Conclusión Macroeconómica

 

 

(Bloomberg) — U.S. stocks turned down from session highs as geopolitical tensions continue to weigh into the weekend; the main indexes are flirting with multiple DMAs.

Mexico’s peso faded after Pompeo reinforced Trump’s comments, saying the U.S. is fast approaching a “moment of crisis” due to the migrant situation.

The 10-year Treasury yield pushed above 3.20%.

The dollar fell while cable gained after Prime Minister Theresa May was said to ditch one of her key Brexit demands in order to resolve the Irish border.

The EUR rallied to a new high for the day after EU commissioner Moscovici commented the bloc won’t interfere in Italian economic policies; the comments drove BTP/Bund spreads to around 300 bps from 340.

Elsewhere, WTI rose back above $69 a barrel and Brent above $80.


Credit Markets 

High-grade supply fell short of estimates this week as corporate borrowers worked through earnings blackouts and volatility in rates and equities.

  • The market tone weakened somewhat
    • Credit spreads widened throughout the week as Lipper reported weekly outflows in IG bond funds. While modest, it marked just the fifth week of outflows seen this year
    • Issuers that did come forward paid heightened concessions. Book over-subscription rates were muted aside from Conagra’s M&A-related transaction and deals tightened modestly through the pricing process *T Week YTD NIC 6.4bps 4.3bps Books Covered 3.4x 2.9x IPT -> Launch (Delta) 13.5bps 15.4bps *T

 

  • Conagra priced just over $7b on Monday, the week’s largest deal, to fund its acquisition of Pinnacle Foods. The issuer ended calls last Wednesday, but likely held off until this week given last week’s equities rout
    • The deal saw the most demand of any this week, with a total book size north of $30b and 4.4x subscription rate, however the issuer paid elevated concessions

 

  • Big banks’ no-show contributed to the light supply this week. Issuance was expected as several of them reported earnings beginning last Friday, yet only JPM and Wells Fargo priced relatively small deals post-earnings
    • Their absence from the primary market may be a result of new rules on total loss- absorbing capacity eligible bonds that go into effect next year
    • Banks may have pre-funded to come into compliance

 

  • Self- imposed corporate earnings blackout periods may have also contributed to the light primary volume this week. Third quarter earnings are running through and companies may come forward in the next few weeks as the season winds down
    • Supply this week was $17.825b, short of projections of $25b-$30b

 

  • Foreign USD issuers, however, came forward in large numbers. Yankee issuance accounted for $4.45b, or 25%, of the week’s issuance while EM and SSA issuers put forward a whopping $10.97b of supply. All together, non-domestic USD supply was $15.42b
    • While many factors could explain the uptick in EM and SSA issuance, it is possible that many of these issuers were sitting on the sidelines last week as equity markets tumbled and macro markets were volatile, choosing to take advantage of this week’s slightly more stable tone
    • Not all foreign issuers executed their deals with ease. On Thursday, Empresa Electrica Cochrane decided to not proceed with their bond sale
    • Across the pond, issuers pulled several EU and GBP deals, citing market conditions

 

WEEK AHEAD

  • Estimates call for $15-$20b next week
  • This week regional banks could issue new bonds as they begin to exit earnings blackouts
  • More on the IG Pipeline
  • October projections ~$110b

ISSUANCE STATS

  • Weekly volume $17.825b vs $7.400b last week
  • MTD volume $69.700b
  • September volume $122.900b
  • YTD volume $965.584b

DAILY BREAKDOWN *T Day Volume Monday $9.975b Tuesday $5.250b Wednesday $2.050b Thursday $550m Friday None *T THIS WEEK’S IG ANALYSES

  • Concessions Elevated as Issuers Return to Market
  • Domestic Supply Slows Despite Market Rally
  • Primary Volume Slows, Deal Outcomes Mixed
  • EM and SSA Issuers Outpace Domestic Supply

 


Key Headlines:

  • U.K. banks can deal with Brexit, trade war at the same time: Carney
  • Mexico dealing with challenge of migrants, Videgaray says
  • U.S. existing-home sales at 5.15m, vs est. of 5.29m

 


Key Economic Data: 

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Canada Watch Inflation still points to hikes


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China Economic Watch GDP growth weakened in 3Q with mixed activity data in September


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Japan Economic Watch Weakness in external demand to continue


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UK Macro Viewpoint Brexit – deal, no deal, referendum or election?


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BofAML_ Global Economic Weekly Currency – a new front in the trade war

 


-R.W.N II, yours in 322.

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