[MORNING CALL:] Few and Far Between

Holidays around the globe, heightened tensions in the Middle East, earnings blackout periods and crucial economic data have all served to keep corporate high-grade issuance to a bare minimum this week. While the Street wasn’t really expecting much – the average ex-SSA estimate for this week came in at $22bln – in the way of new supply, no one expected that we would see only $12.85bln price over the first three days of the week with the prospects of much, if any, more coming to market today, it being Rosh Hashanah – there were no deals announced overnight – and the September jobs report (150k) to be released tomorrow.

No one should have expected much in the way of issuance this week since October is notorious for a slow start to issuance. This week last year produced a mere $8.9bln from 10 issuers, while the first week in October of 2022 saw 11 borrowers raise $13.55bln.

October itself is not known for robust corporate issuance. Over the past decade, the month of October has ranked as the fourth slowest ex-SSA issuance month of the year and has seen an average of $94.9bln cross the tape. We have seen as much as $122.29bln (2021) but as little as $74.41bln (2019) in ex-SSA issuance come to market in October, with only one of the last five October’s breaking the century mark barrier. On average, the Street is looking for around $90bln in ex-SSA issuance to come to market this month, a little more than the five-year average ($88.7bln). The guesses for the month of October ranged from a bearish $75bln, to a bullish $115bln.

In any event, despite the lack of supply, demand has been robust. This week’s deals, though few and far between, managed to capture the hearts of investors, contracting an average of 28.4bp from IPT/PX – Farmers Insurance Exchange’s $300m 40nc30 surplus notes deal came in 50bp - while building a combined book of $60bln (4.7x covered) – Goodman US Finance’s $600m 10yr note offering was 9.08x covered – and pricing with no NIC at all – five of this week’s deals priced through their outstanding bonds.

Still this week’s $12.85bln has brought ex-SSA issuance for the year to just under $1.3trln ($1.299.008bln), which equates to a 28.8% increase in issuance from this time last year. If you recall, the highest annual estimate we got at the beginning of the year was $1.35trln. The Street, on average, was only looking for a 5.4% incremental rise in issuance this year. Even the most bullish were only looking for an uptick of 11%.

As for conditions this morning as the markets await the latest weekly initial jobless claims (221k), futures are indicating a lower opening for the three major indices, after they made a valiant attempt to recover from Tuesday’s losing session, and for the most part, they succeeded.

The Dow closed a little less than 40bp higher, while the S&P500 eked out a 0.01% gain. The Nasdaq also closed higher by 0.08%. Traders attributed the marginal gains to a cautious outlook surrounding events in the Middle East, which put a dent in the risk appetite of investors.

However, Treasuries couldn’t quite keep the momentum alive yesterday, with yields giving up much of Tuesday’s gains. The benchmark 10yr note saw its yield jump 5bp to close at 3.79%, while the long bond saw the same results, closing at 4.14%. On the short end, the 2yr note fared a bit better with its yield edging 2bp higher to 3.63%.

And from the looks of it, it appears yields are leaking once again this morning. The benchmark 10yr note is now yielding 3.80%, 1bp higher, while the 2yr note yield is 3bp this morning at 3.66%, though the long bond is unchanged at 4.14%. Corporate spreads tightened overnight to where the average high grade bond is now trading 91bp over comparable Treasuries.

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2024 HIGH GRADE ISSUANCE - 09/30 WEEK, OCTOBER & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 10/03 CALENDAR

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2024 HIGH GRADE ISSUANCE - 10/02 PRICINGS

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