Moody’s 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Lower volume of issuance, but higher number of deals

“Despite a year-over-year decline in global non-finance corporate bond issuance volume and flat rated bank loan issuance volume, Moody’s benefited from a greater number of smaller deals.”

Global structured finance revs up 22%

“global structured finance revenue for the third quarter was $102 million, an increase of 22% from the prior year primarily reflecting increased rating activity for U.S. collateralized loan obligations or CLO.”

Investment grade debt issuance looks like it’s stabilized

“For investment grade we have had a very good settling of the market since last week. Last week did see in the U.S. reduced investment grade issuance of only $6 billion. This week and I just checked before I came upstairs it’s probably going to be a $20 billion week, a little bit better. Next week looks to be the same or a little bit better. What we are seeing now is that pipelines are robust. The pipelines are quite strong. We are expecting a heavy fourth quarter in investment grade because we have $100 billion of M&A pipeline that needs to be financed before the end of the first quarter in 2015. So investment grade looks like it stabilized and looks quite strong.”

High yield and leveraged loan pipelines look average

“High yield did take a step back last week and had only one deal priced last week. This week it’s been quite a good bit healthier though. So I think we characterize state of the high yield markets as improving. And we have seen some transactions that are looking ready to come next week so that’s good. The pipeline would be viewed as average however. And on leverage loans we also see an average pipeline and we do see perhaps $20 billion in leveraged loans for October. So again that pipeline is looking a little bit on the average side as well.”

Get about 5 bps per deal

“I think we would say the 5-ish basis points we get on investment grade deals that service us very well and we think provides good value for the issuers as well. On larger deal particularly, deals as large as Verizon we wouldn’t apply that same basis point level to a deal of that size. So I wouldn’t make an overall judgment thereon on what the price yield would be on those, but 5-is basis points on per issue pricing would be about right.’

When the 10 year traded to 1.87 there was a view that it was because firms aren’t ready to provide the liquidity that they once did

“last Wednesday when the ten year traded down to 1.87, there was a view that a lot of that unusual decline was because capital markets suggest that various firms are not holding the same sorts of bond inventories that they did before to act as a shock absorber as rates move around.”