Breakdown of This Week’s Corporate Issuance

October 24th, 2014 1:20 pm

Via Bloomberg:
IG CREDIT: Weekly Issuance Stats; Tenors, Ratings, Sectors
2014-10-24 17:11:45.149 GMT

By Lisa Loray
Oct. 24 (Bloomberg) — $34.475b priced from 25 issuers in
34 tranches for week ending today, 15th week this year to exceed
$30b. Monthly volume $75.25b, YTD $1.167t.
* Deals priced every day this week, a 1st since week ending
Sept. 26
* Issuance peaked on Wed. at $13.025b, highest daily volume in
a month and 1st double-digit issuance session in Oct.
* Financials (43.7%) led issuance for 2nd consecutive week,
followed by corporates (31.5%), SAS (13.0%) and EM (11.8%)
* 10Y was most active tenor for 3rd consecutive week and for
14th week this year
* $3.25b FRNs priced, highest weekly FRN volume since $3.95b
in week ending Sept. 5; YTD FRN volume $132.7b
* Daily Breakdown:
* Monday:    $7.6b    (22.0%)
* Tuesday:    $4.8b    (13.9%)
* Wednesday:  $13.025b  (37.8%)
* Thursday:  $6.7b    (19.5%)
* Friday:    $2.35b    (6.8%)
* Friday:    $2.35b    (6.8%)</li></ul>
* Issuance by Sector:
* Financials:  $15.05b  (43.7%)
* Industrials:  $350m    (1.0%)
* Consumer:    $500m    (1.5%)
* Auto:        $1.25b    (3.6%)
* TMT:          $7.25b    (21.0%)
* Utility:      $425m    (1.2%)
* Yankee:      $1.1b    (3.2%)
* SAS:          $4.5b    (13.0%)
* EM:          $4.05b    (11.8%)
* EM:          $4.05b    (11.8%)</li></ul>
* Issuance by Tenor:  Odd maturities default to pricing bench
* <3Y:    $3.15b  (9.1%)
* 3Y:    $4.75b  (13.8%)
* 5Y:    $6.45b  (18.7%)
* 7Y:    $4.0b    (11.6%)
* 10Y:    $8.6b    (25.0%)
* 30Y:    $3.625b  (10.5%)
* Perp:  $3.9b    (11.3%)
* Perp:  $3.9b    (11.3%)</li></ul>
* Issuance by Ratings: Split ratings default to lower rating;
financial sub-debt defaults to issuer rating
* Triple A:  $4.5b    (13.0%)
* Double A:  $3.65b  (10.6%)
* Single A:  $4.475b  (13.0%)
* Triple B:  $21.85b  (63.4%)
* Triple B:  $21.85b  (63.4%)</li></ul>
* Fix vs FRN Issuance:
* Fix:  $31.225b  (90.6%)
* FRN:  $3.25b    (9.4%)
* FRN:  $3.25b    (9.4%)</li></ul>


October 24th, 2014 1:15 pm

Mortgages have seen limited activity today amidst light origination selling. FNMA 3 are lagging Treasuries by 3/4 / 32 . The 4s and 4.5s are outperforming by 1+ ticks.Fifteen year paper  is lagging 30 year paper as REITS and money managers continue to be sellers.

Treasury Market Musings

October 24th, 2014 11:43 am

As I made the rounds of market makers and portfolio managers this morning I find a tired group of people looking forward to the weekend. On the market making side traders report very light volumes today and little information in the types of trades going through or from the actors in those transactions. on both sides traders and portfolio managers lament the difficulty in trading in an Ebola world. It is not a variable which one can even remotely forecast.

The focus in the near term is the FOMC meeting next week. If I had to construct a consensus from my conversations I would say that participants look for a narrow range between 2.18/2.30 down to 2.18/2.20. If anything there seems to be agreement that in advance of the FOMC meting with the Treasury regurgitating supply that rates are likely to trend to the upper end of that range.

Regarding the FOMC participants expect the “considerable period ” language to survive. Some thought that given the last minutes and comments of several Committee members that the statement this time might include some reference to the global economy and FX considerations. That would be very dovish if those sentiments were enshrined in the statement.


Corporate Bond Issuance Today

October 24th, 2014 10:17 am

Via Bloomberg:
IG CREDIT: List of New Issues Expected to Price in U.S. Today
2014-10-24 13:49:12.44 GMT

By Greg Chang
Oct. 24 (Bloomberg) — The following is a list of new
issues expected to price today.
* Credit Suisse, acting through its NY Branch $benchmark A1/A
* 7Y
* IPT +125 area
* IPT +125 area</li></ul>
* E.CL SA $350m (no grow) BBB/BBB
* Long 10Y (1/2025) 144A/Reg S without reg rights
* Guidance +235, +/-5 vs IPT +250 area
* Books: BofAML, C, HSBC
* Books: BofAML, C, HSBC</li></ul>


October 24th, 2014 9:51 am

Swap spreads have leaked wider in the belly. One portfolio manager reports 5s and 10s are each wider by 1/4 basis point. The 2s and 30s are unchanged. He said that flow was minimal and he speculated that the belly widening resulted from the better bid in the Treasury market.

I note that Credit Suisse is selling a benchmark size issue in corporate bond land today. That is an issue which is likely to be swapped so on a quiet Friday that should limit the leakage wider in spreads.

Treasury Market

October 24th, 2014 9:46 am

One dealer reports foreign sellers of off the run 5 year paper and domestic end users looking to pick up off the run 2 year paper at levels above 40 basis points.

Corporate Bonds

October 24th, 2014 9:42 am

Corporate bond spreads are opening with very little change. The IG 23 is a smidgeon wider (+ 1/2)  at 66 1/4 to 66 3/4. Long dated financial paper is unchanged to 1 basis point wider.

Mid Term Election Analysis

October 24th, 2014 9:36 am

A fully paid up subscriber forwarded this analysis of the November 4 midterm and the consequences of a likely GOP takeover of the Senate

Via JPMorgan (from what looks like a daily newsletter entitled J.P.Morgan Early Look at the Market

Nov mid-term elections – an early preview

  • The2014 Nov mid-term elections take place Tues 11/4
  • Right now theSenate is split 55-45 Democrat-Republican.  The GOP needs a net pick-up of 6 seats to control the chamber (if it is tied 50-50 Dems control w/VP Biden casting the deciding vote).
  • Republicans are widely expected to pick-up at least 4 net seats(getting them to 49).  Anything worse would be considered a major disappointment (not so much for the market but instead the party).
  • The odds are considered high (~75%) that the GOP captures 6 net seats to get them to 51 and Control of the Senate.  A pick-up of 7-8 net seats would be an upside surprise.
  • The Housemost likely won’t change a whole lot and GOP control isn’t considered in doubt (the split now is 233-199 and the GOP is seen either holding steady or picking up ~5-8 net seats).
  • How much would Washington change under a Republican-controlled Congress? Probably not that much.  If the majority is slim (only 1-2 seats) the gridlock won’t go away (the Senate may pass more bills but that may just mean Obama is forced to wield his veto powers more frequently).  Keep in mind that once these elections are over the focus will immediately shift to 2016.
  • Bottom Line:the concept of a GOP Senate is generally considered a “positive” but in reality Congress in 2015 may not function much different from how it does now.  There are two actions that have a reasonable change of happening that would be most positive for stocks: 1) passing corporate tax reform (the odds of this aren’t much higher than 50/50 though);2) adopting “dynamic scoring” on budget matters.
  • A few bigthemes/issues to keep an eye on:
  • Budget– budgetary matters have dominated the Congressional calendar for years and that won’t change going forward.  Immediately after the elections Congress will have to tackle spending given the existing CR (Continuing Resolution) expires Dec 11.  The debt ceiling is suspended until Mar 15 2015.  Keep in mind that Republicans appear to have changed how they handle these matters and some of the brinksmanship tactics of the past have been abandoned (so while the fiscal rhetoric will stay heated, investors shouldn’t fear a prolonged shutdown and/or debt ceiling battle).  One very technical but possibly very important change that could occur is how budget matters are “scored” by the CBO (the politically neutral organization that calculates the costs of every bill) – some Republicans have been vocal in adopting “dynamic” scoring which could help tax cuts appear more palatable during budgetary negotiations.
  • ObamaCare– the ACA overall will stay law so long as Obama is in the WH (and prob. won’t go away once he leaves).  However, a Republican Congress will prob. look to adjust pieces of it, inc. “risk corridors” (which provide federal money to health insurers to cover heavy claims costs) and the med tech tax (which will prob. get repealed).  The employer mandate also could be scrapped (but the much more important individual mandate won’t go anywhere).
  • Fannie/Freddie– while a Republican Congress may make more noise about reforming/dismantling Fannie/Freddie, this is more of an economic issue than a political one.  “Housing” is a bipartisan issue and neither party wants to disrupt it – given that the GSEs are playing such an enormous role at present there won’t be much appetite to rush through legislation passing the companies fully back into private hands.
  • Fed– the amount of Fed-related hearings could increase and some “threatening” bills may receive more attention (concerning issues such as auditing, the dual mandate, etc) but nothing material is likely to actually pass through Congress and become law.  One issue to keep an eye on is the payment of interest on excess reserves (IOER) – this is expected to be a key policy tool for the Fed once tightening starts but elevated payments to banks are likely to attract a lot of Congressional scrutiny (esp. from Republicans).
  • Financial reform– Dodd-Frank prob. will prob. pass through a Republican Congress relatively unscathed.  The one area where some changes could occur is on the subject of small bank regulation (where there is bipartisan support to ease pressures) but large-bank oversight could become even tougher (esp. on the “too big to fail” subject which Republicans are more keen on addressing than Democrats).
  • Immigration reform– the two sides aren’t very far apart on this subject and so some sort of immigration reform legislation may be possible.  However, any bill is prob. going to be incomplete and the status of illegals presently in the US feels like too tough an issue for a lot of people to touch before the ’16 presidential election.
  • Keystone XL– it looks pretty likely that legislation to build Keystone would make it through Congress.
  • Tax reform– this would be the issue most impactful to financial markets but the bar to a “grand bargain” feels pretty high.  If the two codes are split (individual vs. corporate) than something might get done (as individual reforms are much more controversial than corporate ones) but even then it looks like this could be a 2017 (at best) accomplishment.
  • Trade– it would be pretty easy to get legislation through that would ease the way for Obama to negotiate and sign trade deals (this is something the WH wants).

Dealer Positions

October 24th, 2014 6:50 am

Via Bloomberg:

IG CREDIT: Dealer Positions Fall; High Yield at Record Low
2014-10-24 10:45:00.2 GMT

By Robert Elson
Oct. 24 (Bloomberg) — Dealer positions in corporate bonds
fell $4.8b to $33.3b as of Oct 15. $45.9b, seen March 5, was the
high for the series Fed began April 2013; $23b low was Aug 28,
* Investment grade positions:
* Short issues fell $185m to $3.5b, a new high for 2014
and for the series that began in April 2013; $1.2b low
Aug 2013
* Positions longer than 13 months fell $245m to $13.3b;
$16.3b, the high, was seen Mar 12 2014, low of $5.4b in
Aug 2013
* Commercial paper positions at $14.5b, fell $114m;
$19.9b, the high, seen Mar 5, 2014 and $7.2b, the low,
seen Jan 1, 2014
* High yield issues fell $4.3b to $2b, a new series low
replacing $4.8b seen 7/9/2014; high of $8.4b was seen
June 2013
* High yield issues fell $4.3b to $2b, a new series low
replacing $4.8b seen 7/9/2014; high of $8.4b was seen
June 2013</li></ul>

What to Watch Today

October 24th, 2014 6:45 am

Via Bloomberg:

* (All times New York)
Economic Data
* 10:00am: New Home Sales, Sept., est. 470k (prior 504k)
* New Home Sales m/m, Sept., est. -6.8% (prior 18%
* New Home Sales m/m, Sept., est. -6.8% (prior 18%</li></ul>