The US investment-grade corporate primary expects just one offering to price today, while no issues are expected in the high-yield arena, as markets and investors head into the holiday.
There is an early stock market close at 1:00pm New York time today and a 2:00pm close for US bond markets on Independence Day eve and then markets will be closed on Thursday for the Fourth of July and reopen on Friday.
Some dovish-leaning comments from Federal Reserve Chair Jerome Powell on a panel at a forum hosted by the ECB in Sintra, Portugal, yesterday initially sent US Treasury yields lower, before his remarks were outweighed by a more hawkish US JOLTS report released as he was speaking, Deutsche Bank Research said in a report today.
Deutsche Bank noted that Powell sounded positive about disinflation, saying that "inflation now shows signs of resuming its disinflationary trend". However, the latest JOLTS report of job openings showed a tighter labor market than expected, pushing yields higher, Deutsche Bank said.
After the S&P 500 set 31 all-time highs in the first half of 2024, the index yesterday achieved its first record of the second half of the year, rallying after Europe went home to close up 0.62%, Deutsche Bank said.
Data releases today include the final services and composite PMIs for June from around the world, and in the US, there’s also the ISM services index for June, the ADP’s report on private payrolls for June, the Challenger report jobs cut report, the weekly initial jobless claims, along with the trade balance and factory orders for May, Deutsche Bank said.
The ADP National employment report showed this morning that US employment increased by 150,000 private sector jobs in June, Reuters reported, lower that the 160,000 jobs in the consensus forecast for ADP.
"Overall, this morning's round of data conformed with the growing sense that the resilience of the labor market has come into question even if the outright numbers remain constructive," BMO said.
Today, following a number of economic report releases, US Treasury yields were flat to lower, hovering around 4.41%. US stocks opened mixed to higher.
When markets reopen on Friday morning the key jobs report for June will be released. This is another report that could have a big impact on markets, depending on scope of jobs creation and the unemployment rate.
Meanwhile, the IG primary on Tuesday saw two offerings priced totaling US$5bn, kicking off the month of July's supply train, according to IFR data. Year-to-date IG volume stands at US$892.659bn, well ahead of the US$715.685bn sold in the same period last year, the data show.
"Most assumed that would be the total supply for the week, but SMRC Automotive surprised with an overnight announcement of a 5yr benchmark," BMO said. "That’s the first deal to price on July 3 in our data going back to the beginning of 2016."
While not likely sufficient to reach weekly IG supply expectations of approximately US$6.5bn, this week will now at least finish close to expectations, BMO said.
"Reception to yesterday’s slate was strong with the day’s seven tranches pricing to average concessions of approximately 3bp on the back of order books an average of 4.7x oversubscribed," BMO said.
No offerings were sold in the HY arena yesterday.
The average IG bond spread edged in 1bp to 93bp on Tuesday and the HY bond spread widened by 2bp to 323bp, according to ICE BofA data.
"IG index spreads narrowed 1bp during yesterday’s session after the market mostly shrugged off a hotter-than-anticipated JOLTS number," BMO said.
HIGH GRADE
A single offering is expected to price in the US investment-grade bond market on Wednesday.
Indian car parts maker Samvardhana Motherson International announced an offering of US dollar five-year senior unsecured bonds. The issuing entity is SMRC Automotive Holdings Netherlands.
Leads tightened guidance to US Treasuries plus 140bp from initial price thoughts of 170bp area. Today's offering is expected to be the last high-grade bond to price this week.
LEVERAGE/HIGH YIELD
Tumbleweeds continue to blow through the primary market for US high-yield bonds, which is expected to see its third consecutive day without any deal announcements.
Bonds issued by Baa3/BB+ rated Paramount Global are some of the most actively traded securities this morning following news that Shari Redstone has reached a preliminary agreement to sell her controlling stake in the company to Skydance Media.
The company's 4.375% 2043s were changing hands this morning at a dollar price of 69.207 or 275bp over US Treasuries, rallying from 67.243 or 300bp over late yesterday, according to MarketAxess data.
CVR Energy is also drawing attention after Reuters reported on Tuesday that the oil refiner controlled by investor Carl Icahn had bid on Venezuela-owned Citgo Petroleum.
Shares in the company's parent are on the auction block to compensate creditors for Venezuela's debt defaults and expropriations.
CVR Energy's 8.5% 2029s, which were issued in December last year at par, were trading at 100.25 yesterday afternoon, down a touch from the 100.541 seen on Friday last week, according to MarketAxess data.
STRUCTURED FINANCE
At least two mortgage offerings are on track to price today in the securitization primary.
In the CMBS sector, Edward Thomas Hospitality is expected to price a US$280m SASB bond to help refinance two upscale hotels in Los Angeles.
On the residential side, Pimco yesterday launched a US$220.84m three-year non-QM offering. The Triple A rated US$182.71m A-1A note was launched at Treasuries plus 150bp.
No asset-backed deal is slated to price today after four issuers together raised more than US$2bn on Monday and Tuesday, according to IFR data.
LATAM
Yesterday, Chile raised €1.6bn (US$1.7bn) from the sale of a 3.875% seven-year senior unsecured social bond. The SEC-registered note priced at 3.912% or 105bp over mid-swaps.
Bank of America, HSBC, JP Morgan and Societe Generale were the bookrunners.
LatAm sovereign five-year CDS yesterday narrowed 2bp for Mexico and Colombia, moving little elsewhere in the region, according to Lucror Analytics.
EQUITIES
Repay filled this week’s US ECM void by raising US$260m late Tuesday from an overnight sale of a new five-year convertible bond.
Barclays, Truist Securities and UBS wall-crossed investors before pricing the fintech and former SPAC’s new CB with a 2.875% coupon and 27.5% conversion premium, in line with the fixed marketing terms.
Repay is using US$177m of the proceeds (plus existing cash) to buy back US$220m of a zero-coupon CB maturing in 2026. The company is also spending US$40m to buy back 3.9m shares of its common stock.
Repay, whose shares closed Tuesday's session at US$10.21, is also buying a capped call to offset future earnings dilution to prices above US$20.42 (a 100% premium).
US exchanges close at 1:00pm New York time on Wednesday and no ECM deals are likely to launch ahead of Thursday’s Fourth of July holiday.