IFR SNAPSHOT - IG primary pauses as HY takes up the slack
The US investment-grade primary is quiet today after seeing 32 issues priced already this week, while the high-yield arena is busy today with at least three offerings expected to price.
A crowded slate of economic data releases is expected on Thursday, starting with the February Advance Economic Indicators report, the third look at Q4 GDP, and weekly jobless claims at 8:30am New York time. There are two Fed speakers scheduled for today.
In the IG primary on Wednesday, 12 offerings were priced totaling US$19.1bn, lifting weekly supply to US$47.15bn and pushing March volume to US$190.837bn, according to IFR data. The weekly issuance exceeded syndicate estimates of US$28bn.
"The $19bn upside surprise to estimates is the largest beat to expectations in two months," BMO said. "Excluding weeks with less than $10bn projected, this week is the largest upside surprise on a percentage basis since November with the possibility of further supply today."
The average IG new issue concession on Wednesday was 4.07bp and the average order book was 2.61x, according to IFR data. The average progression from initial price thoughts to pricing yesterday was 20.98bp tighter.
"Yesterday’s primary market slate was met with strong (if unspectacular) demand despite declining risk sentiment. Concessions paid on the day’s 25 tranches averaged approximately 4bp, slightly stronger than the long-term average," BMO said. "Order book coverage metrics weren't quite as supportive with the day’s deals coming an average of 2.6x oversubscribed."
Looking ahead, Bank of America Research said in a report today that it sees IG April issuance of US$120bn to US$140bn.
"The $130bn mid-point of the forecast would be the heaviest supply for the month of April since Covid in 2020, above the $102bn 5yr average ex. Covid and higher than $105bn priced in April of last year," BofA said.
No issues were priced in the HY primary market on Wednesday, leaving weekly issuance at US$5.6bn and March volume at US$21.6bn.
The average IG bond spread edged out 1bp to 91bp on Wednesday and the HY spread widened by 10bp to 319bp, according to ICE BofA data. US yields across asset classes were higher on Tuesday.
"IG index spreads widened 1bp as risk tone deteriorated over the course of the day, culminating in President Trump’s announcement of 25% tariffs on automobiles effective April 3," BMO said.
"Encouragingly, client activity in the secondary market remained skewed toward better buying yesterday according to TRACE metrics despite the tariff headwinds and an onslaught of IG supply."
HIGH GRADE
No new US investment-grade bond offerings are expected to price today after a volatile session on Wednesday drew 12 borrowers for US$19.1bn of supply.
Malaysian oil company Petronas brought the biggest issue of the day, a US$5bn three-tranche offering. Computer hardware company Dell sold one of the larger deals of the session, a US$4bn trade.
Glencore brought its second bond of the week. The Anglo-Swiss miner priced a US$500m 30-year senior unsecured note at Treasuries plus 145bp, only 10bp away from where its new 10-year priced on Monday.
Other borrowers that came to market yesterday included the likes of Vici Properties, Union Electric and Mutual of Omaha.
LEVERAGE/HIGH YIELD
The US primary market for junk bonds is bracing for a busy Thursday as at least three borrowers ready deal pricings today.
A US$1.2bn two-tranche issue from the Mohegan Tribal Gaming Authority, previously scheduled to price last week, has reemerged, but with some changes.
The deal, which is expected to price today, now comprises a US$750m five-year non-call two bond and a US$450m six-year non-call two issue.
Those two secured tranches were previously sized at US$600m each.
Left lead Deutsche Bank has also made covenant changes and is now aiming to price the six-year with a 11.875% coupon to yield 12.50%, wide to earlier talk of 11.00%-11.25%. Price talk on the five-year remains in the area of 8.25%.
The casino operator is using proceeds to refinance US$1.175bn of senior secured notes due 2026.
Also on the pricing roster today is Apollo-backed packaging company Novolex, which is looking to raise US$1.415bn to help fund its acquisition of rival Pactiv Evergreen.
The company has set price talk of 6.75%-7.00% on a seven-year non-call three senior secured note.
French auto parts manufacturer Forvia is also readying pricing today on a US$500m 5.25-year non-call 2.25 offering.
STRUCTURED FINANCE
Digital infrastructure assets are in the spotlight in the ABS primary, with three deals from this corner of the structured finance market on track to price by tomorrow.
Sabey and TierPoint are seeking to raise US$325m and US$510m data center offerings, respectively, while Allo is returning with a US$200m fiber issue. The TierPoint and Allo are both selling green bonds.
ESG supply is also sprouting in the CMBS sector. Hudson Pacific is preparing to price a US$475m green bond this week to refinance a group of top-notch office properties on the West Coast.
LATAM
No LatAm deals are expected to price today.
Yesterday, South American multilateral bank Fonplata raised US$50m with a private placement of a 10-year sustainable bond, which carries a coupon of 5.622%.
EQUITIES
A wave of negative investor feedback ahead of CoreWeave’s Nasdaq IPO late Thursday could see the offering price come well below the marketing range, according to multiple market sources.
A Morgan Stanley-led syndicate is marketing 49m shares in the Nvidia-backed AI data center operator at US$47-$55 for proceeds of up to US$2.7bn, though a range of buyside concerns about the company’s financials, customer concentration and the capital intensity of its business model is expected to result in a downsizing of the offering and a cut to the asking price.
Early on Thursday, syndicate desks directed all queries to Morgan Stanley, which declined to comment on reports that CoreWeave was now seeking to price a small offering of around US$1.5bn at US$40 per share.
GameStop is seeking to raise US$1.3bn from the sale of a convertible bond to fund the meme stock’s pivot into bitcoin.
Sole bookrunner TD Securities launched one day of marketing late Wednesday on a five-year CB at a fixed zero-percent coupon and 35%-40% conversion premium for pricing after Thursday’s market close.
The video game retailer told investors a day earlier that it would begin to add cryptocurrency as a “treasury reserve asset”.
The news drove GameStop shares up 11.7% on Wednesday to US$28.36, implying a conversion price on the CB of roughly US$39 at the mid-point of premium talk.