[MORNING CALL] Here We Go Again

Right now, it appears SSA’s are picking up right where they left off last week, by dominating the high-grade primary market, with three issues slated to price sometime today, and no less than six more scheduled for tomorrow. This after 20 SSA entities raised $65.465bln, to bring the overall total for the week to $128.165bln, blowing away the highest overall estimate of $80bln, and topped only by the $130.605bln that priced the week of March 30, 2020, at the onset of the pandemic. But that doesn’t mean we won’t see our share of ex-SSA offerings today, or even later in the week with the “big six” banks due to report earnings beginning on Wednesday. As it is, there are eight ex-SSA offerings on today’s docket.

If you recall, ex-SSA issuance last week was dominated by foreign companies as many domestic would-be borrowers are in the midst of earnings blackouts. Yankee issuance accounted for 65% ($40.8bln) of this week’s haul. The same can be said of FIG (both foreign and domestic) issuance, a January stalwart, which made up 79.5% ($49.9bln) of last week’s activity. Today we’re looking at another six (both domestic and foreign) FIG issues to price.

Preliminary thoughts had the Street looking for roughly $40bln in ex-SSA issuance to come to market next week. But that was prior to the December jobs report coming in hotter-than-expected sending the stock market reeling and Treasury yields skyrocketing. Now the Street is even more convinced that we could see $40bln, with the recent rise in interest rates that has already spurred high-grade borrowers to rush to the market before they go any higher. And that’s just the average guess. However, potential borrowers could face some headwinds this week with the market having to contend with more inflationary-centric data. December PPI is due to be released on Tuesday, followed by December CPI on Wednesday.

That along with the beginning of earnings season could keep some borrowers at bay. However, that doesn’t seem to have dampened the spirits of the Street. Even the most pessimistic of the respondents to our weekly issuance poll are looking for at least $30bln to cross the tape this week, while the most optimistic respondent seems to think we could see as much as $50bln tacked on to last week’s $62.7bln. Needless to say, the banks will be the wildcard in the deck.

Maybe that’s why the Street has high hopes for the month. The Street, on average, is looking for $187.5bln in ex-SSA issuance to cross the tape this month, while even the least optimistic respondent is looking for $175bln to price in January. The highest estimate came in at an even $200bln, which would mark only the sixth time in history that monthly issuance topped $200bln.

As for market conditions this morning, the three major averages are opening mixed, with the Dow in the green, while the S&P500 (-0.73% and the Nasdaq (-1.51%) lagging far behind as higher interest rates are taking their toll on the technology sector. This after the Dow fell nearly 700 points on Friday in reaction to the hotter-than-expected jobs number. The S&P500 (-1.54%) and the Nasdaq (-1.63%) also fell victim to the jobs report.

The report had the same effect on the Treasury market where yields blew out as much as 13bp in some cases, with the benchmark 10yr note hitting a 14-month high, closing at 4.77%. While the yield didn’t get any higher over the weekend, we’re still looking at multi-month highs across the curve. Corporate spreads were unchanged, with the average high-grade bond trading 83bp over comparable Treasuries.

The recent rise in interest rates has spurred high-grade borrowers to rush to the market before they go any higher, making last week ($62.8bln) the eleventh busiest ex-SSA issuance week on record. Add to that the $16.05bln that priced the previous week, and the month-to-date ex-SSA total comes to $78.85bln.

.

2024 HIGH GRADE ISSUANCE - 01/13 WEEK, JANUARY & 2025 ESTIMATES

.

.

2025 HIGH GRADE ISSUANCE - RECENT MANDATES

.

.

2025 HIGH GRADE ISSUANCE - 01/13 CALENDAR

.

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.