At least seven investment-grade issuers are expected to price bonds on Monday, as dealmakers aim to complete fundraisings ahead of Wednesday's inflation report, which could influence Federal Reserve's ultimate rate-cut decision next week.
Before the consumer price index report hits the tape in a couple of days, market participants are getting a look at a raft of economic data on Monday. Releases today include the Conference Board's employment trends index, the wholesale trade report, the New York Fed's survey of consumer expectations and the Fed's consumer credit report.
"This week’s inflation data for the month of August offer some hope that the Fed may be coaxed into a 50bp cut in two weeks, though we expect it would likely take a large miss for that to happen," BMO wrote in a report this morning.
The CME FedWatch Tool this morning forecasts a 73% probability for a 50bp fed funds rate cut at the September FOMC meeting and a 23% probability for a 25bp reduction. That compares to the 70%/30% split on Friday.
Meanwhile, the S&P 500 and Nasdaq Composite indexes are trading up early this morning, while the yield on the 10-year US Treasury was quoted at 3.71%, down about a 1bp from Friday’s close.
No high-grade deals priced on Friday after the first week of September closed out with 59 offerings – the most ever – and total issuance for the three post-Labor Day sessions hit US$81.575bn, according to IFR data.
BMO said this morning, "all of the demand metrics that we track continue to indicate the same thing: demand in the IG market remains extremely strong. The question is: how long will that last?"
Junk-rated borrowers were active, too. They raised US$7.615bn last week, though no trades printed on Friday, IFR data show. High-yield issuers have priced US$201.95bn of bonds in the US market so far this year, more than the approximately US$174bn issued during all of 2023.
The average IG bond spread was unchanged for the third day in a row at 99bp on Friday, and the HY bond spread increased 10bp to 339bp, according to ICE BofA data.
HIGH GRADE
The US high-grade bond market is kicking off with another round of deals. At least seven borrowers are expected to price bonds today.
Oil refiner Phillips 66 announced a three-part offering of senior unsecured notes comprising a 10-year, a 30-year and a tap of its 5.25% 2031 notes.
Shopping center REIT Phillips Edison Grocery Center Operating Partnership is marketing a US$300m 10-year senior unsecured note. REIT Equity Residential is selling a 10-year senior bond, too.
Electricity cooperative National Rural Utilities Cooperative Finance is marketing a senior unsecured offering split into three-year fixed and floating-rate tranches, along with a tap of its 5.15% 2029 notes.
Private-credit firm Sixth Street Lending Partners announced a sale for a five-year senior unsecured bond.
Car parts supplier Aptiv PLC and utility Wisconsin Electric Power are also bringing deals today.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds is picking up steam, with seven borrowers now looking to price deals over the coming days.
Utility PG&E is leading the charge with a benchmark sized long 30-year non-call 5.25 offering, which carries a fixed coupon that is reset in 2030.
Leads have set initial price talk at 7.875% area on the junior subordinated notes ahead pricing today.
It joins Fiesta Purchaser, the new parent company of Shearer's Foods, which is expected to price a US$400m eight-year non-call three bond today to pay a dividend to its shareholders. Leads are talking 9.75%-10.00% on the deal.
Elsewhere, five other issuers have launched marketing on new deals, which are expected to price as soon as this week.
Inmarsat is approaching investors with IPTs of high 9% area on a US$1.25bn five-year non-call two issue. The satellite services company is using proceeds from the senior secured deal to pay down its 6.750% 2026.
Pharmaceutical company Perrigo is seeking to raise the equivalent of just over US$1bn in a dual-currency issue comprising two eight-year non-call three tranches, one for US$715m and the other for €350m.
Casino operator Resorts World New York City is showing a US$525m five-year non-call two ahead of expected pricing on Wednesday.
Finally, Verizon retailer Victra is out with a US$500m five-year non-call two issue, while Provident Funding is marketing a US$400m five-year non-call two bond.
STRUCTURED FINANCE
The asset-backed primary will kick into a higher gear this week when at least 13 issuers are expected to raise over US$8bn.
The auto sector is leading the charge on the latest wave of issuance, with Santander setting price guidance this morning on its US$1bn lease securitization.
Toyota is also in the lease space with a US$1bn deal, while Carvana is in the prime auto loan area with a US$661.4m issue
In the subprime auto segment, Consumer Portfolio Services is out with a US$416.8m offering, while Lendbuzz is marketing a US$248.5m deal.
As for other asset classes, John Deere Capital is seeking to raise US$1.4bn with its third equipment securitization of the year, while SBA Communications is readying a US$1.2bn cell tower deal.
LATAM
The Inter-American Development Bank and its private sector arm IDB Invest got the ball rolling in the Latin American primaries this morning after a busy week for the asset class.
The IDB is talking SOFR plus 52bp area on a dollar benchmark bond due 2031, while IDB Invest has set initial price thoughts of SOFR plus 39bp area on a US$750m no-grow offering due 2027. Both deals are set to price on Tuesday.
Meanwhile, Colombian utility Termocandelaria is preparing pricing today on a US$425m seven-year non-call three with initial price thoughts set at low to mid 8% area.
Two other electric power companies – Argentina's Edenor, and Mexico's Fiemex – are also marketing deals this week.
This comes after LatAm issuers piled into the market last week to raise a combined US$7.46bn.
EQUITIES
Trucking company RXO is seeking US$350m from a follow-on stock sale to help fund its US$1.03bn acquisition of freight broker Coyote Logistics from UPS.
Goldman Sachs, Bank of America, Citigroup and Morgan Stanley early on Monday launched a day of marketing to raise the fixed sum. The offering is expected to price after the close.
In June, RXO said the Coyote purchase would make it the US’s third largest provider of brokered transportation and would be “immediately and significantly” accretive to earnings per share and cash flow.
At the time, the company said the purchase price would be funded with a mix of equity and debt, the former including a combined US$550m investment from RXO’s two largest shareholders.
Shares of RXO, which was spun off from XPO Logistics in 2022, closed at US$26.72 on Friday and are now up 15% this year.
The US IPO market is poised to reopen this week with three biotechs now lined up to go public in the week ahead.
MBX Biosciences joined the pricing calendar early Monday by launching an up to US$136m Nasdaq IPO for pricing on Thursday September 12.
JP Morgan, Jefferies, Stifel and Guggenheim Securities are marketing the sale of 8.5m shares in the mid-stage developer of metabolism drugs at US$14-$16.
The banks are marketing at a 13%-30% premium to the US$12.38 investors paid privately last month in a US$63.5m Series C private placement.
MBX joins Bicara Therapeutics and Zenas Biopharma on the road with Nasdaq IPOs for pricing late Thursday by Morgan Stanley-led syndicates.
The offering values MBX just under US$500m.