[MORNING CALL:] The Semifinals

As widely expected, while no records were set, like Olympic sprinters, high grade borrowers were quick off the blocks yesterday to get out ahead of a flurry of high tech earnings, a bevy of central bank rate decisions, and an armload of economic data that will create one hurdle after another for the market this week. Ten ex-SSA high grade borrowers flooded the market, raising $13.6bln through 18 tranches bringing issuance for July to $116.804bln. Coming into this month, even the most optimistic of those who responded to our issuance poll was only expecting high grade issuers to raise $95bln.

To put things in perspective, over the last decade, issuance in the month of July has averaged $88.5bln, ranking it as the tenth slowest issuance week of the year. We have seen as little as $50bln (2014) and as much as $128.48bln (2015) come to market during the month of July. This month marks only the third instance where July high grade issuance has topped the century mark, the other being July of 2017 when $120.3bln crossed the tape.

While there were no deals announced overnight, with the Fed’s rate decision – though the odds (4.1%) of them cutting rates are negligible – and the latest read on the labor market – the ADP payrolls report which is expected to show the private sector added 150k jobs last month – looming large tomorrow, it stands to reason that more would-be borrowers – we’re told to expect at least five, including Citibank NA's proposed 3-pt offering of 2yr fixed and/or floating rate notes and 5yr notes and Netflix' 2-pt offering of 10s and 30s - will add to this month’s final tally. It should be noted that we were also expecting to see a deal from 7-Eleven sometime this week after the company was to hold investor calls yesterday, though those calls were postponed. There was no reason given.

Impressive as yesterday’s new issue volume was, in light of the volatility that plagued the broader markets - all three major averages opened higher and Treasury yields were trading lower, but it was all downhill from there – the reception from investors was less than impressive. A pair of chunky ($3.5bln) deals from Mercedes-Benz Finance North America (5-pt) and Honeywell (4-pt) made up a little more than half of yesterday’s haul, neither of which lit up the board. The MBGGR deal only managed to compress 20bp from IPT/PX, while building a book of a little less than $7bln (1.97x covered), and pricing with an average NIC of 2.5bp.

The same could be said for Honeywell. The 4-pt deal also contracted only 20bp from IPT/PX, only attracted $7.5bln in customer orders (2.14x covered) and needed to pay an average concession of 7.5bp. However, on the other hand, Banco Santander’s $1.5bln pernc10 split-rated preferred offering came in 37.5bp from IPT/PX and was 5.67x covered.

Overall, yesterday’s deals contracted 24.1bp from IPT/PX, while building a book of roughly $35bln, or 2.89x covered. The average NIC on today’s deals came in at an unimpressive 4.19bp., none of which lived up to the year-to-date metrics of -26.5bp IPT/PX, 3.68x covered and 2.54bp average NIC.

As for general market conditions this morning, after the Dow closed 49 points lower and the S&P500 (0.08%) and the Nasdaq (0.07%) were able to eke out fractional gains, futures are setting the stage for modest gains for the three major indices at the open, while it appears Treasuries were unchanged overnight. The over-the-weekend rally in the Treasury market also lost some steam yesterday, though the benchmark 10yr note yield (4.17%) still closed 3bp lower, while the long bond (4.42%) saw its yield close 3bp lower, but the 2yr closed unchanged at 4.36%. Both the 10yr and the long bond yields are unchanged this morning, though the 2yr is trading 3bp higher at 4.39%, while corporate spreads are unchanged at +95bp over comparable Treasuries.

The focus today will be on corporate earnings, with some mixed results already this morning. Shares of Merck (-1%) are trading lower on weaker-than-expected forecasts, while shares of Pfizer (+2%) are trading higher on better-than-expected earnings results. So far, more than 40% of the S&P500 companies have reported their results with 79% posting earnings that exceeded Street expectations. But the real test will come this afternoon after the bell when heavyweights AMD, Microsoft and Starbucks report their quarterly results. Meta Platforms, Apple and Amazon are all scheduled to report later this week.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 07/29 WEEK, JULY & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 7/30 CALENDAR

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2024 HIGH GRADE ISSUANCE - 7/29 PRICINGS

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