[MORNING CALL:] Dead Heat

The month of October ended on a high note with 10 issuers raising $20.55bln over the last two days, seemingly ignoring all the background noise created by conflicting earnings reports, economic data and election hullabaloo. I wish I could say the same for the general market.

Over the first four weeks of the month, a mere $67.55bln was raised in the high-grade primary market for a variety of reasons – earnings blackouts, mixed economic data, rising interest rates and, finally, the run up to the presidential election. However, a closing salvo of deals (18) last week, raised $27.45bln, enough to (1) top all weekly estimates including the highest one of $25bln and (2) bring final issuance for the month to $95bln, enough to outdistance the average monthly estimate of $90bln.

Still, last month was the slowest issuance month of the year and the first month since last October ($81.88bln) (excluding holiday-ridden December) that ex-SSA issuance did not reach or exceed the century mark. However, in the grand scheme of things, it was a typical October, a month that has averaged $94.905bln in ex-SSA issuance over the last 10 years.

Those issues that did price last month were fairly well received by investors, contracting an average of 26.1bp from IPT/PX; were 3.1x covered; pricing with an average NIC of 1.47bp; and tightening 2.3bp in the aftermarket. In comparison, year-to-date, the average compression from IPT/PX stands at 26.8bp, while the average book coverage is 3.6x. On the year, ex-SSA issues have priced with an average NIC of 2.5bp and have traded 1.7bp better in the secondary market.

As for November, a month where new issue volume will certainly be influenced by (1) the presidential election results (2) the conclusion of the FOMC meeting on Thursday (3) the Veteran's Day holiday the following week and (4) Thanksgiving Week at the end of the month, the Street is not all that optimistic when it comes to the level of ex-SSA issuance activity. On average, the Street is looking for roughly $70bln to cross the tape in November, with the estimates ranging from a low of $50bln, to a high of $90bln.

However, we may be looking at a decent size offering from Apple sometime this month. The company filed a debt securities shelf on Friday to fund general corporate purposes which may could include stock repurchases/dividends, capital
expenditures, acquisitions and repayment of debt. Apple last tapped the US public debt market in May of last year, raising $5.25bln via a 5-pt offering for the same purposes.

Over the past decade, the month of November ranks as the sixth most prolific issuance month of the year, with an average output of $101.1bln. We have seen as much as $118.229bln (2017), and as little as $74.41bln (2019) come to market in the penultimate month of the year.

To kick off the month, the Street is looking for, on average, a rather anemic $4bln to cross the tape this week due to the election and FOMC interruptions. The lowest guess came in at $2bln, while the most optimistic of our poll respondents thinks there's a possibility of as much as $7.5bln pricing this week. There were no deals announced overnight. Issuance during the past six presidential election weeks has averaged $11.5bln. We have seen as little as $2.5bln (BIDEN d. TRUMP 2020), and as much as $31.26bln (OBAMA d. ROMNEY 2012) price during the week of the election.

As for market conditions this morning, as one can imagine, futures are signaling a cautious start to the week, with the three major averages apparently headed for fractional gains at the open. This after all three indices ended the month of October lower, with the Dow losing 1.4%; the S&P500 closing out the month down 1.0%; and the Nasdaq dropping 0.5% since September. However, all three did rally on Friday and are looking to build on that this morning. Shares of Nvidia were up 2% in pre-market trading after it was announced that the AI darling will be replacing Intel in the Dow.

After a horrific day of Friday where yields shot up 5bp to 10bp across the board with traders brushing off the October jobs report (12k) that came in well below expectations, due to two major hurricanes and labor walkouts, which negatively impacted the survey, Treasuries rallied over the weekend.

The benchmark 10yr note, which closed at 4.37%, a level not seen since the Fourth of July, is now trading at 4.29%, while the long bond yield, which also closed at a three-month high of 4.57%, plummeted 11bp 4.48%, and the 2yr note, the most susceptible to the vagaries of underlying interest rates, rallied 6bp to 4.15%.

Traders attributed the turnaround to the latest poll out of Iowa that showed Vice President Kamala Harris with a three-point lead over former President Donald Trump in a typically red state, though analysts at ING said asset markets are still broadly pricing in a Trump victory.

Another factor traders are taking into consideration is the results of the congressional election. If the House and Senate are split, or if they are controlled by the same party as the White House, there could be very different implications for the economy and financial markets.

Now, we may not know who the next president will be right away – some states have said it may take days, if not weeks, to determine who the winner is – but we do know the Fed will be in play this week, with the markets betting heavily (98.3%) that the Fed will cut interest rate by another, more conventional 25bp, followed by (78.5%) another in December.

Oh yeah, there’s still quite a few earnings reports – Moderna, CVS Healthcare, Qualcomm and a host of others - this week with roughly 20% of the S&P500 due to report. Seventy percent of those companies that have already reported have beaten Street estimates, though many believe the bar was set very low.

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2024 HIGH GRADE ISSUANCE - 11/04 WEEK, NOVEMBER & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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