Tag Archives: fixed income


Strong Demand For Yield-Outsize Demand For IG Corporate Bonds

MarketsMuse Fixed Income Curators have been keeping tabs on the seemingly insatiable and outsize demand for yield and in particular, the demand for IG Corporate Bonds aka  investment grade corporate debt. With that, we roll to opening excerpt of Aug 9 notes from “Quigley’s Corner”, the financial industry award-winning commentary produced by Ron Quigley, Head of Fixed Income Syndicate for boutique investment bank/institutional brokerage Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans..

Ron Quigley, Mischler Financial Group

Today things slowed down a bit for the IG dollar DCM but it was still a formidable line-up. We featured 5 IG Corporate Debt issuers that priced 9 tranches between them totaling $7.66b.  The Asian Development Bank priced its expected two-part 3s/10s new issue in the SSA space that totaled $1.3b bringing today’s all-in IG tally to 6 issuers, 11 tranches for $8.96b.

WTD we have now priced 85% of the syndicate midpoint average forecast for the week or $19.46b vs. $22.80b.
MTD we eclipsed the syndicate estimate for the month after only 7 sessions or $68.41b vs. $61.13b.

The big deal of the day in the IG Corporate Debt space was Duke Energy Corp. $3.75b 3-part 5s/10s/30s issued to finance a portion of costs in connection with Duke’s acquisition of Piedmont Natural Gas Company Inc.   Last week Duke Energy (NYSE:DUK) announced it mandated Barclays, Credit Suisse, Mizuho, MUFG Securities and UBS as joint leads to arrange investor calls after which a transaction could soon follow.  As has been written in the “QC” pipeline for a while, on Friday, January 22nd, shareholders of Piedmont Natural Gas (A2/A) voted to approve the Company’s acquisition by Duke Energy (A3/BBB+).  66.8% of voting shares supported the acquisition.  In late October 2015, Duke Energy, (A3/BBB+) the nation’s largest utility, announced that it will buy Piedmont Natural Gas (A2/A) for $4.9b in cash.  Both companies are partners in the $5b Atlantic Coast Pipeline.  The purchase adds one million new rate payers to Duke Energy’s customer base.  Congrats to Duke!

Rates on the Rise?…Think Again.

Today the U.S. Treasury held a 3-year notes auction.  It was one of the strongest in years.  Investors or buyers, for that matter, fly into the safety of USTs motivated by fear and desire for safety.  No one flies into 3yr Notes for the 0.85% yield.  You want my money?  Let’s talk about 5-8% and we can discuss it.  So, when I heard the 3yr auction was so wildly successful I pulled up a chair next to my rates guru Mr. Tony Farren to discuss the matter.  Here are the prescient takeaways:

  • The auction stopped thru 1.2 bps which is a big stop for a 3yr auction.
  • Dealers bought 33.7% of it versus the 6-month average of 38.2%.
  • The bid-to-cover or oversubscription rate was 2.98x versus the 6-month average of 2.76x.
  • Bidders at the auction yield (stopped 1.2 bps thru) only received 54.18% of their size bid for (so, if you bid for $100mm you only wound up buying $54.18mm).

What does it all mean?  Lower-for-longer.  The Fed is not raising rates anytime soon folks.  Taking rate volatility off the table means dive int the stock market readers.  Get back in now.

To read the full (excerpted edition) of Aug 9 edition of “Quigley’s Corner”, please click here

e-Bond Trading Chapter 15: Bloomberg & State Street Join in Eurobond Push

MarketsMuse blog update profiles yet another bond trading system. Bloomberg has introduced new bond trading platform, Bloomberg Bond Cross (BBX), which allows market participants to access European bond market liquidity. Participants now have access to the European bond market liquidity thanks to a new partnership between Bloomberg and State Street. This MarketsMuse blog update is courtesy of WatersTechnology’s article by Marina Daras, “Bloomberg, State Street Launch European Bond Trading System“, with an excerpt below.  

Bloomberg Bond Cross will use Bloomberg’s Trading System Order Execution (TSOX) technology to capture clients’ orders. State Street then finds the opposite side of the trade and participants can work towards negotiating and executing a trade with State Street acting as an impartial counterparty for each trade.

“Despite constraints on dealers’ ability to make-markets in corporate credit, large orders still need to be executed each day,” says George Harrington, global head of FICC trading at Bloomberg. “Bloomberg Bond Cross brings together our existing large network of Bloomberg Professional service subscribers, providing the ability for order staging, negotiation and transacting in one place, attracting volume and building liquidity to help investors identify trade opportunities with State Street.”

To continue reading about this new bond trading platform from Bloomberg, click here.

Finra, Fixed Income and FinTech—Fixing What Folks Keep Saying is Broken

MarketsMuse blog update profiles a proposal from FINRA which proposes pre-trade transparency for fixed income automatic trading systems operators. This update is courtesy of  Traders Magazines’ article, “A Step Closer to a Fixed-Income NBBO” with an excerpt from the article below.

A modest proposal made by the Financial Industry Regulatory Authority (FINRA) aims to have fixed-income alternative trading system (ATS) operators to submit a weekly report that contains all of their quotation data for TRACE-eligible corporate and agency debt-securities to the regulator.

Such data would help FINRA better surveil the growing electronic fixed-income market, especially retail trades, according Robert Colby, the chief legal officer at FINRA.

“We would love to have this information,” he said when speaking the Investment Company Institute’s capital markets conference. “We do not get them now, so we are not super familiar with it. We’ve gotten it in batches at times but are not familiar with it enough to know how to work it into our surveillance system, which is our primary line of interest.”

FINRA officials declined to comment on the proposal further citing that it was still out for comment at press time.

According to the proposal’s text, FINRA would not disseminate the ATS-provided data publicly and use it solely for regulatory and surveillance purposes. However the text also states that FINRA may analyze the data for “the potential value and feasibility of public dissemination in the future.”

To read the entire article from Traders Magazine, click here.

5 Reasons To Be High on High Yield Bonds

While high-yield bond followers are seemingly caught between a rock and a hard place as interest rates may be poised to pick up, some expert investors are positing that high yield positioning is precisely the tactical approach to maintain.. The following MarketsMuse.com fixed income fix is courtesy of contributed article “5 Reasons to Hold High Yield” from Philadelphia-based RIA Clark Capital Management Group’s Chief Investment Officer, Sean Clark, CFA.

Editor Note: Before any MarketsMuse followers pooh-pooh the notion that spreads are bound to widen (and in turn, disrupting HY bond exposure), Clark Capital has been successfully navigating fixed income markets since 1986 and currently has $3billion AUM. The firm recently launched Navigator® Tactical Fixed Income Fund.

Sean Clark, CFA; Clark Capital
Sean Clark, CFA; Clark Capital

“The high yield market was bloodied in the second half of last year, primarily due to the collapse in energy prices.While yields and spreads backedup,broader-based credit remained firm, suggesting that it was an isolated problem due to the collapse of the energy market.We believe that the high yield market will reward investors who adopt a tactical approach.Below are five reasons we anticipate a reemergence of opportunities in the high yield space in 2015: Continue reading

A Dearth of Investment Grade Debt: Why Rates Stay Lower for Longer

While a certain sect of economists are lamenting the exponential increase in debt issued by an assortment of sovereign entities [and corporate bond issuers] within the context of a feared liquidity crisis if and when rates turn higher and institutional investors might run for the exits at the same time, MarketsMuse.com fixed income fix profiles global macro observations from Barry Ritholtz, the Bloomberg View columnist who writes about finance, the economy and the business world. Barry started the Big Picture blog in 2003 and is the founder of Ritholtz Wealth Management, an asset management and financial planning firm. Below is excerpt from Barry’s Mar 17 Bloomberg View article”The Worldwide Deficit of High-Quality Debt

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