[MORNING CALL:] The Yanks Are Coming

Coming into this week, the respondents to our weekly high-grade issuance poll, on average, were looking for $35bln in new supply, with the estimates ranging from a low of $25bln, to a high of $41bln. Well, after eight investment grade borrowers raised a collective $7.1bln yesterday, we appear to be right on target.

Granted, we do expect most of this week’s supply to come before the release of the August CPI (CPI (0.2% m-o-m, 2.6% y-o-y) tomorrow, but that doesn’t mean we won’t see issuance the following day. So, once again we could be relegated to just three trading sessions, much like last week. However, should CPI come in favorably, we could see a barrage of issuance on Thursday, despite the release of August PPI (0.1% m-o-m, 1.7% y-o-y) as would-be issuers look to raise relatively cheap capital to bolster their balance sheets should the data suggest the economy is slowing down a little too much.

Yesterday’s haul brought ex-SSA issuance for the month to $87.675bln, and the year to $1.203.633bln – 27.7% ahead of last year’s pace and inching closer to that average yearly estimate of $1.275.000bln, with more than three months remaining. As expected, Nissan Motor Acceptance (3yr fixed and/or floaters and 5yr) and APA Infrastructure (10yr and 20yr notes) announced deals overnight, along with a 2-pt offering of 5.5yr and 10yr notes from CK Hutchison. We’ll still wait and see if Bungee Ltd, Oneok, and Helmerich and Payne join them after wrapping up investor calls yesterday.

There are also five SSA offerings – Kommuninvest ($1bln 3yr notes), IADB (7yr global notes), IDB Invest ($750m 2yr global notes), Province of Ontario (5yr notes) and African Development Bank (5yr “social” bonds) on tap to price today. Overall (SSA-inclusive) issuance stands at $1.515.233bln for the year, 26.7% ahead of last year’s pace and a mere $40bln shy of the highest annual issuance estimate of $1.550.000bln.

Investor demand has also been a driving force behind the flood of issuance this year. Last week, investors submitted orders totaling nearly $300bln (3.71x covered) for the 59 deals that came to market. On average, last week’s deals contracted 29.8bp from IPT/PX and priced with an average NIC of less than 3bp (2.48bp). Investors submitted orders of more than $27bln (3.87x covered) for yesterday’s deals, which contracted an average of 28.2bp from IPT/PX, and priced with an average NIC of 2.71bp.

Be that as it may, in the runup to tomorrow’s CPI report, futures are indicating a rather muted open for the three major averages. This after all three major averages staged impressive rallies after last week’s drubbing. The Dow closed 484 points higher, erasing all of Friday’s losses, and then some, while the S&P500 (+1.16%) recovered a good portion of Friday’s selloff, although the Nasdaq (+1.16%), closed far from Friday’s -2.55% selloff.

Treasury yields look a bit higher this morning after traders in the Treasury market seemed content to hold on to their positions ahead of the inflation-centric economic data releases, with yields virtually unchanged to a tad better yesterday. The benchmark 10yr note yield fell by 2bp to close at 3.70%, while the long bond dropped 3bp, closing at 4.00%. However, the 2yr note saw its yield edge 2bp higher to close at 3.68%, though the yield curve remained positive at 2bp.

This morning, the benchmark 10yr note is trading 2bp higher at 3.72%, while the long bond yield is higher by 1bp at 4.01%, and the 2yr note yield was unchanged overnight at 3.68%. Corporate spreads are unchanged with the average high grade bond trading 99bp over comparable Treasuries.

Traders in the Fed Funds futures market, while in full agreement that the Fed will cut interest rates later this month, are still at odds as to whether the health of the economy warrants a 25bp or 50bp cut., though the bias (73%) is leaning towards the former. However, they seem to think there’s a good chance (52.3%) that could be followed by a 50bp cut in November.

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2024 HIGH GRADE ISSUANCE - 09/09 WEEK, SEPTEMBER & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 09/10 CALENDAR

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2024 HIGH GRADE ISSUANCE - 09/09 PRICINGS

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