BA/ML's Mikkelsen noted that "it......>

US CORPORATES: BA/ML's Mikkelsen noted that "it was made clear at the June FOMC

meeting, where also the FOMC Policy Normalization Principles and Plans were

released, that the Fed planned to proceed with balance sheet normalization

despite the recent weakness in inflation data. We think this is what triggered

companies to front load issuance plans into the summer. US bks largely completed

their TLAC issuance needs, two large M&A deals that were not" set to close until

yrend "went early (AT&T and Amazon), etc."

- "Third qtr HG new issue volumes exceeded our (perhaps too conservative)

expectations by about $120B," he said. "When something - i.e. Fed bal.sheet

reduction - is widely expected it gets priced in. Mechanically," it spured

"supply shock, which led to wider credit sprds more than 2 mos prior to the

Fed's actual (expected) bal. sheet announcemt. Hence what we are seeing now

heading into the event is rapid credit spread tightening as this supply is being

absorbed and investors rationally expect that the shock subtracts from volumes

later in the year. Using the $120B number as a measure of magnitude, this is the

equivalent of the first 7 mos of reduced Fed" buying of Tsys, MBS(thru Apr '18).