investment Grade Composite Spread tightened 1 bps to +147  bps vs. +148 week-on-week. 
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 2 bps to 1.09 vs. 1.11 week-on-week.
  • Investment grade corporate bond trading posted a final Trace count of $19.7b on Thursday versus $20.8b on Wednesday and $19.1b the previous Thursday.  
  • The 10-DMA stands at $17.9b.
  • The VIX widened 0.78 or 6.16% to 13.43 at yesterday’s close vs. last Friday’s 12.65 close.
  • Week-on-week, BAML’s IG Master Index tightened 2.00 bps to +114 vs. +116 week-on-week.  
  • Spreads across the four IG asset classes tightened 2.00 bps week-on-week to 18.75 vs. 20.75 bps as measured against its cumulative post-Crisis low.
  • Spreads across the 19 major IG industry sectors tightened 1.89 bps to an average 25.11 vs. 27.00 bps as measured against their average cumulative post-Crisis lows!
  • For the week ended May 16th, Lipper U.S. Fund Flows reported a net inflow of $3.069b into Corporate Investment Grade Funds (2018 YTD net inflow of $40.444b) and a net outflow of $541.871m from High Yield Funds (2018 YTD net outflow of $15.381b).

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

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

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

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

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

 

The “Best and the Brightest” in Their Own Words

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Investment Grade Debt: Widening Warning
April 2018      Debt Market Commentary   

Quigley’s Corner 04.30.18- Widening Warning Investment Grade Debt

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

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

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

Global Market Recap

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

QC Geopolitical Risk Monitor

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending April 25th     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

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

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

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

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

 

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

 

Today’s IG Primary & Secondary Market Talking Points

 

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

 

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

 

IG Corporate New Issuance This Week
4/30-5/04
vs. Current
WTD – $8.175b
April 2018 vs. Current
MTD – $117.612b
May 2018
Low-End Avg. $25.24b 32.39% $90.60b 129.81% $133.64b
Midpoint Avg. $25.94b 31.52% $91.40b 128.68% $134.84b
High-End Avg. $26.64b 30.69% $92.20b 127.56% $136.04b
The High $20b 40.88% $80b 147.02% $110b
The Low $35b 23.36% $110b 106.92% $150b

 

Global Market Recap

 

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

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

-Tony Farren

 

Have a great evening!
Ron Quigley

 

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

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Quigley’s Corner 04.16.18 : Bank Earnings Bolster Bond Issuance
April 2018      Debt Market Commentary   

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

 

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

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

 

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

 

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

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

  • MTD we’ve priced 51.92% of the syndicate forecast for February IG Corporate new issuance or $47.454b vs. $91.40b.
  • There are now 19 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 12 IG Corporate-only new issue was <18.92> bps.
  • BAML’s IG Master Index tightened 1 bp to +111 vs. +112. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.06.  (0.85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +142 vs. +141. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $15.5b on Friday versus $17.3b on Thursday and $13.8b the previous Friday.
  • The 10-DMA stands at $17b.

 

Syndicate IG Corporate-only Volume Estimates for April

 

IG Corporate New Issuance April 2018 vs. Current
MTD – $47.454b
Low-End Avg. $90.60b 52.38%
Midpoint Avg. $91.40b 51.92%
High-End Avg. $92.20b 51.47%
The High $80b 59.32%
The Low $110b 43.14%

 

Global Market Recap

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

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

-Tony Farren

 

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

 

New Issues Priced

 

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Abu Dhabi Nat’l. Energy Co. A3/A 4.375% 4/23/2025 750 +185a +165a (+/-5) +160 +160 CITI/HSBC/FRAB/ING/MIZ
SCOT/SMBC
Abu Dhabi Nat’l. Energy Co. A3/A 4.875% 4/23/2030 1,000 +240a +210a (+/-5) +205 +205 CITI/HSBC/FRAB/ING/MIZ
SCOT/SMBC
Citigroup Inc. Baa1/A 4.075% 11nc10 F-t-F
4/23/2029
2,000 +140a +125-128 +125 +125
Back-end:
3mL+119.2
CITI-sole
Delta Air Lines Inc. Baa3/BBB- 3.40% 4/19/2021 600 +115a +95a (+/-5) +90 +90 BNPP/CS/DB/FITB/MS/WFS(a)
+11 (p)
Delta Air Lines Inc. Baa3/BBB- 3.80% 4/19/2023 500 +140a +120a (+/-5) +115 +115 BNPP/CS/DB/FITB/MS/WFS(a)
+11 (p)
Delta Air Lines Inc. Baa3/BBB- 4.375% 4/19/2028 500 +170a +160a (+/-5) +155 +155 BNPP/CS/DB/FITB/MS/WFS(a)
+11 (p)
Hanwha Life Insurance A3/A- 4.70% 30nc5
4/23/2023
1,000 5.00%a 4.75%a (+/-5) 4.70% $100.00
Reset:+200
then +300
BAML/JPM/NOM/UBS/HANW
J.P. Morgan Chase & Co. A3/A+ FRN 6nc5
4/23/2024
500 3mL+equiv 3mL+equiv 3mL+73 3mL+73 JPM-sole
J.P. Morgan Chase & Co. A3/A+ 3.559% 6nc5
4/23/2024
1,750 +95a +90a (+/-2) +88 +88 JPM-sole
J.P. Morgan Chase & Co. A3/A+ 4.005% 11nc10
4/23/2029
2,250 +125a +120a (+/-2) +118 +118 JPM-sole
United Overseas Bank Aa1/AA- FRN 4/23/2021 500 3mL+equiv 3mL+equiv 3mL+48 3mL+48 CITI/CS/HSBC/JPM/UOB
United Overseas Bank Aa1/AA- 3.20% 4/23/2021 700 REV. IPTS: +85a
+90a
+72-75 +72 +72 CITI/CS/HSBC/JPM/UOB

 

…..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.
4/09
TUES.
4/10
WED.
4/11
TH.
5/12
FRI.
5/13
AVERAGES
WEEK 4/09
AVERAGES
WEEK 4/02
AVERAGES
WEEK 3/26
AVERAGES
WEEK 3/19
AVERAGES
WEEK 3/12
AVERAGES
WEEK 3/05
New Issue Concessions 10.80 bps 2.60 bps N/A 8.00 bps N/A 7.13 bps 0.57 bps 8.18 bps 15.80 bps 9.16 bps 5.05 bps
Oversubscription Rates 3.78x 2.13x N/A N/A N/A 3.10x 4.07x 2.53x 2.86x 2.16x 2.88x
Tenors 9.63 yrs 3.80 yrs N/A 10.00 yrs N/A 7.57 yrs 10.55 yrs 13.15 yrs 11.82 yrs. 9.49 yrs 10.43 yrs
Tranche Sizes $679mm $900mm N/A $600mm N/A $752mm $812mm $488mm $784mm $568mm $1,559mm
Avg. Spd. Compression
IPTs to Launch
<17.86> bps <14.70> bps N/A <15.00> bps N/A <16.42> bps <21.41> bps <12.41> bps <13.78> bps <7.92> bps <15.63> bps

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