The US investment-grade primary market is not quite ready for a summer lull yet, with at least three offerings slated for sale today.
The high-yield primary continues to be quiet for a third session.
The bulk of the week's economic data reports are due out today, with a handful already released this morning.
Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 232,000 for the week ended August 17, Reuters reported. Economists polled by Reuters had forecast 230,000 claims for the latest week. And the Chicago Fed National Activity Index weakened in July.
"After risk markets shrugged off yesterday’s BLS payrolls revision, the next (and likely August’s largest remaining) macro input is the FOMC’s Jackson Hole Symposium commencing tonight and continuing through Saturday," BMO said. Federal Reserve Chairman Jerome Powell speaks on Friday.
BMO said, "We expect they will continue to foreshadow a September rate cut while avoiding any discussion over the potential for a greater than 25bp rate hike."
This morning the CME FedWatch Tool forecasts a 73.5% probability of a 25bp fed funds rate cut at the September 18 meeting.
Deutsche Bank Research noted in a report this morning that the revisions to US payrolls did not disrupt markets because of the widespread expectations that they would be revised down anyway and the news did not lead to a big reaction among risk assets.
"The dovish mood then got a further boost from the minutes of the July FOMC meeting, which solidified the prospects of a September cut," Deutsche Bank said
In the IG primary yesterday one offering was priced totaling US$1.25bn, lifting weekly issuance to US$20.4bn, further exceeding weekly supply expectations, and August volume to US$103.195bn, according to IFR data.
Yesterday the average IG new issue concession was 2bp and the average order book was 2.3x subscribed, while the average price progression was 22bp tighter, IFR data show.
"As expected, the pace of supply slowed markedly yesterday after the hot start to the week," BMO said.
Reception to yesterday’s lone deal was solid, BMO said, and as anticipated, average new issue concessions dropped from the brief increase on Tuesday, when it hit 8bp.
No offerings were priced in the HY primary yesterday.
The average IG bond spread remained unchanged at 98bp on Wednesday and the HY bond spread edged out 2bp to 327bp, according to ICE BofA data.
"High grade spreads were mostly unchanged alongside light volumes yesterday," BMO said. "That leaves spreads unchanged or modestly wider for the week as a whole as they potentially settle into the next trading range at levels on the upper end of the range prevalent for much of this year."
HIGH GRADE
At least three high-grade bond deals are expected to price on Thursday.
Athene Global Funding and Pacific Life Global Funding are in the market for funding agreement-backed notes. Their deals follow in the wake of similar transactions earlier this week from Pricoa Global Funding and Corebridge.
Athene's transaction was split into two parts, comprising two-year fixed and floating-rate notes. Pacific Life's deal was in a five-year maturity.
American confectionery company Mondelez International announced an offering for a 10-year senior unsecured note, the proceeds of which could help pay down short-term commercial paper debt.
LEVERAGE/HIGH YIELD
The high-yield primaries have effectively shut for the summer, but the secondary market remains active, particularly among certain distressed names.
Avon Products’ 6.95% 2043s were giving back some gains this morning to trade at around 30 cents on the dollar, down from low 40s on Wednesday, according to MarketAxess data.
The bonds have seen substantial swings after trading at the beginning of the week at 27.05.
The company’s decision to file for Chapter 11 bankruptcy on August 12 led Moody’s and Fitch to downgrade the credit last week to Ca and D, respectively.
AMC Entertainment’s 7.5% 2029s ended the day stronger on Wednesday to change hands yesterday afternoon as high as 73.20, up from 70.903 earlier that day.
In late July, the company said that it had extended up to US$2.45bn of 2026 debt maturities out to 2029 and beyond. At the time, the 2029s were trading at around 65.60.
Elsewhere, Lightning Power’s new 7.25% 2032 has performed well since it was priced at par earlier this month. The bond was trading late Wednesday at 103.00.
STRUCTURED FINANCE
At least one more asset-backed offering is slated to price this week to add to the US$2.5bn of deals that has already printed.
Data center operator Compass is preparing to sell by Friday a US$371m green bond.
Yesterday student loan firm Ascent priced a US$52.3m securitization. The US$38.5m Single A rated senior tranche came in at Treasuries plus 250bp.
In the RMBS market, fund manager Pimco is in the market with a US$310.75m non-QM issue, which would bring the sector's issuance to more than US$1.4bn this week.
LATAM
Mexico priced today a five-part senior unsecured sustainable development goal bond deal, raising ¥152.2bn (US$1.04bn).
The three-year priced with a 1.43% coupon at Tonar mid-swaps plus 95bp, the five-year with a 1.72% coupon at 115bp, the seven-year with a 1.88% coupon at 120bp, the 10-year with a 2.27% coupon at 140bp, and the 20-year with a 2.93% coupon at 155bp. The respective amounts are ¥97.1bn, ¥32.2bn, ¥10bn, ¥8.3bn and ¥4.6bn.
Daiwa, Mizuho, Nomura and SMBC Nikko were the bookrunners.
Latin American sovereign five-year CDS yesterday widened 2bp for Mexico, and narrowed 1bp for Colombia, according to Lucror Analytics.
EQUITIES
WeRide has postponed its US$119m Nasdaq IPO in another setback to hopes of reviving the China-to-US new issue market.
A syndicate led by Morgan Stanley, JP Morgan and CICC originally aimed to price the robotaxi/autonomous driving firm’s offering on August 15 before pushing the timing to August 22 to update its disclosures to the SEC.
But even after filing two updates in the past week to clarify various regulatory matters and risk factors, including rising trade and geopolitical tensions between the US and China, the offering will not move ahead this week.
Bankers close to the deal described its status as “temporarily” postponed without any new timetable for pricing.
Elsewhere, Bank of America and TD Cowen joined forces late Wednesday to offload US$2.4bn of shares in brokerage firm Charles Schwab on behalf of Canada’s TD Bank.
In an unregistered block trade, the banks reoffered their joint purchase of 40m Schwab shares at US$61.65, within the US$61.35–$62.65 marketing range and a 4.5% discount to Wednesday’s closing price of US$64.57.
The proceeds will help TD offset a US$2.6bn loss provision also disclosed late Wednesday to cover “monetary and non-monetary penalties” to resolve an embarrassing anti-money laundering probe tied to illicit fentanyl profits.
Raising the cash offsets the decline in TD’s regulatory capital ratios after accounting for the provision.
The offering marked the week’s second large unregistered block.
Walmart led the way with a massive US$3.6bn unregistered sell-down of its stake in China’s JD.com via Morgan Stanley on Tuesday night.