Browsing articles tagged with "Mischler Financial Archives - Mischler Financial Group"
Holiday Time is Over for Muni Bond Issuance-NYS Dormitory is Open
July 2018      Muni Market   

Municipal Debt Deals-New Issue Calendar Week of July 9:  NYS Dormitory Authority Sales Tax Bonds…Mischler Muni Market Update looks back to last week’s muni bond issuance, municipal bond fund flow metrics and a focused lens on the muni bond new offerings for this week.  As always, the Mischler Muni Market Outlook provides public finance investment managers, institutional investors focused on municipal debt and muni bond market participants with a summary of the prior week’s municipal bond market activity, including credit spreads and money flows, and a look at pending municipal finance offerings tentatively scheduled for the most current week.

In advance of the update, a special shout-out to WSJ’s Heather Gillers for her July 9 article: “Municipal Bonds Are Scarce. That’s Good News for Borrowers.” 

Last week muni volume was about $0.2 billion. This week volume is expected to be $8.4 billion. The negotiated market is led by $668.7 million tax-exempt and taxable bonds for Trustees of the California State University. The competitive market is led by $1.8 billion tax exempt and taxable state sales tax bonds for Dormitory Authority of the State of New York on Wednesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6676

mischler-muni-market-update-070918During first half of 2018, and full years 2017 and 2016 alone, minority broker-dealer Mischler Financial Group Inc. underwriting roles (for which MFG has led, co-managed and/or served as selling group member) have included more than $625 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. Mischler is also a federally-certified Service-Disabled Veteran-Owned Business Enterprise (SDVOBE).  Mischler Muni Market updates and Municipal Debt New Issuance outlooks are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

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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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U.S. Unemployment Rate Trumps Lowest in 50 Years-Mischler DCM Commentary
June 2018      Debt Market Commentary, Recent Deals   

Quigley’s Corner 06.01.18 Weekend Edition: Latest Unemployment Rate Trumps Lowest Figure in 50 Yrs; Moody’s Makes It’s Case for Diversity & Inclusion

Investment Grade New Issue Re-Cap – Stealing All Headlines: The Great U.S.A. Flexes Economic Muscle!

Today’s IG Primary & Secondary Market Talking Points – Mischler On Moody’s Corp.

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

Moody’s Corp. 3yr Global Senior Unsecured Notes due 6/07/2021: Mischler DCM Drill-Down

Utilities Power Up- Thanks to the EEI

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

“Knowing the Past for the Future” – A Look at a Decade’s Worth of June IG Corporate and SSA Issuance

Syndicate IG Corporate-only Volume Estimates for Next Week and June

The “QC” Geopolitical Risk Monitor

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

New Issues Priced

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

Indexes and New Issue Volume              

Global Market Recap

2018 Lipper Report/Fund Flows – Week ending May 30th        

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar

 

Pre-release Presidential unemployment tweet or no tweet, this morning’s U.S. domestic data releases were AWESOME!  Recently we’ve witnessed Emerging Markets falling out of bed to rising oil prices; from Italy to trade wars, but today the United States of America trumped the global macro news headlines by posting a 3.8% Unemployment Rate, the lowest in 50+ years. The Underemployment Rate fell two-tenths of 1% to 7.6%.  Personal Income beat, and Spending crushed with a 1.8% number versus 0.8% expectations. U.S. Equity markets rose a couple hundred points and suddenly the U.S. has pushed so much headline risk to the side.  It’s all still there but it should be a sign to Americans, Corporations and the world just how powerful the USA engine is and how critically dependent the world relies on its success.
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Today’s results put a certain rate hike on the table at the FOMC’s next Rate Decision meeting held from, June 12th  thru the 13th thereby lending needed clarity to our market.

I’ve said it here before and I will say it again: love him or hate him or anything else in between, the President and his Administration deserve credit for data like today’s and it would be un-American not to cheer for your nation’s success. More importantly in terms of social responsibility,  the African-American and Hispanic American unemployment rates are at the lowest in their history, and Women achieved their highest employment numbers in over 19 years.

Oh, and the June 12th U.S. North Korean Summit is back on for June 12th. A nice way to end the week.

It’s Friday and you all know what that means.  The Best and Brightest in our world of investment grade rated Corporate new issuance have all spoken. They shared nice sound bites about next week and the month of June. First up though are the recaps followed by in order:

 

  • The deal drill down of today’s Moody’s Corp. transaction on which Mischler served as an active 3.00% Co-Manager.
  • A look into Moody’s D&I initiatives with a focus on the people behind them and their veteran-focused programs.
  • Then there’s a brief summary of the Edison Electric Institute’s 2017 Financial Review Annual Report of the investor-Owned Electric Utility Industry
  • Then it’s all about the Best and Brightest on their thoughts and forecasts for next week and June.

So, sit back, relax in the comfort of wherever you may be and set the table for next week’s IG dollar primary market expectations. You deserve the two day sojourn just ahead. Get comfortable. This daily is done for YOU thanks to the guy-in-the corner.  ……that would be “Quigley’s Corner!” Enjoy and thanks as always for tuning in!

Today the IG dollar DCM hosted 3 issuers across 3 tranches totaling $605mm.  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 28.00% of this week’s syndicate midpoint average forecast or $5.605b vs. $20.02b.
  • MTD we’ve priced 89.09% of the syndicate forecast for April IG Corporate new issuance or $120.13b vs. $134.84b.
  • There are now 16 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points – Mischler Secures Another Friday Print This Time for Moody’s Corp.

  • Mischler Financial served as an active 3.00% Co-Manager on Moody’s Corps. $300mm “will not grow” 3-year Global Senior Unsecured Notes new issue due 6/07/2021. As a result it is today’s featured “Deal-of-the-Day.” However, let’s first review today’s primary market talking points. Please be sure to read about the wildly Moody’s transaction by scrolling below just ahead of today’s Best & Brightest section. Thanks! -RQ
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 2 IG Corporate-only new issues was <13.5> bps.
  • BAML’s IG Master Index widened 2 bps to +122 vs. +120. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +1.15. (1.15 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 $22.5b on Thursday versus $21.9b on Wednesday and $16.6b the previous Thursday.
  • The 10-DMA stands at $17.1b.
  • For the week ended May 30th, Lipper U.S. Fund Flows reported a net inflow of $848.978m into Corporate Investment Grade Funds (2018 YTD net inflow of $43.822b) and a net outflow of $17.869m from High Yield Funds (2018 YTD net outflow of $15.138b).
  • Taking a look at the secondary trading performance of this week’s 11 IG new issues new issues 5 tightened versus NIP for a 50% improvement rate, 5 widened  (45.50%) and 1 were flat (9.00%).

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

 

IG Corporate New Issuance This Week
5/29-6/01
vs. Current
WTD – $5.605b
May 2018 vs. Current
MTD – $120.13b
Low-End Avg. $19.32b 29.01% $133.64b 89.89%
Midpoint Avg. $20.02b 28.00% $134.84b 89.09%
High-End Avg. $20.72b 27.05% $136.04b 88.30%
The High $15b 37.37% $110b 109.21%
The Low $26b 21.56% $150b 80.09%

 

Moody’s Corp. 3yr Global Senior Unsecured Notes due 6/07/2021

Mischler Financial is very happy to announce that it was invited to serve as an active 3.00% Co-Manager on today’s $300mm Moody’s Corp. (NYSE: MCO)  3-year fixed rate Global Senior Unsecured Notes new issue due 6/07/2021.

There were a couple logical ways to approach fair value on today’s transaction.  The first path looked to the outstanding MCO 2.75% due 12/15/2021 that was T+78, G+73 this morning pre-announcement pegging new issue concession as negative 3 bps versus today’s T+70 new issue pricing.

However, there were a wide range of quotes on the 2021s so, if you took a mid-point of the 3 joint leads (BAML, Citigroup and JPM), it was T+80 bid or G+75 nailing NIC as <5> bps.

Ever the politician (Ha!) I am averaging the two analyses and taking the average so the guy-in-the-corner calls NIC on today’s Moody’s new issue negative 4 bps. Either way you look at it folks this was a great deal and the timing, well, it’s now officially legendary!

moody's-veteran-diversity-inclusiion

Moody’s Corp. Deal Dashboard

Use of proceeds from today’s transaction will be used for general corporate purposes, which may include repayment of a portion of the $350mm outstanding under the loan agreement between Moody’s, as borrower, the lenders from time to time party thereto and J.P. Morgan Chase Bank, N.A. as administrative agent, entered into on June 6, 2017 to finance the acquisition of Bureau van Dijk (the “term Loan Facility”). .

 

MCO Issue RATING IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NIC
(bps)
Trading at
the Break
+/-
(bps)
3yr FXD BBB+/BBB+ +87.5a +75a (+/-5) +70 +70 <17.50> bps <4> 68/66 <2>

 

………and here’s a snap shot of today’s final Moody’s Corp. book sizes and oversubscription rates – the measure of investor demand:

Today’s Moody’s Corp. final order book finished at $1.70b making the 3-year Global Senior Unsecured Notes transaction 5.67x-times oversubscribed. “At the top” or at guidance, the book was as high as $1.90b or 6.33x covered. That folks, is VERY impressive especially given the volatility we’ve been witnessing of late. Congrats to Zeeshan Naqvi on his impeccable timing and Moody’s Corp. as well as Team Citigroup Syndicate (Scott, Frank, Adnes and Andrew) with whom it is always my great pleasure to work with on deal day.

Have a look:

MCO Issue Tranche Size Book
at-the-Top
Final Book
Size
Bid-to-Cover
Rate
3yr FXD $300mm $1.90b $1.70b 5.67x

 

Final Pricing – Moody’s Corp.
MCO $300mm 3.25% due 6/07/2021 @$98.85 to yield 3.303% or T+70

moody's-veteran-diversity-inclusiionMoody’s Corp. – Commitment to Diversity & Inclusion

 

When we talk about diversity in our financial services industry, it begins with issuers like GECC and MBNA just before that. If you work in our IG dollar DCM and never heard of Kitty Yoh, well then ………you never did.  She is retired, but have no doubt she is legendary.  Her past senior Treasury team featured some pretty impactfull people who helped create, develop and execute GECC’s iconic D&I initiative in our financial services industry.  Chris Coffey, now with Synchrony Financial and Zeeshan Naqvi, Moody’s Treasurer, are two such legends in our business, who came up through the ranks and are among the best there is in Treasury/Funding.  I’ll sneak in here that my wife, formerly Natalie Armenteros, priced the first-ever Euro denominated issue on the planet (it was for EIB), as well as a slew of GECC’s Euro issuances, including GE’s first Euro new issue whilst she served as head of Paribas’ Syndicate desk in Geneva, Switzerland. I have known Zeeshan for as long as I can remember, from the bulge bracket to the D&I b/d space over 12 years ago. Moody’s D&I and Zeeshan are the focus of this evening’s D&I drill down.

Zeeshan took what he learned in life and working at GECC and brought it with him to Moody’s Corp. bridging the issuer’s already sprouting commitment to social responsibility.  As Zeeshan told me today, “Moody’s takes great efforts to execute Diversity and Inclusion not only internally here within the Company and in their transactions, but we are incredibly active in the community.” As with all such corporate though-leading initiatives, here they begin with the senior leadership team, and at Moody’s Corp. that means President and Chief Executive Officer Randall W. McDaniel. Moody’s leadership team is committed to making diversity and inclusion part of the fabric of its organization. From the office of the CEO to Zeeshan in Treasury/Funding, D&I is implemented across every aspect of Moody’s business.  That only helps create an environment that maximizes every employee’s contribution, widens the leadership pipeline and ultimately increases the quality of opinions, products and services.

I can tell you that in dealing with Zeeshan he is passionate about educating us here at Team Mischler to understand his Company’s diversity and inclusion initiatives, and values our partnership as the nation’s oldest Service-Disabled Veteran broker dealer. Moody’s Diversity Council is responsible for implementing its diversity and inclusion strategies. To achieve its goals, the council is organized into working groups that focus on strategic priorities, developing an action plan and making it a reality. They prioritize educating its employees so that they understand the value of its D&I mandate.

moody's-veterans-ergMoody’s and Veterans

 

As it pertains specifically to Mischler Financial’s Service-Disabled Veteran certification, Moody’s Veteran Employee Resource Group or “ERG” was created to recognize and support veterans, active duty military personnel and military families both at Moody’s and in its communities. Members primarily focus on outreach efforts, including workforce integration and raising awareness around issues that impact veterans. Moody’s is a Global partner with VOWS or Veterans on Wall Street, Diversity Best Practices, and Columbia University Military Veterans Program.

If you didn’t know it before reading today’s “QC” you do now – legendary prints are being made by legendary companies that embrace legendary diversity and inclusion initiatives. It is always my great privilege, honor and personal responsibility to help get those and YOUR D&I stories to the Street – from Wall Street to Main Street.

It is this social responsibility aspect of my job that will always drive and motivate me to go the extra mile.  Friday no print?  Are you kidding me?  Bring it on folks. This is what it’s all about.

Congratulations to Moody’s Corp and to my friend Mr. Zeeshan Naqvi. Thank you both for everything you do for D&I and the greater good, and congratulations on a job very well done today.

 

edison-electric-instituteUtilities Power Up Thanks to the EEI

Edison Electric Institute today released its 2017 Financial Review Annual Report of the investor-Owned Electric Utility Industry that always provides a great recap of the financial performance and strategic direction of investor-owned utilities for the year.

Matching this morning’s stellar domestic economic data releases, the U.S. electric utility industry continues to benefit from its solid financial foundation. The EEI Index returned 11.7%, posting a second consecutive year of double-digit gains after 2016’s 17.4% return, and has now produced a positive total return in 13 of the last 15 years. The industry invested $113.6 billion in 2017 for a sixth-straight year of record-high capital expenditures, while continuing to improve its overall credit profile. Electric utilities continue to be a top dividend-paying sector and 88% of the industry increased the dividend in 2017, the second-highest percentage on record.

 

“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 and enjoy a fabulous weekend with you and yours!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 22 of the top 25 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 81.48% 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 !  More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way.  So, thank you all! –RQ


“Friday arrived so fast.  Nothing beats the four day work week!

Great numbers posted this morning with unemployment and underemployment down 0.1 and 0.2% respectively to 3.8% and 62.7% respectively. 3.8% matches the allt-ime low rate. NFP rose with wages picking up as well.

“QC” readership and I are VERY interested to know syndicate thoughts and expectations for next week’s IG Corporate new issue volume.  Any elaboration of your views is most appreciated especially given the tumultuous global event risk factors currently playing out.

First let’s dive right into all the muck in our world by recapping the most up to date geopolitical event risk factors that impacted our markets this week:

  • 5/31 – Sec. of State Mike Pompeo is encouraged by recent talks with NOKO envoys and an announced meeting on June 1st between a senior nuclear negotiator and Pres. Trump. A personal letter will be hand delivered to Trump today at the White House by Kim Yong-chol, former director of NOKO’s intel bureau and vice-chair of the Cent. Comm. Of the Worker’s Party of Korea.
  • 6/01 – Italy swore in new PM Giuseppe Conte, a former law professor as well as a coalition cabinet that includes both 5-Star Movement head Luigi Di Maio and League’s Mateo Salvini. The Borsa Italiana was up 2.50%. The EU released a statement saying they are confident the ruling coalition government will cooperate with Brussels.  Time will tell. On 5/31 – Right or wrong, EU chief Jean-Claude Juncker slammed Italians saying they need to work hard and stop blaming the EU to resolve their problems which will only exacerbate populist support tensions in the boot nation.  On 5/27 President Mattarella vetoed the coalition’s euro skeptic candidate, Paolo Savona as finance minister. Mattarella then vetoed all cabinet ministers, installed a EU friendly neutral gov’t. headed by an interim PM and former IMF economist as Italy looked to be headed for new elections. Di Maio and Salvini agreed to back down from Savona as Finance Minister. Still, Italy had gone without a government for 89 days shattering the old record of 82 set in 1996. The two populist parties have over 50% support, promote tough immigration reform, spending hikes, no sanctions against Russia, two tax brackets of 15% and 20%, erasing the previously boosted retirement age and a citizen’s income for the poor. Europe should have a contingency plan in place for a derailment of the Union. Italy had 70 post WWII gov’ts in 72 post-WWII years – one every 1.02 years. It is the EU’s 3rd largest economy, has the world’s 3rd highest debt-to-GDP ratio at 132.5% and a $2.8 trillion (equiv.) national debt. Italy is clearly the EU’s biggest economic risk. Italy’s banking sector holds $220bn of bad loans.
  • 5/31 – Trade War fears heated up again. Sighting no progress with Europe and re-negotiating NAFTA, the Trump Admin. announced 25% tariffs on imported steel and 10% on aluminum on national security grounds against the EU, Canada, Mexico effective midnight. Counter tariffs were levied against U.S. goods in response roiling markets. 5/29 – Motivated by intellectual property rights violations, the Trump Admin. will levy 50% tariffs on Chinese imports as well as new controls and restrictions. Despite reduced tensions post Mnuchin’s 5/01 statement that Trump would “put the trade war on hold” negotiations have failed to produce a resolution. Trump indicated a list of tariffed imports will be available on June 15th.
  • 5/29 – Iran’s Ayatollah is concerned the EU will not be able to salvage their end of the Iran nuclear deal as EU nations that link their security to U.S. security will cave to U.S. demands. Iran doubts the EU can prevent major companies from withdrawing due to new U.S. sanctions. 5/08 – President Trump pulled the U.S. from JCPOA while imposing mort stringent sanctions against Iran. He also warned heavy sanctions against nations assisting Iran’s nuclear pursuits. On 4/30 Israeli PM Netanyahu showed evidence of Iran’s continued nuclear ambitions in violation of the JCPOA.
  • 5/29 – Gaza Strip based Hamas and rebels launched over two dozen rockets into southern Israel in the largest barrage of Palestinian fire since 2014. Israel answered with targeted bombings.
  • 5/29 – U.S. interest rates: Amidst a rising rate environment, Italy, Spain and trade war fears counter by pushing investor cash into the safe haven of USTs thereby compressing yields.
  • 5/31 – Spain’s Prime Minister Mariano Rajoy will highly likely be ousted in a vote on Friday, June 1st as Socialists have enough votes of no confidence to boot the leader of a corrupt Administration that has seen nearly 30 officials convicted on various crimes of graft and conspiracy. The disgraced PM can resign ahead of tomorrow’s demoralizing vote. Rajoy has been at the helm of the Spanish gov’t. through the sovereign debt crisis, a national bailout and its own recession and ongoing Catalan independence crisis. Socialist leader Pedro Sanchez looks to win a slim majority in the 350 member Parliament but his party would rule as a minority with less than 25% support but is backed by his own Socialist cause, the Basque nationalist party and far left groups, similar to Italy.
  • 5/31 – Hard vs. soft BREXIT battle continues.  UK PM May is under increasing Tory pressure to defy hard-liners in her party to compromise for a more pragmatic solution. Talk of May’s hardline stance could result in a vote of no confidence.
  • May 2018 Terror Event MTD Casualty Total: 135 terrorist attacks; 917 dead; 1,133

 

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

Attention Syndicate Desks: Please note that the five key primary market driver averages in the below survey question have been updated from this morning to include today’s Moody’s, Texas Instruments or MetLife $25 Preferred new issues that priced or were green shoed  Nothing but the best for the “Best and the Brightest!” 

  

  • The IG Corporate WTD total stands at $5.00b. We priced $15.02b less than this week’s average midpoint estimate of $20.02b or <75.02%>.
  • MTD we priced 88.64% of the syndicate midpoint forecast for IG Corporate new issuance or $119.525b vs. $134.84b.
  • Entering today’s session, the YTD IG Corporate-only volume is $584.196b vs. the $652.039b YoY which is <$67.843b> or <10.40%> less than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $734.261b vs. $808.831b YoY which is <$74.57b> or <9.22%> less than vs. 2017.

 

Here are the five key primary market driver averages for the 9 IG Corporate-only deals that priced this week.  

 

  • NICS: 9.00 bps  
  • Oversubscription Rates: 2.73x
  • Tenors: 9.69 years
  • Tranche Sizes: $467mm
  • Spread Compression from IPTs to the Launch: <8.23> bps

 

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

 

  • Week on week, average NICs tightened 0.67 bps to an average 9.00 bps vs. 9.67 bps across this week’s 11 IG Corporate-only new issues that displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.20x to an average 2.73x vs. 2.93x. 
  • Average tenors expanded by 1.99 years to an average 9.69 years vs. 7.70 years.
  • Tranche sizes decreased by $485mm to $467mm vs. $952mm last week.
  • Spread compression from IPTs to the launch/final pricing of this week’s 11 IG Corporate and Preferred-only new issues widened by 10.48 bps to <8.23> bps vs. <18.71> bps.
  • Standard and Poor’s Investment Grade Composite Spread widened 5 bps to +155 bps vs. +150 week-on-week. 
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened by 6 bps to a new high of 1.15 vs. 1.09 week-on-week.
  • Investment grade corporate bond trading posted a final Trace count of $22.5b on Thursday versus $21.9b on Wednesday and $16.6b the previous Thursday.   
  • The 10-DMA stands at $17.1b.
  • The VIX widened 2.21 or 16.717% to 15.43 at yesterday’s close vs. last Friday’s 13.22 close.
  • Week-on-week, BAML’s IG Master Index widened 7.00 bps to +122 vs. +115 week-on-week.  
  • Spreads across the four IG asset classes widened 5.00 bps week-on-week to 25.50 vs. 20.00 bps as measured against its cumulative post-Crisis low.
  • Spreads across the 19 major IG industry sectors widened 5.73 bps to an average 32.26 vs. 26.53 bps as measured against their average cumulative post-Crisis lows!
  • For the week ended May 30th, Lipper U.S. Fund Flows reported a net inflow of $848.978m into Corporate Investment Grade Funds (2018 YTD net inflow of $43.822b) and a net outflow of $17.869m from High Yield Funds (2018 YTD net outflow of $15.138b).

 

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

  • IG Corps: $5.00b
  • All-in IG (Corps + SSA): $5.00b

 

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 (more…)

Investment Grade Bond Issuance: Market Reboots: Mischler Comment
May 2018      Debt Market Commentary   

Quigley’s Corner 05.30.18 : Investment Grade Bond Issuance: Market Reboots

Investment Grade Bond New Issue Re-Cap – Market Reboots

Today’s IG Primary & Secondary Market Talking Points

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

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

Global Market Recap            

2018 Lipper Report/Fund Flows – Week ending May 23rd        

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

In a dramatic reversal, financial markets recouped much of yesterday’s losses by kicking Italy’s political drama off today’s stage with its own powerful steel-tipped boot in a memorable display of market resiliency. Issuers were actively checking the market this morning with two utilities accounting for three of the session’s six tranches. Dominion Energy and Southern California Edison (NYSEAMERICAN: SCE-E) printed along with a MetLife, Inc. (NYSE: MET) $25 par non-cumulative PerpNC5 preferred stock transaction that was upsized to $700mm from an initially announced $200mm deal size on the back of strong demand. Morgan Stanley had physical books. Congrats to Team MS’s Captain Morgan, Mike Borut for leading that charge.  It was a nice shot in the arm after yesterday’s market woes. There remain myriad geopolitical event risk factors treading on thin ice that could make this summer a bumpy ride.  But it’s responses like today’s session that remind us all how irrepressible the market is.

Today the IG dollar DCM hosted 4 issuers across 6 tranches totaling $3.45b.  The SSA space was inactive.

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 17.23% of this week’s syndicate midpoint average forecast or $3.45b vs. $20.02b.
  • MTD we’ve priced 87.49% of the syndicate forecast for April IG Corporate new issuance or $117.975b vs. $134.84b.
  • There are now 14 issuers in the IG credit pipeline.

 

Today’s IG Primary & Secondary Market Talking Points

  • MetLife Inc. upsized today’s 28mm share $25 par non-cumulative PerpNC5 Preferred stock transaction to $700mm from $200mm
  • The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 5 IG Corporate-only new issues was <8.70> bps.
  • Including today’s MetLife Inc. $25 par perpNC5 Preferred stock transaction, spread compression among the 6 IG Corporate and Preferred was <8.29> bps.
  • BAML’s Investment Grade Bond Master Index widened 4 bps to +120 vs. +116. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 3 bps to +114 vs. 1.11.  (0.85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread widened 5 bps to +156 vs. +151. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $16.9b on Tuesday versus $6.9b on Friday and $18.5b the previous Tuesday. Monday was a holiday.
  • The 10-DMA stands at $16.8b.

 

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

 

IG Corporate New Issuance This Week
5/29-6/01
vs. Current
WTD – $3.45b
May 2018 vs. Current
MTD – $117.975b
Low-End Avg. $19.32b 17.86% $133.64b 88.28%
Midpoint Avg. $20.02b 17.23% $134.84b 87.49%
High-End Avg. $20.72b 16.65% $136.04b 86.72%
The High $15b 23.00% $110b 107.25%
The Low $26b 13.27% $150b 78.65%


The “QC” Geopolitical Risk Monitor

Updates are in BOLD print!

Risk Level/Main Factor Geopolitical Risks
HIGH ·        N/A
ELEVATED
North Korea
& Italy
·        5/29 – President Trump continues pressing demands for complete denuclearization of North Korea. The on again, off again June 12th summit may still happen. Trump cancelled the planned summit last week sighting Kim Jong-un’s “tremendous anger and open hostility” but asked his top aides to continue carrying out high level talks in preparation for it.

·        5/29 – Italy’s en route to derail the Euro Zone as its two ant-establishment parties 5-Star and League could not form a coalition. President Mattarella put the kabosh on the first populist gov’t. by nixing their candidate for finance minister given their euro skepticism. As a result Mattarella vetoed all cabinet ministers, installed a EU friendly neutral gov’t. headed by an interim PM and former IMF economist as Italy looks to be headed for new elections. Italy has now gone without a gov’t. for 86 days shattering the old record of 82 set in 1996. Yields on Italian debt soared, the EU is getting hammered. The two  populist parties have over 50% support and promote tough immigration reform, increased spending, lifting all sanctions against Russia, creating 2 tax brackets of 15 and 20%, dropping a previously boosted retirement age and a citizen’s income for the poor. This makes Greece’s problems looks like child’s play. With Italy, Europe should have an emergency plan in place for a derailment of the Union. Italy had 70 post WWII gov’ts in 72 post-WWII years – one every 1.02 years. It is the EU’s 3rd largest economy, has the world’s 3rd highest debt-to-GDP ratio at 132.5% and a $2.8 trillion (equiv.) national debt. Italy is clearly the EU’s biggest economic risk. Italy’s banking sector holds $220bn of bad loans.

CAUTION
U.S-China
Tariffs, Iran, Israel,
U.S. Interest Rates,
BREXIT & Terror
·        5/29 – Motivated by intellectual property rights violations, the Trump Administration will impose 50% tariffs on Chinese imports along with new controls and restrictions. Although tensions reduced since U.S. Tsy. Sec. Steve Mnuchin said Pres. Trump would “put the trade war on hold” last Monday 5/21, negotiations have failed to produce any sweeping resolution. Trump indicated a list of tariffed imports will be available on 6/15.

·        5/29 – Iran’s Ayatollah is concerned the EU will not be able to salvage their end of the Iran nuclear deal as EU nations that link their security to U.S. security will cave to U.S. demands. Iran doubts the EU can prevent major companies from withdrawing due to new U.S. sanctions. 5/08 – President Trump pulled the U.S. from JCPOA while imposing mort stringent sanctions against Iran. He also warned heavy sanctions against nation that assists in Iran’s nuclear pursuits. On 4/30 Israeli PM Netanyahu revealed evidence proving Iran’s nuclear ambitions continued in violation of the 2015 agreement.

·        5/29 – Gaza Strip based Hamas and rebels launched over two dozen rockets into southern Israel in the largest barrage of Palestinian fire since 2014. Israel answered with targeted bombings.

·        5/29 – U.S. interest rates: Amidst a rising rate environment, Italy and EU concerns counter by pushing investor cash into the safe haven of USTs thereby compressing yields. June is historically the second lowest volume month for issuance besides December. Repatriation and tax reform deepened cash reserves for many U.S. corps especially tech cos.  The absence of AAPL, MSFT, etc has impacted YTD issuance.

·        5/17 – Pressure on U.K. 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: 124 terrorist attacks; 850 dead; 1,116 wounded.

MODERATE

Spain
& CyberCime
·        5/29 – Spanish Prime Minister Rajoy’s minority administration will face a second vote of confidence on Friday 6/01 amidst increasing pressure and resistance with calls for new elections that could unseat him thanks to a multi-million-euro graft conspiracy that saw dozens of his party’s officials convicted of various crimes. Corruption runs rampant under Rajoy’s watch. He survived a similar vote in June but may not make it through this round. The IBEX is down 8.6% YTD.

·        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

 

 

Have a great evening!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate

 

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

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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Wall Street Rating Interest Rates: Trading at the Corner of Hollywood and Wall
May 2018      Debt Market Commentary   

Quigley’s Corner 05.16.18 – Financial Markets Rating Impact of Higher Interest Rates: Trading at the Corner of Wall Street & Hollywood Blvd.

Investment Grade New Issue Re-Cap – Wall Street & Hollywood; Reality & Illusion

Today’s IG Primary & Secondary Market Talking Points

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

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

2018 Lipper Report/Fund Flows – Week ending May 9th       

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

Today the suddenly subdued IG dollar DCM hosted one $800mm two-part deal from Harley-Davidson Financial Services in the form of a 2-year FRN and a 3-year fixed rate senior unsecured transaction. In fact, the SSA space outperformed on the volume front thanks to Kommuninvest’s $1b 3-year bringing the all-in IG day total to 2 issuers, 3 tranches and a mere $1.8b…………What gives?  Well, look at the CT10-year that closed out yesterday’s session yielding 3.07% and 3.10% today. U.S. interest rates are going up, though they’ve been tame thus far as they begin their trajectory.

In speaking with Mischler’s resident Treasury guru Tony Farren about the subject of rising rates today, the very first week of 2018 (Jan. 2-5) saw the 2yr (1.891%), 5yr (2.213%), 10yr (2.416%) and the 30yr (2.749%) all trading at their 2018 YTD low yields. Fast forward to today – both the 2yr (2.589%) and 5yr (2.941%) are at the highest yields since 2008; the 10yr (3.10%) is at its highest yield dating back to 2011 while the CT30yr (3.22%) came to within 1 bp of its YTD high which was the highest yield since 2015. The market IS and always has been ahead of the curve, while the Fed has ALWAYS and will forever be a market laggard. It’s the nature of the beast we call “the market.”  Rates are finding a new level and that level is HIGHER folks!

Things could certainly be changing especially after S.F. Fed Chief Williams’ comments yesterday in which he said he’s “very positive” on the domestic economic outlook and shared his view that we can sustain 3 to 4 rate hikes in 2018!  The statement has more impact than it typically would, especially considering that Mr Williams will soon upgrade to a much more powerful role as the NY Fed Chief. There is a large contingent of people and market participants who would like to see Fed-speak banned (other than post-FOMC Press Conferences and Q&A). Still, rates are going up folks. Just have a look at the emboldened U.S. dollar for evidence. Look at Emerging Markets, especially Argentina and Turkey. They are signals not only of their own domestic issue,s but also the rising rate environment.  Sprinkle on some powerful geopolitical risk factors like the bubbling Middle East, Iran vs. the unlikely Dynamic Duo that is quickly becoming Saudi Arabia and Israel, and Kim Jong-un’s recent comments threatening to un-schedule the June 12th denuclearization talks.  China, Italy, Washington dysfunction – they are all among the starring players in an endlessly rewritten historical epic scenario that beckons a script doctor’s skills to fill in the holes, add some character arcs and tie all the plots and subplots together to achieve a nice, neat denouement.  Guess what? That happy ending is not coming; after all, this is the reality, not illusion and we, readers are realists.  This is Wall Street, not Hollywood. At least I think and hope so.

So, the 3.095% CT10yr yield was the wake-up call that gave pause for today.  We are also running $7b shy of this week’s syndicate estimate, but tomorrow’s another day!

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 79.32% of this week’s syndicate midpoint average forecast or $26.905b vs. $33.92b.
  • MTD we’ve priced 64.28% of the syndicate forecast for April IG Corporate new issuance or $86.675b vs. $134.84b.
  • There are now 15 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 2 IG Corporate-only new issues was <15.00> 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 tightened 1 bp to +145 vs. +146. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $19.9b on Tuesday versus $16b on Monday and $17.4b the previous Tuesday.
  • The 10-DMA stands at $17.4b.

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

 

IG Corporate New Issuance This Week
5/14-5/18
vs. Current
WTD – $26.905b
May 2018 vs. Current
MTD – $86.675b
Low-End Avg. $32.52b 82.73% $133.64b 64.86%
Midpoint Avg. $33.92b 79.32% $134.84b 64.28%
High-End Avg. $35.32b 76.17% $136.04b 63.71%
The High $20b 134.53% $110b 78.80%
The Low $40b 67.26% $150b 57.78%

 Global Market Recap

  • U.S. Treasuries – Small losses. 2yr reached its highest yield since 2008.
  • Overseas Bonds – JGB’s mixed. Bunds/Gilts better. Italy/Greece hit very hard.
  • SOFR – 1.79% from 1.70%.
  • 3mth Libor – 2.32563% from 2.32063%.
  • Stocks – Solid gains at 3pm with the NASDAQ leading the way.
  • Overseas Stocks – Asia closed down. Europe more green than red. Italy hit hard.
  • Economic – Mixed U.S. data with more good than bad.
  • Overseas Economic – Japan GDP was negative. EU, Germany and Italy CPI’s were tame.
  • Currencies – DXY Index traded at its YTD high and the Euro its YTD low.
  • Commodities – Small gains. Gold hit its YTD low. Gasoline reached its high since 2014.
  • CDX IG: -0.59 to 60.68
  • CDX HY: -2.45 to 338.22
  • CDX EM: -2.13 to 158.88
  • VIX: -1.19 to 13.44

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

-Tony Farren

 

The “QC” Geopolitical Risk Monitor

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Mischler Financial Group 2018 Memorial Day Month Pledge
May 2018      Company News, Giving Back   

memorial day pledge mischler financial semper fi fund

May 01 2018

Re: 2018 Mischler Memorial Day Month Pledge

Since our inception in 1995, Mischler Financial Group (“MFG”) has been devoted to meeting the capital market needs of the nation’s leading corporations, municipal issuers and a broad spectrum of the industry’s most demanding investment managers and public plan sponsors.

Of equal importance, throughout our history we’ve committed resources and year-round financial support to veteran-centric legislative initiatives, career building and mentoring veterans. This includes our support of carefully-evaluated philanthropic programs focused on improving the quality of SDVs and their families’ lives and charitable programs that concentrate on supporting the families of military men and women who made the ultimate sacrifice in the course of serving our country.

In connection with our year-round philanthropic mission, the months of May and November are specifically dedicated to honoring Memorial Day and Veterans Day. During these two months, we contribute a percentage of the firm’s profit to carefully-selected organization(s) that we believe provide a unique and positive impact on the lives of vets, SDVs and Gold Star family members who simply do not have the depth of resources that so many of us take for granted.

With that, in honor of “Memorial Day Month 2018,” MFG is proud to make our pledge to the Semper Fi Fund, one of the country’s highest-rated charities. Formed in 2004, “SFF” is committed to providing immediate financial assistance, education scholarships, career transition programs and life-time support to post-9/11 combat wounded, critically ill and catastrophically injured members of all branches of the U.S. Armed Forces and their families.  Since its inception, Semper Fi Fund has distributed over $167 million to more than 20,000 service members and their families and MFG is therefore privileged to continue our support of SFF.

On behalf of the entire Mischler Financial Group family, we are grateful and honored that clients of our firm will be supporting our Memorial Day Month 2018 pledge via our trading and capital markets desks and/or direct contribution to SFF.

Dean Chamberlain (SDV) | Principal & Chief Executive Officer

Doyle Holmes | President & Chief Operating Officer

Walter Mischler (SDV) | Founder & Chairman

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Muni Bond Credit Spreads Stay Flat; New Deals This Week: GO Bonds
April 2018      Muni Market   

Municipal Debt New Issue Outlook Week of 04-16-18: Muni Bond Credit Spreads Stay Flat; Week’s Scheduled Deals: GO Bonds from CA, UConn. and City of Memphis Mischler Muni Market Update looks back to last week’s new issue and muni bond fund flow metrics and provides a focused lens on municipal debt new issuance scheduled for this week.  As always, the Mischler Muni Market Outlook provides public finance investment managers, institutional investors focused on municipal debt and muni bond market participants with a summary of the prior week’s municipal bond market activity, including credit spreads and money flows, and a look at pending municipal finance offerings tentatively scheduled for the most current week.

Last week muni volume was about $4.5 billion. This week volume is expected to be about $7.5 billion. The negotiated market is led by $2.1 billion taxable general obligation bonds for the State of California. The competitive market is led by $314.9 million general obligation bonds for the City of Memphis, Tennessee on Tuesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

 

mischler-muni-market-calendar-week-041618

During 2017 and 2016 alone, minority broker-dealer Mischler Financial Group Inc. underwriting roles (for which MFG has led, co-managed and/or served as selling group member) have included more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. Mischler is also a federally-certified Service-Disabled Veteran-Owned Business Enterprise (SDVOBE).  Mischler Muni Market updates and Municipal Debt New Issuance outlooks are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

This document may be not reproduced in any manner without the permission of Mischler Financial Group. Although the statements of fact have been obtained from and are based upon sources Mischler Financial Group believes reliable, we do not guarantee their accuracy, and any such information may be incomplete.  All opinions and estimates included in this report are subject to change without notice.  This report is for informational purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security.   Veteran-owned broker-dealer Mischler Financial Group, its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation of this report, may from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as market-makers or advisors or brokers in relation to the securities (or related securities, financial products, options, warrants, rights, or derivatives), of companies mentioned in this report or be represented on the board of such companies. Neither Mischler Financial Group nor any officer or employee of Mischler Financial Group or any affiliate thereof accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

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Muni Deals This Week: State of CT, GWU; Go Colonials
March 2018      Muni Market   

Municipal Debt New Issue Outlook Week of 03-26-18 – $1.5b taxable for GWU (The George Washington University); Go Colonials. Mischler Muni Market Update looks back to last week’s new issue and muni fund flow metrics and provides a focused lens on municipal debt new issuance scheduled for this week.  As always, the Mischler Muni Market Outlook provides public finance investment managers, institutional investors focused on municipal debt and muni bond market participants with a summary of the prior week’s municipal bond market activity, including credit spreads and money flows, and a look at pending municipal finance offerings tentatively scheduled for the most current week.

Last week muni volume was about $2.1 billion. This week volume is expected to be about $3.7 billion. The negotiated market is led by $1.5 billion for two taxable financings for George Washington University and Sutter Health and $617million of general obligation bonds for the State of Connecticut. The competitive market is led by $123.7 million tax-exempt and taxable general obligation bonds in two bids for the City of Oklahoma City, Oklahoma on Tuesday.

Below and attached is neither a recommendation or offer to purchase or sell securities. Mischler Financial Group is not a Municipal Advisor. For additional information, please contact Managing Director Richard Tilghman at 203.276.6656

muni-market-new-issue-calendar-mischler

During 2017 and 2016 alone, minority broker-dealer Mischler Financial Group Inc. underwriting roles (for which MFG has led, co-managed and/or served as selling group member) have included more than $600 Billion (notional value) in new debt and preferred shares issued by Fortune corporations, as well as debt issued by various municipalities and US Government agencies.

Mischler Financial Group is the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. Mischler is also a federally-certified Service-Disabled Veteran-Owned Business Enterprise (SDVOBE).  Mischler Muni Market updates and Municipal Debt New Issuance outlooks are provided as a courtesy to institutional clients of Mischler Financial Group, Inc.

This document may be not reproduced in any manner without the permission of Mischler Financial Group. Although the statements of fact have been obtained from and are based upon sources Mischler Financial Group believes reliable, we do not guarantee their accuracy, and any such information may be incomplete.  All opinions and estimates included in this report are subject to change without notice.  This report is for informational purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security.   Veteran-owned broker-dealer Mischler Financial Group, its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation of this report, may from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as market-makers or advisors or brokers in relation to the securities (or related securities, financial products, options, warrants, rights, or derivatives), of companies mentioned in this report or be represented on the board of such companies. Neither Mischler Financial Group nor any officer or employee of Mischler Financial Group or any affiliate thereof accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

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Trump Tries Trade War Saber Rattling; March IG DCM New Issue Madness
March 2018      Debt Market Commentary   

Quigley’s Corner 03.02.18 – Weekend Edition: Trump Tries Trade War Saber Rattling; March IG Issuance Madness

  

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

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

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week; CVS Getting Set?

“Knowing the Past for the Future” – A Look at a Decade’s Worth of March IG Corporate and SSA Issuance

Syndicate IG Corporate-only Volume Estimates 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

2018 Lipper Report/Fund Flows – Week ending February 28th  

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

Economic Data Releases

Rates Trading Lab

 

Investment Grade New Issue Re-Cap

What with poor market tone, widening spreads, “chatter” of trade wars from Trump Twitter account, a major Northeast storm on the way and CVS heard rumbling into position for next week’s M&A related financing, it was indeed VERY WISE for the IG dollar DCM to stand down today.  I am once again honoured to have received 100% participation for my Friday “QC” edition, from Wall Street’s Best and Brightest Investment Grade Fixed Income Syndicate sophisticates  I surveyed all of them for next week’s forecast and for March IG Corporate volume.  Strap yourselves in for a humdinger of a week next week and what looks like March IG Issuance Madness. Their thoughtful comments, which add color to their forecast numbers are in-depth and formidable, especially in today’s edition.

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

  • The IG Corporate WTD total is 136.89% of this week’s syndicate midpoint average forecast or $36.85b vs. $26.92b.
  • There are now 11 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

  • BAML’s IG Master Index widened 3 bps to +104 vs. +101. (It’s post-Crisis low is +90 set on 2/01).
  • Bloomberg/Barclays US IG Corporate Bond Index OAS widened 3 bps to 0.99 vs. 0.96.  (0.85 is its post-Crisis low set on 1/30).
  • Standard & Poor’s Investment Grade Composite Spread widened 3 bps to +138 vs. +135. (+125 represents its post-Crisis low set 2/02).
  • Investment grade corporate bond trading posted a final Trace count of $17b on Thursday versus $23b on Wednesday and $20.1b the previous Thursday.
  • The 10-DMA stands at $18.9b.

 

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

 

IG Corporate New Issuance This Week
2/26-3/02
vs. Current
WTD – $36.85b
Low-End Avg. $25.72b 143.27%
Midpoint Avg. $26.92b 136.89%
High-End Avg. $28.12b 131.05%
The Low $15b 245.67%
The High $40b 92.13%

 

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 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 17 of today’s respondents are in the top 18 of the new 2018 League table including 19 of the top 21 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 82.87% 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!

“Happy Friday. You can almost hear the rumble of CVS getting into position! I am looking for forecasts for BOTH MARCH and NEXT WEEK today!

All the data you need to know is here. There’s lots to talk about so let’s run through this week’s key geopolitical risk recapas a segue to the big question: What does Wall Street’s Biggest Syndicate Desks Expect re: Next Week’s IG DCM?

 

NORTH KOREA
The U.S. imposed new sanctions against 28 NOKO ships registered under changing names and under different national flags including China. The ships funnel banned exports into NOKO. The action is another step the U.S. has taken toward a full NOKO blockade. With diplomacy the strongly favored path to resolution, the Trump Administration will agree to a diplomatic resolution to tensions only if NOKO agrees to put denuclearization on the table which it refuses to do. In the interim, the U.S. DoD conducted classified military exercises in Hawaii last weekend and the U.S. is pre-staging equipment and supplies in the Pacific. I reiterate that sources continue to tell me to “watch” mid-March thru April as NOKO will be back to its old tricks and the game will ratchet up with newly announced war games along with a much larger allied force participating together.

 

TRUMP TO LAUNCH A TRADE WAR?
Sighting unfair trade practices and bad policy on the U.S. steel and aluminium industries, Pres. Trump invited sector CEOs to the White House on Thursday and when they departed, the current president declared he will impose trade tariffs/quotas on imports amounting to 25% on steel and 10% on aluminium. The announcement, which apparently did not include his sending any advance memos to key White House advisors such as Gary Cohn or TreasSec Mnuchin, was made in the name of “national security,” setting off the fear and tenor of new “trade wars.” The move, coupled with unrelated comments from newly-appointed Fed Chair Powell, weighed heavily on the DOW, which lost 550 points on Thursday and extended declines into Friday’s early trading.

THE FED
New Fed Chief Jay Powell delivered his testimony before the Senate Thursday. Powell sent jitters across markets on Tuesday following his House testimony and Q&A when he said, “my outlook for the economy has strengthened since December” albeit in the midst of the recent historic though transparent, healthy market correction. The market always likes to be ahead of the curve and is concerned over a tighter monetary policy stance with participants repricing in higher inflation and interests rates. Yesterday Powell said 4 hikes “would be gradual” and sighted that aggressive tightening is challenged with inflation so low.

GERMANY
A poll released today showed that 56% of Germans favor the SPD joining Merkel’s grand coalition or “marriage of convenience” to avoid another vote and further turmoil in the EU’s keystone nation. The SPD Party formally votes therein tomorrow March 2nd. The caveat is the poll surveyed a much wider group of voters whereas the Friday vote includes the actual hardcore Socialist members.

U.K. & BREXIT
Theresa May delivers a speech on Friday, March 2nd outlining her vision for the U.K.’s future relationship with the EU. Key points were hammered out at the PM’s country manor Chequers with her cabinet ministers on Feb. 22nd. After having drawn so many red lines pre-negotiations with the EU, May & Co. have backed themselves into a corner. Now Ireland and Wales are pushing back on May regarding her hard stance on the customs union. N. Ireland wants to remain under EU customs rules with a UK/EU border demarcation zone in the Irish Sea. Wales subsequently fears reduced trade as a result of EU and Irish ships avoiding British ports. Wales voted to leave the EU but favors some EU alignment.

ITALY

Italy’s Sunday March 4th election shows the combined right-wing alliance parties running around 37% likely enough for victory. Silvio Berlusconi’s Forza Italia has a narrow lead. The centre-right coalition is projecting sufficient votes to govern without a second ballot.

CHINA

China’s ruling Communist Party proposed lifting limits on presidential terms, a first step to assuring President Xi remains in power interminably. A vote on the proposal is slated for next month and is expected to pass marking a major departure from rules in place for decades. Power has never been as centralized since the days of Mao. Maybe Xi should contemplate a little red book a la Mao and call it “Xi’s Little Red Book Volume II.”

SPAIN

With no compromise in sight, Spain’s PM Rajoy is challenged by efforts to impose order on the Catalan region. It is highly improbable that self-exiled leader Carles Puigdemont governs de facto from Brussels. Meanwhile, PM Rajoy cannot pass a national budget having lost the support of the Basque party that backs Catalonian independence. This could force new elections. Nationalist parties are subsequently securing more support foretelling new tensions in a nation that was ravaged by civil war from 1936-1939.

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

  • The IG Corporate WTD total stands at $36.85b. We priced $9.93b more than the week’s average midpoint estimate of $26.92b or +36.89%.
  • February finished the month having priced 105.77% of the syndicate midpoint forecast for IG Corporates new issuance or $94.117b vs. $88.98b.
  • Entering today’s session, the YTD IG Corporate-only volume is $229.452b vs. the $272.358b YoY or <$42.906b> / <18.70%> less than a year ago.
  • The all-in or IG Corporate plus SSA YTD volume is $311.067b vs. $354.608b YoY <$43.541b> or <14.00%> less than vs. 2017. 

Here are the five key primary market driver averages for the 29 IG Corporate-only deals that priced this week.   

o   NICS:  5.36 bps  

o   Oversubscription Rates: 2.52x

o   Tenors: 13.49 years

o   Tranche Sizes: $768mm

o   Spread Compression from IPTs to the Launch: <14.42> bps 

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

  • Week on week, average NICs widened considerably by 3.41 bps to an average 5.36 bps vs. 1.95 bps across this week’s IG Corporate-only new issues that displayed relative value.
  • Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.77x to an average 2.52x vs. 3.29x. 
  • Average tenors extended by 1.52 years to an average 13.49 years vs. 11.97 years.
  • Tranche sizes grew by $142mm to $768mm vs. $626mm.
  • Spread compression from IPTs to the launch/final pricing of this week’s 48 IG Corporate-only new issues widened by 2.04 bps to <14.42> bps vs. <16.46> bps.
  • Standard and Poor’s Investment Grade Composite Spread widened 5 bps to +138 vs. +133 week-on-week. 
  • Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 6 bps to 0.99 vs 0.93 week-on-week.
  • Investment grade corporate bond trading posted a final Trace count of $17b on Thursday versus $23b on Wednesday and $20.1b the previous Thursday.
  • The 10-DMA stands at $18.9b.
  • The VIX widened 5.98 or 36.26% to 22.47 at yesterday’s close vs. last Friday’s 16.49.
  • Week-on-week, BAML’s IG Master Index widened 5 bps to +104 vs. +99.  
  • Spreads across the four IG asset classes widened 4.75 bp week-on-week to 12.75 bps vs. 8.00 bps as measured against its cumulative post-Crisis low.
  • Spreads across the 19 major IG industry sectors gapped out 4.73 bps to an average 13.68 bps vs. 8.95 bps as measured against their average cumulative post-Crisis lows!
  • For the week ended February 28th, Lipper U.S. Fund Flows reported a net inflow of $1.372b into Corporate Investment Grade Funds (2018 YTD net inflow of $20.632b) and a net outflow of $702.879m from High Yield Funds (2018 YTD net outflow of $13.202b).
  • Taking a look at the secondary trading performance of this week’s 48 IG Corporate and 5 SSA new issues, of the 53 deals that printed, 11 tightened versus NIP for a 20.75% improvement rate, 33 widened  (62.25%), 9 were flat (17.00%).  

 

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

  • IG Corps: $36.85b
  • All-in IG (Corps + SSA): $43.10b

And now it’s time for today’s question “what are your thoughts and numbers for MARCH and next week’s IG Corporate new issue volume?”
Thank you in advance for your time and contribution!


Please know that on each and every new issue, the guy-in-the-corner is ALWAYS be in YOUR corner on deal day! If an issuer asks you who 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” account orders.    

Have a great weekend!

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

The “Best and the Brightest” in Their Own Words

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