The improved market is proving to be enticing to IG issuers as nine of them are planning to jump in on Monday.
With the threat of tariffs on Mexico now put to rest - at least for the moment - issuers and investors are going about their business in a much more stable market.
US stocks are up at the open. And the US 10-year Treasury note is hovering around a 2.13% yield.
Friday’s weaker-than-expected jobs report is also fueling investor speculation that the Fed will cut rates this year.
The cut may not be immediate, however. Fed fund futures indicated 17.5% chance the U.S. central bank would lower rates by a quarter point to 2.00%-2.25% at its June 18-19 meeting, down from a 25% probability late on Friday, according to CME Group’s FedWatch program Reuters reported.
HIGH GRADE
Financial services technology provider Fiserv is leading the pack with at least nine issuers hit the high-grade primaries on Monday as markets rally on hopes that US tariffs on Mexico will be avoided.
Fiserv is expected to be the largest deal of the day, a US$9bn four-parter that will be used to take out a US$12bn bridge loan for its US$22bn acquisition of First Data.
The remaining US$3bn is expected to be raised in the euro and sterling markets after roadshows in Europe end on Wednesday.
Other high-grade companies readying deals for pricing today are American Tower, Unum Group, AEP Transmission, Aircastle, Digital Realty, DTE Energy, WP Carey, and Wells Fargo.
Meanwhile, bonds issued by United Technologies (Baa1/BBB+) were outperforming on news it had agreed to merge its aerospace business with US contractor Raytheon Co.
Its 4.125% 2028s and 4.625% 2048s - some of the most heavily traded securities this morning - were 19bp and 25bp tighter at T+91bp and T+121bp, respectively.
This follows a S&P downgrade to BBB+ from A- in November after the company announced plans to spin off its business into three separate entities.
“The [Raytheon] deal will bolster the firm’s market position and replenish lost revenues from the spin-offs, while most importantly, strengthen the credit profile,” CreditSights analysts wrote on Monday.
HIGH YIELD
Harsco Corporation and Hilton are the first off the block in the US high-yield market as investors bet on rate cuts and find relief in hopes that Mexican tariffs are off the cards for now.
The provider of industrial services and engineered products will start roadshows this week for a US$500m eight non-call three bond to help fund its US$625m acquisition of Clean Earth, a specialty waste processing company.
Hilton Worldwide Holdiings is also readying pricing today on a US$750m 2030 as it seeks to repay senior secured credit facilities.
Two other buyouts are also on the roster for this week, namely a US$505m deal from US Renal Care for the acquisition of USRC and a US$1.39bn dual-tranche issue from Multi-Color to fund its buyout by Platinum Equity.
This comes after the primary market for junk issues saw some US$5.425bn in new supply last week, including a US$600m five-year non-call two from Stericycle on Friday.
That deal priced at a yield of 5.375%, inside but not at the tight end of price talk of 5.25%-5.50%.
STRUCTURED FINANCE
Around US$6.7bn of deals are expected in the ABS primary market this week.
Global Jet Capital Holdings will be among them. The business jet leasing firm issued price guidance for its US$517m BJETS 2019-1 deal on Monday.
The senior notes, rated A/A-, have been indicated in the 4.25% area.
Navistar also issued guidance for its US$250m floorplan deal, NAVMT 2019-1. The senior notes have guidance of 67bp-70bp over one month Libor.
Wendy’s also announced its new US$1bn whole business securitization refinancing, while Santander Consumer USA is out with a US$969m sub-prime auto loan deal, its third of the year.
US$3.8bn of ABS supply came last week, most of which were priced at the wide end of guidance amid softer market conditions and volatility in rates markets.
JP Morgan analysts wrote on Friday they expect heightened recession risks to drive more tiering in the market for different sponsors and liquidity risks.
Commercial real-estate pros gather in New York this week for the CREFC annual conference, which runs Monday through Wednesday.
CMBS issuance has been relatively light so far in June after a busy May, although the rally in Treasury rates has tightening in secondary market CMBS spreads, JP Morgan analysts said.
LATAM
Two sovereigns readying dollar deals this week against an improving macroeconomic backdrop today.
Ecuador is retapping its January 2029 notes, while Peru has mandated HSBC, Morgan Stanley, Santander, and Scotiabank ahead of a dual-currency local/dollar deal.
The market seems to be reacting positively spurred on by news about a potential tariff agreement with Mexico over the weekend.
Although not yet finalized, President Trump announced on Sunday that both countries had reached a deal.
“With market tone improving, I would expect more activity. But you just never know,” said a syndicate banker.
Ecuador is so far the only issuer expected today, announcing a retap of its 10.75% January 2029 notes this morning in a deal led by Deutsche Bank, Citigroup, and JP Morgan.
Mineral Logistics, owned by Uruguay-based Corporacion Navios, wrapped a roadshow last Friday on a US$483m 18.2-year senior secured bond. It is expected to price a deal as soon as this week.
Peru will conduct roadshows ending June 12, ahead of a dual-currency deal comprising intermediate to long maturities.
EQUITIES
Led by PetSmart online unit Chewy and cybersecurity special CrowdStrike, there are four companies seeking to raise a combined US$1.5bn through IPOs this week.
CrowdStrike is seeking US$540m on its all-primary offering due price after the close Tuesday, and Chewy about US$790m on its offering Thursday, though PetSmart nearly US$700m that funding total.
Discount grocery chain Grocery Outlet opened the doors this morning on its up to US$292m IPO.
Bank of America Merrill Lynch, Morgan Stanley, Deutsche Bank and Jefferies are marketing an all-primary offering of 17.2m shares at US$15-$17 each for pricing on June 19.
Dermavant, a subsidiary of biotech incubator Roivant Sciences, is seeking up to US$108m of funding on its IPO.
Jefferies, SVB Leerink and Guggenheim Securities marketing 7.7m shares at US$12-$14 for pricing on June 19.
Roivant formed Dermavant to develop a psoriasis drug that it acquired from GlaxoSmithKline for US$191m. GSK would get another US$133m if the drug is approved.
Dermavant is one among seven biotech IPOs that became eligible to launch over the weekend.
Prevail Therapeutics launched an up to US$132m IPO that will fund clinical trials of its gene therapy for Parkinson’s disease.
Morgan Stanley, Bank of America Merrill Lynch and Cowen are marketing 7.35m shares at US$16-$18 each for pricing on June 19.
Cloud software company Smartsheet launched a first time follow-on this morning that will provide a return of capital to some of its venture backers.
Morgan Stanley and JP Morgan are marketing 10.75m shares for pricing after the close on Tuesday off of a recent price of US$45.50, triple its US$15 IPO price last April.
Smartsheet is selling 6.5m shares and selling shareholders led by Madrona Ventures the remaining 4.25m.