[MORNING CALL:] Room for One More

It was a little surprising that we didn t see at least one ex-SSA high grade bond deal come to market on Monday the tenth zero issuance day of the year with the window of opportunity being limited to, at the most, two days, with an early close on today, ahead of the Fourth of July holiday tomorrow, and the June jobs report (190k) due to be released on Friday.

However, with SMRC Automotive Holdings Netherlands BV, after holding investor calls last week, deciding today was as good a day as any to proceed with its senior secured guaranteed 5yr note offering, investors got their second surprise of the week, assuring them of at least one more (another Yankee) deal this week.

This after two more Yankee deals, ANZ New Zealand Bank's $500m 10nc5 subordinated note offering and Sumitomo Mitsui Financial Group's $4.5bln 5-pt offering of 5yr fixed and floating rate notes, 7yr and 10yr senior unsecured notes, and 20yr subordinated Tier 2 notes, combined to raise $5bln yesterday.

Though not enough to reach the average estimate for the week of $6.5bln, it was enough to match the lowest weekly estimate of $5bln. Should today s SMRC deal come in under $750m (the book stands at $1.5bln), this will be the slowest issuance week of the year, unseating the week of June 10th when a mere $5.75bln came to market.

However, when it comes to overall (SSA-inclusive) issuance, with the pricing of Tuesday's $3.5bln 2-pt deal from Bank Gospodarstwa Krajowego and yesterday's $4bln 7yr SEC registered global "climate awareness" "green" bond deal from European Investment Bank, overall issuance ($12.5bln) topped the average weekly estimate of $8bln, and could match the highest weekly estimate of $15bln, again depending on the size of the SMRC deal.

With very little in the way of issuance this week, investors received yesterday s deals with open arms. The EIB deal built a book of $21bln (5.25x covered), while the SUMIBK deal, the fifth largest Yankee deal priced this year, saw $19.4bln in investor interest at its peak, before settling in at $16.35bln (3.63x covered).

The SUMIBK deal also contracted 29.5bp from IPT/PX, while pricing with an average NIC of 7bp, though, without the 20yr sub note (+21bp), the average NIC would have been like 2.1bp. Even the ANZNZ deal was 6.0x covered, and priced with a NIC of 2bp, demonstrating the continued attraction of high yielding subordinated debt.

As for market conditions on this abbreviated trading day (the stock market closes at 1:00pm, while the bond market shuts down at 2:00pm) futures are indicating a mostly unchanged to mixed open for the three major averages. This after the Dow closed 162 points higher, despite homebuilders taking it on the chin after a couple of downgrades, and the S&P500 (+0.62%) closed marginally higher on the back of Tesla (+8.8%), while the Nasdaq (+0.84%) kept chugging along, despite the fourth down day in a row for Nvidia. Both the S&P and the Nasdaq closed at new all-time highs, and above 5,000 and 18,000, respectively, for the very first time.

Treasuries appear to be unchanged to a tad better this morning after rebounding somewhat from Monday s drubbing, with the benchmark 10yr note yielding 4.43%; the long bond yielding 4.59%; and the 2yr note yielding 4.76%. Encouraged by news that Eurozone inflation fell to 2.5% last month, in line with expectations, the benchmark 10yr note, which closed at a three-week high of 4.48% on Monday, regained half of that yesterday, closing at 4.43%, while the long bond yield fell 4bp to 4.60% and the 2yr also regained most of Monday s losses, closing at 4.74%, lower by 3bp. Meanwhile, corporate spreads tightened for the second straight day with the average high grade bond now trading 93bp over comparable Treasuries.

However, comments by Fed Chair Powell, re-emphasizing progress in inflation but the desire for more evidence before lowering rates, served to keep a lid on the rally. Initially, traders in the Fed Fund futures market took the Eurozone data to heart, raising their expectations of a rate cut in September to 63.4%, though following Powell s comments, the odds fell to 59.9%, but still up from last week s 56.3% chance. The volatility comes from the premise among some that a 25bp rate cut is already priced into the market, and aside from reducing the Treasury's debt servicing cost, will have little impact on the markets. Meanwhile, corporate spreads tightened for the second straight day with the average high grade bond now trading 93bp over comparable Treasuries.

Yesterday 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. Today the markets will focus on the ADP private payrolls report (165k) and the weekly initial jobless claims (235k) which will be released a day early due to the holiday on Thursday.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 07/01 WEEK, JULY & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 07/03 CALENDAR

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2024 HIGH GRADE ISSUANCE - 07/02 PRICINGS

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