IFR SNAPSHOT - HY continues issuance while IG makes robust comeback
The US high-yield primary on Tuesday is again a busy corner for corporates, with at least four issues expected to price.
The investment-grade primary today is active again after silence yesterday, with at least eight issues expected to price, including a FIG offering, as issuers and investors tread the market ructions triggered by President Trump's tariffs and other policies.
"After the first day of no IG supply of the year excluding Fridays and the January FOMC meeting, today is potentially setting up as a large day in the IG primary market with risk sentiment mostly neutral in early trading," BMO said in a report today.
After a tumultuous run on Monday, markets have settled down after some tariffs were delayed, with US Treasury yields edging higher and US stocks opening in mixed to positive territory.
"While markets are generally breathing a sigh of relief, relative to where we were over the weekend, the past few days have raised ongoing questions over Trump’s tariff policy plans," Deutsche Bank Research said in a report today. "Some immediate concessions on the border issues have avoided immediate severe escalation, but Trump’s comments suggest that he will look to use the delay to leverage broader economic concessions."
The economic data calendar for Tuesday offers a handful of releases, including factory orders and the Job Openings and Labor Turnover Survey (JOLTS), both for December, at 10:00am New York time.
No issues were priced in the IG primary yesterday. In the HY primary, five offerings were priced totaling US$4.324bn to start issuance for the month of February.
The average IG bond spread widened by 1bp to 83bp on Monday and the HY bond spread gapped out by 5bp to 273bp, according to ICE BofA data. US yields across asset classes edged higher on Monday.
"High grade credit spreads widened 1-2bp at the index level yesterday as risk tone improved over the course of the session in response to news that tariffs on Mexico and Canada will be delayed for at least one month after productive conversations between the nations," BMO said. "Sectors most exposed to tariff headlines saw the largest widening, with both autos and basic industry widening 2bp. No other sector widened more than 1bp."
Bank of America Research said in a report late yesterday, "Investors do not expect a significant negative impact from tariffs on IG spreads. The moderate market moves today and on Friday illustrate that point."
"Such outlook suggests little upside in case tariffs are in fact benign, and significant downside if they are not."
HIGH GRADE
The US investment-grade bond market is expected to draw at least eight offerings on Tuesday, after no issuance on Monday.
Utility NextEra Energy Capital is marketing a two-part junior subordinated note to refinance outstanding debt.
Custody lender Bank of New York Mellon is issuing six-year non-call five senior unsecured notes in both fixed and floating rate format.
Energy company National Fuel Gas is issuing five and 10-year bonds. Valero Energy is printing a five-year senior unsecured note.
Tobacco company Altria is marketing three and 10-year senior bonds. Railcar lessor GATX is issuing 10 and 30-year senior unsecured notes.
Foundry JV Holdco is raising funds from a five-part secured offering, split into six, eight, 11, 12 and 14-year maturities. Foundry JV holds Brookfield's 49% stake in the Arizona chip plants Intel has under construction.
National Rural Utilities Cooperative Finance is the eighth issuer today.
LEVERAGE/HIGH YIELD
Unease over the Trump administration's tariff policies has done little to slow issuance in the US primary market for junk bonds as borrowers continue to line up to raise funding.
Financial companies are coming out in force on Tuesday, with Freedom Mortgage, PennyMac Financial Services and Republic Finance expected to access the primaries today for a combined US$1.65bn.
Meanwhile, advertising company Outbrain has announced a US$625m five-year senior secured offering to help finance its purchase of ad platform Teads from struggling telecom firm Altice.
Trailer leasing firm Transportation Equipment Network is marketing a US$700m five-year non-call two offering, while aircraft leasing company TrueNoord is looking to raise US$400m with a bond of the same tenor.
Both companies will use proceeds to refinance debt and expect to price their deals on Thursday.
Today's announcements come after five issuers raised US$4.324bn on Monday.
STRUCTURED FINANCE
Dealmakers are pushing to complete this week's heavy asset-backed calendar, with at least five asset-backed deals moving closer to pricing.
American Express, BMW, Honda, M&T Bank and Oportun yesterday released price guidance on their offerings. These issues are slated to raise at least US$4.9bn, with four of them structured with the potential to increase in size. There are 10 other ABS deals in the market, totaling US$7.5bn.
The CMBS primary is also poised for a busy week. There are three conduit offerings that are set to raise over US$2.3bn, while the SASB sector is contending with a US$2.4bn green deal from Switch, which would be the largest data center CMBS issue in this ESG format.
As for the RMBS market, PRP Advisors priced a US$223.1m nonperforming securitization yesterday. The US$158.0m Triple A rated tranche with a 2.69-year weighted-average life cleared at US Treasuries plus 115bp.
There are several more residential mortgage trades slated to price this week, including a US$476.0m non-QM issue from Invictus and a US$310.2m non-QM offering from Ares.
LATAM
Mexican corporate issuers are appearing in the dollar bond primary market despite the recent tariff tiff.
Saavi Energia is expected to price a 10-year non-call five senior unsecured note today. Price thoughts are in the low 9% area. BNP Paribas, Citigroup and Goldman Sachs are the bookrunners.
Minera Mexico mandated Bank of America as global coordinator to arrange fixed-income investor calls starting today for an potential seven-year senior unsecured dollar-denominated benchmark offering. The other bookrunners are Barclays, Morgan Stanley and Santander.
Central American development bank Cabei mandated Barclays, Bank of America and BNP Paribas to arrange calls with fixed-income investors, starting today, for a potential inaugural British pound-denominated three-year sustainability benchmark bond offering.
EQUITIES
SailPoint is poised to return to public markets via an up to US$1.05bn Nasdaq IPO launched early Tuesday, marking this year’s first new issue of size from the software sector.
A syndicate led by Morgan Stanley and Goldman Sachs is marketing the sale of 50m shares or about 9% of the security software firm at US$19-$21 for pricing next Wednesday, February 12.
Cornerstone investors AllianceBernstein and Dragoneer Investment have agreed upfront to purchase up to 20% of the offering.
SailPoint is selling 47.5m primary shares and will use US$690m of the proceeds to repay part of the US$1bn outstanding under its term loan.
Private equity firm and controlling shareholder Thoma Bravo, which took SailPoint private in 2022 and invested another US$600m in December, is selling 2.5m shares in the offering but will still own 88.5% of the company post-IPO.
Commanding a market cap of around US$11.5bn at the top of the marketing range, SailPoint is the first US software IPO of note since ServiceTitan’s strong debut in December.
Just hours after its home country's tariff reprieve on Monday, NYSE-listed Mexican discount grocer BBB Foods launched a US$546m follow-on stock sale that comes one year after its IPO.
JP Morgan and Morgan Stanley are undertaking two days of marketing to sell 17.5m Class A shares on behalf of a range of selling shareholders, including CEO and founder Anthony Hatoum.
BBB shares closed Monday at US$31.23, up 78.5% from BBB’s IPO price of US$17.50 struck in early February last year.
GH Research took advantage of a strong run-up in its shares on Monday to launch a US$150m follow-on stock sale.
Cantor, Stifel and RBC Capital Markets are marketing a fixed-size offering through Tuesday for pricing after the market close.
Shares of the Irish biotech soared 70% to US$17.99 on Monday after it released promising Phase IIb trial results for its psychedelic drug treatment for depression.