[MORNING CALL] Nov(end)er

After two consecutive “zero” issuance days, numbers 22 and 23 for the year, and the markets closed yesterday for Thanksgiving, and few, if any, market players in attendance today, it’s safe to say that we can officially close the books on November as far as the high-grade primary market is concerned.

Coming into the month, a month where new issue volume was certainly influenced by (1) the presidential election results (2) the conclusion of the FOMC meeting (3) the Veteran's Day holiday and (4) Thanksgiving Week, the Street was not all that optimistic when it came to the level of ex-SSA issuance activity. On average, the Street was looking for roughly $70bln to cross the tape in November, with the estimates ranging from a low of $50bln, to a high of $90bln. Not all that typical for November which, over the past decade, has ranked as the sixth most prolific issuance month of the year, with an average output of $101.1bln. We had seen as much as $118.229bln (2017), and as little as $74.41bln (2019) come to market in the penultimate month of the year.

Well, for the eleventh month this year, corporate issuers proved the Street wrong by raising $98.7bln, therefore topping not only the average estimate, but the highest one as well. However, it only ranks this month as the second slowest issuance month of the year behind last month’s $95bln. That brought ex-SSA issuance for the year to $1.482.208bln, a 25.2% increase over 2023, enough to top not only the average annual estimate of $1.275trln, but the highest estimate of $1.35bln. That makes 2024 the second most prolific ex-SSA high-grade issuance year on record, topping 2021’s $1.461.891bln and trailing only 2020’s $1.795.825bln.

Since Trump was re-elected, when issuance actually started to flow this month, 64 issuers have tapped the primary market, raising $98bln in the process. Of those, 38 have been FIG issuers, who raised $63.4bln, or 64.7% of the monthly total. That shouldn’t come as a big surprise considering the fact that the sector has the most to gain from Trump’s victory, given his penchant for deregulation, a positive yield curve, tight credit spreads (+82bp) and what are expected to be higher interest rates, though they have been moving in the opposite direction of late.

Still, the expectation of a banner year for the banks can be seen in the performance of the stocks of some of the nation’s largest banks. Shares of Morgan Stanley have rallied 43.3% year to date, while Goldman Sachs shares have surged 56.3% in 2024. “Sentiment has started to shift. Financial stocks have rallied substantially in the last five months,” said one bank analyst. “The S&P500 Financials Index has surged 35.12% this year, outperforming the benchmark's 26.9% gain over the same period.”

We saw an increase in the amount of issuance from the “big six” banks in 2024. Combined, the “big six” have raised $151.2bln, or 10.2% of the total ex-SSA priced thus far in 2024. Last year the group raised a combined total of $118.675bln, or 9.85% of the ex-SSA total for the year, though that was down from the $170.8bln (14.12%) of the final tally in 2022. We also saw the number of M&A-related transactions balloon from 32 issues last year ($126.15bln / 10.43%) to 46 this year ($170.39bln / 11.57%) – four of those priced this month ($6.3bln) – and next year there should be plenty more where that came from considering the probability of more deregulation.

So, now let’s turn our attention to December, a month when issuance is usually confined to the first couple of weeks. The primary market traditionally shuts down on either side of the fifteenth of the month, or right around the last FOMC meeting (December 17-18), whichever comes first. Over the last decade, the month of December, the perennial slowest issuance month of the year, has averaged $33.402bln, with as little as $7.25bln coming to market in 2022, and as much as $63.275bln priced in 2021.

And this year, despite the barrage of issuance, should be a little different. On average, those in the know are looking for $40bln to cross the tape next month, while the least optimistic is looking for only $25bln in new supply. However, there are those that believe we could see as much as $50bln come to market before the year is out, well above the month’s historical average. But every month must start with the first week and that week. according to the results of our weekly issuance poll, is expected, on average to produce $27bln, the bulk of December's total. The guesses for next week ranged from a low of $25bln, to a high of $30bln.

As for market conditions this morning, in what should be a low volume day, futures are pointing to a higher open for the three major indices. This after all three closed lower on Wednesday. The move comes as traders look to the end of a winning week and month. November trading largely centered on the post-election rally seen on the back of President-elect Trump’s victory. The Dow has added 1% week to date, bringing its gain for November above 7%. That’s the best month for the Dow since November 2023. Meanwhile the S&P500 and Nasdaq have advanced 0.5% and 0.4%, respectively, on the week. Both are slated to end the month higher by more than 5%.

Over in the Treasury market, which saw yields fall again on Wednesday, the rally continues this morning. The benchmark 10yr, which closed 5bp better on Wednesday at 4.25%, is now trading at 4.22%, while the long bond is trading 4bp lower at 4.40%. However, the 2yr note is trading a tad higher at 4.20, after closing at 4.19 on Wednesday. Corporate spreads, as previously mentioned, are a tad wider this morning, with the average high-grade bond trading 82bp over comparable Treasuries, still 22bp tighter on the year.

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2024 HIGH GRADE ISSUANCE - 11/25 WEEK, NOVEMBER & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - 12/02 WEEK, DECEMBER & 2024 ESTIMATES

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