Senior Unsecured Global Notes Archives - Mischler Financial Group Mischler Financial Group

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Investment Grade Corporate Debt Issuance-A Common Thread

October 2017 Debt Market Commentary, Recent Deals

Quigley’s Corner 10.24.17 – A Common Thread re Ford Motor Credit and Goldman Sachs Corporate Debt Issuance

Investment Grade US Corporate Debt New Issue Re-Cap

Today’s IG Primary & Secondary Market Talking Points: Spotlight on Ford Motor Credit & GS

Global Market Recap

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

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 18^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 7 tranches totaling $9.45b. The SSA space featured 4 issuers and 6 tranches for $7.50b bringing the all-in IG day totals to 7 issuers, 13 tranches and $16.95b. Clearly the mega deal of the day belongs to The Goldman Sachs Group, Inc. that issued a $7b three-part Senior Unsecured Global Notes transaction for which Mischler served as an active Co-Manager on the 21nc20 fixed-to-floating tranche due 10/31/2038. That deal and more specifically that tranche is today’s Deal-of-the-Day.

Here are the day’s recaps first:

The DOW skyrocketed 168 points to close at a new all-time high of 23,441 propelled by stellar earnings from the likes of Caterpillar, 3M, GM and Fiat Chrysler.

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

The IG Corporate WTD total is 108.88% of this week’s syndicate midpoint average forecast or $23.724b vs. $21.79b.
MTD we’ve priced 98.36% of the syndicate forecast for October IG Corporate new issuance or $90.178b vs. $91.68b.
There are now 8 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

Mischler Financial is proud to have been named a Selling Group member on today’s $1bn Ford Credit Auto Lease Trust Series 2017-B. Thank you Team Ford for choosing Mischler from among your diversity candidates.
The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 7 IG Corporate-only new issues was <18.71> bps.
BAML’s IG Master Index was unchanged at +101 tying its post Crisis low set with last Friday’s close.
BAML’s IG Master Index saw 3 of the 4 IG asset classes set or tied new post Crisis lows as follows: “AA” +59 (tied), “A” +79 (tied) and “BBB” +130 (set).
3 of the 19 major IG sectors set new post Crisis lows as follows: Banking (+84), Basic Industry (+127) and Industrials (+105).
6 of the 19 major IG sectors tied their post Crisis lows as follows: Cap Goods (+79), Consumer Products (+85), Insurance (+110), Services (+102), Technology (+76) and Transportation (+106).
Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.95 vs. 0.96 while setting yet another new low.
Standard & Poor’s Investment Grade Composite Spread widened 1 bp to +144 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 $15.5b on Monday versus $13.8b on Friday and $14.3b the previous Monday.
The 10-DMA stands at $16.4b.

Global Market Recap

U.S. Treasuries – USTs market continues to struggle. 10yr closed over 2.40%.
Overseas Bonds – JGB’s mixed & flatter. Down day in Europe.
3mth Libor – Set at its highest yield (1.37064%) since January 2009.
Stocks – Earnings sends U.S. stocks higher. Dow at all-time high.
Overseas Stocks – Asia weaker expected. Japan (record winning streak). Europe better.
Economic – All 3 Markit PMI’s were better but Richmond manufacturing was weaker.
Overseas Economic – Japan data weaker. Europe data mixed but solid overall.
Currencies – USD better bid vs. 4 of the Big 5 bit the DXY Index was little changed.
Commodities – CRB traded at high since May. Crude & gasoline up. Gold down.
CDX IG: -0.20 to 52.73
CDX HY: -0.44 to 308.86
CDX EM: +0.34 to 174.84

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

-Tony Farren

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

IG Corporate New Issuance	This Week 10/23-10/27	vs. Current WTD – $23.724b	October 2017	vs. Current MTD – $90.178b
Low-End Avg.	$20.75b	114.33%	$90.96b	99.14%
Midpoint Avg.	$21.79b	108.88%	$91.68b	98.36%
High-End Avg.	$22.83b	103.92%	$92.42b	97.57%
The Low	$15b	158.16%	$110b	81.98%
The High	$30b	79.08%	$75b	120.24%

The Goldman Sachs Group, Inc. $2.5b 21nc20 Fixed-to-Floating Senior Unsecured Global Notes

Today’s Goldman Sachs transaction was a $7bn three-part comprised of a 5nc4 fixed-to-floater as well as a 5yr FRN both due 10/31/2022. Mischler proudly served as an active Co-Manager on today’s longest tranche of that issuance – the 21nc20 fixed-to-floating due 10/31/2038 so I am writing about that tranche this evening.

It’s important to note that in speaking with today’s accounts they like the pro-U.S. growth sentiment and rates that are helping to boost markets especially for bank and finance issuers. Broader corporate tax reform will certainly lead to additional M&A activity ahead which is good for banks/finance. Several international accounts expressed their view that U.S. banks as flight to relative safety underscore an overall bullish sentiment in the sector. Other investors were attracted by some additional yield compared to the risk-reward in European banks and Asian banks. We’ve seen some front-loaded supply in the sector post Q3 earnings but the demand for GS paper has been consistently strong.

BAML’s IG Master Index was unchanged at +101 tying its post Crisis low set with last Friday’s close.
BAML’s IG Master Index saw 3 of the 4 IG asset classes set or tied new post Crisis lows as follows: “AA” +59 (tied), “A” +79 (tied) and “BBB” +130 (set).
3 of the 19 major IG sectors set new post Crisis lows as follows: Banking (+84), Basic Industry (+127) and Industrials (+105).
6 of the 19 major IG sectors tied their post Crisis lows as follows: Cap Goods (+79), Consumer Products (+85), Insurance (+110), Services (+102), Technology (+76) and Transportation (+106).
Bloomberg/Barclays US IG Corporate Bond Index OAS tightened 1 bp to 0.95 vs. 0.96 while setting yet another new low.

Use of proceeds on today’s transaction will be used for general corporate purposes.

For relative value we looked to the outstanding GS 3.691% due 6/05/2028 6nc5 fixed-to-floating that priced on May 31^st that was quoted today T+119 (G+120) pre-announcement.

Curves on comparable FIGs show an average 11- to 21-year spread differential of <13> bps. Applying that to the GS 11nc10 pegs fair value at T+106 nailing NIC on today’s new 21nc20 F-t-F as 2 bps.

GS Issue	IPTs	GUIDANCE	LAUNCH	PRICED	Spread Compression	NICs (bps)	Trading at the Break	+/- (bps)
21nc20 F-t-F 10/31/2038	+120-125	+110a (+/-2)	+108	+108	<14.5> bps	2 bps	106/104	<2>

………and here’s a snap shot of today’s final book size and oversubscription rate:

GS Issue	Tranche Size	Final Book Size	Bid-to-Cover Rate
21nc20 F-t-F 10/31/2038	$2.5b	$5bn	2.00x

Final Pricing – The Goldman Sachs Group, Inc. f-t-f Perp NC5 Preferred

GS $2.5b 4.017% 10/31/2038 21nc20 fixed-to-floating @ $100.00 T+108 (Back-end: 3mL+137.3)

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

KEY IG CORPORATE NEW ISSUE DRIVERS	MON. 10/23	AVERAGES WEEK 10/16	AVERAGES WEEK 10/09	AVERAGES WEEK 10/02	AVERAGES WEEK 8/25	AVERAGES WEEK 8/18	AVERAGES WEEK 9/11
New Issue Concessions	1.33 bps	0.41 bps	<0.38> bps	1.18 bps	1.38 bps	0.62 bps	1.40 bps
Oversubscription Rates	2.23x	2.89x	3.03x	3.50x	3.31x	3.18x	3.27x
Tenors	6.20 yrs	8.85 yrs	9.77 yrs	12.00 yrs	8.50 yrs	8.21 yrs	9.84 yrs
Tranche Sizes	$793mm	$804mm	$906mm	$608mm	$645mm	$483mm	$674mm
Avg. Spd. Compression IPTs to Launch	<12.75> bps	<16.81> bps	<19.81> bps	<18.40> bps	<20.19> yrs	<18.40> bps	<18.91> bps

Rates Trading Lab

Most of today’s trading was confined to a tight range with yields slowly migrating higher as the curve steepened. Then came the news that John Taylor had reportedly won a straw poll on a show of hands when President Trump asked GOP Senators about their Fed pick. Market got hit with the belly leading the sell-off and 5yrs traded at 2.044%, 10yr at 2.4225% and 30yr 2.934%. Stops were hit in futures as TY touched 124-18 before bouncing. Taylor had a big day in the betting pools, for what it’s worth, solidifying his second place standing. https://www.predictit.org/Market/3306/Who-will-be-Senate-confirmed-Fed-Chair-on-February-4%2C-2018 Lost in the fray were reports that the trio of Corker, McCain and Paul might not support a tax cut program if not revenue neutral and that Jeff Flake bowed out of the Arizona Republican race, but not before saying that “[w]ithout fear of the consequences and without consideration of the rules of what is politically safe, we must stop pretending that the conduct of some in our executive branch are normal. They are not normal. Reckless, outrageous and undignified behavior has become excused as telling it like it is when it is actually reckless, outrageous and undignified.” Meanwhile, stocks carried on, with records falling once again and the financial networks straining to contain their giddiness.

Thoughts:

Today’s price action was a textbook case of why this market is becoming so difficult to trade. I understand that a Taylor chairmanship and its potentially consequential rules-based policy metrics is a decidedly hawkish event. Countering that, however, is more stagnation on the legislative front. Senators Corker and Flake are now question marks in the Republican camps along with the fiscal conservatives. I know we have broken through established support levels and that it may trigger a further sell-off on that basis alone, but I think this is a counter-trade. Whatever happens, it will happen fast. Machines can hit bids and lift offers faster than you can blink.

-Jim Levenson

UST Resistance/Support Table

	CT3	CT5	CT7	CT10	CT30
RESISTANCE LEVEL	99-30	99-19+	99-22	99-10	97-23
RESISTANCE LEVEL	99-27+	99-14	99-14+	99-00	97-12+
RESISTANCE LEVEL	99-25	99-102	99-08+	98-23+	96-28

SUPPORT LEVEL	99-22+	99-052	99-02+	98-15+	96-11
SUPPORT LEVEL	99-196	99-01+	98-28+	98-07+	95-30
SUPPORT LEVEL	99-17+	98-31	98-24+	98-01	95-24