At least 16 investment-grade issuers are in the market on Tuesday, as borrowers across several industries, fresh from earnings blackouts, seek to take advantage of narrowing spreads and a broadly receptive financing environment.
The average spread on US investment-grade corporate bonds has narrowed 16bp this year to hit 88bp yesterday, according to ICE/BofA data. Overall rates have at the same time come down – with the two-year US Treasury below 5% – and softer economic data reports have recently helped quell concerns that Federal Reserve would keep its target rate higher for longer than expected.
“We saw the two-year (US Treasury) get back below 5%, we saw the long end come down a little bit,” said Scott Kimball, chief investment officer at Loop Capital Asset Management. “At the same time, credit spread actually tightened, so from a corporate finance perspective, I think most are coming to grips with this being about as good as it’s going to get, and they’re right.”
Before today’s slate of transactions, 14 high-grade issuers raised a combined US$13.6bn on Monday.
Deals hitting the market today include trades from real estate investment trusts Host Hotels & Resorts and AvalonBay Communities, mortgage insurer NMI Holdings and lenders Deutsche Bank, Standard Chartered and NatWest.
Deutsche Bank launched its US$1bn offering this afternoon in the senior preferred format at US Treasuries plus 95bp, while Standard Chartered is raising US$3bn via four-year non-call three tranches of fixed and floating notes and a 11-year non-call 10.
Elsewhere, CVS Health is raising US$5bn selling fives, sevens, 10s, 20s and 30s. Mastercard has launched a US$1bn 10-year, the financing arm of Caterpillar is out with a US$1.2bn offering of three-year fixed and floating notes, and Ingersoll Rand is seeking US$3.3bn via threes, fives, sevens, 10s and 30s.
Kimball also said that conditions are good for fixed-income money managers, especially in the high-grade market where all-in yields are attractive.
“If you've got good old fashioned US fixed income – not high-yield but regular old investment-grade – paying 5% plus, that creates a good amount of demand,” he said.
“If you're the investment bankers sitting in the middle and you've got a corporate client who wants to refinance and on the other side your trading desk is telling you that they have a lot of institutional buyers looking for paper, you’ve got to get on the phone and start putting deals together.”
Tuesday’s other deals include a fundraising from casino and resort operator Las Vegas Sands and electricity providers Entergy Arkansas, Wisconsin Electric Power and National Rural Utilities and Asia-based borrowers BOC Aviation and Korea Expressway.