[MORNING CALL:] Your Guess is as Good as Mine...

…or maybe better. After what can only be described as a hectic three days, it was interesting to see what the Street had in store for issuance this week, since typically, the second week of September pales in comparison to the first week. Over the last five years, issuance during the second week of September has declined, on average, 47.2% from the opening salvo. Loosely translated, that means we could be looking at a week that produces between $35-40bln. Still nothing to sneeze at.

And, wouldn’t you know it, the Street must be reading from the same playbook as we are. The bears (2) among the respondents to our impromptu weekly issuance poll are looking for no more than $25bln to cross the tape this week, while the bulls (4) think we could see as much as $41bln. However, on average, the 30 desks who answered the call are looking for $35bln in new high-grade corporate supply to hit the market this week. Should that turn out to be the case, that would bring September ex-SSA issuance for the month to $115.575bln, and push the yearly total to $1.231.533bln, that much closer to the average annual estimate of $1.275.000bln.

As we have said time and time again, the volatility that is seeping into the markets in the run up to the Fed’s interest rate decision in a couple of weeks, whether it be 25 or 50bp - currently, traders in the Fed Funds futures market see a 75% chance of a 25bp cut later this month, with a 25% chance the Fed slashes rates by 50bp after Friday’s weaker-than-expected jobs report (142k) - and the upcoming presidential election, appears to have compelled borrowers to come forward sooner rather than later. At the same time, more and more companies are determined to bolster their balance sheets, just in case the economy continues to slow. And, why not? They apparently have a ready, willing and able audience, since demand has been the driving catalyst behind the flood of issuance this year.

Last week alone, investors submitted orders totaling nearly $300bln (3.71x covered) for the 59 deals that came to market. On average, the week’s deals contracted 29.8bp from IPT/PX and priced with an average NIC of less than 3bp (2.48bp). Additionally, considering the Treasury market’s reaction to the latest economic data – yields across the board fell to levels not seen in sometime – 2yr/3.66% (2yrs), 10yr/3.72% (15 months), long bond/3.99% (9 months) – there’s no reason to believe that would-be borrowers won’t take the opportunity to raise cheap funds while they can.

Therefore, I’m going to go out on a limb here and say ex-SSA issuance comes in at $52bln this week, while overall (SSA-inclusive) issuance tops out at $70bln – the average overall estimate is calling for $45bln, with guesses ranging from a low of $35bln, to a high of $50bln.

We’ve already got Nissan Motor Acceptance, APA Infrastructure and Aptiv wrapping up investor calls today, which should result in a deal this week from each. Aside from one SSA offering, a $1bln no-grow 3yr note from Kommuninvest i Sverige Aktiebolag there were no deals announced overnight. However, we are told to expect at least six issuers to take a look at market conditions this morning.

As for those market conditions this morning, futures are indicating a strong open, as the three major indices try to rebound from Friday’s massive selloff – the Dow closed 411 points lower, while the S&P500 (-1.73%) suffered through its worst week since March of last year, and the Nasdaq closed 2.55% lower, capping its worst week in two years as investors bailed out of high tech stocks as yields fell.

Traders we’ve spoken with attribute the rally this morning, not so much to any developments over the weekend, but to buying on the dip as there is a belief among some that the selloff was overdone after Friday’s jobs report. However, they will still have August CPI (0.2% m-o-m, 2.6% y-o-y) to contend with on Wednesday, and PPI (0.1% m-o-m, 1.7% y-o-y) on Thursday.

The rally in futures has Treasury yields backing up this morning after the weaker-than-expected jobs report sent yields tumbling again on Friday, especially on the underlying interest rate-sensitive short end. The benchmark 10yr is trading at 3.74%, 3bp higher, while the long bond also inched 3bp higher overnight to 4.05%. The 2yr note is trading at 3.69%, 4bp higher than Friday’s close. Corporate spreads were unchanged with the average high grade bond trading 99bp over comparable Treasuries.

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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 - 09/09 CALENDAR

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2024 HIGH GRADE ISSUANCE - CALENDAR (PRICING 9/10)

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