Institutional Fixed Income Sales - Trading Strategy - Analytics LGIP Sell Side Observations And Building Processes Mark Lewis General Securities Principal Fixed Income Sales & Trading Mutual Securities, Inc. Main Office (OSJ) 807-A Camarillo Springs Road Camarillo, CA 93012 (310) 230-1536 mark.lewis@mutualsecurities.com This has been prepared solely for informational purposes for institutional clients only. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. It is based on information generally available to the public from sources believed to be reliable. No representation is made that it is accurate or complete or that any returns indicated will be achieved. Changes to assumptions may have a material impact on any returns detailed. Past performance is not indicative of future returns. Price and availability are subject to change without notice. Additional information is available upon request. Portfolio analytics data provided by Bloomberg Finance L.P. PowerPoint slides include data provided by Bloomberg Analytics, clients, and generally available market information. The material has been prepared by the individual authors and is intended only to provide observations and views of the individual authors and may not necessarily reflect those of Mutual Securities, Inc. Observations and views expressed herein may be changed by the individual authors at any time without notice. 1
Wednesday, March 8 Conversations and Observations Shared Processes for Buy Lists and a Few Shades of Grey Monitoring the Chosen Few 2
Conversations and Observations Is it really a problem that I have DOUBLE my investment policy s concentration limit in that specific agency? Our investment strategy worked fine until it didn t. Strategy of buying callable premiums in which the cash flow needs were based on the call dates. We weren t presented with a process for feeling comfortable with choosing and monitoring Commercial Paper issuers, thus the CP program did not proceed. (process, experience, confidence lacking) Why does county ABC say absolutely NO to 144a and county XYZ say yes? What is an initial screening process I could implement to produce a BUY list? 3
Processes for Buys Lists Rating MTN CP & YCD Long term rating Asset Size Maturity Industry Comfort Country Risk Exposure Comfort Organized and Operating within the United States Yankee CD vs CP vs MTN 144A or RegS Securities Yankee CD vs CP vs MTN 4
Grey Organized & Operating within the United States USD GMTN yet it Is issued off the London office. (PLC is a Public Limited Company, more commonly used in the U.K.) Data and chart provided by Bloomberg Finance L.P. 5
Issuer Description and Company Info Detail A company may issue YCDs or CP off of a NY branch, but a MTN may be off the foreign branch. Similar MTNs: Bank of Montreal Bank of Nova Scotia Toronto Dominion Bank Westpac Banking Data and chart provided by Bloomberg Finance L.P. 6
US Bancorp Organized and Operating in the U.S. A1/A+ rated, Stable/Stable Outlook, Minneapolis based, Domestic MTN, Senior Unsecured, trading ~+58/5s. Data and chart provided by Bloomberg Finance L.P. 7
Local Agencies and 144A Securities (Business Risk Acceptability) 8
Apple Commercial Paper Apple s CP program: APPINC For comparison, Korea Development Bank lists two programs, both U.S. $, however One is issued off the Seoul branch (KDB) and the other is issued off the NY branch (KDBNY). Data and chart provided by Bloomberg Finance L.P. 9
Apple Commercial Paper A-1+/P-1 CP AA+/Aa1 Long Term 144A Data and chart provided by Bloomberg Finance L.P. 10
New York Life Global Funding Rated Aaa/AA+, usually shown with an attractive yield, non-callable, 144A. Data and chart provided by Bloomberg Finance L.P. 11
Common 144a MTNs Daimler Finance North America Metropolitan Life Global Funding MassMutual Global Funding Jackson National Life Global Funding Data and chart provided by Bloomberg Finance L.P. 12
Sample Corporate Bond Buy List (A2/A> Stable/Stable>) 3M (MMM) Alphabet (GOOGL) American Honda Finance (A1/A+, Neg/Neg) Apple (AAPL) Australia/NZ Banking Group NY (ANZ) Bank of America (certain structures A1/A+) Bank of New York Mellon (BK) Branch Banking & Trust (BBT) Berkshire Hathaway (BRK) Boeing (BA) Charles Schwab (SCH) Chevron (CVX) Cisco (CSCO) Coca-Cola (KO) Colgate Palmolive (CL) Duke Energy Carolinas Eli Lilly (LLY) Estee Lauder (EL) Exxon Mobil (XOM) General Electric (GE) Hershey (HSY) Honeywell (HON) IBM (IBM) Illinois Tool Works (ITW) Intel (INTC) Intercontinental Exchange (ICE) John Deere Capital (DE) Johnson & Johnson (JNJ) JPMorgan Chase Bank (JPM) Merck (MRK) Microsoft (MSFT) National Rural Utilities Coop (NRUC) Oracle (ORCL) PACCAR Financial (PCAR) Pfizer (PFE) PNC Bank (PNC) Precision Cast Parts (PCP) Procter & Gamble (PG) Rabobank NY (RABOBK) Simon Property Group (SPG) Starbucks (SBUX) Toyota Motor Credit (TOYOTA) US Bancorp (USB) Wal-Mart (WMT) Walt Disney (DIS) Wells Fargo (WFC - certain structures) John Deere A2/A Neg Outlook Moody s JPMBank Aa3/A+ JPMorgan A3/A- 13
Sample Commercial Paper & Yankee CD Buy Lists Commercial Paper A-1/P-1 Bank Tokyo-Mit NY BNP Paribas NY Canadian Imperial Holdings Cooperative Rabobank NY Credit Agricole CIB NY Credit Suisse NY Mitsui & Company USA A-1+/P-1 General Electric Korea Development Bank NY Toyota Credit PR Yankee CDs A-1/P-1 Abbey National Treasury Bank Tokyo-Mit NY BNP Paribas Fortis NY Canadian Imperial Bank NY Cooperative Rabobank NY Credit Indus NY Kookmin Bank NY A-1+/P-1 Aust & NZ Bank NY Banco Estado Chile Dexia Credit NY Korea Development Bank Nordea Bank NY OCBC New York Swedbank NY Toronto Dominion Bank Westpac Bank NY 14
Monitoring Equity Price Trend CDS Trend 15
Monitoring Corporate Earnings Estimates Sell Side Analyst Recommendations 16
Monitoring Credit Profile Credit Trend 17
Mark Lewis, General Securities Principal - Bio Mark Lewis has over 28 years of experience in the financial services industry. His global experience includes finance, business development, sales and trading, marketing, relationship management, employee management, and operational management. Currently, Mark is an institutional fixed-income trader and General Securities Principal servicing institutional clients who trade AAA rated US$ Supranational Securities, US Treasuries and Agencies, investment-grade corporate bonds, commercial paper, yankee CDs, and certificates of deposit. Mark is in daily contact with the trading desks of over 90 primary and regional dealers in NYC and throughout the country. Mark primarily works with large institutional clients' investment portfolios, focusing on Supranational securities, U.S. government agencies and investment grade corporate bonds with a 1-year to 10-year maturity range. Prior to Mutual Securities, Inc. Mark was a Managing Director and Principal with Wilshire Associates, Inc. Wilshire is a leading global investment technology, investment consulting and investment management firm with four distinct business units including Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets. He was directly responsible for managing Global Business Development and Global Client Relationship Management teams in Santa Monica, Chicago, New York, London, and Singapore for the fixed income analytics division. Clients included Central Banks, Custodian Banks, Mutual Funds, Hedge Funds, Insurance Companies, State Retirement Boards, Trust Departments, Universities, and Governments. Wilshire advises on approximately $1 trillion in assets, directly manages approximately $10 billion in assets, and provides analytical tools to approximately 350 institutions around the world. Mark has visited clients in 20+ different countries throughout Europe, Asia, Africa, and the Americas. Prior to his role at Wilshire, Mark spent more than 17 years in the financial services industry working with financial institutions, governments, foundations, insurance companies, and high net worth individuals throughout the United States. He has worked at Bear Stearns, PaineWebber, and Shearson Lehman Hutton. Mark holds Financial Industry Regulatory Authority (FINRA) licenses as a General Securities Principal (Series 24), a General Securities Representative (Series 7), and a NASAA Uniform Combined State Law (Series 66). Mark has 3 children and is an avid hiker and mountain trail runner. 18