IFR SNAPSHOT - Issuance unbound: IG primary sees 17 deals
The US investment-grade corporate bond market is unleashing a tsunami of offerings on Monday with 17 issues slated for sale.
As markets have settled on news that US tariffs may no be as bad as previously threatened by the administration, investors are assuming a more risk-on posture. With demand still keen, corporate IG issuers are diving into the primary to take advantage of investor appetite and the reasonable borrowing costs still available to corporations.
US stocks opened sharply higher this morning, continuing a market phase started last week. US Treasury yields were higher, but moving in a range. In the ECM arena, CoreWeave saw strong demand for its upcoming IPO offering later this week.
In the high-yield primary, pawn shop operator EZCORP announced a US$300m seven-year non-call three bond that is expected to price today.
Further adding to junk supply this week is Bausch Health, which is preparing what could be the largest single US junk bond sale since 2022 and is scheduled to price on Tuesday, March 25.
Some of this week's economic data reports include the Conference Board Consumer Confidence Index on Tuesday, the durable goods report on Wednesday and the University of Michigan’s Survey of Consumers on Friday. For today, releases include the Chicago Fed's National Activity Index at 8:30am New York time and the preliminary March S&P Global PMIs at 9:45am.
The ABS sector saw steady auto supply last week as investors see comfort in those securities during recent volatile markets.
No offerings were priced in the IG primary on Friday. The week ended with weekly IG supply rising to US$33.862bn and March supply swelling to US$143.687bn, according to IFR data.
The average IG new issue concession last week was 3.51bp and the average order book was 3.54x, according to IFR data. The average progression from initial price thoughts to pricing last week was 24.88bp tighter.
Syndicate desks are anticipating approximately US$28bn in IG supply this week, BMO said, adding that the weekly estimate remains above historical averages, with the last week of March seeing average IG supply of U$22bn since 2016 excluding the outlier of 2020.
"For the month as a whole, March IG supply now sits at $143bn compared to expectations coming into the month for $175-$180bn," BMO said. "Thus, if this week’s expectations are realized, March will close with IG supply around $170bn, just shy of ex-ante projections."
In the HY primary market on Friday no offerings were priced, although one issue totaling US$1.2bn was in the market. Excluding Friday's possible issuance, weekly HY supply totaled US$3.35bn, increasing March volume to US$16bn, according to IFR data.
The average IG bond spread edged out 1bp to 92bp on Friday and the HY spread gapped out 4bp to 321bp, according to ICE BofA data. US yields across asset classes were higher on Friday.
"IG index spreads widened 1bp on Friday to close the week 2bp narrower," BMO said. "Friday’s widening came despite potentially supportive headlines on the tariff front with President Trump saying that there would be flexibility on tariffs as the all-important April 2 date draws near, though risk assets are off to a very strong start to the week this morning on speculation that tariffs will not be as widespread as originally feared."
Looking ahead, BMO said, "We remain of the belief that demand for corporate bonds, both in the primary and secondary market, will remain robust in the near term, and that view is highly reliant on the notion that flows will remain strong."
In particular, flows from mutual funds and ETFs as well as demand from the foreign sector are extremely important to the level of IG spreads after these two investor types represented almost 75% of net corporate purchases in 2024, BMO said.
HIGH GRADE
The US investment-grade bond market is expected to draw at least 17 deals today.
Air lessors are active in the market today, with deals coming from Macquarie AirFinance, Avolon and SMBC Aviation.
Canadian Imperial Bank of Commerce and Royal Bank of Canada are issuing senior paper.
Reinsurer Swiss Re is issuing a 21-year non-call 20 subordinated note for Tier 2 capital. Utilities Oklahoma Gas & Electric and San Diego Gas & Electric are issuing paper.
Asian borrowers are bringing deals too, including offerings from Hyundai Capital America, Korea National Oil and Marubeni.
Anglo-Swiss mining company Glencore is issuing a four-part bond, comprising three, five and 10-year senior unsecured notes. The offering also includes an unusual 1.5-year floating-rate note.
Telecom operators T-Mobile and Verizon Communications are issuing bonds. Today's borrowers also include Equitable Financial, RELX Capital and Harbour Energy.
LEVERAGE/HIGH YIELD
Clydesdale Acquisition Holdings is headlining deal activity in the US high-yield primaries today after announcing a US$1.415bn bond to help fund Pactiv Evergreen's acquisition by Novolex, a packaging company owned by Apollo.
The borrower is approaching investors with a seven-year non-call three bond, which is expected to price later this week.
The funding for the acquisition, which has been valued at US$6.7bn including debt, also comprises loans and equity, according to S&P.
Pawn shop operator EZCORP has also announced a US$300m seven-year non-call three bond that is expected to price today.
Proceeds will be used to repay unconverted 2025 convertible notes at maturity with the rest slated for general corporate purposes.
Meanwhile, two large trades remain in the pipeline, namely a US$1.2bn two-part offering from casino operator Mohegan Tribal Gaming Authority and a US$4bn seven-year non-call three offering from Bausch Health.
Mohegan had been expected to price its deal on Friday. Bausch is likely to wrap up its bond sale on Tuesday.
STRUCTURED FINANCE
The asset-backed primary is poised for a light week of supply after US$10bn of issuance landed last week.
Regional Management is one of the several issuers that are preparing deals for sale this week. The lender is seeking to price a US$265m securitization backed by consumer loans.
In contrast, the RMBS sector is expected to remain active following the completion of US$2.7bn of deals last week.
JP Morgan is in the market with a US$311m non-QM offering, while Goldman Sachs is readying a US$440m seasoned mortgage issue.
As for the CMBS market, Freddie Mac this morning announced a US$500m 10-year fixed-rate multifamily deal for sale this week. The housing agency last week raised US$973m via two offerings.
LATAM
IDB Invest is expected to price today a five-year dollar-denominated global bond via Citigroup, Goldman Sachs, Scotiabank and Wells Fargo. Price thoughts for this no-grow US$1bn offering have opened in the 50bp area over SOFR mid-swaps.
EQUITIES
StandardAero returned with a circa US$855m first-time secondary sell-down on behalf of top shareholders Carlyle and Singaporean sovereign wealth fund GIC, a sale that comes just ahead of the six-month anniversary of the aviation services firm’s US$1.44bn NYSE IPO.
JP Morgan and Morgan Stanley are undertaking the standard two days of marketing for recent new issues before pricing the offering of 30m shares or about 9% of the company post-close Tuesday.
StandardAero shares closed Friday’s session at US$28.59, up 19% from its US$24 IPO price set in early October last year. Carlyle is selling 24.5m shares and GIC the balance of 5.5m shares, cutting their holdings to 55.5% and 12.5%, respectively.
SmartStop Self Storage REIT is finally moving forward with a US$970m NYSE IPO after nearly three years on file.
JP Morgan is leading a syndicate of 13 banks marketing 27m shares in the internally managed self-storage landlord at US$28-$36 for pricing on April 1.
SmartStop expects to pay a monthly dividend of 13 cents per share, an annual payout of US$1.60 and a 5% yield at the US$32 midpoint.
This week's big test remains Thursday night's pricing of AI data center operator CoreWeave's US$2.7bn Nasdaq IPO. The offering was "well oversubscribed" as of Friday or just a day after the offering launched, according to bankers.