[THE ENDGAME] : Accentu(r)ating the Positive

October has always been known for such raucous celebrations as Oktoberfest, Halloween, the start of hockey season and the Major League Playoffs. And after the first trading session of the month, despite a troubling backdrop, it looks as though the high-grade primary market can join the celebration, though events in the Middle East kept the celebration to a minimum.

Five ex-SSA borrowers converged on the market today to raise $9bln to kick off the month. This while the rest of the market occupied itself elsewhere with the walkout by more than 50k longshoremen that has all but closed down ports from New England to Texas, and Iran’s missile attack on Israel, not to mention a handful of economic data releases.

According to the results of our impromptu weekly issuance poll, on average, the Street was looking for $22bln in new ex-SSA supply this week, with the guesses ranging from a low of $20bln, to a high of $30bln, most of it expected to be frontloaded as another host of economic data later in the week may give potential issuers cause to pause. As for the month, on average, the Street is looking for around $90bln in ex-SSA issuance to come to market this month, a little more than the five-year average ($88.7bln). The guesses for the month of October ranged from a bearish $75bln, to a bullish $115bln. The bearish respondents are evidently taking into consideration that earnings blackouts will have a negative impact on domestic issuance this month, despite the brunt of earnings season not starting for another two weeks.

Over the past decade, the month of October has ranked as the ninth busiest ex-SSA issuance month of the year and has seen an average of $94.9bln in ex-SSA issuance cross the tape. We have seen as much as $122.29bln (2021) and as little as $74.41bln (2019) in ex-SSA issuance come to market in October, with only one of the last five October’s breaking the century mark barrier.

Today’s crop of issues was lead by a $5bln 4-pt offering from Accenture Capital, which built a final book of $16.3bln (3.26x covered) and contracted 23bp from IPT/PX. Dell International added $1.5bln to today’s haul via a 2-pt offering, while Alaska Airlines, through its loyalty program¸ chipped in with $1.25bln, while Ferguson Enterprises ($750m) and F&G Annuities and Life (500m) made up the balance. On average, today’s deals compressed 26.5bp – ALK contracted 40bp – were 3.5x covered, though, with three debut issues – ALK, CAN and FERG - the average NIC of 0.9bp is of little consequence.

As previously mentioned, there was plenty of geopolitical and economic news to divert attention away from the new issue market. The dockworkers strike could have an adverse impact on an already fragile economy, as it wreaks have with the global supply chain. It is estimated that the strike could cost the economy hundreds of thousands of dollars a day, throwing a monkey wrench into the Fed’s plans to cut interest rates. That had traders in the Fed Funds reducing their odds of another 50bp cut come November from 58.2% last week to 37.3% today.

Meanwhile, heightened tensions in the Middle East, which sent oil prices higher (2.9%) and investors into safer havens, could also add to inflationary pressures, not to mention global economy turmoil. Aside from gold, which closed up $23 an ounce to $2,582, Treasuries were the safe haven of choice. The benchmark 10yr note, which closed at 3.81% last night, saw its yield fall to as low as 3.71%, before closing out the day at 3.74%, 7bp better on the day. Meanwhile the long bond yield fell 6bp, closing at 4.08%, while the 2yr note saw its yield fall 5bp to close at 3.61%. In the end, the Dow, which was down as much as 350 at one point, closed 173 points lower, while the S&P500 fell nearly 1%, both coming off record high closes. The Nasdaq was the worst performer, closing 1.53% lower on the day.

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