[MORNING CALL:] Occidentally on Purpose

Six ex-SSA borrowers tapped the high grade primary market yesterday occidently on purpose to get in before the widely expected jumbo multi-tranche offering from Occidental Petroleum that will no doubt command the attention of investors. For the same reason, there were no deals announced overnight. But that doesn t mean OXY will be the only game in town, though we haven t heard of any other potential borrowers vying for a piece of the action today. And Citigroup is one of them, just announcing a $1,000 par perpnc10 preferred stock offering.

Occidental held investor calls yesterday, ahead of a deal to help fund its $12bln cash and stock acquisition of Permian producer CrownRock. It was announced at the time of the acquisition (December 2023) that OXY would issue $9.1bln in debt prior to closing the deal. If that turns out to be the case, it will make the deal the fifth largest ex-SSA, domestic, industrial/corporate and M&A-related issue of the year.

Until we get the official announcement, which I thought would come while I was writing this piece, those six borrowers raised $8.254bln yesterday, bringing ex-SSA issuance for the month of July to $79.954bln, enough to match, well close enough for government work, the lowest monthly estimate of $80bln.

At the same time, overall (SSA-inclusive) issuance has already topped the average monthly estimate. Coming into the month, on average, the Street was looking for $100bln in overall issuance, and with the addition of $21.2bln in SSA issuance, overall issuance stands at $101.154bln.

Year-to-date, ex-SSA issuance ($963.413bln) is running at a 24% faster clip than last year at this time, while overall issuance ($1.226.963bln) is running ahead of last year by 22.4%. As a matter of fact, with five months remaining in the year, overall issuance is already closing in on the lowest annual estimate of $1.35trln.

American Express Co led the way yesterday with a $3.4bln 3-pt offering of fixed-to-floating and floating rate notes. AXP was joined by United Airlines $1.354bln 2-pt EETC offering, Kinder Morgan s $125bln 2-pt offering of 5s and 30s, Nationwide Building Society s $1bln 5yr senior preferred deal, Ally Financial s $750m 11nc10 fixed-to-floating rate note offering and Korea Hydro & Nuclear Power s (though some consider it an SSA) $500m 5yr note deal.

Judging by the reception given to yesterday's deals, it appears investors are still flush with cash to put to work and didn t hold back waiting for today s expected sizeable offer. On average, yesterday's deals contracted 26.7bp from IPT/PX, while attracting $27bln (3.26x covered) in investor interest, and pricing with an average NIC of 2.17bp.

As for the market conditions OXY could be facing, futures are indicating a rather benign open for the three major indices as investors digest the latest round of earnings. General Motors reported quarterly earnings that beat on both the top ($3.06 vs $2.75) and bottom ($47.97bln vs $45.46bln) lines, as did Coca-Cola ($0.84 vs $0.81 and $12.36bln vs $11.76bln) who also raised its full-year outlook. Both were trading higher in pre-market action, +4% and +1%, respectively.

But doesn t seem to have had much of an impact on the Dow, which appears headed for a modest gain at the open, while S&P500 and the Nasdaq futures are indicating fractionally gains. This after the three major averages staged a bit of a comeback after suffering through their worst week in two months.

The Dow closed 128 points higher despite a 6% decline in the share price of Verizon after reporting mixed Q2 earnings, while the S&P500 closed 1.08% higher despite the second day of double digit (12.5%) losses in the shares of CrowdStrike in the aftermath of last Friday s global IT outage caused the cybersecurity firm s software update. On the other hand, a resurgence in AI darling Nvidia (+4%) and a 15% jump in the share price of Mattel on reports of a takeover bid drove the Nasdaq up 1.58% on the day.

Treasuries staged a mini rally overnight as traders position themselves ahead of some key economic data later this week Q2 GDP and the PCE Price Index. The benchmark 10yr note is trading at 4.23%, better by 3bp, while the long bond saw its yield fall a like amount to 4.45%, though the 2yr note is unchanged at 4.50%.

Corporate spreads were also unchanged with the average high grade bond trading 93bp over comparable Treasuries. It s worth noting, since it speaks to the demand for relatively safe corporate paper, that the spread (+212bp) between the average high grade bond and the average high yield bond, is trading at its tightest level of the year.

In M&A news, German technology group Bosch has agreed to acquire Johnson Controls' residential ventilation businesses for $8bln. Meanwhile, cloud security concern Wiz has reportedly walked away from Google s $23bln offer to acquire the company in favor of pursuing the IPO route.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 07/22 WEEK, JULY & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 7/22 PRICINGS

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