Credit Pipeline

March 3rd, 2017 6:50 am

Via Bloomberg:

IG CREDIT PIPELINE: A Dollop of MS to Top off ~$56b Week
2017-03-03 10:57:15.569 GMT

By Robert Elson
(Bloomberg) — Friday sessions YTD have not followed the
2016 mode of being live for issuance. Not clear that the MS re-
opening will be the start of a return to the new normal. Last
year even saw deals come and go on Fridays that had jobs data
released. Stay tuned.

Set to price today:

* Morgan Stanley (MS) A3/BBB+, to price a re-opened 5/NC4 FRN;
IPT 3ML +Low-90s
* This issue originally priced Jan. 17 at 3ML +118

Added/updated today:

* Kuwait (KUWIB) to hold investor meetings March 6-10, via
C/DB/HSBC/JPM/NBK/SCB; debut 144a/Reg-S 5Y-10Y deal to
follow
* The State of Kuwait is rated Aa2/AA

Recent updates:

* Mitsubishi UFJ Lease & Finance (MUFJLF) A3/A, to hold
investor meetings March 13-14, via MS
* Nordstrom (JWN) Baa1/BBB+, to hold investor calls March 1-2,
via BAML/MS/USB; $benchmark offering may follow
* JWN last priced a new deal in May 2014
* Great Plains Energy (GXP) Baa2/BBB, to hold investor calls
March 2-3, via Barc/BAML/GS/JPM/MUFG/WFS
* Great Plains Energy agreed to buy Westar Energy (WR) in
May 2016
* GXP last issued in March 2012
* Republic of Indonesia (INDON) Baa3/BB+, mandates
BAML/C/HSBC/SCB for investor meetings to begin March 6
* Woori Bank (WOORIB) A2/A, mandates BNP/C/HSBC/JPM/Nom to
hold inestor meetings March 6-9
* 3M (MMM) A1/AA-; filed mixed shelf
* Plans up to $2.8b debt in 2017, suggesting another yr of
incrementally higher leverage, BI says (Dec. 14)
* Korea National Oil (KOROIL) Aa2/AA, mandates
BAML/C/CA/DB/HSBC/JPM for investor meetings March 2-10; a
USD and/or EUR denominated 144a/Reg-S short to intermediate
maturity deal expected to follow
* Texas Instruments (TXN) A1/A+, has history of March, April
issuance
* Mosaic (MOS) Baa2/BBB-, filed automatic mixed shelf; has not
issued since 2013
* $2.5b deal for Vale fertilizer ops; to fund purchase via
$1.25b cash and debt issuance
* Allergan (AGN) Baa3/BBB, exits blackout; last issued in 2015
* Has $1b maturing March 1
* General Motors Company Files Shelf; Parent Last Issued Feb.
2016
* Medtronic (MDT) A3/A, Files Debt Shelf, Has February
Maturities
* CNA Financial (CNAFNL) Baa2/BBB, Exits Blackout, Has History
of Feb. 10Y Issuance
* Exxon Mobil (XOM) Aaa/AA+, has a history of Q1 issuance
* Feb. 29, 2016: $12b in 8-tranches
* March 3, 2015: $8b in 7-tranches
* March 17, 2014: $5.5b in 5 parts
* Has $2.25b maturing March 15

* M&A deals expected in 2017, updated
* List grows with the addition of RBLN, BATSLN, FOXA
* MARS, the privately help candy behemoth of M&M fame has
a $5b loan outstanding for its VCA purchase; a private
place or debut bond sale to support the acquisition is
possible

SHELF FILINGS

* Panama; debt shelf amended to offer up to $3b debt, warrants
(Jan. 9)
* PG&E Corp (PCG) Baa1/BBB; $350m mixed shelf; Feb. 2014 was
last issuance at this level (Jan. 4)

OTHER

* United Technologies (UTX) A3/A-; plans to tap debt markets
in early 2017 to complete share buyback (Dec. 14)
* European Stability Mechanism (ESM) Aa1/–; mandates for
advisement on inaugural USD issuance (Oct. 21)
* Conagra Brands (CAG) Baa2/BBB; could add up to $2.5b debt
for M&A, BI said
* CAG was raised to BBB by S&P in Nov. on the expectation
co. will maintain debt leverage ~3x and below

French Polling

March 3rd, 2017 6:40 am

Via Bloomberg:

Macron Overtakes Le Pen in France as Juppe Looms Over Fillon Bid
2017-03-03 11:31:49.221 GMT

By Mark Deen and Gregory Viscusi
(Bloomberg) — Emmanuel Macron overtook the anti-euro
candidate Marine Le Pen for the first time in polling for the
French presidential election as the clamor grew for Republican
Francois Fillon to step aside.
Macron’s support jumped 2 points to 27 percent from a week
earlier in an Odoxa survey of first-round voting intentions
while Le Pen slipped to 25.5 percent from 27 percent. Yet the
March 1 and 2 survey of 951 people also showed that Alain Juppe,
defeated by Fillon in the Republican primary, would lead if he
was back in the race.
Juppe was favorite to become France’s next president last
year before he was overwhelmed by a late surge in support for
Fillon during the nomination battle. With prosecutors preparing
to charge Fillon with embezzling public money, some Republicans
are looking to Juppe to jump back in to salvage their party’s
hopes in the first ballot on April 23.
More than 60 politicians have said they could no longer
support Fillon, who is set to be charged for the embezzlement of
public funds despite his protests of innocence. Juppe, the 71-
year-old mayor of Bordeaux, featured on the front page of Le
Parisian newspaper with a report that he is telling allies he is
ready to run if the party wants him. One official who was in
Juppe’s primary campaign suggested he is unlikely to return,
while the mayor himself couldn’t be reached for comment.

Fillon Clings On

Such a dramatic reversal would be in keeping with a race
that has seen three different front-runners and the
unprecedented sidelining of both a sitting and former president.
For now though, Fillon is registered as a candidate and clinging
on to his bid.
“It’s not at all given that Juppe would just waltz back
into his previous position,” Elabe pollster Yves-Marie Cann said
in an interview. “A lot has happened since the primary, there’s
just seven weeks to go.”
The return of Juppe would threaten to drain away centrist
voters who gravitated toward Macron rather than Fillon, an
admirer of former British Prime Minister Margaret Thatcher. Even
so, Cann said it may prove tough to stop Macron now.
“There’s real momentum for Macron,” Cann said. “Look where
he is now. With each poll the percentage of Macron voters who
say they are certain of their choice is rising.”

‘Political Assassination’

The 39-year-old former economy minister brushed off the
possibility of a Juppe challenge.
“A presidential campaign isn’t a series of catch-ups,” he
said on RTL radio Friday. “I’ll continue to advance and march no
matter what happens.”
Fillon, who was the front-runner as little as two months
ago, has seen his campaign marred since mid-January by the
investigation into his employment of his wife. Currently third
in the polls, Fillon says he’s done nothing illegal and
characterized his judicial woes as a “political assassination”
as his center-right party of Charles de Gaulle faces elimination
in the first round of a presidential election for the first
time.
Fillon Family Pay Revelations Muddy French Race: QuickTake
Q&A
The Fillon campaign is planning a crucial rally of
supporters in Paris on Sunday. The gathering on an esplanade
overlooking the Eiffel Tower is meant to be a show of force,
though many officials from the Republican party have said they
won’t be attending. Speaking late Thursday, Fillon dismissed the
significance of the Republican deserters.
“We’ll do it without them,” he said while campaigning
around the southern city of Nimes on Thursday. “The base is
holding on. The right-wing voters are holding on.”

–With assistance from David Whitehouse, Helene Fouquet and
Geraldine Amiel.

FX

March 3rd, 2017 6:32 am

Via Marc Chandler at Brown Brothers Harriman:

Yellen and Jobs Report Last Two Hurdles to US Hike

  • The US dollar is narrowly mixed as Yellen’s speech in Chicago is awaited
  • The failure of the Fed to raise rates in March would be potentially more destabilizing than raising rates
  • Japan reported a slew of data
  • Turkey February CPI rose 10.13% y/y vs. 9.74% expected; Colombia reports February CPI Saturday

The dollar is mixed against the majors ahead of the weekend.  The euro and the Swedish krona are outperforming, while sterling and dollar bloc are underperforming.  EM currencies are also mixed.  ZAR and RUB are outperforming, while TWD and KRW are underperforming.  MSCI Asia Pacific was down 0.7%, with the Nikkei falling 0.5%.  MSCI EM is down 0.9%, with China shares falling 0.2%.  Euro Stoxx 600 is down 0.3% near midday, while S&P futures are pointing to a lower open.  The 10-year UST yield is up 2 bp at 2.49%.  Commodity prices are mixed, with oil up 0.4%, copper flat, and gold down 0.5%.

The US dollar is narrowly mixed as Yellen’s speech in Chicago is awaited.  The greenback’s three-day advance against the euro and four-day advance against the yen is at risk.  Sterling, however, is lower for the sixth session following the weaker than expected service PMI (53.3 vs. 54.5 in January and 54.1 expected).  

The dollar-bloc currencies, where speculators in the futures market had gone net long, continue to underperform.  The dollar-bloc along with sterling are the weakest of the major currencies today.  On the week, the Canadian and New Zealand dollars have lost about 2.5%, while the Australian dollar is off 1.6% and has broken out of the month-long $0.7600-$0.7700 range that had largely confined the price action.  

If Yellen (or Fischer) want to push against expectations for a hike on March 15, today may be their last opportunity.  This seems unlikely given the recent comments by Dudley, but also Governors Brainard and Powell.  There appears to have been a relatively sudden change in the official rhetoric, and it has been seemingly without exception.  

We had thought the word cues in the minutes (“fairly soon”) did not imply March, given the previous signals before the December 2015 and December 2016 hikes.  We thought June was too far but thought May was more promising and had the added advantage of giving the Fed greater degrees of freedom.  The Fed will eventually need to have the flexibility to raise rates at half of its meetings where forecasts are not updated and there is no press conference scheduled.  

An important part of the shift in the rhetoric of Fed officials is that the rate hike is not tied to any specific trigger, such as stronger data or more improvement in the labor market.  The general economic conditions and proximity to the full employment and price stability goals are sufficient, and officials are simply looking for appropriate opportunities.  The broader context, including stronger world growth and a stable dollar (which eased on a broad trade-weighted basis in both January and February), is also conducive.  

The failure to raise rates would be potentially more destabilizing than raising rates.  Investors, seeing the rising prices and improving labor market (with weekly jobless claims at new cyclical lows) would wonder about at least two things:  What does the Fed know that we don’t and is the Fed slipping behind the curve?  It does not seem Fed officials will let expectations build to such a degree (nearly 90% by Bloomberg’s calculation and almost 80% in the CME’s estimate) without delivering.  

The market’s focus is squarely on Yellen (and Fischer), with today’s economic data having little impact.  Japan and EMU data were constructive, while the UK service PMI and China’s Caixin PMIs were not so strong.  Caixin’s composite rose to 52.6 from 52.2, which reflects the gains in the previously reported manufacturing survey as the services PMI slipped to 52.6 from 53.1.  

Japan reported a slew of data.  The most important were the CPI.  The Japanese core rate, which excludes fresh food, rose 0.1% year-over-year in January.  It was the first positive year-over-year reading since December 2015.  Excluding food and energy (like the US core), consumer prices rose 0.2% after a 0.1% increase in December.  The unemployment rate also ticked lower to 3.0% from 3.1%.  

That is where the good news ended for Japan.  The services and composite PMI slipped (51.3 vs. 51.9 and 52.2 vs. 52.3 respectively).  However, the more worrisome sign was the unexpectedly large 1.2% year-over-year decline in overall household spending.  It was expected to have fallen 0.4% after a 0.3% contraction in the year through December.  Purchases of homes and autos were particularly soft.  

Japan’s Topix gapped higher yesterday but retreated today to fill the gap and finished near the middle of the day’s range.  The dollar moved above JPY114 in the middle of the week.  It closed above there yesterday and is holding above there today as it consolidates.  Optionality is thought to be discouraging a run to JPY115.00.  

The composite eurozone PMI was unchanged from the 56.0 flash reading.  Recall that this reading was a marked improvement from January’s 54.4, although the service PMI was a tad softer than the flash.  The composite averaged 53.9 in Q4, which suggests some upside risk to growth.  In the country reports, Germany was as the flash indicated, and both Italy and Spain surprised on the upside.  That leaves France as the source of disappointment.  The service PMI was revised to 56.4 from the flash’s 56.7.  The French composite is at 55.9 rather than 56.2 that the flash estimate had it.  

Disappointment comes from the January retail sales.  German retail sales were the likely culprit.  They fell 0.8%.  The Bloomberg survey produced a median forecast of a 0.3% gain.  Recall December was flat and retail sales in November fell 0.7%.  German retail sales have not grown since October (though fell in August and September too).

Retail sales for the eurozone fell 0.1% in January compared with expectations for a 0.3% gain.   This follows a revised 0.5% contraction in December, which were originally reported as a 0.3% decline.  Eurozone retail sales have now fallen for three consecutive months and five of the last six.  The disappointing consumption and the stable core CPI (0.9%) will give Draghi fodder to push back against some hawks at next week’s ECB meeting.  

The French premium over Germany narrowed this week at both the two- and 10-year tenors.  And it took place at higher absolute yields.  In some sense, the French political picture is clearing.  Fillon’s campaign is in trouble as reports suggest that the center-right Republicans are abandoning it.  Macron’s support is increasing.  Neither Macron nor Le Pen has a parliamentary coalition (Macron’s new party has no members in parliament while the National Front has two seats).  The first round of the presidential contest is April 23 and the second round is May 7.  In June, France goes back to the polls to vote for parliament (June 11 and 18).  

Oil prices are stabilizing after a three-day slide that brought the April light sweet futures contract to the lower end of its three-month trading range.  Even though OPEC appears to have cut output for the second month in February, US output is rising.  At 9.03 mln barrels a day, it is the highest since last March.  Moreover, US oil inventory continues to rise.  The EIA estimates a 1.5 mln barrel build in the past week that raises the year-to-date accumulation to 41 mln barrels.  

Lastly, we note that the S&P 500 gapped higher on Wednesday and did not enter the gap yesterday.  US shares are trading lower in Europe, and the S&P 500 is expected to open lower.  The gap is an important technical consideration now.  The gap is found roughly between 2367.8 and 2380.1.  The gap will likely be entered but is not necessarily bearish.  A close below the bottom would likely be sufficient to be concerning for next week’s activity.

Turkey February CPI rose 10.13% y/y vs. 9.74% expected and 9.22% in January.  Despite the firmer lira, CPI moved further above the 3-7% target range.  Recent lira weakness and the 15.36% y/y surge in PPI suggest price pressures are intensifying.  Yet the central bank has hesitated to hike rates outright.  Instead, it has used the rates corridor in recent months to push interbank rates higher.  Next policy meeting is March 16.  If the lira continues to weaken, further tightening is likely by tweaking the rates corridors again.

Colombia reports February CPI Saturday, which is expected to rise 5.36% y/y vs. 5.47% in January.  If so, this would still be above the 2-4% target range.  The pace of disinflation appears to be easing but the central bank still unexpectedly cut rates 25 bp to 7.25% last Friday.  Steady rates were expected.  The bank has hiked every other month since it started the tightening cycle in December.  As such, we see no move at the March 24 policy meeting, especially if the peso continues to weaken.  

Will Janet Panic the Shorts

March 2nd, 2017 4:38 pm

This is an interesting (at least to me) article from Bloomberg on the possibility that the confluence of huge shorts and an equivocating Ms Yellen might lead to a sharp turn around in bond prices.

Via Bloomberg:

You Should Be Nervous About Janet Yellen’s Speech: Macro View
2017-03-02 20:11:30.972 GMT

By Vincent Cignarella
(Bloomberg) — Foreign-exchange and Treasuries traders may
have gotten ahead of themselves.

* While it seems obvious based on recent economic data that
the Federal Reserve will eventually need to raise rates,
Chair Janet Yellen could walk back market expectations on
Friday to create padding for risk events ahead of the March
15 decision.
* If so, markets appear precariously perched. Dollar-yen has
risen around 2.5 percent and the U.S. 10-year yield has
climbed more than 16 basis points in just three days.
* Short positioning in eurodollars, which are highly sensitive
to the path of Fed rate hikes, is near record levels with
both real and fast money extending hawkish bets, according
to the latest CFTC data.
* These moves have been driven by Fed speakers saying this
week that rates will need to rise soon. First Fed dated
overnight-interest-rate contracts have priced in close to 80
percent odds of a March increase, based on Fed effective
rate of 0.66 percent. Other measures of market-implied
probability approach 90 percent.
* But not everyone is on board. Alan Blinder, former vice
chair at the Fed, said on Bloomberg Radio Thursday that
Yellen won’t sound hawkish and she will want to leave open
the possibility of standing pat in March.
* The Fed hasn’t been coy about its intention to hike
gradually, so March is far from a slam dunk even if
officials collectively see three hikes this year. Don’t
forget, the Fed expected to hike four times in 2016, only to
tighten once.
* Non-farm payrolls on March 10 seems to be the main risk
event ahead of the FOMC. While one data set probably
wouldn’t alter the tightening trend, it could affect timing.
* Another uncertainty is fiscal stimulus. President Trump has
yet to offer specifics on tax cuts, trade and infrastructure
plans that have helped spur inflation expectations.
* Remember, one of the most profitable bets traders could have
made in the last two years is that Fed forecasts would be
wrong.

* NOTE: Vincent Cignarella is an FX strategist who writes for
Bloomberg. The observations he makes are his own and are not
intended as investment advice

Data Dissection

February 28th, 2017 9:19 am

Via Stephen Stanley at Amherst Pierpont Securities:

Real GDP in Q4 was slightly weaker than expected, coming in unrevised at 1.9%.  The shortfall relative to my expectations reflects the old saying “a few billion here and a few billion there, and pretty soon it adds up to real money.”  There were not any big surprises, but a handful of categories came in a few billion dollars lower than I had anticipated.  Business spending on equipment, intellectual property, state and local government outlays, and inventories were all a little lower than expected.  Meanwhile, the main category that was revised higher was consumer spending, which was boosted from a 2.5% growth rate to a 3.0% annualized rise, in line with the robust average recorded since the beginning of 2014.

There are a few other details within the GDP report to discuss.  First, the core PCE deflator was revised downward from a 1.3% annualized increase to 1.2%, but this is even less than meets the eye.  The 1.3% reading before was actually 1.253% unrounded, and the new reading is 1.22%, so the revision is worth even less than full tenth (and will probably be worth a mere 2 BPs on the year-over-year calculation for December).  The January reading due tomorrow for the core PCE deflator will probably increase by 0.3% on a monthly basis, but the January 2016 reading was also up 0.3%, so the year-over-year advance may hold steady at 1.7%.  Meanwhile, the downward revision to the headline PCE deflator in Q4 was more substantial, from a 2.2% annualized clip to 1.9%.  As a result, the year-over-year advance through December is probably about 15 BPs lower than before.  This means that, while the surge in prices for January that will likely be reported tomorrow will still push the year-over-year increase up by around 0.4 percentage points, we are no longer going to hit the 2.0% mark in January.  More likely, the January year-over-year increase will jump to 1.8%.  I still think we get to 2% by spring, but the urgency may be slightly lower than I had anticipated heading into the March FOMC meeting.

The other key detail from today’s report is the incorporation of benchmark employment data into the wage and salary figures for Q3.  The revisions were upward but small for both Q3 and Q4, about $10 billion and $1 billion respectively.

Switching gears, the January merchandise trade deficit exploded upward by about $5 billion to $69.2 billion, about $2½ billion worse than I had expected (and over $3 billion worse than the consensus).  Imports surged, reflecting a big bounceback in auto imports and a surge in consumer goods imports.  The latter may reflect, at least in part, the timing of Chinese New Year, so it will be important to keep a close watch on these data for February as well.  In any case, based on the downside surprise, I am trimming my Q1 real GDP growth estimate to 1.8%.  While economic data have generally been quite strong of late, the key contributors to GDP that we have so far for January have been mostly soft.  I will not be surprised to see Q1 once again come in below the trend as well as recording the worst growth reading for the year.

Durable Goods

February 27th, 2017 9:00 am

Via Stephen Stanley at Amherst Pierpont Securities:

rable goods orders in January were not far from expectations.  The January changes were a bit weaker than projected, but there were upward revisions to December that were largely offsetting.  Given how volatile this dataset typically is, the January report is close enough to expectations that it does not really alter the big picture.

The headline orders gauge rose by 1.8%, very close to expectations, driven mainly (as forecast) by a sizable rebound in aircraft bookings.  Excluding the volatile defense and aircraft categories, orders were slightly better than I had expected, slipping by 0.1% in January, while December’s advance was revised higher by three-tenths.  Motor vehicle industry activity held up better than I had estimated based on the noticeable decline in assemblies last month.

In contrast, core capital goods orders were a touch softer than projected in January, falling by 0.4% (partially offset by a four-tenths upward revision to December).  The modest decline in January breaks a string of three straight monthly advances (and 6 out of 7), but the setback is modest.  Similarly, core capital goods shipments slid by 0.6% in January, but December’s level was revised higher by six tenths of a percentage point.  My view on business investment remains that there is a good deal of pent-up energy that had been held back by an adverse and uncertain policy environment.  The surge in business sentiment in recent months suggests that some of that energy is leaking out already, but my guess is that a full-on strengthening in investment will probably have to wait until there is greater resolution on some of the outstanding policy questions, particularly corporate tax reform (and within that, the proposed treatment of depreciation).  Today’s data is consistent with that big-picture view.  After a dismal 2015-2016, things may be slightly better for now, with the prospect of more significant improvement later in the year.

Index Extension

February 27th, 2017 7:26 am

Via a fully paid up subscriber:

Bloomberg Barclays duration extension estimates as of Feb. 23 are unchanged from Feb. 15 estimates:

• U.S. Treasury: 0.11yrs
• U.S. Agency: 0.08yrs
• U.S. Credit: 0.07yrs
• U.S. Govt/Credit: 0.10yrs
• U.S. MBS: 0.09yrs
• U.S. Aggregate: 0.09yrs
• U.S. High Yield: 0.07yrs

Overnight Credit Trading

February 21st, 2017 6:37 am

Via Bloomberg:

IG CREDIT: Lowest Volume Since Jan. vs Huge Volume Prior 3 Days
2017-02-21 11:15:49.518 GMT

By Robert Elson
(Bloomberg) — Secondary IG trading ended with a Trace
count of $13.5b Friday vs $24b Thursday, $18.2b last Friday. It
was the lowest volume session since $12.8b Jan. 3.

* 10-DMA $19.9b; 10-Friday moving avg $13.2b
* 144a trading added $1.8b of IG volume Friday vs $2.2b
Thursday, $2.1b last Friday

* Top 5 highest volume sessions back to 2005
* $28.2b, 1/31/2017
* $25.2b, 11/30/2016
* $24.6b, 2/15/2017
* $24.0b, 2/16/2017
* $23.8b, 2/14/2017
* 6 of the top-10 highest volume sessions have been this
year

* The top-3 most active issues longer than 2 years:
* KHC 4.375% 2046 was 1st with client flows accounting for
90% of volume
* GS 3.85% 2027 was next with client and affiliate trades
taking 87% of volume
* VZ 2.625% 2020 was 3rd; client and affiliate trades took
82% of volume
* VZ 2.946% 2022 was most active 144a issue with client and
affiliate trades taking 83% of volume

* Bloomberg Barclays US IG Corporate Bond Index OAS at +119 vs
+118, the new tight for the year and the tightest level
since 2014
* 2017 wide/tight: 122/118
* 2016 wide/tight: 215 (a new wide since Jan. 2012)/122
* 2015 wide/tight: 171/122
* 2014 wide/tight: 137/97
* All time wide/tight back to 1989: 555 (Dec. 2008)/54
(March 1997)

* BofAML US Corporate IG Index unchanged at +124; +123, a new
tight level YTD and the tightest since Oct. 2014 was seen
Feb. 15; +106 was hit in June 2014

* Standard & Poor’s Global Fixed Income Research IG Index
unchanged at +165; +164, the tightest spread back to at
least 2015 was seen Jan. 24-27

* Current market levels vs early Friday:
* 2Y 1.235% vs 1.194%
* 2017 High/Low, 1.236%/1.145%
* 2016 High/Low, 1.275%/0.552%
* Looking back 10 years: 5.098%/0.155%
* 10Y 2.449% vs 2.418
* 2017 High/Low, 2.513%/2.326%
* 2016 High/Low, 2.598%/1.359%
* Looking back 10 years: 5.295%/1.359%
* DOW futures +54
* Oil $54.25 vs $52.98

* No IG issuance Friday vs $800m Thursday, $5.65b Wednesday,
$11.9b Tuesday, $6.7b Monday
* Recap of last week’s subdued IG issuance
* Monthly volume $63.65b
* YTD volume $291.1b; ex-SSAs $226.6b

* Pipeline: 2 to Price, Adds/Updates PH, TXN, MOS, MCY
* Note: subscribe bar in upper left corner

Credit Pipeline

February 21st, 2017 6:33 am

Via Bloomberg:

IG CREDIT PIPELINE: 2 to Price, Adds/Updates PH, TXN, MOS, MCY
2017-02-21 10:53:05.763 GMT

By Robert Elson
(Bloomberg) — 2 Yankee deals came forward overnight and
are set to price today. Domestic names are expected to be added
to the mix as 86% of dealers, in a Bloomberg News survey, look
for at least $15b-$20b of IG issuance this week. 44% think it
will be more than $20b.

Recent updates:

* Parker-Hannifin (PH) Baa1/A, plans to issue up to $2.5b sr
notes to fund Clarcor acquisition; mandates C/MS for
investor meetings and calls Feb. 13-16; 144a/Reg-S USD
and/or EUR expected to follow
* PH announced a € benchmark deal today; the announcement
said, in part, “net proceeds from this offering,
together with;(i) the net proceeds from the US Dollar
notes”
* PH was cut to Baa1 by Moody’s, citing the co.’s “modest
but noteworthy increase in financial risk tolerance”
* Texas Instruments (TXN) A1/A+, has history of March, April
issuance
* Mercury General (MCY), to hold investor calls Feb. 22-23,
via BAML/WFS
* Mosaic (MOS) Baa2/BBB-, filed automatic mixed shelf; has not
issued since 2013
* $2.5b deal for Vale fertilizer ops; to fund purchase via
$1.25b cash and debt issuance
* PepsiCo (PEP) A1/A, has $4.4b maturing this year including
$750m next week; has issued in February in 2016, 2014, 2013,
2012.
* Kuwait (KUWIB) to hold roadshows March 5-15, via
C/HSBC/others; a debut deal of as much as $10b may price in
late March/early April
* The State of Kuwait is rated Aa2/AA
* Allergan (AGN) Baa3/BBB, exits blackout; last issued in 2015
* Has $1b maturing March 1
* General Motors Company Files Shelf; Parent Last Issued Feb.
2016
* Medtronic (MDT) A3/A, Files Debt Shelf, Has February
Maturities
* CNA Financial (CNAFNL) Baa2/BBB, Exits Blackout, Has History
of Feb. 10Y Issuance
* Exxon Mobil (XOM) Aaa/AA+, has a history of Q1 issuance
* Feb. 29, 2016: $12b in 8-tranches
* March 3, 2015: $8b in 7-tranches
* March 17, 2014: $5.5b in 5 parts
* Has $2.25b maturing March 15

* M&A deals expected in 2017, updated
* List grows with the addition of RBLN, BATSLN, FOXA
* MARS, the privately help candy behemoth of M&M fame has
a $5b loan outstanding for its VCA purchase; a private
place or debut bond sale to support the acquisition is
possible

SHELF FILINGS

* Panama; debt shelf amended to offer up to $3b debt, warrants
(Jan. 9)
* PG&E Corp (PCG) Baa1/BBB; $350m mixed shelf; Feb. 2014 was
last issuance at this level (Jan. 4)

OTHER

* United Technologies (UTX) A3/A-; plans to tap debt markets
in early 2017 to complete share buyback (Dec. 14)
* 3M (MMM) A1/AA-; plans up to $2.8b debt in 2017, suggesting
another yr of incrementally higher leverage, BI says (Dec.
14)
* European Stability Mechanism (ESM) Aa1/–; mandates for
advisement on inaugural USD issuance (Oct. 21)
* Conagra Brands (CAG) Baa2/BBB; could add up to $2.5b debt
for M&A, BI said
* CAG was raised to BBB by S&P in Nov. on the expectation
co. will maintain debt leverage ~3x and below

Spread Widening

February 21st, 2017 6:32 am

An excerpt from morning note by Marc Chandler of Brown Brothers Harriman:

The 10-year French premium over Germany has widened to 80 bp, the most since August 2012.  It has risen nearly 14 bp since the middle of last week.  The two-year spread is also widening.  It is at 44 bp today, the widest since May 2012.  It is up about 16 bp over the last four sessions.  The five-year credit-default swap was at 68 bp yesterday, up from 38 bp at the end of last year and 42 bp at the end of January.  The sell-off in French debt instruments has reportedly come on high volume.

The demand for German paper, not only emanating from flows out of France but the periphery more general, has seen the German two-year note fell to a new record low (~-88 bp).  This in turn has widened the spread between the US and Germany.  The US two-year premium took out the end of last year’s high (~205 bp) today to make a new post-2000 high.