Quigley’s Corner 02.23.18 – Investment Grade Debt Market Comment Weekend Edition

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

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

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

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 21^st

IG Credit Spreads by Industry

IG Credit Spreads by Rating

New Issue Pipeline

M&A Pipeline Highlights

Investment Grade New Issue Re-Cap

Well, there were no new issues from either the IG Corporate or the SSA space today. No harm, no fowl and a welcome relief on a Friday! Next week is shaping up to be a nice one with the average syndicate estimate calling for $26.92b to price.  In conducting my Friday morning survey of the top 25 syndicate desks, not only did all respond again but there seemed to be considerable “chatter” away from them on the street that CVS may be sooner than we think.  That could be a significant volume booster to what’s already a hefty week next week.  53.33% of this week’s IG Corporate new issues tightened with 23.33% flat to new issue spread levels for an overall 79% rate which is a very healthy number.

I have this week’s primary market data download below as well as comments and projections from the sagacious, scholarly, sapient sages of syndicate. That’s right they are all here as my personal guests each and every Friday, for which I am grateful to them all, but hustle up before they leave for their weekends. Some key investment grade debt market comment talking points are to keep an eye, more like an ear, on our new Fed head, Jerome Powell’s first Congressional testimony before the House that was rescheduled this morning for next Tuesday, February 27^th from Wednesday.  Otherwise known as the Humphrey-Hawkins hearings, this is the first of two such annual appearances the Fed chief makes each year. He is supposed to follow that up with a repeat performance before the Senate on Thursday assuming they don’t shift that schedule as well. His testimony may well have a strong immediate market impact should he elaborate on interest rates and inflation. Expectations are that he will stay the Fed course and not “rock the boat.”  Great tune by the Hues Corporation BTW. Advice to the newbie, ………don’t rock the boat baby……… don’t tip the boat over!

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

• The IG Corporate WTD total is 96.65% of this week’s syndicate midpoint average forecast or $18.15b vs. $18.78b.
• MTD we’ve priced 67.67% of the syndicate forecast for February IG Corporate new issuance or $60.217b vs. $88.98b.
• There are now 11 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

• BAML’s IG Master Index was unchanged at +98. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.93.  (+85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread was unchanged at +133. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $20.1b on Thursday versus $19.4b on Wednesday and $19.2b the previous Thursday.
• The 10-DMA stands at $18.5b. 

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

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 82.21% 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 ! 

The Segue: Here is this week’s geopolitical recap:

The PyeongChang Winter Olympics will officially come to and this Sunday February 25^th, and you know what that means?  North Korea will invariably return to its pre-Olympic nuclear stride. U.S. financial markets will be focused next week on new Fed head Powell’s testimony before the House next Wednesday followed by the Senate on Thursday. Three rate hikes have been solidly forecast for 2018 with many now touting four and murmurings of the possibility of five! With a massive budget, the largest UST auctions on record this week – $258b – and higher rates to pay off, many are worried that our economy, that is running on all cylinders with low unemployment, means inflation is lurking around the corner.  Equity markets proved resilient this week although we are still witnessing extreme intra-day swings as the “correction” finds itself.  Next Friday, March 2^nd Germany‘s Social Democrats (Socialist Party) votes to approve or reject the recent grand coalition deal better referred to as a “marriage of convenience” with Merkel’s CDU/CSU party. A “no” vote means new elections for the Hinterland and further political tension and turmoil in the EU’s keystone state and the world’s third-largest economy. A week from Sunday – March 4^th – Italy holds its eagerly anticipated election with many projecting Berlusconi’s Forza Party to win and form a coalition government with other Eurosceptic parties. In a nation with 65 governments in 71 post-WWII years, anything can happen. Italy’s national debt is $2.8trillion and its banking sector holds $220bn of bad loans.  It has the world’s third highest debt-to-GDP ratio. So, fun times ahead folks!

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

• The IG Corporate WTD total stands at $18.15b. We priced $630mm less than the week’s average midpoint estimate of $18.78b or 96.65%.
• MTD we priced 67.67% of the syndicate projection for February IG Corporates or $60.217b vs. $88.98b.
• Entering today’s session, the YTD IG Corporate-only volume is $192.602b vs. the $233.533b that priced on Thursday, February 23^rd, 2017 or $40.931b (21.25%) less than this time last year.
• The all-in or IG Corporate plus SSA YTD volume is $267.967b vs. $303.183b on Thursday, February 23^rd, 2017 or $35.216b (13.14%) less than the same time year ago total.

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

o   NICS:  1.95 bps  

o   Oversubscription Rates: 3.29x

o   Tenors: 11.97 years

o   Tranche Sizes: $626mm

o   Spread Compression from IPTs to the Launch: <16.46> bps 

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

• Week on week, average NICs tightened minutely by 0.67 bps to an average 1.95 bps vs. 2.62 bps across last this week’s 29 IG Corporate-only new issues that displayed relative value.
• Over subscription or bid-to-cover rates, the measure of demand, increased considerably by 1.33x to an average 3.29x vs. 1.96x. 
• Average tenors reduced dramatically by 6.19 years to an average 11.97 years vs. 18.16 years.
• Tranche sizes grew by $127mm to $626mm vs. $499mm.
• Spread compression from IPTs to the launch/final pricing of this week’s 29 IG Corporate-only new issues tightened by 3.64 bps to <16.46> bps vs. <12.82> bps.
• Standard and Poor’s Investment Grade Composite Spread was unchanged at +133. 
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning was unchanged at 0.93 week-on-week.
• Investment grade corporate bond trading posted a final Trace count of $20.1b on Thursday versus $19.4b on Wednesday and $19.2b the previous Thursday.
• The 10-DMA stands at $18.5b.
• The VIX narrowed 0.74 to 18.72 at yesterday’s close vs. last Friday’s 19.46.

• Week-on-week, BAML’s IG Master Index widened 1 bp to +99 vs. +98.  
• Spreads across the four IG asset classes widened 0.75 bp week-on-week to 8.00 bps vs. 7.25 bps as measured against its cumulative post-Crisis low.
• Spreads across the 19 major IG industry sectors widened 0.58 bps to an average 8.95 bps vs. 8.37 bps wider as measured against their average cumulative post-Crisis lows!
• For the week ended February 21^st, Lipper U.S. Fund Flows reported a net inflow of $1.572b into Corporate Investment Grade Funds (2018 YTD net inflow of $20.260b) and a net outflow of $335.066m from High Yield Funds (2018 YTD net outflow of $12.499b).
• Taking a look at the secondary trading performance of this week’s 29 IG Corporate and 1 SSA new issues, of the 30 deals that printed, X tightened versus NIP for a 53.00% improvement rate, 7 widened  (23.50%), 7 were flat (23.50%).  

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

• IG Corps: $18.15b
• All-in IG (Corps + SSA): $20.65b

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

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

The “Best and the Brightest” in Their Own Words

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

Investment Grade New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points

Economic Data Releases

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

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

Syndicate IG Corporate-only Volume Estimates for Next Week

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

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

Indexes and New Issue Volume

Economic Data Releases           

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

The “QC” Geopolitical Risk Monitor     

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Investment Grade New Issue Re-Cap

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

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

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

Today’s IG Primary & Secondary Market Talking Points

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

Economic Data Releases

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

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 19 of today’s respondents are in the top 20 of the new 2018 League table including 21 of the top 25 according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.93% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they are the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they are the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

Here is this week’s geopolitical recap:

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

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

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

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

o   NICS:  2.62 bps  

o   Oversubscription Rates: 1.96x

o   Tenors: 18.16 years

o   Tranche Sizes: $499mm

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

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

• Week on week, average NICs tightened minutely by 0.05 bps to an average 2.62 bps vs. 2.67 bps across last this week’s 17 IG Corporate-only new issues that displayed relative value.
• Over subscription or bid-to-cover rates, the measure of demand, decreased dramatically by 2.13x to an average 1.96x vs. 4.09x. 
• Average tenors widened considerably by 3.31 years to an average 18.16 years vs. 14.85 years.
• Tranche sizes decreased by $324mm to $ 499mm vs. $823mm
• Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 4.20 bps to <12.82> bps vs. <17.02> bps.
• Standard and Poor’s Investment Grade Composite Spread widened 1 bp to +133 vs. +132. 
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bp to 0.93 vs. 0.94 week-on-week.
• Investment grade corporate bond trading posted a final Trace count of $19.2b on Thursday versus $19.7b on Wednesday and $21b the previous Thursday.
• The 10-DMA stands at $19.4b.

• Week-on-week, BAML’s IG Master Index widened 1 bp to +98 vs. +97.  
• Spreads across the four IG asset classes widened 1.00 bp week-on-week to 7.25 bps vs. 6.25 bps as measured against its cumulative post-Crisis low.
• Spreads across the 19 major IG industry sectors widened 0.95 bps to an average 8.37 bps vs. 7.42 bps wider as measured against their average cumulative post-Crisis lows!
• For the week ended February 14^th, Lipper U.S. Fund Flows reported a net outflow of $790.183m into Corporate Investment Grade Funds (2018 YTD net inflow of $18.688b) and a net outflow of $6.306b from High Yield Funds (2018 YTD net outflow of $12.164b).

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

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

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

The “Best and the Brightest” in Their Own Words

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

Quigley’s Corner 02.15.18 – Exelon Inspires Investment Grade Debt Issuance Case Study

Investment Grade New Issue Re-Cap

Explaining EXC 10bp Spread Differential

Today’s IG Primary & Secondary Market Talking Points

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

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

The “QC” Geopolitical Risk Monitor

New Issues Priced

Indexes and New Issue Volume              

Lipper Report/Fund Flows – Week ending February 7th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases

Tomorrow’s Calendar 

  
Investment Grade New Issue Re-Cap – Better Clearing Levels

Today the IG dollar DCM hosted 3 issuers across 8 tranches totalling $4.575b.  The SSA space was inactive today and with nothing slated.

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

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

At the Crossroads of Art & Science: EXC-plaining a 10 bp Spread Differential

Last evening I wrote a bit about Exelon’s $800mm CoMed 30-year Global Secured FMBs rated A1/A-/A that priced at T+85 on Monday that printed with a 7 bp NIC. The comp used for the relative was the outstanding CoMed 3.75%s due 8/2047 that were T+78 pre-announcement pegging NIC as 7 bps.  The order book finished at $1.85b for a 2.31x bid-to-cover rate. Those bonds are T+83 bid this afternoon or 2 bps tighter vs. NIP. Some of the reasons for the 7 bp NIC were: 

• It was an $800mm deal size that needed a bit more to clear
• Market volatility/uncertainty
• Exelon has numerous subs that need to issue and we all know that investors have long memories. In other words, do the right thing at an inflection point of sorts in our market and investors will come back to you in spades.

Now let’s fast forward to today, a mere 72 hours later, in which Exelon’s PECO Energy priced a $325mm 30-year that is also a Global Secured FMB rated Aa3/A that priced at T+77. Today’s PECO comp was the outstanding PECO “EXC” 3.70% due 9/2047 that was T+80 pre-announcement nailing NIC on today’s new issue as negative <3> bps. WHOOOOAA!  A 10 bp differential between the two and remember as a 30-year there is no curve adjusting and both entities have direct comparables to use for a relative value study. We all know that relative value is part art and part science!

On Monday 2/12 at 10:27am ET, and in the middle of CoMed’s book build, the VIX or “fear factor” was 29.70 versus this morning’s 2/15 opening session level of 18.50 when PECO was announced. That’s a whopping 37.7% drop in the all-important and eagerly watched VIX volatility index……more dramatic supporting evidence for the final spread level.

And guess what?  Exelon’s Commonwealth Edison deal on Monday was the first utility to issue since the recent historic market gyrations! That nailed it for me. Ahhhhh!  There it is! The search for a resolution in what seemed an illogical endeavor was discovered.  It was a combination of many market ingredients including a dramatic VIX and was all about the utility that opened up the issuance doors for the sector.  A question begot an answer with myriad moving parts and persistence really does pay off. So, to re-cap:

• EXC’s CoMed deal was an $800mm deal size that needed a bit more to clear
• Market volatility/uncertainty (re: VIX levels and a 37.7% differential between Monday’s pricing and today’s PECO pricing).
• CoMed was the first U.S. IG Utility to print since the historic volatility and equity market gyrations.  
• PECO is +76 bid or 1 bp tighter and CoMed is T+83 or 2 bps tighter.

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 8 IG Corporate-only new issues was <11.31> bps.
• BAML’s IG Master Index tightened 1 bp to +99 vs. +100. (It’s post-Crisis low is +90 set on 2/01).
• Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.94 vs. 0.95.  (+85 is its post-Crisis low set on 1/30).
• Standard & Poor’s Investment Grade Composite Spread tightened 2 bps to +133 vs. +135. (+125 represents its post-Crisis low set 2/02).
• Investment grade corporate bond trading posted a final Trace count of $19.7b on Wednesday versus $19b on Tuesday and $22.8b the previous Wednesday.
• The 10-DMA stands at $19.4b. 

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

Global Market Recap 

• U.S. Treasuries – closed mixed with a flatter curve.
• Overseas Bonds – JGB’s mixed and little changed. Europe mixed with no major moves.
• 3mth Libor – Set at 1.87250% the highest since December 2008.
• Stocks – At 3pm stocks had strong gains with the NASDAQ leading the way.
• Overseas Stocks – Nikkei and HS had strong rallies. Europe also closed higher.
• Economic – Higher inflation data with weaker economic data for the 2nd day in a row.
• Overseas Economic – Japan mixed. France unemployment rate improved (big). No inflation in Europe.
• Currencies – The USD struggles continued. DXY Index approaching a 3-year low.
• Commodities – CRB, crude oil and copper up (+ $20 this week) and gold small loss.
• CDX IG: -2.32 to 53.85
• CDX HY: -11.23 to 328.23
• CDX EM: -5.30 to 123.35
• VIX: +0.33 to 19.59

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

-Tony Farren

The “QC” Geopolitical Risk Monitor

Updates are highlighted in BOLD print!

Have a great evening!
Ron Quigley

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

Here’s a review of this week’s five key primary market driver averages for IG Corporates only through Wednesday’s session followed by the averages over the prior six weeks:

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

Please Note: for ratings I use the better two of Moody’s, S&P or Fitch.

IG

Indexes and New Issue Volume              

Countable IG volume includes maturities of 18-months and out and IG-rated Preferreds.

*Denotes new high or tight.

2018 Lipper Report/Fund Flows – Week ending February 7^th

• For the week ended February 7^th, Lipper U.S. Fund Flows reported an inflow of $4.734b into Corporate Investment Grade Funds (2018 YTD net inflow of $19.478b) and a net outflow of $2.743b from High Yield Funds (2018 YTD net outflow of $5.858b).

• Over the same period, Lipper reported a net inflow of $611.901m from Loan Participation Funds (2018 YTD net inflow of $900.938m).

• Emerging Market debt funds reported a net outflow of $679.846m (2018 YTD inflow of $3.128b).

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Quigley’s Corner 12.08.17 : IG Corporate Debt Issuers Standing Pat

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates For This Week

Global Market Recap

The “QC” Geopolitical Risk Monitor

The Best and the Brightest” Investment Grade Corporate Syndicate Forecasts and Sound Bites for Next Week & November

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

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’re Trading

Indexes and New Issue Volume

Rates Trading Lab

Lipper Report/Fund Flows – Week ending Dec 6th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Rates Trading Lab

Economic Data Releases 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM produced zero…….zilch……….nada. It was a December Friday goose egg as they say! The geopolitical risk monitor featured quite a bit of fluid news this week so be sure to review the QC monitor by scrolling below.  Also, the “Best and the Brightest” are back this week albeit there is not much activity lining up to get done. Next week looks like a light front-loaded week of between $5-10b. The average estimate of the 25 top syndicate desks for next week’s IG Corporate only issuance is $7.58b. The FOMC holds its final meeting of 2017 next Tuesday and Wednesday the 12^th and 13^th with overwhelming expectations for a rate hike that has long been baked into the market………..and despite the absence of inflation.  It looks like December issuance will come to an end a few days earlier than is the historical average with a chance of posting the lowest December IG Corporate issuance volume since $21.10b printed the same week back in 2008.  Team B&B are all waiting below for you to take in their forecasts and comments.  Enjoy the read.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate desk estimates:

• The IG Corporate WTD total is 98.31% of this week’s syndicate midpoint average forecast or $18.434b vs. $18.75b.
• MTD we’ve priced 55.86% of the syndicate forecast for December IG Corporate new issuance or $18.434b vs. $33b.
• There are now 7 issuers in the IG credit pipeline. 

Today’s IG Primary & Secondary Market Talking Points

• BAML’s IG Master Index was unchanged at +102.
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 0.97.
• Standard & Poor’s Investment Grade Composite Spread was unchanged at +143.  The +140 reached on July 30^th 2014 represents the post-Crisis low.
• Investment grade corporate bond trading posted a final Trace count of $16b on Thursday versus $17.9b on Wednesday and $23.6b the previous Thursday.
• The 10-DMA stands at $16b.

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

Global Market Recap 

• U.S. Treasuries – Closed mixed with no move greater than 0.7 bps.
• Overseas Bonds – JGB’s unchanged to better. Bunds & Gilts small red. Peripherals more green.
• 3mth Libor – Set at highest yield (daily occurrence) since December 2008 (1.54878%).
• U.S. Stocks – Higher heading into the last hour.
• Overseas Stocks – Global stock rally.
• U.S. Economic – Very good U.S. Employment Report with tame average hourly earnings.
• Overseas Economic – China (trade) & Japan (GDP) were strong. Europe data was mixed.
• Currencies – USD was better bid vs. all of the Big 5.
• Commodities – Crude oil ended the week with 2 good days. Gold struggled all week.
• CDX IG: -0.67 to 50.93
• CDX HY: -4.47 to 316.39
• CDX EM: -1.37 to 177.35

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

-Tony Farren

The “QC” Geopolitical Risk Monitor

Updates are in BOLD print!

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

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. 20 of today’s respondents are in the top 21 while 23 are among 2017’s YTD top 27 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.38% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

As always “thank you” to all the syndicate desks that participated in today’s survey.  Below is opening to this week’s survey. 

 “Welcome to Friday. In preparation for takeoff, please ensure all negative attitudes are properly stowed. On behalf of QC Air welcome aboard. I expect sunshine and good intel today for our trip. Enjoy the ride and thanks for flying QC Air.

This week’s geopolitical recap: 

The FOMC meets next Tuesday and Wednesday the 13^th and 14^th.  Over 94% believe the Fed will hike rates which is already baked in. The nation’s largest Tax Reform bill in over 30 years may in fact get signed by President Trump by Christmas. The situation in North Korea remains the lone high risk event on the global risk monitor despite the U.S. claim to possess powerful CHAMPS microwave pulse technology that can disable NOKO’s missile launch systems. The situation in MENA has been upgraded to elevated with Trump’s announcement that the U.S. formally recognizes Jerusalem as Israel’s capital following warnings from Jordanian, Palestinian and Turkish leadership among others that it will destabilize the region. Yemeni President Ali Saleh was assassinated and Prince Mohammed bin Salman’s “Vision 2030” resulted in multi-billion dollar anti-corruption settlements with members of the house of Saud and major KAS players. MBS, as the Saudi Prince is commonly known, also purged rivals in order to anchor his leadership and future plans. Germany’s Social Democrats agreed to pursue preliminary talks to form a coalition government with Merkel’s conservative CDU party and will include a third CSU party. German political stability is needed to cement the EU’s keystone economy. Ireland and Britain are near an accord on future Irish border regulations that would help promote an agreement in principle on the BREXIT “divorce bill.”  Leveraging his 85% approval rating at home, Vlad Putin announced he will seek a 4^th 6-year term as President of Russia that would make it the second longest tenure to Stalin’s 29 year reign. Putin also moved the Russian election to coincide with the 4^th year anniversary of its annexation of Crimea, possibly in reaction to the prior day’s Olympic Committee ruling that bars Russian officials, flags and anthem at the 2018 Seoul Olympics in which Russian athletes must also agree to stringent drug testing.       

Entering this morning’s Friday session –  

• The IG Corporate WTD total stands at $18.434b. We priced $316mm less than this week’s average midpoint estimate of $18.75b or 98.31%.
• MTD we priced 55.86% of the syndicate projection for November IG Corporates or $18.434b vs. $33b.
• Entering today’s session, the YTD IG Corporate-only volume is $1,325.402b vs. $1,281.017b on December 8^th, 2016 or $44.385b (3.46%) more than a year ago.
• The all-in or IG Corporate plus SSA YTD volume is $1,640.543b vs. $1,620.951b on December 8^th, 2016 or $19.592b (1.21%) more than the year ago total. 

Entering this morning’s session, here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week. 

o   NICS:  1.62 bps  

o   Oversubscription Rates: 3.18x

o   Tenors: 10.69 years

o   Tranche Sizes: $576mm

o   Spread Compression from IPTs to the Launch: <16.34> bps 

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

• Week on week, average NICs widened by 1.11 bps to an average 1.62 bps vs.0.51 bps across this week’s 33 IG Corporate-only new issues displayed relative value.
• Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.13x to an average 3.18x vs. 3.31x. 
• Average tenors narrowed by 0.74 years to an average 10.69 years vs. 11.43 years.
• Tranche sizes decreased by $72mm to $576mm vs. $648mm.
• Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues widened by 1.26 bps to <16.34> bps vs. <17.60> bps.
• Standard and Poor’s Investment Grade Composite Spreads was unchanged at +143.
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightned 1 bp to 0.97 vs. 0.98 week-on-week. 

• Week-on-week, BAML’s IG Master Index tightened 1 bp to +102 vs. +103. 
• Spreads across the four IG asset classes tightened 0.25 bps to 3.00 bps vs. 3.25 bps as measured against their post-Crisis lows. 
• The 19 major industry sectors tightened 0.68 bps to 6.32 bps from 7.00 bps as measured against their post-Crisis lows.
• For the week ended December 6^th, Lipper U.S. Fund Flows reported an inflow of $622.386b into Corporate Investment Grade Funds (2017 YTD net inflow of $116.331b) and a net inflow of $217.412m into High Yield Funds (2017 YTD net outflow of $12.633b).
• Taking a look at the secondary trading performance of this week’s 33 IG Corporate and 6 SSA new issues, of the 39 deals that printed, 23 tightened versus NIP for a 59.00% improvement rate, 11 widened  (28.25%) and 5 were flat 12.75%).

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

• IG Corps: $18.434b
• All-in IG (Corps + SSA): $24.684b 

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

The “Best and the Brightest” in Their Own Words

……..……and here are their responses:

(more…)

Quigley’s Corner 11.17.17  Investment Grade Debt Issuance Weekend Before Thanksgiving Edition

Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

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

Syndicate IG Corporate-only Volume Estimates For This Week

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

Rates Trading Lab

New Issues Priced

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

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending Nov 15^th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

The “QC” Geopolitical Risk Monitor

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 3 issuers across 3 tranches totaling $1.485b.  The SSA space was quiet.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate desk estimates:

• The IG Corporate WTD total is 101.89% of this week’s syndicate midpoint average forecast or $28.775b vs. $28.24b.
• MTD we’ve priced 87.21% of the syndicate forecast for October IG Corporate new issuance or $84.054b vs. $96.38b.
• There are now 4 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 (Non $25 par) new issue was <20.00> bps.
• Including today’s Southern Company $25 par Jr. Sub Notes the average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 2 IG Corporate-only new issues that displayed price evolution was <13.125> bps.

• BAML’s IG Master Index tightened 1 bp to +107 vs. to +108.

• Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.02 from 1.03.
• Standard & Poor’s Investment Grade Composite Spread tightened 2 bps to +148 from +150. The +140 reached on July 30^th 2014 represents the post-Crisis low.
• Investment grade corporate bond trading posted a final Trace count of $17.4b on Thursday versus $17.2b on Wednesday and $17b the previous Thursday.
• The 10-DMA stands at $16.4b.

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

Global Market Recap

• U.S. Treasuries – Same old story with the 30yr better bid & the 2yr in the red.
• Overseas Bonds – JGB’s were better bid. Europe was unchanged to better bid.
• 3mth Libor – Set at 1.44067% the highest since December 2008.
• U.S. Stocks – Could not build on yesterday’s big rally.
• Overseas Stocks – Shenzhen was hit hard. Nikkei higher. Europe more red than green.
• U.S. Economic – The housing data was very good. KC Manufacturing down.
• Overseas Economic – Not a factor today.
• Currencies – USD traded poorly vs. the Yen and also lost ground vs. the Euro & Pound.
• Commodities – CRB, crude oil, gold, etc., took advantage of the weaker USD & rallied.
• CDX IG: +0.06 to 55.05
• CDX HY: +0.36 to 325.24
• CDX EM: -2.41 to 184.16

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

-Tony Farren 

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. 21 of today’s respondents are in the top 23 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.33% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

As always “thank you” to all the 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! That’s 2014, 2015 and 2016 !!

Below is the opening segue to our weekly canvass of top fixed income syndicate desks.. 

“Good morning and TGIF Ahead of Thanksgiving week!  I thought I’d start a bit early today as next week should, for all intents and purposes, be a two-day week..   

Entering this morning’s Friday session –  

• The IG Corporate WTD total stands at $28.775b. We priced $535mm more than this week’s average midpoint estimate of $28.24b or 101.89%.
• MTD we priced 87.21% of the syndicate projection for November IG Corporates or $84.054b vs. $96.38b.
• Entering today’s session, the YTD IG Corporate-only volume is $1,271.993b vs. $1,226.792b on November 10^th, 2016 or $45.201b (3.68%) more than a year ago.
• The all-in or IG Corporate plus SSA YTD volume is $1,579.184b vs. $1,557.776b on November 10^th, 2016 or $21.408b (1.37%) more than the year ago total. 

Entering this morning’s session, here are the five key primary market driver averages for the 49 IG Corporate-only deals that priced this week. 

o   NICS:  6.56 bps  

o   Oversubscription Rates: 3.00x

o   Tenors: 10.44 years

o   Tranche Sizes: $553mm

o   Spread Compression from IPTs to the Launch: <17.42> bps 

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

• Week on week, average NICs tightened by 1.32 bps to an average 6.76 bps vs.7.88 bps across this week’s 50 IG Corporate-only new issues that had relative value.
• Over subscription or bid-to-cover rates, the measure of demand, increased by 0.66x to an average 3.00x vs. 2.34x. 
• Average tenors decreased by 0.02 years to an average 10.44 years vs. 10.46 years.
• Tranche sizes decreased by $207mm to $553mm vs. $760mm.
• Spread compression from IPTs to the launch/final pricing of this week’s IG Corporate-only new issues tightened by 3.48 bps to <17.42> bps vs. <13.94> bps.
• Standard and Poor’s Investment Grade Composite Spreads widened 1 bps to +148 vs. +147.
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning widened 1 bps to 1.02 vs. 1.01 week-on-week. 

• Week-on-week, BAML’s IG Master Index widened 2 bps to +107 vs. +105. 
• Spreads across the four IG asset classes widened 1.50 bps to 8.25 bps vs. 6.75 bps as measured against their post-Crisis lows. 
• The 19 major industry sectors also widened 1.37 bps to 10.58 bps vs. 9.21 bps also as measured against their post-Crisis lows.
• For the week ended November 15^th, Lipper U.S. Fund Flows reported an inflow of $2.407b into Corporate Investment Grade Funds (2017 YTD net inflow of $111.988b) and a net outflow of $4.442b from High Yield Funds (2017 YTD net outflow of $12.951b).
• Taking a look at the secondary trading performance of this week’s 52 IG Corporate and 2 SSA new issues, of the 54 deals that printed, 36 tightened versus NIP for a 66.75% improvement rate, 15 widened  (27.75%) and 3 were flat 5.50%).

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

• IG Corps: $28.775b
• All-in IG (Corps + SSA): $84.054b 

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

Thank you in advance for your time and contribution!

In this season of Thanksgiving I have many things to be grateful for and one of them are wonderful clients like yourself. Thank you for your friendship and participation here each week and on deal day.  Wishing you and your family a great weekend and a very Happy Thanksgiving! -Ron”

The “Best and the Brightest” in Their Own Words

(more…)

Quigley’s Corner 11.01.17  FOMC Rate Decision Talking Points “Unchanged!”

 Investment Grade US Corporate Debt New Issue Re-Cap 

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

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

FOMC Rate Decision Talking Points: Unchanged (as Expected)

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

Rates Trading Lab

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending October 25^th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline Highlights

Economic Data Releases

The “QC” Geopolitical Risk Monitor

As you all know, Mischler Financial Group, Inc. is our great nation’s oldest Service Disabled Veteran broker dealer and as such our veteran give-back initiatives are prolific and lay at the core of our shared ethos here at Team Mischler.  I would appreciate it if you could all take a moment to read about our 2017 Veteran’s Day Month Pledge from my CEO Dean Chamberlain just before my evening sign-off below.  It is with great appreciation that Mischler Financial is able to “give-back” the fruits of our labor throughout the year and it is all thanks to you the issuers and accounts who elect to do business with us to address the need for best-in-class capital market services and your own internal diversity/veteran procurement initiatives. It means everything to each of us here at Mischler and the non-profit organizations we support.  Thank you all very much! –RQ 

Investment Grade New Issue Re-Cap

Today the IG dollar DCM hosted 3 issuers across 5 tranches totaling $2.50b.  The SSA space was inactive today.

Here’s how the session’s IG Corporate new issue volume impacted the WTD and MTD syndicate estimates:

• The IG Corporate WTD total is 83.16% of this week’s syndicate midpoint average forecast or $21.323b vs. $25.64b.
• MTD we’ve priced 2.59% of the syndicate forecast for October IG Corporate new issuance or $2.50b vs. $96.38b.
• There are now 7 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 3 IG Corporate-only new issues that displayed price evolution was <27.33> bps.
• BAML’s IG Master Index widened 1 bp to +101 vs. +100.
• BAML’s IG Master Index saw  the “AA” tied its post Crisis low of +58 for the third session in a row while the “A” class held its post Crisis low of +78 for the sixth consecutive session.
• The Transportation industry sector set a new post Crisis low of +104.
• 2 of the 19 major IG sectors tied their post Crisis lows as follows: Banking (+84)  and Energy (+132).
• Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 0.95 vs. 0.94.
• Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +142 vs. +143.  The +140 reached on July 30^th 2014 represents the post-Crisis low.
• Investment grade corporate bond trading posted a final Trace count of $21.1b on Tuesday versus $16.3b on Monday and $23.4b the previous Tuesday.
• The 10-DMA stands at $18.7b.

Global Market Recap 

• Treasury November Refunding: More supply in the front end coming in 2018 (February).
• FOMC Statement – Upgraded growth (solid from moderate) & no change on inflation.
• U.S. Treasuries – Closed mixed with the curve flattening the story.
• Overseas Bonds – JGB’s unchanged to better. Bunds little changed & Gilts weaker.
• 3mth Libor – Set at 1.38483% the highest since January 2009.
• Stocks – Mixed heading into the close. Gave up big morning gains (reached ATH’s).
• Overseas Stocks – Nikkei 21 year high. EM 6 year high. Europe 2 year high.
• Economic – More positive economic data.
• Overseas Economic – China unchanged, Japan mixed & U.K. data solid.
• Currencies – USD better bid vs. Euro, PND & Yen but weaker vs. CAD & AUD.
• Commodities – Crude oil traded at high since January before rolling over. Metals bid.
• CDX IG: +0.45 to 52.60
• CDX HY: +0.24 to 310.32
• CDX EM: +0.55 to 174.91

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

-Tony Farren

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

FOMC Rate Decision Talking Points: Unchanged (as Expected) 

Once again rates were left unchanged by the Fed, however there is more color on the $4.5 trillion balance sheet (b/s) unwind. Here’s all you need to know:

Policy:

• The Fed left rates unchanged in the 1%-1.25% range, voting unanimously to so.
• The Board left the discount rate unchanged at 1.75%.
• Expects the economy to evolve in a way warranting gradual rate hikes.

Economy:

• Economic activity is rising at solid rate despite recent storms.
• Fed says storms are unlikely to alter the economy’s medium-term course.
• Repeats risks are roughly balanced, while watching inflation closely.

Employment:

• The labor market continued to strengthen while unemployment declined.
• Repeats that market-based inflation compensation gauges are still low.

Inflation:

• Inflation for items other than food and energy remained soft.
• Repeats that it sees inflation stabilizing at around 2% in the medium-term

The U.S. Federal Open Market Committee November 1^st Statement in its Entirety 

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The balance sheet normalization program initiated in October 2017 is proceeding.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles.

The “QC” Geopolitical Risk Monitor

(more…)

Quigley’s Corner 09.22.17-Distilling the Week’s DCM Activity; Look Back to Learn, Look Forward to Window of Opportunity

Investment Grade US Corporate Debt New Issue Re-Cap –A Day for Donuts, Dissecting the New Issue Pipeline

Today’s IG Primary & Secondary Market Talking Points

Global Market Recap

The “QC” Geopolitical Risk Monitor

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

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 13^th

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

Investment Grade US Corporate Debt New Issue Recap

No IG issues printed today, however, it does not mean that nothing happened. In fact, something big happened!  The Best & Brightest all came back to me once again today in the “QC’s” most eagerly anticipated Friday edition.  That’s right they’re busy lining things up for next week and they’re taking just a little bit of time out to respond in their own words and with their own volume thoughts for next week’s IG Corporate new issue volume.  And you know what? ….They’re all here just waiting for you to scroll down below.  So, let’s get thru the recaps et al and then it’s onto the best and the brightest in the world of investment grade dollar syndicate. Thank you as always to those 24 desks and the very fine operatives on all of them for participating.

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

• The IG Corporate WTD total is 65.41% of this week’s syndicate midpoint average forecast or $17.876b vs. $27.33b.
• MTD we’ve priced 99.02% of the syndicate forecast for September or $111.346b vs. $112.45b.
• There are now 4 issuers in the IG credit pipeline

Today’s IG Primary & Secondary Market Talking Points

BAML’s IG Master Index was unchanged at +111. +106 represents the post-Crisis low dating back to July 2007.

Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.06.

Standard & Poor’s Investment Grade Composite Spread was unchanged at +154.  The +140 reached on July 30th 2014 represents the post-Crisis low.

Investment grade corporate bond trading posted a final Trace count of $17.5b on Thursday versus $18.8b on Wednesday and $20.2b the previous Thursday.

The 10-DMA stands at $17.1b.

The “QC” Geopolitical Risk Monitor

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

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week’s Investment Grade Corporate Debt

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  Thank you to all of them. 19 of those participants are among 2017’s YTD top 20 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 81.46% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.  But it’s not only about their volume forecasts, it’s also about their comments!  This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from.  It’s a great look at the week ahead.

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

Here are this week’s primary market recap and data downloads:

Fed Chair Yellen continues to express concern about the absence of inflation that she’d like to see at 2%.  The FOMC tempts markets with accolades about the how low the unemployment rate is. Meanwhile, Wednesday’s eagerly anticipated $4.5 trillion QExit guidance amounted to nothing more than “we’ll start that in October!” Although the FOMC voiced there’d be one more rate hike in 2017 and 3 in 2018, the market doesn’t really believe that. The devastating hurricanes Harvey, Irma and Maria have not begun to show up in our economic data. I don’t believe we’ll see a rate hike in 2017.  Additionally, the next meeting in late October is not followed by a press conference so it’s highly unlikely that they’ll raise rates at that time. That leaves one meeting left in December. Do you think the Fed is giving out holiday gifts this year? I think not.  The S&P, Dow and Nasdaq once again reached new all-time highs this week.

Entering this morning’s Friday session –

• The IG Corporate WTD total stands at $17.876b. We priced $9.454b less than this week’s average estimate of $27.33b or 65.41%.
• MTD we have now priced 99.02% of the syndicate projection for September IG Corporates or $111.346b vs. $112.45b.
• Entering today’s session, the YTD IG Corporate-only volume is $1,053.881b vs. $1,055.736b on September 22nd, 2016 or 0.18% less than a year ago.
• The all-in or IG Corporate plus SSA YTD volume is $1,280.209b vs. $1,331.873b on September 22nd, 2016 or 4.04% less than the year ago total.
• Entering this morning’s session, here are the five key primary market driver averages from the 37 IG Corporate-only deals that priced this week
• NICS:  0.62 bps
• Oversubscription Rates: 3.18x
• Tenors: 8.21 years
• Tranche Sizes: $483mm
• Spread Compression from IPTs to the Launch: <18.40> bps

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

• Average NICs widened 0.78 bps to an average 0.62 bps vs. 1.40 bps across this week’s 37 IG Corporate-only new issues.
• Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.12-times to 3.18x vs. 3.30x.
• Average tenors contracted by 1.63 years to an average 8.21 years vs. 9.84.
• Tranche sizes decreased by $192mm to $483mm vs. $675mm.
• Spread compression from IPTs to the launch/final pricing of this week’s 37 IG Corporate-only new issues widened by 0.51 bps to <18.40> bps vs. <18.91>.
• Standard and Poor’s Investment Grade Composite Spreads tightened 4 bps to +154 vs. +158 bps.
• Bloomberg/Barclays US IG Corporate Bond Index OAS thru this morning tightened 4 bps to 1.06 vs. 1.10 bps.
• Week-on-week, BAML’s IG Master Index tightened 5 bps to +111 vs. +115.
• Spreads across the four IG asset classes tightened 3.5 bps to 7.50 bps vs. 11.00 bps as measured against their post-Crisis lows.
• The 19 major industry sectors also tightened 3.58 bps to 11.95 vs. 15.53 bps also as measured against their post-Crisis lows.
• For the week ended September 20th, Lipper U.S. Fund Flows reported an inflow of $2.858b into Corporate Investment Grade Funds (2017 YTD net inflow of $91.384b) and a net inflow of $865.832m into High Yield Funds (2017 YTD net outflow of $8.410b).
• Taking a look at the secondary trading performance of this week’s 37 IG Corporate and 4 SSA new issues, of the 41 deals that printed, XX tightened versus NIP for a 75.50% improvement rate, 5 widened (12.25%) and 5 were flat (12.25%).

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

• IG Corps: $17.876b
• All-in IG (Corps + SSA): $23.389b

And now ladies and gentlemen, as honored members of the “B&B” Club it’s time for the guy-in-the corner to ask today’s question, “what are your thoughts and numbers for next week’s IG Corporate new issue volume?”

Thank you in advance for your time and contribution!

Have a great evening!

Ron Quigley, Managing Director, Head of Fixed Income Syndicate

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

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Quigley’s Corner 04.03.17 Dysfunction Junction & the Nuclear Option; Mischler Debt Market Commentary

Investment Grade New Issue Re-Cap – Knowing the Past for the Future; The Nuclear Option; Rates Rally, Yields Compress

IG Primary & Secondary Market Talking Points

Global Market Recap

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 29^th

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

Tomorrow’s Calendar

It was November 21^st , 2013 when Democrats, frustrated at GOP efforts to stall its Congressional plans under former President Barack Obama, decided to take a vote to stop debate on executive and judicial branch nominees with a simple Senate majority vote rather than having to secure 60 Senate votes.  House Majority leader Harry Reid (D-Nevada), and his party won 52-48.  Reid & Co. set in motion a process that day that eased passage of several key Obama executive and judicial nominees by changing the rules of engagement. Politicians have LONG memories and it’s now payback time…..and guess which party doesn’t like it?  With the tables now turned, the so-called nuclear option –a simple majority – is likely to prevail under Senate Majority leader Mitch McConnell to avoid a Democratic filibuster of Judge Gorsuch’s nomination to the Supreme Court. It may also be used for legislation as well.  Remember everyone, Harry Reid set the precedent.  The “nuclear option” or simple majority vote will weaken the power of the filibuster but it is officially in play now.

As a result, Treasuries rallied and the CT10yr is yielding 2.34%. That’s down 28 bps since the Monday before the FOMC rate hike on Wednesday March 15^th.  It’s on its way lower, much lower so, issuers be advised to watch that. Be patient. Let the market come to you.  All this thanks to “Dysfunction Junction.”  The great divide between Republicans and Democrats is getting deeper and more disparate as threats of filibusters are inviting the GOP to employ the aforementioned “nuclear option” to their arsenal.  Republicans remember all too well Democratic hardball strategies used against them in the recent past. Political campaign promises need to be kept and not danced around.  The Dems will NEVER forget (and vice versa) and as they say pay back is going to be………a well, uh…………an issue shall I say?  What goes around, comes around but in the here and now, the nuclear option will be deployed and used to pass legislation as well.  Political dislocation will continue to rally rates and compress Treasury yields lower.  @.00% is in sight folks.  I’ll remind you when we get there.

If you are a banker advising issuers when to print, if they wait, you’ll look smarter and more brilliant than ever! If you’re an issuer, well, when you do print, if you listen to the “QC” please give us an ACTIVE Co-Manager opportunity on your next deal so we can show you what a true distribution value is all about.  You WILL only look even better and brighter than you already are.  One doesn’t get what one doesn’t ask for in life right?

The Monday session featured a continuum of “quirky” issues with the exception of Met Life Global Funding’s 5-year FA-backed notes.  Investment Grade primary markets currently have 10 items in the pipeline all of which are Yankee transactions.

Today, the IG DCM hosted 5 issuers across 5 tranches totaling $2.75b or 12.85% of this week’s IG Corporate-only midpoint syndicate forecast calling for $21.40b.

IG Primary & Secondary Market Talking Points

• Essex Portfolio LP upsized today’s 10-year Senior Notes new issue to $350mm from $300mm at the launch and at the tightest side of guidance.
• The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 5 IG Corporate-only new issues was <20.30> bps.
• BAML’s IG Master Index widened 2 bps to +124 vs. +122.  +106 represents the post-Crisis low dating back to July 2007.
• Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.18 vs. 1.17.
• Standard & Poor’s Investment Grade Composite Spread was unchanged at +164.  The +140 reached on July 30^th 2014 represents the post-Crisis low.
• Investment grade corporate bond trading posted a final Trace count of $19.6b on Friday versus $19.3b on Thursday and $13.8b the previous Friday.
• The 10-DMA stands at $17.7b.

Global Market Recap

• U.S. Treasuries – USTs built on Friday’s rally.
• Overseas Bonds – Front end JGB’s hit. Core & semi core EU bonds had a strong day.
• Stocks – U.S. stocks closed in the red but had a nice afternoon comeback.
• Overseas Stocks – Japan & HS closed higher. China was closed. Europe was red.
• Economic – ISM manufacturing dipped 0.5 points but remained very strong. Vehicle sales were weak.
• Overseas Economic – Good Tankan in Japan & positive unemployment rates in Europe.
• Currencies – USD outperformed the Pound, CAD & AUD and lost ground vs. the Euro & Yen.
• Commodities – Down day for CRB, crude oil & copper while gold closed with a gain.
• CDX IG: +0.37 to 66.70
• CDX HY: +0.47 to 339.04
• CDX EM: +0.83 to 213.60

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

-Tony Farren

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

It’s a Tough Job But Somebody’s Gotta Do It

It’s not always fun writing about politics but then again, politics is driving everything in our market more than ever before and it will continue to do that.  Given the myriad global risk factors playing out in our inextricably global-linked world economy, it’s safe to say we are living in dangerous times.  For my part, all I can do is try and tell you about what’s going on in a genuinely honest, insightful and hopefully, refreshing way.  Why?  Well, if you see that we “get it” i.e. understand the machinations of global markets, and appreciate that we work every day to get fresh and informative perspectives to you,  in turn you’ll notice the distinct added-value that we provide and ideally, you will conclude that we should be appointed to the list of other formidable syndicate desks you have chosen to distribute your offerings.

We might be a minority firm, but we are NOT a “one check shop.”  Mischler has a long history in which we have earned Fortune Issuers’ mandates by demonstrating best-in-class cap mkt capabilities via a proven process and recognized platform. As the nation’s oldest Service Disabled Veteran broker-dealer, our ethos is dedicated to serving not just clients with integrity, but also in-need veteran organizations. Towards that mission, we give back 10% of our firm’s profits to veteran causes year round. When hiring for roles within the organization, we prioritize hiring service-disabled veterans and recently-returning veterans who meet our criteria. Once hired, we mentor and coach up our veteran compatriots and we integrate them into becoming members of our team because they earned the opportunity. We grow our own capital month-to-month, quarter-to-quarter and year-to-year. Our operations staff is second to none; it’s not just about our getting underwriter roles for Issuer deals, more important to all, it’s about settling the trade on trade date to settlement date smoothly, each and every time.  We also take great pride in sharing with clients our daily fixed income “downloads”; content that has earned Mischler the Wall Street Letter Award for Best Broker Dealer/Research for three consecutive years – 2014, 2015  and 2016.  It’s all about a value-added proposition.

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

Have a great evening!
Ron Quigley

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

(more…)

Quigley’s Corner 03.31.17   QC’s Q1 Investment Grade Corporate Debt DCM Look-Back and Look Ahead

Investment Grade Corporate Debt New Issue Re-Cap

IG Primary & Secondary Market Talking Points

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

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

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

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’re Trading – Great Market Tone!

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 29^th

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Month end? Quarter end?  Lots of Global economic data? You know what that means. It was a signed, sealed and delivered no-print Friday today.  That’s always welcome as it gave me a head start on today’s more involved syndicate survey.  Forecasts today are for next week’s primary market supply as well as for the month of April.  I also have a snapshot of a decade’s worth of April IG supply across three categories: all-in (Corps + SSA), Corporate as well as just SSA volumes.  I call the section “Knowing the Past for the Future.” It will help put the Best and Brightest’s thoughts and numbers into a historical perspective for you.  You should take a look at that table.

To quickly re-cap their thoughts, all 24 syndicate desks responded to my “QC” survey  The midpoint average for next week’s IG Corporate only supply is $21.40b characterized by tight voting groups with 18 of the 24 participants projecting within $20 to $25b with a low of $12b and a high of $31b.  As for April, the average was $91.50b.  Voting brackets were all over the place ranging from a low of $65b to a high of $111b. But don’t just take my word for it.  All 24 syndicate operatives contributed responses with their numbers so, scroll down below and read their meaningful thoughts.

I hope you enjoy your read and that it helps you prepare for the week and month ahead.  Thanks again to the stellar 24 participating syndicate desks who are always there for me and for YOU each and every Friday edition of the “QC”.

IG Primary & Secondary Market Talking Points

• BAML’s IG Master Index was unchanged at +122.  +106 represents the post-Crisis low dating back to July 2007.
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.17.
• Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +163 vs. +164.  The +140 reached on July 30^th 2014 represents the post-Crisis low.
• Investment grade corporate bond trading posted a final Trace count of $19.3b on Thursday versus $20.7b on Wednesday and $17.8b the previous Thursday.
• The 10-DMA stands at $17.3b.

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

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

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition!  23 of those participants are among 2017’s YTD top 26 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table.  The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates).  The participating desks represent 83.65% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility.

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

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was prefaced as follows:

First up, here’s are this week’s IG new issue volume talking points:

• We fell 17% shy of this week’s syndicate midpoint average forecast or $22.15b vs. $26.50b.
• MTD we’ve priced 13% more than the IG Corporate mid-range projection for all of March or $129.998b vs. $114.31b.
• The all-in MTD total (IG Corporates plus SSA) now stands at $166.158b. March, 2017 has officially broken into 8^th place as the highest volume month for all-in issuance (IG Corporates plus SSA).
• The YTD IG Corporate only volume is now $393.085b. It is the highest IG Corporate-only quarterly volume total in history.
• YTD we have officially priced $506.151b in all-in IG Corporate and SSA issuance also ranking it #1 as the highest quarterly volume total ever.
  

Here are this week’s five key primary market driver averages from the 38 IG Corporate-only deals that priced:

• NICS:  0.46 bps
• Oversubscription Rates: 3.48x
• Tenors:  10.14 years
• Tranche Sizes: $791mm
• Spread Compression from IPTs to the Launch: <19.31> bps

Here’s how this week’s performance data compares against last week’s:

• Average NICs tightened 1.29 bps this week to 0.46 bps vs. 1.75 bps.
• Over subscription or bid-to-cover rates, the measure of demand, increased 0.58x to 3.48x vs. 2.90x.. 
• Average tenors shortened by a meaningful 1.41 years to 10.14 years vs. 11.55 years.
• Tranche sizes upsized by $99mm to $791mm vs. $692mm.
• Spread compression from IPTs to the launch/final pricing of this week’s 38 IG Corporate-only new issues tightened 3.87 bps to <19.31> bps vs. <15.44>.
• Standard and Poor’s Investment Grade Composite Spreads tightened 2 bps to +163 vs. +165 week on week,
• Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 1.17 vs. 1.18 last Friday. 

• Week-on-week, BAML’s IG Master Index tightened by 1 bp to +122 vs. +123. 
• Spreads across the four IG asset classes tightened by 0.75 bps to 16.00 bps vs. 16.75 as measured against their post-Crisis lows. 
• The 19 major industry sectors also tightened by 0.74 bps to 19.63 vs. 20.37 also against their post-Crisis lows.
• For the week ended March 29^th, Lipper U.S. Fund Flows reported an inflow of $3.966b into Corporate Investment Grade Funds (2017 YTD net inflow of $39.089b) and a net outflow of $248.465m from High Yield Funds (2017 YTD net outflow of $5.937b).
• Taking a look at the secondary trading performance of this week’s 38 IG and 3 SSA new issues, of the 41 deals that printed, 32 tightened versus NIP for a 78.00% improvement rate while 4 widened (9.75%) and 5 were flat (12.25%).
  

The numbers are in.  Entering today’s Friday’s session here’s how much we issued this week:

• IG Corps: $22.15b
• All-in IG (Corps + SSA): $25.90b
  

Is this week’s overwhelmingly hawkish Fed-speak justified? Or, is Fed leadership talking up yields?  The GOP seemed to have recovered from the health care fiasco.  Monday saw 10 issuers stand down, but the market quickly recouped lost ground with issuers printing the rest of the week.  Today marks month-end but more importantly quarter end. The Easter break is approaching all before we re-enter black-outs.

And now the all-important “two-part” question (and answer(s) posed to the fixed income market’s top Syndicate desks, along with my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

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

(more…)

Quigley’s Corner 03.27.17 -Corporate Debt Issuance Slows Due to DC Swamp Sewage Stalemates

Investment Grade Corporate Debt New Issue Re-Cap – IG Primary Markets Bogged Down by the Swamp

CT10 Year Yield Going Lower

IG Primary & Secondary Market Talking Points

Global Market Recap

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

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending March 22^nd       

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

Well it was a rare, highly inactive Monday for IG primary markets today. Only one well-telegraphed new issue priced that had been in the pipeline for KEB Hana Bank in the form of a $500mm 3-year FRN. I heard that as many as 10 issuers stood down today following Go/No Go calls.  So, what gives?

On Friday, I placed at the top of my edition, a comment from a widely respected Head of Syndicate.  It was an interesting comment in that it expressed an against-the-grain opinion that Friday’s healthcare bill issue might actually be good for the market in that it pulls forward focus and attention on the all-important and market impactful tax reform bill.  As we were getting ready to close shop on Friday my CEO asked me, “so do you think it’ll be busy next week?  I said, “I hate to go against 24 of the top syndicate desks, but I fear we could see a zero day on Monday and a slower week in store. A health care bill failure will send a horrible message to the market.” I added, “I hope I’m wrong and that we see lots of issuance, but I think I’m right.”  That’s how Friday ended as I left for the weekend.

First, let’s revisit my Friday syndicate voting brackets for this week’s IG new issue volume forecasts:

Out of 24 desks surveyed, 19 of them, or 79%, were in a tight band of $25-$30b.  That is always a great sign.  It means a lot of joint leads verified that similar or consensus volume is expected. The comments were characterized by lots of smaller deals with the absence of any mega transaction. But, I cannot see how issuance gets done if the health care bill is pulled or doesn’t pass. Well it got pulled later on Friday as we now all know. The issue is that republicans made a mistake in prioritizing health care as the first item on their agenda. They did so because it was perceived internally as a “no brainer.” Their plan was to save a trillion dollars to justify a massive tax reform plan.  Guess what?  When it got pulled the message sent to Wall Street was that consensus will continue to be an issue within the GOP.  That’s a MAJOR problem. The historic election is now over. People no longer want to hear the same campaign rhetoric, rather they want action, as the power to legislate has been voted on and given to Trump and the GOP.  The first test was a failure. In fact, it is a massive failure.  So, the market will not be kind to an Administration that has now experienced it’s “Dysfunction Junction” wake-up call. (I refuse to call it Capitol Hill or The Beltway anymore). It’s all about action now. Failure to get a consensus on tax reform WILL lose House and Senate seats in the next elections. That would be a political disgrace after the 7 long years they had amongst themselves to one day ratify a revamped bill. That day came and went last Friday.

The result? ………..The CT10-year is going back to 2.00% to 2.10% or lower.  Here’s the challenge –  with as many as 10 Go/No Go calls this morning that wound up with issuers standing down, we risk building a congested pipeline.  That leads to creating additional congestion, sloppy deals, more concession and bankers could look bad advising clients to go now rather than wait for another 25-35 bps rally in yields. Let the market come to the issuer. The latter are in the driver’s seat.  The market is waiting for a sign of optimism. That optimism will come when positive sounders on SUBSTANTIAL – as in “historic” – tax reform emanates from the White House and Dysfunction Junction. When that happens, equities will rally, yields will climb quickly and we’ll be back to where the GOP wants to be. For now, the Republican Party IS part of the Swamp that desperately needs draining.  It’s a harsh but well-deserved wake-up call to get their act together.  Seven years to fix Obama Care and they come up holding nothing but a yanked deal.  Unbelievable folks!  When that happens in business people get fired fast! Trump needs to run things like a corporation and Dysfunction Junction needs a hard case of tough love. This is not what was voted for on election day. It’s all about well……….waste management………now.

CT10 Year Yield Going Lower

Sorry if I sound like a broken record, but I published this next piece 12 days in advance of the recent FOMC Rate Decision on Friday, March 3^rd and re-printed it the day of Janet Yellen’s Press Conference on Wednesday, March 15^th.  Here it is yet again:

………..I had an interesting and revealing conversation with a Chairman of a six-pack bank (That’s either BAML, CITI, GS, JPM, MS or WFS folks!) who shared thoughts on a potential March interest rate hike that the market has already built in.  I thought it would be helpful and informative to you all.  Here’s what that person said,

“Everyone is thinking a rate hike is coming in March but, the FED needs to be somewhat worried about the yield curve.  When they raised rates in December 2015 the 10yr Treasury rallied 70 bps in yield, thus crushing banks’ net interest margin or “NIM” and, having the effect of dampening growth.  When they raised rates this past December 2016, that did not happen…..instead all rates moved up a bit.  But when Yellen talked about March being a “live meeting’’, the UST 10 year went from 2.56% to 2.31%……The Fed needs to talk a good game to dampen the “animal spirits” that have elevated equity markets but, I really don’t think the Fed wants to raise rates and see the 10 year Treasury move to 2.25%. As a result, it’s a very close call…..I err on the side of thinking that the rate hike comes in June.  But, it’s  close.  If the Fed is committed to 2 to 3 hikes this year and they feel the markets are fully prepared for a March hike…they may just take advantage of that window.”

Today the CT10-year closed at 2.379% and has tightened 24.8 bps versus 2.627% on March 13^th the Monday before the Fed raised rates. It’s going tighter. Issuers be patient!

IG Primary & Secondary Market Talking Points

• The average spread from IPTs and/or guidance thru the launch/final pricing of today’s 1 IG Corporate-only new issues was <17.50> bps.
• BAML’s IG Master Index was unchanged at +123.  +106 represents the post-Crisis low dating back to July 2007.
• Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.18.
• Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +164 vs. +165.  The +140 reached on July 30^th 2014 represents the post-Crisis low.
• Investment grade corporate bond trading posted a final Trace count of $13.8b on Friday versus $17.8b on Thursday and $15.2b the previous Friday.
• The 10-DMA stands at $17.4b.

Global Market Recap

• U.S. Treasuries – Closed with gains except the 2yr but closed near the low prices of day.
• Overseas Bonds – JGB’s better except the 30yr. Bunds red & Gilts green.
• Stocks – U.S. stocks mixed heading into the close. Nice comeback in the afternoon.
• Overseas Stocks – The Nikkei led Asia lower. Europe had more red than green.
• Economic – Dallas Fed manufacturing was weaker than expected/last.
• Overseas Economic – Positive IFO releases in Germany.
• Currencies – The USD had a poor day vs. the Euro, Pound & Yen.
• Commodities – Crude down, gold up & a 2% gain for silver.
• CDX IG: +0.83 to 67.84
• CDX HY: +29.80 to 354.58
• CDX EM: +1.72 to 213.92

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

-Tony Farren

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

 
Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

Have a great evening!
Ron Quigley

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

(more…)