The US investment-grade corporate primary is stirring today, with at least two offerings slated for sale.
The high-yield arena is also active on Thursday with at least two offerings, SS&C Technologies and Park Hotels, set for pricing. In the ECM arena, cruise operator Viking delivered a 9% opening gain in its NYSE debut on Wednesday.
Markets have taken a sanguine turn following the Federal Reserve's FOMC meeting yesterday, taking solace in Fed chair Jerome Powell's views expressed at a press conference following the meeting that rates cuts are still on the cards.
"While the Fed acknowledged the recent run of high inflation readings in its policy statement, that was about the extent of any hawkishness at the May FOMC meeting," BNP Paribas said in a report late Wednesday. "First, despite flagging the discouraging data, the Fed retained its easing bias in the statement, continuing to characterize a future move as a reduction in rates. Second, we viewed the press conference as unequivocally dovish."
This result helped drive a relief rally for bonds, with two-year US Treasury yields falling 7.5bp and seeing their largest fall since the day of the previous FOMC decision six weeks ago, Deutsche Bank Research said.
Equities saw a strong rally in response to Powell's very early comments in the presser that rates are unlikely to move higher, Deutsche Bank said, but reversed this move later on, with the S&P 500 down 0.34% by the close. The Dow index ended the session over 80 points higher.
This morning US stocks open the trading session sharply higher, while Treasury yields see-sawed, with the 10-year benchmark note edging up to 4.64%.
US data releases today include weekly initial jobless claims, the trade balance and factory orders for March, Challenger layoffs along with preliminary nonfarm productivity for Q1, Deutsche Bank said.
No offerings were priced in the IG primary on Wednesday, according to IFR data.
Thursdays following FOMC meetings typically see at least some supply, with the last post-FOMC date to see no supply coming in June 2022 – excluding December – BMO said in a report today.
"Supply on post-Fed days has averaged $5bn since the beginning of 2023, and the risk to that average is likely to the upside today given supportive post-FOMC risk tone has carried over to this morning with CDX spreads approximately 1bp narrower and equities at least 0.5% higher ahead of the bell," BMO said.
The HY primary saw no offerings priced yesterday.
The average IG bond spread remained unchanged at 91bp on Wednesday and the HY bond spread edged out 3bp to 321bp, according to ICE BofA data.
"At the time of closing, IG index spreads were unchanged or slightly wider on the day yesterday after an early session sell-off was retraced in the risk-on response to the May FOMC meeting where Chair Powell was not as hawkish as market participants were bracing for," BMO said.
HIGH GRADE
At least two investment-grade bond offerings are slated to price on Thursday, after no deals priced on Wednesday when market participants awaited the Fed rate decision.
Today’s biggest deal is expected from Foundry JV, the Brookfield unit backing Intel's plans to build out semiconductor plants in Arizona. The issuer is marketing an offering of fives, sevens, 10s and 13s. The other deal on the docket today is a US$350m 10-year bond from Ohio Power.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds is enjoying some signs of life as SS&C Technologies and Park Hotels & Resorts ready deal pricings today.
SS&C, a software company, is preparing to raise US$3.525bn through a US$750m eight-year non-call three bond and a US$2.775bn first-lien senior secured term loan.
Proceeds are going to refinance outstanding term loans due in 2025.
Park Hotels is out with a US$450m 5.75-year non-call 2.25 offering to fund a tender for its 7.5% 2025s.
STRUCTURED FINANCE
The securitization primary will remain sluggish today as supply is expected to restart in earnest next week.
Only one deal, a US$1.38bn floating-rate commercial mortgage bond from Blackstone, is left on the calendar for pricing this week, according to IFR data.
Yesterday, Freddie Mac priced a US$1.07bn 10-year fixed-rate multifamily CMBS issue. The US$912.05m Triple A rated A-2 class came in at Treasuries plus 48bp, tighter than guidance in the plus 50bp area.
In the asset-backed market, most of the primary activity is focused on preparing supply for sale next week. One of the upcoming deals is a US$210m note from Zaxby's, a fast casual restaurant franchiser.
CyrusOne, a data center operator, kicked off ABS issuance in May yesterday with a US$1.18bn deal, which brought the week's ABS supply to US$1.45bn.
LATAM
Fitch yesterday upgraded Brazilian protein foods producer BRF to BB+ from BB, giving it a stable outlook, to reflect expected improvement of credit metrics in 2024.
Also yesterday, Moody's revised the outlook on Brazil to positive from stable, affirming its Ba2 ratings, on "more robust growth" and continued but gradual progress towards fiscal consolidation.
LatAm sovereign five-year CDS yesterday narrowed 4bp for Brazil, moving little elsewhere in the region, according to Lucror Analytics.
EQUITIES
Michael Klein’s Churchill Capital IX early Thursday priced a US$250m NYSE IPO, one of just a handful of SPAC new issues this year and the blank check kingpin’s first new vehicle since the product's short-lived boom in 2021.
Citigroup led the sale of 25m Churchill Capital IX units at US$10. Each unit comprises one share and a quarter of a warrant exercisable at US$11.50.
Klein, the former Citi M&A rainmaker perhaps best known for taking EV maker Lucid public through a predecessor SPAC, now has two years to complete an acquisition or must return 100% of the trust proceeds. Still, the SPAC may extend the tenor by three months if a merger agreement is in place around that time.
Churchill IX units will begin trading on Thursday under the symbol “CCIXU”.
US ECM activity otherwise remains quiet this week amid a deluge of earnings and as investors face a longer-than-expected wait for the US Federal Reserve to cut interest rates.
Viking delivered a modest debut gain on Wednesday after raising US$1.5bn from its twice-upsized NYSE IPO late Tuesday, another positive marker for the IPO recovery.
Shares in the luxury cruise line closed their first session at US$26.10, or 8.8% above the US$24 price of the 64m-share offering.
Bank of America, JP Morgan, UBS and Wells Fargo led Viking’s IPO, which would rank as the largest in the US this year assuming the greenshoe is exercised.