[MORNING CALL:] Rapid Dismissal

Found my coat and grabbed my hat. On the road in seconds flat. This is not a drill. AAA is projecting nearly 44m people will travel this Memorial Day weekend, including 3.5m by plane, and more than 38m are expected to hit the road this weekend, many of them last night, and many of them from Wall Street, which is going to keep primary borrowers out of the market today.

That is going to leave ex-SSA issuance for the week at $28.175bln, thereby topping the average weekly estimate ($25bln), for the fifteenth week this year. It also leaves ex-SSA issuance for the month at $116.35bln, inching closer to the average monthly estimate of $125bln, though far below the decade-long average for the month of May, one of the most prolific issuance months (#3) of the year, of $143.953bln.

With the addition of a 10yr note offering from Province of Manitoba, overall (SSA-inclusive) issuance for the week came in at $34.225bln, a hair below the average estimate for the week of $35bln. That also brought overall (SSA-inclusive) issuance, which is running 23.2% ahead of last year, for the month to $136.9bln (the average monthly estimate was calling for $150bln to price this month). Ex-SSA issuance is on a 24.4% faster pace than last year.

While it really had little to do with the tanking of the broader markets yesterday, the high-grade primary market saw its seventh zero ex-SSA issuance day of the year, as the Street began packing up for the long Memorial Day weekend. With nothing expected to price before today s early market close, the Street is setting its sights on the primary market for next week, where, in just four days, anywhere from $15 to $20bln in new supply is expected, which should be enough for ex-SSA issuance to reach the average monthly estimate of $125bln. We ll get a better handle on it when we conduct our weekly issuance poll later this morning.

One could say that the 28 deals that priced this week were met with a mixed reception from investors. The average contraction from IPT/PX came in at 23.8bp, while the oversubscription rate was more than decent at 3.42x, though the average NIC was kind of elevated at 3.78bp. In comparison, on the year the 484 deals in the books compressed an average of 26bp from IPT/PX; have been 3.81x oversubscribed; and priced with an average NIC of 2.1bp

The latest round of economic data came in hotter than expected sending the stock market reeling. Services and manufacturing data for the month both topped expectations, while labor market data also came in stronger-than-expected, adding to the belief the Fed will not lower interest rates any time soon.

Traders in the Fed Funds futures market reduced their pie-in-the-sky odds of a rate cut at the July FOMC meeting from 16.3% to 12.3%, while the odds of a more realistic chance of a rate cut in September were also revised from 52% to 46.5% after the latest read on the economy. A day after minutes from the last Fed meeting affirmed that policymakers are worried over inflation and not in a hurry to cut rates, has the Street thinking we may only see one cut, if that, before the year is out.

What had started out as a relatively positive day for the major averages, quickly turned into a rout. The Dow fell 606 points (-1.53%), it s worse session in 14 months, led lower by a 7% decline in the share price of Boeing, while the S&P500, which early on traded at a new intraday high, fell 0.74%. The Nasdaq, which was up at much as 140 points, also a new intraday high, on the back of Nvidia s earnings, did a complete turnaround, before rallying in the final minutes, closing 66 points (-0.39%) lower, despite a 9% gain in the share price of the AI darling.

Apparently, traders in the Treasury market got the message as well, with yields backing up anywhere from 3 to 7bp, with most of the damage on the short end of the curve. The benchmark 10yr note, which closed at 4.43% last night, added 4bp today, closing at 4.47%, while the long bond yield rose 3bp to 4.58%. The 2yr note saw its yield skyrocket by 5bp to close at 4.91%, its highest yield in three weeks. At the same time corporate spreads remained unchanged, with the average high grade bond trading 89bp over comparable Treasuries, 1bp off its tightest spread of the year and 3bp away from the tightest spread (+86bp) in the last three years.

Things don t look much better this morning, though futures are indicating a slightly higher open for the three major averages. However, the early holiday close should keep trading volume light, which usually leads to volatility in the market. What could also add some volatility will be the release of April s durable goods orders (-0.8%) and the University of Michigan sentiment survey (67.7).

Treasury yields barely budged overnight with the benchmark 10yr note and the long bond trading at their closing levels of 4.47% and 4.58%, respectively. However, the 2yr note, the most susceptible to the vagaries of inflation and its impact on underlying interest rates, saw its yield rise 2 more basis points to 4.93%.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 05/20 WEEK, MAY & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 05/23 PRICINGS

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