Below excerpts courtesy of “Quigley’s Corner”, a daily summary of debt capital market activity from Mischler Financial Group’s Ron Quigley
On the “Backpedal”, “Reverse”, “Renege”, “U-Turn”, “About-Face”…………and the FED
The week’s biggest data point belongs to the release of today’s FOMC Minutes. Here are the major talking points:
o Several Fed officials said “forecasts overstated the pace of rate increases.”
o The FOMC minutes did not mention a “rate rise six months after the end of QE.”
o Most FOMC participants saw inflation rising to the 2% Fed goal.
o Minutes revealed “slack” persisting in the Labor market and a gradual decline in unemployment.
o A continued housing recovery was sighted..
o Several members identified trends that pose financial stability risks.
So, what’s it all mean? Great question, simple answer:
Lower for longer. Short-term rates will remain near historic lows. As a result lending will remain en vogue thereby helping equity prices. Let’s go to the videotape – The S&P 500 closed up 20 points; the DOW closed up 181 points; the volatility index known as “VIX” or the “fear factor was shed over 1 point and credit indices IG22 and HV22 reeled in 2.5 and 3.2 bps respectively. And, as a result we’ll continue to see corporate issuers print into this low rate environment. Today’s Greece Euro transaction – its first print since its multiple bail-outs – was well received. In mid-afternoon trading the book build was heard to attract over €11 billion in orders with London bracing for a very active trading session for the issue in the a.m. The deal carried IPTs in the 5.00%-5.25% range with grays indicating 4.85%. So, when Greece does well with investors others will follow suit; when we’re in the midst of U.S. Corporate black-outs, we’ll see EM and Yankees fill up the pipeline; should U.S. Corporate earnings deliver good, bad or indifferent news, companies will continue to issue because they’ll appreciate the favorable rate opportunity before them. In other words, with many calling for a rather sedate IG Corporate new issue amount for April I have stood out most of my peers when I wrote the following in response to several April monthly financial pollsters on Monday March 31st:
To continue reading, please click on the link to Mischler’s Debt Market Commentary