[MORNING CALL:] The Final Four

No, not the college basketball tournament, but the last four days of the month of May. Millions travelled this Memorial Day weekend, many of them from Wall Street, which kept primary borrowers out of the market on Thursday and Friday. That left ex-SSA issuance for the week at $28.175bln, thereby topping the average weekly estimate ($25bln), for the fifteenth week this year. It also left 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.

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.

One could say that the 28 deals that priced last 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.

Now the Street is setting its sights on the primary market for this 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. On average, syndicate desks are looking for roughly $15bln in ex-SSA issuance to come to market this week.

That would be more than enough to top the average monthly estimate, but not quite enough to reach the highest estimate of $135bln. The guesses for this week ranged from a low of $10bln, to a high of $25bln, the latter giving us a fighting chance to exceed that highest estimate.

The latest round of economic data came in hotter than expected sending the stock market reeling on the week. 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.

Futures are indicating an attempt at a rebound from last week for the Dow and the S&P500, while the Nasdaq looks to add to last Friday's new all-time record close. Treasury yields barely budged over the weekend with the benchmark 10yr note and the long bond trading close to their closing levels of 4.46% and 4.57%, 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 4.95%.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 05/27 WEEK, MAY & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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