[MORNING CALL:] You Can Bank On It

While last week was devoid of any domestic FIG issuance, watch out for this week, after Friday's bank earnings results JPMorgan, Wells Fargo and Citigroup - and those that are slated for today Goldman Sachs - and tomorrow Bank of America and Morgan Stanley.

JPMorgan ($15.75bln) and Morgan Stanley ($21.285bln) have tapped the US public debt market in July four of the last five years, while we have seen Wells Fargo ($18.975bln) and Bank of America ($22.5bln) come to market in July three times over that same period. Goldman Sachs, on the other hand, appears to prefer to wait until August before tapping the market post Q2 earnings results, while Citigroup has been nowhere to be seen in the month of July.

With that in mind, on average, the Street is looking for, $35bln to price this week, with the guesses ranging from a low of $30bln, to a high of $50bln. As a point of interest, the week of, or after the banks reported Q2 earnings last year, $30.575bln in ex-SSA issuance came to market, $21.475bln of that coming from three big six banks.

While there's no guarantee, JPMorgan and Wells Fargo should be the first out of the gate. And, who knows, Citigroup could change its stripes and make an appearance this week. In any event, it should be a very busy week in the US high grade primary market. We ve already seen one deal announced overnight. NongHyup Bank is in the market with a 2-pt offering of 3yr floaters and 5yr social bonds.

This after 11 high grade issuers raised $18.25bln last week, a week that, on average, was only expected to produce $15bln in new ex-SSA debt. While it was enough to top the average weekly estimate for the twentieth time this year, it was not quite enough to reach the highest estimate for the week of $20bln.

However, the same cannot be said for overall (SSA-inclusive) issuance which not only topped the average overall estimate of $22.5bln, but the highest estimate of $27.5bln as well, thanks to the addition of $17.5bln in SSA issuance, the bulk of which came from Saudi Aramco who raised $6bln via a 3-pt deal and IADB who raised $4bln through a 10yr global sustainability offering.

Last week s limited number of deals were relatively well-received by investors. On average, the week s deals contracted 26.7bp from IPT/PX; were 2.85x covered; and priced with an average NIC of 3.46bp. In comparison, the average compression from IPT/PX, year-to-date, stands at 27bp, while book coverage stands at 3.5x, and the average NIC is 3.4bp. Ex-SSA issuance this year is running at a 22.5% faster pace than last year ($907.059bln vs $737.735bln), while overall issuance is outpacing 2023 by 21.5% ($1.166.909bln vs $955.735bln).

As for market conditions this morning as investors evaluate the impact of the assassination attempt on former President Trump, and a full week of corporate earnings, futures are indicating a solid open for the three major indices this after all three are coming off a winning week as easing inflation data upped the ante on rate-cuts.

Traders in the Fed Funds futures market are now putting the odds of a September rate cut at 89.9%, up from 71% just a week ago. Even a rate cut in November is now on the table, as the odds have increased to 56.7% from 33.5% last week.

The perception is that the events of the weekend could lead to further gains in the polls for Trump as the Republican National Convention gets underway today in Milwaukee, commented one political analyst. After surviving an assassination attempt, Ronald Reagan gained 22 points in the polls back in 1981. He added, Trump was already the clear frontrunner, and the shooting will only cement that status.

Investors will also be keeping an eye a slew 255 companies are scheduled to report this week of Q2 earnings releases, beginning with Goldman Sachs who just reported earnings that beat on both the top ($8.62 vs $8.34) and bottom ($12.73bln vs $12.46bln) lines on better-than-expected fixed income trading results.

As for Treasuries, yields backed up somewhat over the weekend after rallying on softer than expected economic data last week. The benchmark 10yr note, which closed out last week yielding 4.18%, is now trading at 4.24%, while the long bond yield backed up 8bp to 4.47%.

At the shorter end of the curve, the 2yr note saw its yield edge 2bp higher to 4.47%. On the other hand, corporate spreads tightened to where the average high grade bond is now trading 92bp over comparable Treasuries. Traders appear to be more focused on inflation, unemployment, and the questions surrounding when the Fed will finally cut interest rates Fed Chair Powell is scheduled to speak this afternoon - rather than the impact of the assassination attempt on the election.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 07/15 WEEK, JULY & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 07/15 CALENDAR

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