IFR SNAPSHOT - IG and HY primaries continue steady issuance pace
The US investment-grade corporate primary continues its steady pace of issuance on Tuesday, with at least six offerings adding to the 10 sold yesterday.
The high-yield primary, which has become more active in recent sessions, expects three issues to price on Tuesday. In the ECM primary, Flowco’s up to US$409m NYSE IPO is the only offering scheduled to price this week.
The economic calendar offers a handful of releases today including PPI, an important inflation report for December, and the National Federation of Independent Business's Small Business Optimism Survey, which rose 3.4 points to 105.1 in December.
The PPI index for final demand rose 0.2% last month after an unrevised 0.4% advance in November, Reuters reported today. Economists polled by Reuters had forecast the PPI would climb 0.3%.
"Overall, it was an update on the producer price landscape that was more benign than expected, although it goes without saying tomorrow's core-CPI figures will be far more market-moving," BMO said in a report after the release.
Deutsche Bank Research said in a report today, "The bond market mini-meltdown and inflation concerns have magnified the focus on tomorrow’s CPI report, as another upside surprise would further cement doubts that the Fed will be cutting rates anytime soon."
US stocks responded to the PPI data by jumping higher, while US Treasury yields, which had been moving steadily higher in recent sessions, slipped following the report before edging back up.
"Treasuries benefited in the wake of PPI, however, the price action has quickly faded and US rates are effectively unchanged on the session," BMO said.
On Monday, 10 IG issues were priced totaling US$11.7bn, lifting January volume to US$91.95bn, according to IFR data. The average new issue concession for the IG deals on Monday was 2.50bp and the average order book was 3.47x subscribed, according to the data. The average move on Monday from initial price thoughts to pricing was 24.79bp tighter.
The HY primary saw three offerings priced totaling US$1.55bn, pushing January issuance to US$4.85bn.
The average IG bond spread edged out by 1bp to 84bp on Monday and the HY bond spread widened by 4bp to 285bp, according to ICE BofA data. US yields across asset classes moved higher on Monday.
"High grade spreads were 1bp wider yesterday on very strong secondary market volume with activity in the IG market running 25% of the average over the past year," BMO said.
HIGH GRADE
At least six high-grade borrowers are expected to price US bond offerings on Tuesday.
Hyundai Capital Services, the Korean carmaker's financing subsidiary, is marketing a three-year senior bond. Leads set IPTs at Treasuries plus 105bp area.
French lender Banque Federative du Credit Mutuel is selling five-year senior preferred paper in both fixed and floating rate format.
Software company Adobe is issuing three, five and 10-year senior unsecured notes. Elsewhere, spirits company Bacardi is selling five and 10-year notes to repay its US$750m 4.45% 2025 notes and US$250m of outstanding loan debt.
Private credit firm Nuveen Churchill Direct Lending is marking its debut in the high-grade bond market with a new five-year senior unsecured note. And Blackstone Private Credit Fund is issuing a seven-year senior unsecured note.
LEVERAGE/HIGH YIELD
Activity in the high-yield primary continues at a steady pace, with three issuers expected to raise funding on Tuesday.
LifePoint Health has announced a US$700m seven-year non-call three issue ahead of pricing today as it looks to redeem its existing 4.375% 2027s.
Brundage-Bone Concrete Pumping has released price talk of 7.5%-7.75% on a US$400m seven-year non-call three senior secured note that is also scheduled to price this afternoon.
Calumet Specialty Products, meanwhile, is out with a small US$100m mirror issue to its 9.75% senior notes due 2028.
STRUCTURED FINANCE
The asset-backed primary is humming along today as dealmakers are expected to push offerings toward pricing.
Yesterday at least four issuers – CarMax, Santander, Westlake and AGCO Finance – showed guidance on their offerings, which are part of the more than US$10bn of ABS supply poised for sale this week.
Lendbuzz cleared a US$248.8m subprime auto issue yesterday. The US$157.1m tranche came in at US Treasuries plus 85bp, which was tighter than guidance of plus 90bp-95bp. The note, with a 1.44-year weighted-average life, was expected to be rated AA/AAA respectively by S&P and Kroll.
LATAM
The primary market for crossborder bond issuance out of Latin America is picking up steam as a string of borrowers prepare to price deals over the next week or so.
Development bank CAF, Brazil's Banco Bradesco, Mexican REIT Fibra Uno and Mexican retailer El Puerto de Liverpool are all lining up bond deals.
Bradesco has released initial price thoughts in the 7% area on a five-year note ahead of expected pricing today.
CAF is also on the pricing roster today with a US$2bn five-year SEC-registered bond after order books swelled to US$13bn in size.
Liverpool, meanwhile, is marketing an up to US$900m dual-tranche bond offering to help fund its purchase of a minority stake in US retailer Nordstrom.
Tecpetrol also appears to be eyeing an international capital raise after Fitch yesterday assigned a BB- rating to a proposed US$500m note offering from the Argentine oil company.
EQUITIES
No stock sales have priced so far this week, as the mixed start to the year for markets and calendar issues continue to hold back activity levels.
Rising bond yields on the back of Friday’s strong employment numbers are one significant source of unease for investors, putting greater emphasis on Wednesday’s consumer inflation data.
Several large investment conferences, including the annual JP Morgan healthcare conference in San Francisco, blackouts ahead of the impending start of fourth-quarter earnings, and caution ahead of next week’s inauguration of the new administration (and any early policy changes) may also be keeping issuers on the sidelines.
For now, Flowco’s up to US$409m NYSE IPO is the only offering scheduled to price this week.
The syndicate led by JP Morgan, Jefferies, Piper Sandler and Evercore has told investors the offering is many times covered with strong demand from long-only investors.
After marketing 17.8m shares of the oil field equipment supplier at US$21-$23, the banks plan to close the order books at 4:00pm today, a day ahead of pricing on Wednesday night.
Looking ahead to next week, Venture Global is marketing an up to US$2.3bn NYSE IPO for pricing on Thursday, January 23, the first of what bankers hope will be a string of large IPOs in the first half of 2025.