IFR SNAPSHOT - IG primary quiet; CoreWeave IPO stumbles
As the month of March and the first quarter wind down, the US investment-grade corporate bond primary is quiet on Friday as markets and investors digest the latest inflation news. The high-yield arena, however, is active, with two high-yield issuers expected to price bonds today, including one from Xerox.
Meanwhile in the ECM arena, the much commented upon IPO from CoreWeave saw the size of its Nasdaq offering slashed and priced well below the price range for proceeds of US$1.5bn. Morgan Stanley, JP Morgan and Goldman Sachs yesterday evening priced 37.5m shares in the AI data center operator at US$40.00, down from the marketed terms of 49m shares at US$47-$55 target range and shrinking the offering by about 40%.
The US economic calendar offers two key measures on Friday, starting with the February Personal Income and Outlays report at 8:30am New York time and finishing with the revised March University of Michigan Survey of Consumers at 10:00am. Also, two Fed speakers are scheduled for today.
Consumer spending, which accounts for more than two-thirds of economic activity, climbed 0.4% after a revised 0.3% decline in January, Reuters reported on Friday. Economists polled by Reuters had forecast consumer spending rising 0.5% after a previously reported 0.2% fall in January.
The Personal Consumption Expenditures price index increased 0.3% in February after advancing by an unrevised 0.3% in January, Reuters reported. Economists had forecast the PCE price index gaining 0.3%. In the 12 months through February, prices increased 2.5%, matching January's rise. And stripping out the volatile food and energy components, the PCE price index rose 0.4% after an unrevised 0.3% advance in January, Reuters reported. In the 12 months through December, core inflation increased 2.8% after rising 2.7% in January.
US stocks opened the Friday session sharply down while US Treasury prices rose and yields fell sharply, with the 10-year benchmark swooning to 4.27% from around 4.40% yesterday.
In the IG primary on Thursday, no offerings were priced, leaving weekly supply at US$47.15bn and March IG volume at US$190.837bn, according to IFR data. The weekly IG issuance exceeded syndicate estimates of US$28bn.
Yesterday was just the fourth non-Friday of the year to see no IG supply and the second if one excludes the days of FOMC meetings, BMO said in a report today. Assuming no issuance today, the March total stands just over US$190bn, already above expectations for approximately US$175bn with one more session remaining on Monday, the last day of the month and quarter.
Three issues were priced in the HY primary market on Thursday totaling US$3.115bn, pushing weekly issuance to US$8.715bn and March volume to US$24.715bn.
The average IG bond spread was unchanged at 91bp on Thursday and the HY spread widened by 8bp to 327bp, according to ICE BofA data. US yields across asset classes were higher on Thursday.
"IG index spreads were unchanged or modestly weaker yesterday and enter the final session mostly unchanged for the week as a whole," BMO said.
For the week ended March 26, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net outflow was US$406.11m and the all corporate high-yield debt funds/ETFs net outflow was US$110.28m. The all domestic equity funds/ETFs net inflow was US$26.257bn and the all non-domestic equity funds/ETFs net inflow was US$274.28m.
"While the magnitude of the (IG) outflow was naturally very small, it was the first outflow of the year," BMO said. "This bears monitoring in the weeks ahead for any further evidence of a softening in demand from the all-important mutual fund sector."
HIGH GRADE
No new investment-grade bond deals are expected to price on Friday.
Regardless, the pipeline for new supply is building up. Japan Tobacco is holding investor calls on Monday and Tuesday for a potential multi-tranche senior unsecured trade in the US dollar market.
Spanish energy company Repsol E&P Capital is continuing to host fixed-income investor calls today, after starting to hold calls yesterday.
LEVERAGE/HIGH YIELD
Two high-yield issuers are expected to price bonds on Friday, after three borrowers raised US$3.115bn on Thursday.
Later today, Xerox is slated to print US$400m of 5.5-year non-call 2.5 senior secured first lien notes and US$400m of six-year non-call three senior secured second lien notes. Proceeds will be used to fund the acquisition of Lexmark and refinance existing notes due this year.
The day’s other trade is from CEC Entertainment, which is wrapping up a US$660m offering of five-year non-call two bonds. The company, known for its Chuck E Cheese restaurant chain, is using proceeds to refinance its existing 6.75% 2026s.
Yesterday’s deals included a US$1.415bn seven-year from Novolex, which was in the market to fund its purchase of Pactiv Evergreen, a US$1.2bn refinancing from Mohegan Tribal Gaming Authority and a US$500m 5.25-year trade, also a refinancing, from French auto parts maker Forvia.
STRUCTURED FINANCE
The asset-backed primary is wrapping up a modest supply week with at least two deals poised to price later today.
Data center operator Sabey is preparing a US$510m deal and TierPoint, which operates in the same industry, is in the market with a US$325m issue.
From Monday to Thursday, four issuers raised nearly US$3bn in the ABS market, down from the US$10bn total the week before, IFR data show.
The ABS pipeline is light as some issuers are taking a wait-and-see approach given the pickup in market volatility driven by the tariff spat between the United States and other nations, dealmakers said.
LATAM
Banco Votorantim begins meetings today with fixed-income investors about a potential dollar-denominated benchmark-size transaction, its first since 2020. Meetings with investors will run through March 31 and the Brazilian bank could price the new bond offering as early as April 1, if market conditions allow.
Bank of America, Bradesco, Citigroup, Itau, JP Morgan, Morgan Stanley and UBS are mandated as joint bookrunners on the potential three-year offering.
Yesterday, the central bank of Mexico decided to lower the target for the overnight interbank interest rate by 50bp to 9%.
EQUITIES
CoreWeave slashed the size of its Nasdaq IPO and priced the offering well below range for proceeds of US$1.5bn, another setback for the recovery hopes of the US new issue market.
Morgan Stanley, JP Morgan and Goldman Sachs priced 37.5m shares in the AI data center operator at US$40.00, down from the marketed terms of 49m shares at US$47-$55 target range and shrinking the offering by about 40%.
Reports surfaced ahead of pricing that Nvidia, which already owns 6% of CoreWeave’s Class A shares, would write a US$250m check to anchor the deal, though CoreWeave has yet to confirm the investment.
CoreWeave uses 250,000 of Nvidia’s GPU chips to provide heavy computing power to the AI models of customers such as Microsoft and OpenAI.
This IPO was the first in a month and the largest since Venture Global’s equally challenging US$1.75bn IPO in January.
CoreWeave shares will begin trading on Nasdaq on Friday under the symbol “CRWV”.
Shares of GameStop tumbled on Thursday while the video game retailer marketed a US$1.3bn zero-coupon convertible bond to help fund planned bitcoin purchases.
Following an earlier wall cross, sole bookrunner TD Securities priced the five-year CB late Thursday at a zero-percent coupon and a 37.5% conversion premium, versus the fixed zero-percent coupon and 35%-40% premium range.
The US$21.72 reference price on the CB was set at the 1:00pm-4:00pm VWAP the day of pricing, putting the conversion price on the security at US$29.85.
Yet shares of the video game retailer cratered 22.1% on Thursday to US$22.09, cutting its market capitalization by US$2.8bn to US$9.9bn as 95.5m shares (or nearly one-quarter of outstanding) traded hands.
GameStop revealed earlier in the week that its board of directors approved a plan to purchase bitcoin as a “treasury reserve asset”.
GameStop capped a mixed week in US ECM as eight companies raised a combined US$7.4bn of proceeds, including larger offerings from American Electric Power (US$2bn), StandardAero (US$1bn) and GFL Environmental (US$900m).