Investment-grade issuers including Hewlett Packard Enterprise and Citigroup are hitting the market on Thursday, after just one offering – a US$100m retap – printed yesterday, when dealmakers were busy parsing the latest inflation data.
Many would-be borrowers opted to sit out yesterday’s primary market to sidestep any volatility around the closely watched consumer price report that was published in the morning. Today’s slate of economic data releases includes the producer price index, initial jobless claims and, this afternoon, the monthly Treasury budget statement. Yet there was nothing in that mix of numbers to prevent at least four high-grade issuers from braving the market on Thursday.
The PPI release for August, the last key inflation report before next week's Fed meeting, came in a little hotter than expected, IFR reported. Month on month the all-items index was up 0.2% and the core index was up 0.3%, compared with expectations of 0.1% and 0.2%, respectively. Meanwhile, as a result of negative revisions, year-on-year increases were lower than expected.
Nonetheless, the PPI report has not much changed market expectations for next week's Federal Open Market Committee meeting. The CME FedWatch Tool forecasts an 87% probability of a 25bp cut this morning, compared to 86% yesterday and 60% last week.
Two high-yield bond issuers raised US$2.69bn yesterday, bringing weekly issuance to US$8.965bn, according to IFR data. So far this year junk borrowers have priced US$210.9bn of bonds, already more than the US$174bn done during all of last year, the data show.
The average IG bond spread was unchanged at 101bp on Wednesday, and the HY bond spread tightened 2bp to 344bp, according to ICE BofA data.
"High grade spreads closed yesterday mostly unchanged on volumes that remained very strong, running 20% above the average Wednesday over the past year," BMO said in a report this morning. "Risk tone strengthened over the course of the day yesterday, which is notable after relatively strong CPI data yesterday almost assuredly ended any conversation over a 50bp rate cut next week."
HIGH GRADE
The primary market for US investment-grade bonds is expected to draw at least four deals today.
Server maker Hewlett Packard Enterprise is in the market for a bond deal expected to be around US$6.5bn, according to an investor presentation. The seven-part senior unsecured transaction comprises fixed tranches of two, three, five, seven, 10 and 30 years. The offering also includes a two-year floater.
US money-center bank Citigroup is selling both senior unsecured and subordinated notes today. The six-year non-call five senior offering is coming in a fixed-to-floating rate structure, while the 15-year non-call 10 subordinated note is coming in a fixed-to-fixed format.
Shopping center REIT Kimco Realty is marketing a US$350m 10-year senior unsecured note, returning to the bond market after its last offering in October 2023.
Brazilian energy company Raizen is selling a 10-year green bond, with IPTs set at US Treasuries plus 250bp area.
LEVERAGE/HIGH YIELD
Junk-rated borrowers continue to pile into the primary market after what has already been a busy week for the asset class.
At least two borrowers are expected to price deals today though several others have been lining to issue this week.
Service Corp, a funeral services company, announced this morning that it was seeking to raise US$800m today through an eight-year non-call three bond.
Griffin Global Asset Management is also in the market with a US$400m 5.5-year non-call two offering ahead of expected pricing today.
Meanwhile, insurance firm Alliant Holdings, printing company Cimpress and HAH Group, a provider of home care and support for the elderly, are also marketing deals for pricing this week.
STRUCTURED FINANCE
Dealmakers are preparing to price at least four more asset-backed offerings by tomorrow, adding to the US$9.2bn of supply that has already landed this week.
JP Morgan is in the market with a US$707m prime auto securitization, while Pagaya is readying a US$487.9m consumer loan deal.
In the esoteric space, Accelerated Assets is showing a US$199.8m timeshare issue to investors, and SKY Leasing is seeking to raise US$569.5m with an aircraft bond.
Market participants are also lining up ABS issues for next week, including a US$1.2bn subprime auto offering from Santander and a US$906.4m equipment deal from CNH.
In the CMBS market, Blackstone yesterday released price guidance on a US$1.05bn deal, which is the asset manager's second securitization to fund its acquisition of apartment rental operator AIR Communities. Guidance on the $631.1m Triple A rated tranche has been set at SOFR plus 165bp-170bp.
LATAM
The primary market for LatAm bond issues remains active as more borrowers line up to raise funding.
Brazilian energy company Raizen is returning to market today with a long 10-year senior unsecured green bond. Initial price thoughts are in the 250bp area over US Treasuries.
Earlier this year, the company raised US$1.5bn from a two-part green bond offering that was well received by investors.
Gran Tierra Energy, a Canadian E&P company with operations in Ecuador and Colombia, has also announced a tap of its 9.5% senior secured amortizing notes due 2029.
Meanwhile, Fitch has assigned a BBB rating to the Metropolitan Municipality of Lima's proposed senior securitized bond of up to S1.25bn (US$330m).
EQUITIES
Bicara Therapeutics has upsized its Nasdaq IPO by 25% to as much as US$265m in response to overflowing investor demand ahead of pricing later on Thursday.
The Phase II cancer specialist is now looking to sell 14.7m shares, up from 11.8m shares at launch, in the same US$16.00–$18.00 marketing range.
The Morgan Stanley-led syndicate told investors earlier on Wednesday that the IPO was multiple-times covered and that it expects the offering to price at the top or above the range.
Bicara is the standout of the three biotech IPOs pricing late Thursday, though the other two, MBX Biosciences and Zenas Biopharma, have also drawn strong interest from investors.
Both are multiple times covered with strong support from both new and existing investors.
MBX is riding a wave of enthusiasm for GLP-1 weight loss drugs into a US$136m Nasdaq IPO.
Bankers led by JP Morgan point to strong demand from new investors as supporting pricing of 8.5m shares at the top of the US$14-$16 range.
The US$212m IPO of Zenas, a castoff drug developer, marks the return of veteran biotech dealmaker Lonnie Moulder.
Elsewhere, premium cruise line operator Viking priced a US$930m secondary sell-down late Wednesday in its first follow-on since its late April IPO. Oil and gas royalty play Viper Energy also raised US$425m from an overnight stock sale to fund acquisitions.
So far this week, 12 companies have raised a combined US$4.8bn from blocks/overnight stock sales, marketed follow-ons and convertible bonds.