At least 10 investment-grade bond offerings are slated to price on Thursday, as the market for new issuance from the best-rated corporate credits downshifts after shattering weekly forecasts in just two days.
The investment-grade bond market welcomed 19 offerings on Wednesday with issuers raising a combined US$28.65bn, according to IFR data. The US$72.925bn of bonds priced on Tuesday and Wednesday bested expectations for the entire week of US$50bn-$60bn.
Yesterday the average investment-grade new issue concession was 2.2bp and the average order book was 3.83x subscribed, while the average price progression from IPTs was 31.42bp tighter, IFR data show.
Meanwhile, the pace of the high-grade primary is picking up. At least five offerings are expected to price on Thursday, after two deals printed on Wednesday and raised a combined US$1.25bn, which brought weekly (and monthly) issuance to US$3.565bn, IFR data show. This year’s issuance of US$197.9bn is already more than the US$174bn of junk bonds that printed during all of 2023.
The average IG bond spread widened 1bp to 99bp on Wednesday, and the HY bond spread increased 4bp to 335bp, according to ICE BofA data.
Elsewhere, the S&P 500 and Nasdaq Composite indexes rose in early trading this morning, while the yield on the 10-year US Treasury was quoted at 3.73%, down from yesterday's close of 3.77%. Investors are busy vetting today's slate of economic data releases, including the Challenger Job Cuts report, the ADP Employment Report, weekly jobless claims, revised Q2 productivity and cost data, the revised S&P Global Services PMI and the ISM Services PMI.
The releases are precursors to the closely watched August employment report from the Bureau of Labor Statistics that will hit the tape tomorrow morning and could influence the Federal Reserve's next rate decision. This morning the CME FedWatch Tool forecasts a 59% probability for a 50bp fed funds rate cut at the September FOMC meeting and a 41% probability for a 25bp reduction.
HIGH GRADE
The US high-grade market is slowing from the pace set by Tuesday's frenetic session, but investors will still have plenty of paper to buy. At least 10 US investment-grade bond offerings are expected to price on Thursday.
Insurer Corebridge Financial is issuing a 30-year non-call 10 junior subordinated note in a fixed-to-fixed reset structure.
Asset managers Golub Capital Private Credit Fund is marketing a five-year senior unsecured note. Drug distributor McKesson Corp is also issuing a five-year bond.
A spree of 10-year senior note offerings will come from industrial company WW Grainger, asset manager Janus Henderson and two REITs - Ventas Realty and Americold Realty Operating Partnership.
Swiss bank UBS Group is marketing a US dollar Additional Tier 1 bond at IPTs of 7.5% area.
A subsidiary of Australian oil and gas company Woodside Energy is selling 10 and 30-year senior unsecured notes.
Insurer Northwestern Mutual announced an offering for a three-year funding agreement-backed note.
LEVERAGE/HIGH YIELD
Five junk-rated issuers are lining up to raise funds on Thursday as borrowers continue to take advantage of what remains a solid backdrop for credit.
Hotel chain Hilton, insurance company Ryan Specialty and plastics maker Avient all announced deals this morning ahead of expected pricing later today.
They join aerospace component firm TransDigm and crane manufacturer Manitowoc. Together those five issuers are expected to raise a combined US$3.95bn today.
Fiesta Purchaser, the new parent company of Shearer's Foods following its acquisition by Clayton, Dubilier & Rice, has also announced a US$400m eight-year non-call three. Pricing is scheduled for next week and proceeds are going toward dividend payments.
In the secondary markets, meanwhile, the 5.875% 2029 issued by Frontier Communications was giving back some gains this morning on the announcement earlier today that Verizon would buy the company in an all-cash transaction valued at US$20bn.
Those bonds were changing hands this morning at 99.65 after they had climbed to above par this week on reports that an acquisition was in the works, according to MarketAxess data. On Tuesday the 2029s were trading in the low 90s.
STRUCTURED FINANCE
At least 16 issuers are lining up to raise US$11bn through asset-backed deals over the next week or so.
In the ABS sector, the biggest offering is a US$2.3bn whole business securitization from Roark's Subway sandwich chain.
But deals are also emerging in the CMBS and RMBS markets.
Bridge Investment is out with a US$549.9m CRE CLO CMBS issue, with the US$376.7m Triple A rated senior note being guided at SOFR plus 170bp-175bp.
MFA and Lone Star are also in the market with their latest non-QM deals, while Atlas SP is preparing its first re-performing mortgage securitzation.
LATAM
At least three Latin America issuers are expected to price today.
Argentina's Pampa Energia announced a US$400m seven-year non-call three senior unsecured note, with initial price thoughts in the mid-high 8% area.
Chile's Banco de Credito e Inversiones (Bci) is out with its second AT1 offering this year. IPTs on the non-call 10.25 perpetual Additional Tier 1 subordinated notes are in the 7.875% area.
Eletrobras has also opened price thoughts for a long 10-year senior unsecured note in the low 7% area.
Yesterday development bank CAF and Argentine oil producer YPF raised a combined US$1.5bn
Termocandelaria's roadshow ends today. The Colombian power company is pitching a benchmark senior unsecured note. Potential tenors are a seven-year non-call three or a 10-year non-call five.
EQUITIES
Five issuers raised US$2.4bn from a mix of five follow-on stock sales, marking a busy night for US ECM, even though the IPO market remains quiet with no live deals on the calendar.
Vaxcyte led the charge by raising an upsized US$1.3bn from the largest biotech follow-on this year.
After a day of marketing, a Bank of America-led syndicate priced the sale of 12.6m shares of the pneumonia vaccine developer at US$103, a 5.6% discount to Wednesday’s closing price.
The offering was also upsized from an initial US$1bn fixed proceeds target, amounting to just over 10% of the enlarged biotech.
The Phase III-ready biotech now has over US$3bn of cash for a late-stage trial beginning next year and to manufacture its vaccine at a commercial scale.
Also late Wednesday, private equity firms Warburg Pincus and GTCR cut their stake in lab services provider Sotera Health via a US$381m sponsor block.
Citigroup offloaded its purchase of 25m Sotera shares at US$15.25, a 1% discount to Wednesday’s closing price of US$15.41.
Warburg owned a 31.3% equity stake and GTCR 20.9% prior to the stock sale, and their combined stake has now fallen below 50%.
The sponsors can sell more Sotera stock in 45 days.
Mid-market PE firm American Industrial Partners also cut its circa-60% stake in defense mission support provider V2X via a US$96m overnight stock sale.
Joint books Goldman Sachs, Morgan Stanley and Baird priced the sale of 2m shares or about 6% of V2X at US$48, within the US$47–$50 marketing range and at a 10% discount to Wednesday’s closing price of US$53.35.
It was not all secondary selling on Wednesday.
CSW Industrials raised an upsized US$313.5m from an overnight stock sale to help repay debt.
Software developer Zeta Global rounded out Wednesday’s activity with a US$310m overnight stock sale that was mostly primary but included a modest sell-down by its long-time sponsor GPI Capital Gemini.