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[MORNING CALL:] Relatively Normal

MORNING CALL: Relatively Normal 07/08/24

Coming off the slowest ex-SSA issuance week of the year three deals, seven tranches for $5.35bln - according to the results of our impromptu weekly issuance poll, the Street is looking for high grade issuance to return to some degree of normalcy this week, though the start of earnings season, and the June CPI report (0.1% m-o-m, 3.1% y-o-y) on Wednesday may keep issuance in check. With that in mind, on average, the Street is looking for triple ($15bln) of what we saw last week to price this week, with the guesses ranging from a low of $10bln, to a high of $20bln. That doesn t bode well for a month that is expected to see, on average, $85bln in ex-SSA issuance cross the tape. If you recall the estimates for this month ranged from a low of $80bln, to a high of $95bln. Over the last decade, ex-SSA issuance in July has averaged $88bln.

We re not expecting any help from any of the big six banks who kick off the earnings season on Friday. JPMorgan Chase, Wells Fargo and Citigroup are all scheduled to report Q1 earnings at the end of the week, all but eliminating them as candidates to tap the primary market this week, though they have never shied away from tapping the market on a Friday.

The same can be said for Goldman Sachs (7/15), Morgan Stanley and Bank of America (7/16) as earnings blackouts take effect. That s not to say we won t see one or more tap the market after reporting earnings. JPMorgan ($15.75bln) and Morgan Stanley ($21.285bln) have tapped the US public debt market in July four of the last five years, while we have seen Wells Fargo ($18.975bln) and Bank of America ($22.5bln) come to market in July three times over the past five years. Goldman Sachs, on the other hand, appears to prefer to wait until August before tapping the market post Q1 earnings results, while Citigroup has been nowhere to be seen in July.

There were two deals announced overnight to get the ball rolling. Kraton Corporation, who held investor calls last week, is in the market with a 3yr note offering, while ANZ Banking Group, in its second foray into the US public market this month, is looking to sell 3yr fixed and/or floating rate notes. From what we've been told, we can expect at least five others to take a look at market conditions this morning.

Aside from CPI, earnings will be the main focus for the markets this week, while last week was all about the labor market. After Tuesday s JOLTS report (8140k vs 7946k estimate) showed little change in the labor market, though the previous read was revised downward, all but negating May's gains, Wednesday the markets focus turned to the ADP payrolls report which showed the private sector added 150k jobs in June, 15k less than economist estimates, and 7k fewer than the previous month.

Weekly initial jobless claims (238k vs 235k estimate) rose 4k from the previous week, while continuing claims rose from a revised 1832k to 1858k, slightly higher than expectations (1840k). Then there was Friday s jobs report which showed that the economy added 206k jobs last month, a decline of 12k from a revised May report, further evidence of a loosening in the labor market. The unemployment rate rose to 4.1%. The question remains whether the weakness in the latest jobs data is enough to entice the Fed to consider cutting interest rates this year. Early last week, Fed Chair Powell, while re-emphasizing progress in inflation, reiterated the central bank s stance on the need for more evidence of a weakening in the labor market and a further decline in inflation before lowering rates.

Treasuries took their cue from weaker than expected job-related data with yields falling across the board. The benchmark 10yr note saw its yield fall 15bp on the week to 4.28%. Meanwhile, the long bond yield fell 13bp to close at 4.47%, while the 2yr note, the most susceptible to the vagaries of underlying interest rates, saw its yield fall 14bp, closing at 4.60%. Traders in the Fed Funds futures market reacted the same way, upping the odds of a rate hike come September from 66.5% to 72.2%, 13 percentage points higher than the previous week. Meanwhile, the three major averages closed higher on the week, with the S&P500 and the Nasdaq adding to their number of all-time high closes.

As for market conditions this morning, futures are indicating a modest gain at the open for the three major indices as investors tread lightly ahead of earnings and inflation data. Meanwhile, Treasuries have backed off a bit from last week s gains. The benchmark 10yr note is now yielding 4.31%, 3bp higher than Friday s close, while the long bond (4.50%) and the 2yr (4.63%) are also trading 3bp higher. Corporate spreads tightened throughout last week (2bp) to where the average high grade bond is now trading 92bp over comparable Treasuries.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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5-Jul07/01 WK07/08 WK07/15 WK07/22 WK07/29 WKMTD23 MTD24 YTD23 YTDCHNG
IND0



00251775272470-8%
UTL0



0078600739906%
FIG0



0175028605018282556%
Y(I)350



3501500771844235082%
Y(F)5000



5000955017997014815021%
Y(U)0



0015130950059%
SSA7500



7500024985021250018%
EX-SSA5350000053501280088870972928521.9%
OVERALL1285000001285014800113855994178520.9%

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

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07/08 WKLO ESTAVE ESTHI ESTACTUALJULLO ESTAVE ESTHI ESTACTUAL2024LO ESTAVE ESTHI ESTACTUAL
EX-SSA$10.0B$15.0B$20.0B$0EX-SSA$80.0B$85.0B$95.0B$5,350EX-SSA$1.100B$1.275B$1.350B$888,709
OVERALL$15.0B$22.5B$27.5B$0OVERALL$90.0B$100.0B$110.0B$12,850OVERALL$1.350B$1.420B$1.550B$1,138,559

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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ANNOUNCEDISSUERRATINGSMGRSCALLDEAL
30-MayREC LIMITEDBAA3/BBB-BARC/DBS/HSBC/MIZ/MUFG/SCB3-Jun144A REG S DEAL
25-JunNONGHYUP BANKAA3/A+BOA/C/CA/HSBC/MUFG/SCB1-Jul144A REG S DEAL
28-JunWOORI BANKA1/A+BOA/C/HSBC/MUFG/SG/WFS4-Jul144A REG S TIER I SUB S
7-JulPANASONIC
BOA/MS8-Jul3YR AND/OR 10YR DEAL



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