[MORNING CALL:] Rising Above the Noise and Confusion

Political drama aside, with earnings season just getting underway in earnest, it's not unusual that issuance would have been dominated by financials last week - of the $48.1bln raised last week, the eighth busiest ex-SSA issuance week of the year, and the twenty-first time this year that the average weekly estimate ($35bln) has been breached, $36.85bln, or 77% came from domestic FIGS - since scores of corporate/industrial companies, some of whom have M&A deals on the table, were restricted by blackout periods.

However, as those blackouts begin to lift, it bodes well for high grade issuance going forward as we enter on the final days of the month there are eight viable trading days remaining. With that in mind, on average, the Street is looking for $30bln to price this week, with the guesses ranging from a low of $20bln, to a high of $42.5bln.

One possibility for this week has already emerged. Occidental Petroleum is holding investor calls today, with a potentially large multi-tranche deal to follow. If you recall back in December, the company announced that it would acquire Permian producer CrownRock for $12bln in a cash and stock deal. We originally expected the deal to close by the end of the first quarter. However, the closing was delayed due to the FTC's request for more information. It was announced at the time of the acquisition that OXY would issue $9.1bln in debt prior to closing the deal.

Coming into today s session, ex-SSA issuance stands at $71.7bln. If you recall, the respondents to our monthly issuance poll we re calling for, on average, $85bln in ex-SSA debt to price this month, with the guesses ranging from a low of $80bln, which should be a no-brainer to surpass, to a high of $95bln, which could also be in sight. Over the last decade July ex-SSA issuance has averaged $88bln, with as much as $128bln priced in 2015, and as little as $50bln in 2014. Last year July produced $90bln in new ex-SSA debt.

Not only did investors give a relatively warm reception to last week s offerings, but the vast majority traded better in the secondary market as well. While year-to-date, the 621 deals (1141 tranches) that have priced contracted an average of 26.8bp from IPT/PX. Last week, 27.2bp. As for book building, deals have been 3.6x covered y-t-d. Last week, 3.57x.

The blaring difference, NICs. Where the average NIC year-to-date stands at 2.3bp, last week s deals priced with an average NIC of 0.94bp. On average, last week s deals traded nearly 6bp better in the aftermarket. As a matter of fact, of the 41 tranches priced last week, only two failed to tighten in secondary trading, and those two were unchanged.

While there were no deals announced overnight, we don t expect that to remain the case for long as we re told to expect at least a half dozen prospective borrowers to assess market conditions this morning. As for those market conditions, the broader markets seem to be having a mooted reaction to the news that President Biden has dropped out of the presidential race, seemingly passing the torch to Vice President Kamala Harris.

After suffering through the worst week in two months, futures are indicating a higher open for the three major indices, especially the Nasdaq which was the hardest hit last week as investors turned away from mega cap technology stocks as interest rates fell in favor of more cyclical names.

Treasuries rallied over the weekend, but not necessarily because the so called Trump trade could be in jeopardy with a new opponent, but more likely ahead of some key economic data Q2 GDP and the PCE Price Index. The benchmark 10yr note, which closed out last week yielding 4.25%, edged 3bp to 4.22%, while the long bond did the same, with the yield falling to 4.42%.

However, the 2yr note, the most susceptible to the vagaries of underlying interest rates, saw it yield move 3bp in the opposite direction to where it is now trading at 4.52%. Meanwhile. Corporate spreads are unchanged with the average high grade bond trading 93bp over comparable Treasuries.

Traders in the Fed Funds futures market have not changed their outlook much for a rate cut in September, though the odds have fallen slightly from 93% on Friday to 91.7% this morning. However, the odds of a subsequent cut in November increased from 39.4% to 41.5%.

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