IFR SNAPSHOT - US IG primary keeps the heat on as nine issuers jump in
Capitalizing on the powerful momentum of the markets, the US investment-grade primary is welcoming at least nine more offerings to price today, following the 17 issues sold yesterday.
"IG yields dropping to some of the lower levels since August 2022 triggered a rush to borrow in the IG corporate market," Bank of America Research said in a report late yesterday.
The high-yield primary expects at least five offerings to price today.
The only data release of note for today is jobless claims, which came in lower than expected, providing a little more comfort to the markets concerned about a possible recession in the US.
"The drop in initial filings was larger-than-anticipated and the resulting price action suggests the update is being interpreted as evidence that the labor market remains on solid footing despite the July BLS report," BMO said in a report after the data release. "Overall, the lack of information suggesting a further deterioration of the employment landscape was the most relevant takeaway from the final data release of the week."
In the IG primary on Wednesday, 17 issues were priced totaling US$31.8bn, lifting weekly issuance to US$38.5bn and August volume to US$47.395bn, according to IFR data.
"Yesterday was the largest day for the IG primary market in terms of both total volume and deal count since September 5 2023 saw 23 deals bring a total of $38.2bn to market," BMO said in a report today.
Meta’s US$10.5bn five-tranche offering dominated the arena yesterday. BMO said that yesterday's volume "suddenly brings the weekly total in-line with expectations coming into the week for $35-$40bn with one session remaining."
The strong reception to yesterday's deals and the neutral risk tone of the market this morning "could bring as many as nine additional borrowers," BMO said. "That would likely push weekly supply over the $40bn threshold for only the third time in the past five months."
Yesterday, the average IG new issue concession was 5.24bp and the average order book was 4.9x subscribed, according to IFR data. Average price progression from IPTs to pricing was tighter by 32.12bp.
The HY primary yesterday saw offerings priced for the first time this week with two issues totaling US$1.7bn, pushing August volume to US$2.9bn, according to IFR data.
The average IG bond spread edged in by 1bp to 107bp on Wednesday and the HY bond spread narrowed by 10bp to 357bp, according to ICE BofA data.
"High grade spreads narrowed approximately 1bp yesterday as risk-tone faded over the course of the day," BMO said.
HIGH GRADE
The US investment-grade bond market is expected to draw at least nine deals today.
Utilities were a mainstay of today's supply slate, including offerings from National Rural Utilities Cooperative Finance, One Gas, Essential Utilities and Southern California Gas.
The rest of today's issuance is also coming from non-financial companies. Gas pipeline operator Williams Companies is in the market for a three-part bond deal.
REIT Prologis Targeted US Logistics Fund is out with a 10-year senior unsecured bond. Meanwhile, jet engine maker Howmet Aerospace is issuing a seven-year senior bond.
Hotel operator Marriott International is selling five and 10-year bonds. And Medical device company Zimmer Biomet Holdings announced an offering of 10-year senior unsecured notes.
LEVERAGE/HIGH YIELDG
The primary for US high-yield bonds is back in business as five issuers ready deal pricings on Thursday amid an improving market backdrop.
Walgreens Boots Alliance is stepping forward with a US$600m five-year non-call two offering, the company’s first as a junk-rated issuer.
The borrower is using proceeds to refinance its 3.8% 2024s and for general corporate purposes.
Post Holdings is approaching investors with a US$1.2bn 8.5-year non-call three bond. The packaged goods company, whose brands include cereals Grape-Nuts and Weetabix, is raising funding to pay down debt.
California Resources, Noble Finance and DaVita are also preparing bond pricings today.
STRUCTURED FINANCE
Six asset-backed securities issuers raised more than US$2bn on Wednesday, as several other borrowers made progress on new offerings, including a U$750m trade from Porsche Financial Services.
Porsche’s biggest tranche, totaling US$289.7m, is rated Triple A and has a weighted-average life of 1.08 years. Bank of America, Barclays, Mizuho and Wells Fargo are joint lead bookrunners. The trade is expected next week.
World Omni Financial mandated MUFG, Truist, US Bancorp and Wells Fargo as joint bookrunners on a US$958.28m prime auto loan ABS trade. American Honda Finance is working with JP Morgan, Barclays, Societe Generale and SMBC on a US$1.58bn prime auto loan deal. And Wheels is preparing a US$750m fleet lease ABS offering.
LATAM
No deals are expected to price in the international Latin American bond market on Thursday.
LatAm sovereign five-year CDS yesterday tightened 4bp for Brazil and Mexico, and moved little elsewhere in the rest of the region, according to Lucror Analytics.
EQUITIES
CenterPoint Energy raised US$250m late Wednesday from an all-primary block trade to help the embattled Houston power utility improve the resiliency of its network after Hurricane Beryl last month left millions of its customers without power.
Barclays and Citigroup offloaded their joint purchase of 9.8m shares or 1.5% of CenterPoint at US$25.63, zero discount to Wednesday’s closing price.
CenterPoint plans to use the proceeds to repay debt, specifically US$900m of commercial paper. That compares with nearly US$2bn of damage to power lines and other equipment caused by Beryl and other storms this year.
Management hinted at its fundraising plans during CenterPoint’s earnings call late last month, telling investors the utility planned to "pull forward" US$250m of equity needs for 2025 into this year to help maintain its credit metrics and cover storm costs.
Highlighting the relative strength of the structured equity market, Ani Pharmaceuticals secured US$275m late Wednesday from the upsized sale of a convertible bond to help fund an acquisition.
JP Morgan, Jefferies and Leerink Partners priced five-year CB at a 2.25% coupon and 30% conversion premium after marketing US$250m of the security through Wednesday at 2.25%-2.75% and 27.5%-32.5%.
The commercial-stage drug company's shares fell 9.9% to US$57.01 ahead of pricing, putting the conversion price on the CB at US$74.11.