[MORNING CALL:] I'm Looking Through You

Based on yesterday s broader market performance, investors appear to be looking past, or at least through, today s inflationary data, convinced a rate cut or two, is coming sooner rather than later. This morning s CPI data release should keep most, if not all, would-be high grade issuers on the sidelines, though tomorrow could be a different story. While its rare, but not unheard of, for deals to price on Friday, especially during the summer months, JPMorgan Chase, Wells Fargo and Citigroup are all scheduled to report Q1 earnings, which all but eliminated them as candidates to tap the primary market this week. However, they have never shied away from tapping the market post-earnings on a Friday.

This after 11 high grade issuers raised $18.25bln during the week, a week that, on average, was only expected to produce $15bln in new ex-SSA debt. While it was enough to top the average weekly estimate for the for the twentieth time this year, it was not quite enough to reach the highest estimate for the week of $20bln.

However, the same cannot be said for overall (SSA-inclusive) issuance which not only topped the average overall estimate of $22.5bln, but the highest estimate of $27.5bln as well, thanks to the addition of $17.5bln in SSA issuance, the bulk of which came from Saudi Aramco who raised $6bln via a 3-pt deal and IADB who raised $4bln through a 10yr global sustainability offering. The Aramco deal drew $31bln in investor interest, or 5.16x covered

By far the largest contributor to this week s ex-SSA total was the $5bln 3-pt offering from Broadcom which built a book of $20.3bln at its peak, before topping out at $18.55bln, or 3.71x covered. But not far behind was Banco Santander SA s $3.75bln 3-pt offering, which also saw some decent interest (2.66x covered).

As a whole, this week s limited number of deals were relatively well-received by the investor community. On average, this week s deals have contracted 26.7bp from IPT/PX; have been 2.85x covered; and have priced with an average NIC of 3.46bp. In comparison, the average compression from IPT/PX, year-to-date, stands at 27bp, while book coverage stands at 3.5x, and the average NIC is 3.4bp. Ex-SSA issuance this year is running at a 23% faster pace than last year ($907.059bln vs $737.735bln), while overall issuance is outpacing 2023 by 22.1% ($1.166.909bln vs $955.735bln)

As previously mentioned, this morning s CPI report will be the main focus. With recent signs that the labor market is softening, and the CPI report (0.1% m-o-m, 3.1% y-o-y) expected to show a decline from a year ago, the market is expecting the data to prompt the Fed to consider loosening its restrictive monetary policy sooner rather than later. That along with seemingly dovish comments from Fed Chair Powell in his second day of testimony on Capitol Hill, resonated throughout the markets.

So much so, that the Dow closed 429 points higher after two days of moderate losses, while the S&P500 (+1.02%) and the Nasdaq (+1.18%) set new all-time closing records again, with the S&P500 crossing the 5,600 mark (5,634) for the first time ever. The rally was led by semiconductors with Taiwan Semiconductor (+3%) leading the way after revenue in the last quarter came in ahead of Street estimates. Qualcomm and Broadcom each traded 1% higher, while AI darling Nvidia saw its share price also spike 3%.

Over in the Treasury market, yields fell slightly, with the benchmark 10yr note yield falling 2bp to close at 4.28%, despite a $39bln 10yr reopening auction that came in (4.276%) 1bp below the when issued market (4.286%). The long bond yield also closed 2bp lower at 4.47%, though the 2yr note was unchanged at 4.62%. At the same time, the odds of a rate cut in September rose 1.6% from yesterday, with traders now putting odds of a cut at 70%. The same can be said for the probability of a subsequent cut at the December meeting, which now sits at 47.1%, up 0.5% from this previous session.

However, there appears to have been a bit less enthusiasm overnight, with futures indicating a lower open for the three major averages and a reduction in the odds of a rate cut come September (68.1% versus 70%), though, for the most part, Treasury yields, and corporate spreads (+92bp) are unchanged. Shares of PepsiCo and Delta are leading the Dow lower after reporting quarterly earnings this morning. PepsiCo, who beat on the top line, but fell short on the bottom line on declining demand, saw its share price fall 2% in early trading. Despite reporting record revenues, net income at Delta fell 30% for the quarter sending the share price tumbling 9% in pre-market trading.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 07/08 WEEK, JULY & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 07/10 PRICINGS

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