The US investment-grade corporate primary continues to crawl through the week with just one offering expected on Wednesday, after only three deals priced since Monday.
The meager show of offerings is most likely tied to current corporate earnings blackouts during earnings, although a number of those are expected to lift as soon as this week, so the issuance pace could pick up quickly.
The high-yield corporate bond primary perks up today with three offerings – from Encino, Tenneco and Vail Resorts – expected to price after two consecutive idle sessions. In the ECM arena, IPOs remain the hot hand, with offerings already priced or lining up to be priced this week.
Meanwhile, secondary markets yesterday continued their surge started on Monday with the S&P 500 posting its strongest two-day performance since February, Deutsche Bank Research said in a report today. US Treasuries also performed well, with the 10-year note yield falling back for a third consecutive day.
This morning US stocks opened mixed to higher but US Treasuries yields edged up with the 10-year note yield now hovering around 4.64%.
For data today in the US there was the preliminary reading of durable goods orders and core capital goods orders for March, Deutsche Bank said.
"There isn't anything within the release that will materially impact expectations for Q1 growth – still on solid footing with investors more focused on the quarterly annualized core-PCE pace than headline growth," BMO said. "Treasuries are weaker on the day with nothing within the data impacting the broader direction of the market. An in-range drift higher in yields appears to be the path of least resistance and with 10s edging above 4.65%."
Just two offerings made it into the IG primary on Tuesday totaling US$7bn, including a US$5bn three-part offering from Citibank, lifting weekly IG supply to US$10.5bn and April IG issuance to US$90.78bn, according to IFR data.
"Reception to yesterday’s deals was strong with new issue concessions remaining in the low single digits alongside a modest rebound in average oversubscription," BMO said. "Order book coverage for yesterday’s six tranches increased to 3.2x subscribed on average, mostly in-line with long term averages."
BMO said yesterday's IG offerings brought the market closer to expectations for around US$20bn of issuance for this week, though supply may increase in the latter half of the week as corporate borrowers emerge from earnings blackouts.
And Citi’s US$1bn floating-rate note tranche yesterday brought total floater supply during April to US$5.1bn, BMO said, continuing a trend of increasing floater supply in IG markets recently, with the past two months seeing total floater issuance of US$15.1bn.
"That’s the largest supply of floaters in a two-month span since early-2022, just before the Fed embarked on the most rapid tightening campaign in decades," BMO said.
No offerings were priced in the HY primary on Tuesday.
The average IG bond spread on Tuesday tightened by 1bp to 92bp and the HY bond spread narrowed by 9bp to 320bp, according to ICE BofA data.
"High grade spreads narrowed 1bp during yesterday’s session and have now retraced the entirety of widening in response to Iran’s retaliatory strike on Israel," BMO said. "For all of the volatility in financial markets during recent weeks, credit spreads have settled into a relatively narrow range over the past six weeks as strong demand prevents meaningful widening while narrow spreads work against meaningful tightening."
HIGH GRADE
At least one investment-grade bond offering is slated to price today, after two issuers raised US$7bn combined on Tuesday.
Moroccan fertilizer maker OCP is in the market this morning with an offering of 10 and 30-year bonds denominated in dollars. BNP Paribas, Citigroup and JP Morgan are bookrunners for the Baa3/BB+/BB+ rated issuer’s fundraising.
Yesterday’s two deals came from Citigroup and CK Hutchison.
LEVERAGE/HIGH YIELD
After a slow start to the week, the primary high-yield bond market is seeing some signs of life on Wednesday after Encino Acquisition Partners, Vail Resorts and Tenneco announced deals for pricing today.
Encino has announced a seven-year non-call three offering as it seeks to raise US$500m to repay outstanding borrowings under a revolving credit facility. Tenneco, meanwhile, is out with a US$364.5m 5.5-year non-call life offering to take out a portion of a senior unsecured bridge loan.
Vail Resorts is approaching investors with a US$600m eight-year non-call three bond to redeem notes maturing in 2025.
On the roster for pricing tomorrow is Brightline East. The high-speed train operator announced price talk of 10.75%-11% on a six-year non-call three, which has been upsized to US$1.325bn from US$1.25bn.
STRUCTURED FINANCE
At least one asset-backed deal is slated to price today after two issues raised more than US$3bn yesterday.
Internet service provider Cogent is expected to complete this afternoon a first-of-its-kind securitization backed by leases on a portfolio of IP addresses. The US$206m five-year note is also the company's first ABS issue. Price guidance on the Triple B rated offering is Treasuries plus 350bp area.
Another internet deal in the market this week is a US$150m issue from data center operator Sabey. Price guidance on the five-year A+ rated deal is 180bp-190bp over Treasuries.
In the consumer space, buy-now-pay-later lender Affirm has been showing investors a US$602.8m securitization. The deal may price as early as Friday, a banker familiar with the deal said.
LATAM
State-owned Banco del Estado de Chile started meeting with investors yesterday afternoon for a possible offering of perpetual non-call five Additional Tier 1 notes. Virtual meetings were scheduled for Tuesday and Wednesday.
BNP Paribas, HSBC and JP Morgan are global coordinators. Bank of America, Citigroup, Credit Agricole and Goldman Sachs are joint bookrunners.
Latin American development bank Fonplata, rated A2/A, priced a SFr145m (US$159m) 2.5925% three-year note at par today. Luzerner Kantonalbank, UBS and Zurcher Kantonalbank are joint bookrunners.
LatAm sovereign five-year CDS yesterday tightened 6bp for Brazil and Colombia, and 2bp-3bp elsewhere in the region, according to Lucror Analytics.
EQUITIES
The IPOs of aerospace parts maker Loar, London-based clearing and trading firm Marex and cybersecurity software firm Rubrik are all well oversubscribed ahead of pricing late Wednesday and their scheduled debuts on Thursday.
Loar’s circa-US$300m NYSE offering is shaping up as the most hotly sought of this week’s IPOs, with syndicate guidance already pointing to pricing well above the US$24-$26 marketing range.
Rubrik’s up to US$713m NYSE IPO is headed for the “high end” of the US$28-$31 range (though some sources expect above-range pricing), while there is no official pricing guidance yet on the US$323m Nasdaq IPO of Marex.
Other US ECM activity remains light this week as the deluge of quarterly earnings releases keeping investors otherwise occupied, though one biotech follow-on and one convertible bond offering still priced overnight.
Centessa Pharmaceuticals added US$100m of cash to its balance sheet via the overnight sale of American Depositary Receipts, coming after a busy year of clinical milestones.
Goldman Sachs, Leerink Partners, Evercore, Guggenheim Securities and BMO Capital Markets priced 10.8m ADSs in the Nasdaq-listed biotech at US$9.25, a 1.6% discount to Tuesday’s closing price of US$9.40.
The FDA recently gave Centessa the go-ahead to begin Phase I trials on its new narcolepsy drug. Results are expected in the second half of this year.
The biotech is also in Phase II/III trials with a drug that has been fast tracked for patients with hemophilia B. If those results are positive, Centessa may seek early approval for the hemophilia drug as soon as next year.
Vertex secured an upsized US$300m from the sale of a five-year convertible bond that improves the tax software firm’s ability to compete for acquisitions.
After marketing the security for one day, Morgan Stanley and Goldman Sachs priced the new CB at a 0.75% coupon and 30% conversion premium versus the earlier talk of 0.75%-1.25% and 27.5%-32.5%.
Vertex is using the proceeds to improve its financial flexibility, allowing it to fund future acquisitions.
It used some of the proceeds to buy a call spread to lift the effective conversion price to US$55.88, a 100% premium to Tuesday’s closing price of US$27.94.