The IG primary market expects at least two offerings on Tuesday as investors await the Fed’s rate decision, which is expected to be delivered on Wednesday afternoon.
And two offerings are expected in the high-yield sector.
Meanwhile, President Trump’s tweets and comments on trade talks with China are once again roiling stock markets, as the word bursts veer between negative and positive assessments of the negotiations.
US Treasuries are holding up, with the 10-year note hovering around a 2.05% yield.
On Monday, 9 deals totaling US$15.75bn were priced in the IG primary, pushing weekly volume to US$15.75bn and monthly issuance to US$93.819bn, according to IFR data. Year-to-date issuance stands at US$695.587bn.
HIGH GRADE
Issuers are taking advantage of low spreads and looking to get their deals done ahead of Wednesday’s conclusion to the US Federal Reserve meeting in which markets are anticipating a rate cut.
At least two issuers are offering notes in the US investment-grade primary Tuesday as credit spreads continue to rally with the average IG bond spread tightening to 113bp on Monday over Treasuries, according to ICE BAML data.
American engineering and aerospace company Honeywell International is out with a four-part bond to repay outstanding notes.
Additionally, Ohio-based bank Huntington Bancshares announced a five-year benchmark note, with initial price thoughts around Treasuries plus high 90s.
Casino Las Vegas Sands is rallying in the secondary as much as 7.5bp after its debut investment grade issuance on Monday, according to MarketAxess data. nL2N24U0RM
The 3.5% 2026 issuance was the most active in the secondary market early Tuesday, trading hands at 155bp over Treasuries compared with a spread of T+162.5 at pricing.
Boeing was the big player in the market Monday with a six-part issuance that is also tightening modestly by around 1bp on Tuesday, even on the long dated 40-year note. nL2N24U0S2
HIGH YIELD
Educational firm GEMs and packaging company Ardagh are on the roster today as both issuers straddle the dollar and euro markets for funding.
Ardagh has increased a euro-denominated 7NC3 by US$100m equivalent to EUR440m, while reducing the secured dollar tranche by the same amount to US$500m at talk of 4-4.25%.
It is also showing an unsecured US$800m 8NC3 at 5.25-5.5% ahead of pricing today.
GEMs has taken the opposite tack after dropping its euro tranche altogether and increasing the dollar 7NC3 to US$900m from US$500m and tightening final talk to 7.25% area from 7.5% area.
This comes on the back of some mild weakness with average high-yield bond spreads widening 4bp yesterday, according to ICE BAML data.
Even so, the asset class is still about 150bp tighter on the year and, according to JP Morgan, high-yield bonds have enjoyed year-to-date gains of 10.35%, or 11.06% for double B names.
Issuers have been taking advantage of the buoyant conditions to refinance debt, with refinancing activity totaling US$106.9bn year to date, the bank said in a report.
That is near the US$114.1bn in refinancing volume for the full year of 2018.
STRUCTURED FINANCE
A private non-QM RMBS from JP Morgan was the only deal priced on Monday.
The bank sold a US$608.8m deal, CHASE 2019-ATR2, backed by prime jumbo loans that fall outside Qualified Mortgage rules. It was the bank’s second from the shelf this year.
ABS activity is set to remain busy, based on the number of 15G filings and announcements in recent days.
Activity in the CMBS market is also picking up.
Freddie Mac announced a new US$1.089bn multifamily K-Series CMBS on Tuesday, while a new US$804.589m conduit CMBS, WFCM 2019-C52, was also announced. Both are expected to price this week.
Citi, Goldman Sachs and Deutsche Bank have filed a 15G for another new conduit deal, CGCMT 2019-GC41, while Benefit Street Partners has filed for a new CRE CLO.
And Bank of America Merrill Lynch has filed for potential single loan CMBS backed by the bank’s ground lease interest in its headquarters at One Bryant Park, New York.
The new deal will refinance previously issued bonds secured on the property, according to the filing. The property secures a loan that backs a US$650m single loan CMBS, OBP 2010-OBP, according to Trepp data.
LATAM
El Salvador and Brazilian beef name Marfrig are both taking a run at the market today as issuers look to get in ahead of the end of the Federal Reserve’s FOMC meeting on Wednesday.
El Salvador, rated B3/B-/B-, is out with initial price thoughts of 7.5% area on a new 30-year bond, while Marfrig is testing the waters with high 6s to 7% on a benchmark size 10NC5.
Marfrig’s bond is being dubbed as a sustainable bond in transition, meaning the industry has not traditionally been green. Proceeds are going toward the purchase of cattle in an environmentally friendly way, such as avoiding deforestation.
El Salvador, meanwhile, is expected to lure a decent crowd given its rarity value and the appeal of EM sovereigns ahead of what is expected to be the Federal Reserve’s first rate cut in a decade.
The country was last in the market in February 2017 when it sold a 2029 bond at par to yield 8.625%.
Those bond have been trading at a yield of around 6.1%, while the country’s 2041s are trading at being bid at 6.9%.
EQUITIES
Shares of fake meat maker Beyond Meat slumped 16% this morning after the company last night revealed plans for a US$600m secondary offering that allows insiders to cash in on runaway stock price gains since the company went public just three months ago.
Goldman Sachs, JP Morgan and Credit Suisse and Bank of America Merrill Lynch are marketing 3.25m shares for pricing after the close Wednesday.
Beyond Meat is easily 2019’s strongest performing IPO, closing at US$222.13 last night, nearly 800% above their US$25.00 May IPO price.
However, shares opened down 16% to US$186.34 this morning, suggesting the offering announced alongside second quarter earnings last night will need to come at a significant discount to recent highs.
Goldman Sachs, JP Morgan and Credit Suisse and Bank of America Merrill Lynch are marketing 3.25m shares for pricing after the close Wednesday.
The offering includes 3m shares from insiders that are taking some money off the table.
As it flagged last week, power utility Edison International is looking to fund a portion of its US$2.4bn contribution to California’s new wildfire insurance fund with equity.
The California utility is taking out one day of marketing today to sell 25m shares, raising US$1.77bn based on last night’s close of US$70.60. The shares are trading near a 52-week high of US$72.59 struck last week.
JP Morgan, Barclays, Morgan Stanley, Citigroup and Wells Fargo are the joint bookrunners.
Also last night, independent investment bank Houlihan Lokey priced a US$154.4m secondary block trade, the final sell-down by Japanese parent Orix.
JP Morgan reoffered its purchase of 3.38m shares at US$45.75, at the low end of the US$47.75-$46.00 marketing range versus yesterday’s closing price of US$46.20.
Orix acquired a 70% stake in Houlihan in 2015 and took it public later that year.
As for this week’s scheduled IPOs, software intelligence platform Dynatrace underscored current robust demand for software IPOs by this morning, upping its pricing range to US$13-$15 from US$11-$13 at launch. At the top of the range, the IPO would now raise US$534m, mostly to help the company deleverage.
Goldman Sachs, JP Morgan and Citigroup are leading the offering, which is expected to price tomorrow night.