IFR SNAPSHOT - HY primary continues borrowing run
The high-yield sector continues its borrowing binge, with at least one offering expected to price on Monday and two more issues announced for pricing later in the week.
The investment-grade primary expects at least three offerings to price today.
The asset-backed primary is bracing for another busy week after 16 issuers priced more than US$14.8bn last week, while the RMBS sector is expecting a number of jumbo deals. Over in the ECM, primary activity continues, with follow-on and block trades, as well as an IPO that is expected to price on Wednesday.
For the week ahead, major economic releases will deal with inflation, from the FRB New York Survey of Consumer Expectations on Monday to the Consumer Price Index report on Wednesday, the Producer Price Index report on Thursday and import/export prices on Friday.
There will be a slate of Fed speakers during the week, including Federal Reserve Chairman Jerome Powell delivering his semi-annual testimony before the Senate Banking Committee on Tuesday and the House Financial Services on Wednesday.
"Though normally investors would focus on the first day of Powell's testimony, Wednesday's appearance may take on added significance given the release of the January CPI data earlier in the morning," Deutsche Bank Research said in a report today. "In general, we expect Powell will largely reiterate the message from the January FOMC meeting, that with a strong economy, solid labor market, and bumpy progress on inflation, the Fed is not in a hurry to cut rates."
Last week, the IG primary kicked off the month of February with 48 tranches priced totaling US$43.365bn, according to IFR data.
"After last week became the sixth consecutive week this year in the primary IG market to surprise to the upside with over $43bn compared to expectations for $34bn, syndicate desks are once again anticipating approximately $34bn in supply this week," BMO said in a report today.
Part of this week’s heavy supply estimate is potentially attributable to expectations for M&A-related financing, BMO said, since February has been a relatively popular month for M&A-related issuance in recent years.
The average new issue concession for last week's IG issues was 1.67bp and the average order book was 4.00x subscribed, according to the data. The average move from initial price thoughts to pricing for IG offerings last week was 33.31bp tighter.
"We note that demand in the primary IG market remains very healthy as evidenced by last week’s execution metrics," BMO said.
In the HY primary last week, 15 tranches were priced totaling US$10.416bn, of which two issues were priced on Friday totaling US$1.237bn.
The average IG bond spread was unchanged at 84bp on Friday and the HY bond spread edged out by 1bp to 267bp, according to ICE BofA data. US yields across asset classes were higher on Friday.
"IG index spreads were unchanged during Friday’s session, with spreads holding steady at the top of the 7bp range that has prevailed since the election of President Trump to a second term," BMO said.
HIGH GRADE
At least three US investment-grade bond deals are expected to price Monday.
Industrial conglomerate Textron is issuing a 10-year senior unsecured bond via leads Bank of America, Citigroup and MUFG.
Drug maker Eli Lilly is selling a six-part senior unsecured bond to finance the cash consideration for its acquisition of a drug inhibitor program by Scorpion Therapeutics. The offering's tenors range from three to 40 years.
Railroad company Union Pacific is marketing 10 and 30-year senior unsecured notes.
LEVERAGE/HIGH YIELD
The US primary market for junk bonds remains active on Monday after several borrowers announced deals this morning.
On the pricing roster today is Rogers Communications, a Baa3/BBB- rated Canadian telecom that has announced a US$1bn two-part junk-rated subordinated offering.
The company is approaching investors with 30-year non-call five and 30-year non-call 10 tranches that come with a fixed-to-fixed rate structure and carry equity credit from the rating agencies. Initial price thoughts have been set at 7.625% on both tranches.
Proceeds will refinance debt and/or help fund the purchase of an ownership stake in Maple Leafs Sports & Entertainment.
Elsewhere, Snap has set initial price thoughts in the low 7% area on a US$700m eight-year non-call three offering ahead of expected pricing on Tuesday.
The social media company, whose flagship product is Snapchat, will use proceeds to repurchase some of its outstanding convertible bonds and for general corporate purposes.
Meanwhile, Turning Point Brands is out with a US$300m seven-year non-call three note as the maker of branded smoking products seeks to refinance a 2026 debt maturity and top up its cash balances. Pricing is expected tomorrow.
STRUCTURED FINANCE
The asset-backed primary is bracing for another busy week after 16 issuers priced more than US$14.8bn last week for the heaviest weekly volume since last October, IFR data show.
Stellantis is tapping the market for the first time this year with a US$875m prime auto securitization, while Global Lending is making its maiden trip of 2025 with a US$633.21m subprime auto offering.
Outside of the auto space, First National Bank of Omaha is seeking to raise US$300m with a prime credit card issue.
Data center operator Compass is offering two green bonds: a US$497.5m five-year note and a US$387.5m seven-year security.
This digital infrastructure component that is critical to support artificial intelligence is also hitting the CMBS market. Blackstone is readying a US$2bn deal, following Switch, which sold a US$2.4bn issue last week, marking the biggest green data center securitization.
As for other commercial real estate assets, Prime Group is poised to price a US$479m securitization today to refinance a portfolio of self-storage facilities.
In the RMBS sector, a slew of prime jumbo deals are making their way to market, including a US$548m offering from Redwood and a US$372.9m issue from Radian.
LATAM
Central American development bank Cabei priced an inaugural sterling-denominated offering today. The issuer printed £750m of 4.625% three-year sustainability bonds at 75bp over mid-swaps, with books closing in excess of £3.1bn.
Barclays, Bank of America and BNP Paribas led the transaction.
EQUITIES
Canada’s TD Bank moved to sell its remaining 10.1% stake in discount broker Charles Schwab via a roughly US$15bn follow-on stock sale.
TD Securities and Goldman Sachs are marketing all of TD's 184.7m shares in Schwab through Monday’s session for pricing after the market close.
The banks firmed up support through a targeted wall-cross, ensuring the offering was multiple-times covered at launch.
This is TD Bank’s second Schwab sell-down, following a US$2.5bn unregistered block sale last August.
TD, which took the stake as part of the US$26bn all-stock sale of TD Ameritrade to Schwab in 2020, said it planned to use US$8bn of the proceeds to buy back its own shares and would invest the rest in the bank to support its businesses and accelerate organic growth.
Schwab shares closed last week at US$83.18, 35% above the US$61.65 offer price from last year’s unregistered block.
Also early Monday, Apollo Global Management sold its remaining stake in Sun Country Airlines via a US$100m pre-open block trade.
Barclays and Morgan Stanley are looking to offload their joint purchase of 6.35m shares or 12% of the hybrid low-cost airline at US$16.20, the top of the US$15.80-$16.20 marketing range and a 1.8% discount to Friday’s closing price of US$16.50.
To help ensure a smooth exit for Apollo, Sun Country has agreed to buy back up to US$10m of shares in the offering.
On the IPO front, all indications suggest sponsor-backed security software firm SailPoint’s US$1.05bn Nasdaq IPO pricing on Wednesday night is in excellent shape.
The Morgan Stanley/Goldman Sachs-led syndicate has already secured double-digit coverage levels, with anchor orders at the top of the book.