The last week of August is not expected to be an active session for the US corporate bond primaries as many syndicate desks take vacations.
For today, just one IG offering is expected to price in the primary and the HY arena is idle.
"Amidst the second week of the so-called 'dog days' of summer, IG supply is naturally expected to slow markedly this week with expectations for just $3bn," BMO said. That is in-line with the historical average for the final week of August of US$2.1bn since 2017, BMO said, adding that over that span, the heaviest final week of August came in 2020, which saw US$5.4bn.
Looking ahead to September supply, the early expectations project approximately US$132bn of IG issuance, which mostly aligns with the historical average September over the past seven years of US$134bn, excluding 2020, BMO said.
For the ECM primary, IFR reports a handful of companies could move ahead with offerings after Labor Day. For this week, however, overall ECM activity will be light to non-existent as investors take their traditional summer break.
As for economic data, IFR reports that none of the month’s marquee data releases are scheduled for this week, with the principal reports being July durable goods and personal income and outlays. The data release for today featured durable goods, which was higher than expected.
Next month, however, markets will begin September absorbing newer key economic data releases.
"After (Federal Reserve Chairman) Powell's speech in Jackson Hole, markets will focus on US payrolls to gauge the state of the economy and the labor market following the July slowdown," Bank of America Research said in a report yesterday.
US stocks opened the trading session higher, while US Treasury yields ebbed with the 10-year benchmark note yield slipping to 3.78%. There will be no early close for bond and stock markets on Friday ahead of the Labor Day holiday. However, all US markets will be closed next Monday for the holiday.
Last week in the IG corporate bond primary, 26 tranches were priced totaling US$22.65bn, lifting August IG volume to 137 tranches priced totaling US$105.445bn, according to IFR data.
The weekly average IG new issue concession for last week was 4.48bp and the weekly average order book was 3.99x subscribed, while the weekly average price progression was 28.03bp tighter, IFR data show.
In the HY primary, one tranche was priced totaling US$300m last week, nudging August HY volume to 23 tranches totaling US$18.05bn, according to IFR data.
The average IG bond spread tightened by 1bp to 96bp on Friday and the HY bond spread edged in 2bp to 319bp, according to ICE BofA data.
"High grade spreads narrowed approximately 1bp during Friday’s session to bring total tightening on the week to 2bp," BMO said. "After last week’s move, IG index spreads have effectively retraced the volatility-induced widening a month ago, with spreads now unchanged for Q3."
HIGH GRADE
It is expected to be a quiet week in the investment-grade bond market, with at least one deal slated to price on Monday.
Associated Banc-Corp is out with a US$300m offering of six-year non-call five senior unsecured fixed to floating-rate notes. Bank of America, Citigroup and RBC are the active bookrunners.
LEVERAGE/HIGH YIELD
It is another quiet day for the US high-yield primaries as the market heads into the last full week of summer before a throng of issuers are expected to raise funding post Labor Day.
Meanwhile, in the secondaries, Cleveland-Cliffs’ 7% 2032 is one of the securities changing hands this morning to trade at a dollar price of 100.34, according to MarketAxess data.
The bond was tapped earlier this month at 99.25.
The 4.25% 2029 issued by AMC Networks gave back some gains this morning after trading at 73.40, down from 75.88 on Friday afternoon.
That low coupon bond was issued in January 2021. Since then, the content distributor has had to pay up in the primary market, where in March it issued US$875m of new 2029s at par to yield 10.25%.
That bond was changing hands on Friday at 100.75 to yield 9.976%.
STRUCTURED FINANCE
The asset-backed primary is poised for a light week with few deals slated for sale.
Last week eight ABS issuers raised US$3.56bn, bringing the month's supply to US$17.35bn, IFR data show.
Elsewhere, several RMBS offerings are expected to come to market this week.
A&D Mortgage, Angel Oak and Rithm filed last week with the Securities and Exchange Commission for their latest non-QM issues.
LATAM
Brazilian pulp and paper producer Suzano is planning to tap the Panda bond market to raise up to Rmb1.2bn (US$168m) from a three-year bond.
Costa Rica announced on Friday that it recalculated its financing needs for 2024, increasing the figure by approximately US$760m, to C2.7trn (US$5.134bn) from C2.3trn (US$4.374bn). To date, about 61% of the total has been raised in the domestic market, the ministry of finance said.
Latin American sovereign five-year CDS on Friday tightened 5bp each for Brazil and Mexico, and 2bp-3bp for Colombia, Chile and Peru, according to Lucror Analytics.
EQUITIES
Energized by the prospect of a September interest rate cut, bankers have begun restocking the US IPO pipeline with four deals capable of pricing after Labor Day.
Last week saw Canadian/Brazilian mine owner Brazil Potash and biotechs Bicara Therapeutics, MBX Biosciences and Zenas BioPharma all file for upcoming IPOs.
In the latest of those, MBX filed for a Nasdaq IPO late Friday that looks to capitalize on the market’s ongoing obsession with GLP-1 weight loss drugs.
JP Morgan, Jefferies, Stifel and Guggenheim Securities are named as joint bookrunners on an offering that could price as soon as next month.
The IPO proceeds would add to the US$63.5m MBX raised in early August from a private funding round led by Deep Track Capital, Driehaus Capital and T Rowe Price.
With recent updates from some other names already on file, at least a handful of companies could also move ahead after Labor Day. However, overall ECM activity will be light to non-existent this week as investors take their traditional summer break.
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