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Fixed Income

Rate Outlook: This Fixed Income Expert Says: “Lower For Longer”

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MarketsMuse update courtesy of debt capital markets desk notes distributed to clients of boutique brokerdealer Mischler Financial under the banner “Quigley’s Corner”. Mischler Financial, the financial industry’s oldest and largest minority firm owned/operated by Service-Disabled Veterans received the 2015 Wall Street Letter Award for Best Research/BrokerDealer.

Ron Quigley, Mischler Financial Group
Ron Quigley, Mischler Financial Group

Well, it’s finally Friday and every Friday is a Good Friday!  So, let’s take a look back at the amazing week the investment grade corporate debt market has just concluded.

  • This week was the second busiest in history for all-in IG volume (Corps+SSA) at $65.03b.
  • It is now the fourth busiest all-time as measured by the number of individual tranches priced for all-in IG Corporate plus SSA issues with 63tranches priced.
  • In terms of IG Corporate only supply the week’s  $54.03bn ranks 5th all-time in that category.
  • Market tone remains firm with CDX IG23 at a new low this morning of 60.12.
  • The DOW and S&P are hovering around all-times highs both set this past Monday.
  • Deals are performing well, NICs remain skimpy averaging 3.16 bps across this week’s 59 IG Corporate-only prints and demand is very strong with those 59 issues averaging a 3.55x bid-to-cover rate.
  • The U.S. NFP number was upbeat blowing by estimates or 295k vs. 235k and the EU will be purchasing assets launching EU QE as early as Monday’s session.
  • The average spread daily compression across today’s 59 IG Corporate-only new pricings was 16.28 bps from IPTs to the launch.
  • Spreads across the 4 IG asset classes are an average 21.00 bps wider versus their post-Crisis lows and versus 23.50 last Friday or 2.50 bps tighter on the week!
  • Spreads across the 19 major industry sectors are an average 25.32 bps wider versus their post-Crisis lows and versus 28.21 bps last Friday or 2.89 bps tighter!
  • BAML’s IG Master Index was unchanged at +131 versus yesterday but 6 bps tighter versus last Friday’s +137 although rebalancing took place thanks to Petrobras being dropped due its high yield rating.
  • Standard & Poor’s Global Fixed Income Research was at +171 versus +173 one week ago or 2 bps tighter.
  • Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 63 deals that printed, 51 tightened versus NIP for a 81.00% improvement rate while only 4 widened (6.50%), 7 were trading flat (11.00%) and 1 was not available (1.50%).

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