Browsing articles tagged with " Lipper Report"
Primary IG Syndicate Desks Sound Off-Next Week Will…
February 2018      Debt Market Commentary   

Quigley’s Corner 02.16.18 – Best & Brightest Primary IG Syndicate Sound Off

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Economic Data Releases

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

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

Syndicate IG Corporate-only Volume Estimates for Next Week

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

Economic Data Releases           

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

The “QC” Geopolitical Risk Monitor     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

 

Investment Grade New Issue Re-Cap

Today was a welcome no-print Friday ahead of the long three-day weekend! The Best and the Brightest are below with their thoughts and numbers for next week’s IG Corporate new issuance.  It appears that with many kids on spring break next week in what will already be a holiday-shortened work week, the midpoint average supply forecast calls for $18.78b to price.  But why hear it from me when you can simply scroll down below and read their formidable comments and thoughts along with their numbers and/or ranges?  Let’s first run down the recaps for this week and then it’s on to syndicate’s B&B!

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

  • The IG Corporate WTD total is 50.79% of this week’s syndicate midpoint average forecast or $9.477b vs. $18.66b.
  • MTD we’ve priced 47.28% of the syndicate forecast for February IG Corporate new issuance or $42.067b vs. $88.98b.
  • There are now 6 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index tightened 1 bp to +98 vs. +99. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.93 vs. 0.94.  (+85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread was unchanged at +133. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
  • The 10-DMA stands at $19.4b.
  • For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield             Funds (2018 YTD net outflow of $12.164b).
  • Taking a look at the secondary trading performance of this week’s 19 IG Corporate and 4 SSA new issues, of the 23 deals that printed, 9 tightened versus NIP for a 39.00% improvement rate, 6 widened  (26.00%), 8 were flat (35.00%).   

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Import Price Index MoM January 0.6% 1.0% 0.1% 0.2%
Import Price Index ex Petroleum January 0.1% 0.5% <0.2%> 0.0%
Import Price Index YoY January 3.0% 3.6% 3.0% 3.2%
Export Price Index MoM January 0.3% 0.8% <0.1%> 0.1%
Export Price Index YoY January —- 3.4% 2.6% 2.8%
Housing Starts January 1234k 1326k 1192k 1209k
Housing Starts MoM January 3.5% 9.7% <8.2%> <6.9%>
Building Permits January 1300k 1396k 1302k 1300k
Building Permits MoM January 0.0% 7.4% <0.1%> <0.2%>
U. of Michigan Sentiment February 95.5 99.9 95.7 —-
U. of Michigan Current Conditions February 111.1 115.1 110.5 —-
U. of Michigan Expectations February 87.2 90.2 86.3 —-
U. of Michigan 1 Year Inflation February —- 2.7% 2.7% —-
U. of Michigan 5-10 Year Inflation February —- 2.5% 2.5% —-

 

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

 

IG Corporate New Issuance This Week
2/12-2/16
vs. Current
WTD – $9.477b
February 2018 vs. Current
MTD – $42.067b
Low-End Avg. $17.56mm 53.97% $88.28b 47.65%
Midpoint Avg. $18.66mm 50.79% $88.98b 47.28%
High-End Avg. $19.75mm 47.98% $89.68b 46.91%
The Low $10mm 94.77% $70b 60.10%
The High $26mm 36.45% $110b 38.24%

 

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 19 of today’s respondents are in the top 20 of the new 2018 League table including 21 of the top 25 according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.93% 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. 

Here is this week’s geopolitical recap:

North Korea remains the number one ranked geopolitical event risk factor despite niceties during the current Olympics.  That ends on Sunday the 25th after which Kim Jong-Un will revert back to his nuclear ambitions. Equity markets seem to be settling in as the U.S. economy is running on all cylinders. U.S. equity markets have enjoyed their finest week since 2011. Interest rates are expected to rise and perhaps more quickly and higher than anticipated creating a steeper curve and rising yields.  President Trump broke with the GOP tradition of fiscal prudence with his $4.4 trillion 2019 budget to Congress that is unlikely to be enacted as is. March 2nd looms large for the EU’s anchor state, Germany, as the Socialist SPD party votes to approve or reject Angela Merkel’s grand coalition government which is a “marriage of convenience.” A “no” vote means new elections and further political turmoil for the EU’s keystone nation and largest economy. Prime Minister Theresa May has “let the dogs out” as her cabinet members began laying out the U.K’s. post-BREXIT future beginning with Boris Johnson’s speech on 2/14 while avoiding response to questions of a possible Second Referendum. Italy’s center right party continues to hold the lead heading into the March 4th election.  The immigration issue plays a big role in Italian voter sentiment. Italy’s national debt is $2.8 trillion and the banking sector owns $220b of bad loans.

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

  • The IG Corporate WTD total stands at $18.94b. We priced $6.30b less than the week’s average midpoint estimate of $25.24b or 75.04%.
  • MTD we priced 36.63% of the syndicate projection for February IG Corporates or $32.59b vs. $88.98b.
  • Entering today’s session, the YTD IG Corporate-only volume is $164.975b vs. the $199.658b that priced on Thursday, February 9th, 2017 or 21.02% less than this time last year.
  • The all-in or IG Corporate plus SSA YTD volume is $233.54b vs. $268.558b on Thursday, February 9th, 2017 or $35.02b (14.99%) less than the same time year ago total. 

Here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week.   

o   NICS:  2.62 bps  

o   Oversubscription Rates: 1.96x

o   Tenors: 18.16 years

o   Tranche Sizes: $499mm

o   Spread Compression from IPTs to the Launch: <12.82> bps 

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

  • Week on week, average NICs tightened minutely by 0.05 bps to an average 2.62 bps vs. 2.67 bps across last this week’s 17 IG Corporate-only new issues that displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased dramatically by 2.13x to an average 1.96x vs. 4.09x. 
  • Average tenors widened considerably by 3.31 years to an average 18.16 years vs. 14.85 years.
  • Tranche sizes decreased by $324mm to $ 499mm vs. $823mm
  • Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 4.20 bps to <12.82> bps vs. <17.02> bps.
  • Standard and Poor’s Investment Grade Composite Spread widened 1 bp to +133 vs. +132. 
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bp to 0.93 vs. 0.94 week-on-week.
  • Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
  • The 10-DMA stands at $19.4b.
  • Week-on-week, BAML’s IG Master Index widened 1 bp to +98 vs. +97.  
  • Spreads across the four IG asset classes widened 1.00 bp week-on-week to 7.25 bps vs. 6.25 bps as measured against its cumulative post-Crisis low.
  • Spreads across the 19 major IG industry sectors widened 0.95 bps to an average 8.37 bps vs. 7.42 bps wider as measured against their average cumulative post-Crisis lows!
  • For the week ended February 14th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield Funds (2018 YTD net outflow of $12.164b).

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

  • IG Corps: $9.477b
  • All-in IG (Corps + SSA): $13.777b

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

The “Best and the Brightest” in Their Own Words

……..……and here are their responses: (more…)

Tax Reform Bill Passes Both Houses-Let The Good Times Roll
December 2017      Debt Market Commentary   

Quigley’s Corner 12.20.17 – Tax Reform Bill Heralded By US Corporations

 

Investment Grade New Issue Re-Cap -Tax Reform Bill Ready For President’s Signature

Investment Grade Credit Spreads at Post Financial Crisis Lows

Syndicate IG Corporate-only Volume Estimates For This Week, December & January 2018

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending December 13th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

Below is the opening extract from Quigley’s Corner aka “QC”  Wednesday December 20 2017 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC is one of three distinctive market comment pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline.

Investment Grade New Issue Re-Cap – It’s Official: Tax Reform Bill Has Passed in Both Houses

That is one heck of a Christmas present to the American middle class which – make no mistake about it – IS the engine that drives the greatest country on the planet. To illustrate just how great this event could prove to be, let’s turn to the world’s 15th largest global company AT&T Inc. (NYSE:ATT) which announced it will give over 200,000 U.S. employees a special $1,000 bonus – to celebrate the signing of today’s historic tax bill! AT&T also committed to invest $1b in the U.S. in 2018.
IG Spreads Set or Tie Post-Crisis Lows

The good news doesn’t stop there though! Getting more granular to our IG dollar DCM, today saw credit spreads set or tie new post-Crisis lows across the four IG asset classes and the 19 major industry sectors.  It was bound to happen as IG secondary spreads continue to tighten given the absence of any new issuance here at year end among others. I suspect that despite the 10% reduction in IG Corporate new issuance being called for in 2018 as a consequence of the 21% corporate tax rate, there should also be a positive impact of the massive repatriation of trillions of dollars of offshore funds back to domestic corporate coffers. Overall, the new tax reform bill should reflect positively on IG credit quality.

Year-to-date we priced $1.333 trillion in IG Corporate new issues. Many are calling for a 10% reduction in 2018 IG Corporate issuance versus 2017 thanks to repatriation of funds. That would bring the amount down to $1.2tln.  Backing out this year’s $200b in M&A related financings gets you to $1tln even. I think we’ll actually see another 5% increase to that number thanks to redemptions, etc so, and more utility and FIG activity that will bring us to $1.05tln. However, many issuers are looking at their new piles of cash as a “strategic asset” in which they will be asking, “what can we buy with all these new found greenbacks?”  I think we’ll actually see ~$250bn in M&A-related financings.  So, that would bring my total to $1.3tln.

So, $1.3tln is my call for 2018 IG Corporate new issuance. Remember I count split-rated issuance as long as one of the 3 IG ratings is by Moodys, S&P or Fitch and I also include IG rated $25 par Preferreds.

Additionally, today’s November Existing Home Sales beat by 5.06% or 5.81m vs. 5.53m the highest number in 11 years!  The MoM number was 5.6% vs. 0.9% forecasts.

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

  • The IG Corporate WTD total is 0.00% of this week’s syndicate midpoint average forecast or $0.00m vs. $994mm.
  • MTD we’ve priced 79.96% of the syndicate forecast for December IG Corporate new issuance or $26.387b vs. $33b.
  • There are now 5 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points  

  • The IG Average set a new post-Crisis low of +99; the “AA” asset class also set a new post-Crisis low of +56.
  • The “A” (+77) IG asset class tied its post-Crisis low for the second consecutive session. “BBBs” also tied it post-Crisis low of +129.
  • Of the 19 major industry sectors, a total of 9 of them (47.4%) set or tied their post-Crisis lows as follows: Basic Industry (+124) and Transportation (+102) set new lows while Banking (+82), Consumer Products (+84), Energy (+132), Industrials (+104), Insurance (+108), Real Estate (+111) and Services (+100) tied their post-Crisis lows.
  • BAML’s IG Master Index tightened 1 bp to +99 vs. +100.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.94 vs. 0.95.
  • Standard & Poor’s Investment Grade Composite Spread tightened 3 bps to +137 vs. +140 setting a new post-Crisis low dating back to July 30th 2014 (+140).
  • Investment grade corporate bond trading posted a final Trace count of $14.5b on Tuesday versus $12.9b on Monday and $18.6b the previous Tuesday.
  • The 10-DMA stands at $15.4b.

Syndicate IG Corporate-only Volume Estimates For This Week, December & January 2018

 

IG Corporate New Issuance Thru year End
12/18-12/29
vs. Current
WTD – $0.00b
December 2017 vs. Current
MTD – $26.387b
January 2018
Low-End Avg. $344mm 0.00% $31.33b 84.22% $128.54b
Midpoint Avg. $994mm 0.00% $33b 79.96% $129.29b
High-End Avg. $1.64b 0.00% $34.67b 76.11% $130.04b
The Low $0b 0.00% $25b 105.55% $100b
The High $5b 0.00% $28b 94.24% $150b

 Global Market Recap

  •  U.S. Treasuries – 30yr experienced its third terrible session in a row.
  • Overseas Bonds – JGB’s weaker. EU core and semi core lost. EU Peripherals mixed.
  • 3mth Libor – Set at 1.65793% the highest since December 2008.
  • Stocks – Small losses at 3pm.
  • Overseas Stocks – Asia lower except Nikkei. Europe closed red except Greece.
  • Economic – U.S. housing data continues to impress. Existing home sales best since 2006.
  • Overseas Economic – Japan data was mixed. German PPI was lower than the last.
  • Currencies – USD better vs. Yen, weaker vs. Euro/CAD and little changed vs. Pound/AUD.
  • Commodities – CRB, crude oil, gasoline, gold, copper, silver, wheat, etc higher.
  • CDX IG: -0.61 to 49.14
  • CDX HY: -1.46 to 308.13
  • CDX EM: -1.24 to 120.54

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

 

Risk Level/Main Factor Geopolitical Risks
HIGH +
“North Korea”
·        12/20 – U.K. successfully tests Sea Ceptor air defense aboard HMS Argyll recently sent to Sea of Japan to join U.S. Naval ships. System shields against multiple airborne targets protecting 500 square mile area.  NOKO pushed further into a corner. 12/05 – U.S. reveals powerful microwave pulses from missiles that can disable NOKO’s electronic missile/launch systems. 12/02 – WH Nat’l. Security Advisor H.R. McMaster says “possibility of war with NOKO increases every day.” 11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. SOKO Olympics begin Friday 2/2018 thru Sunday 2/25. 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”
ELEVATED
“MENA and
Trumponomics and Beltway Beginning to Function”
·        12/20 – The House, in its re-vote cleared the tax rewrite for Trump’s signature 224-201. Tax Reform is official.  One of the single greatest GOP legislative wins in history. 12/19 – The Senate passed the bill in a 51-48 vote after the House voted in support 227 to 203 (4 no votes) requiring a revote the 12/20 due to a 529 home schooling technicality.  A typical U.S. family will get an add’l. $2k in 2018, the U.S. Corporate tax rate would be reduced to 21%, Americans can choose their own healthcare and Tax  Form is simplified. These are the largest tax cuts in U.S. history. President Trump said he wanted to sign the bill into law before Christmas.

·        12/19 – Yemeni rockets launched at the royal palace in Riyadh intercepted by Saudi forces.  Iranian-backed rebels now targeting population and power centers in Saudi Arabia is more than enough to promote an act of war between KAS and Iran. 12/06 – Pres. Trump formally recognizes Jerusalem as Israel’s capital. Plans to move U.S. embassy there from Tel Aviv. Could take three years. Palestinian leader Mahmoud Abbas and Jordan’s King Abdullah warn Trump of dangerous consequences for stability and security in the Middle East. Turkey’s Erdogan threatens to cut ties with Israel calling the move a “red line for all Muslims” and decision puts “world and region in a ring of fire.” 12/04 – Former Yemeni President Ali Abdullah Saleh assassinated in Sanaa by former allied and Iranian-backed Houthis.  Yemen, like Lebanon are sights of proxy wars fought between Saudi Arabia and Iran. 11/28 – Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group.  Beirut, is proving ground for Saudi-Iranian proxy wars. Crown Prince Mohammed bin Salman’s plans sweeping with “Vision 2030” to wean KSA off oil. Saudi inner players arrested in anti-corruption probe involving multi-billion dollar “settlements.” Both Trump and KAS share strong views of an anti-nuclear Iran. KSA needs oil above $81 to break even. Mideast tension expected to boost the price of oil.

CAUTION
“Russia, Europe,
Uranium 1 & Terror”
·        December MTD Terror Stats a/o 12/20: 56 terrorist attacks; 225 dead; 414 wounded.

·        U.S. trade protectionism contrarian to the world coming together on trade. Long term impact?

MODERATE
“China”
·        12/19 – Spain’s Rajoy announces snap elections on Thursday, Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Separatists remain ahead in latest polls 46.9% to 43.7% for the Unionists. 7.8% are “non-aligned.”

·        Italian elections to be held no later than March 20th, 2018. 5-Star Populist Party leader Luigi Di Maio is hopeful for EU negotiations but said he would vote for an ITALEXIT if discussions fail. Italians are resistant to the EU’s stringent austerity measures. 5-Star holds a lead in polls.

·        China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. 6% GDP in 2018 will be difficult.

·        Cybercrime, ransomware, viruses & hacking.

MARGINAL
“2018 US Recession?”
·        12/13 – FOMC raises rates 0.25% recognizes prolonged inflation miss that is globally low. Sees faster 2018 growth and strong labor market. Economic activity and investment picked up. Low odds of a recession. Concerned about debt. Asset prices characterized as being “elevated.”

 

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