At least one investment-grade bond is expected to price on Friday as issuers mainly stand down in the final day of the week before the Federal Reserve's September rate-setting meeting
Today is also a rather quiet session for economic data releases. The few reports published today include import/export prices indexes and the preliminary September University of Michigan Survey of consumers.
The S&P 500 index was modestly higher in early trading this morning, while the yield on the 10-year US Treasury hovered around 3.65%, down a few basis points from yesterday's close at 3.68%. This morning the markets are less certain, however, that the central bank will cut rates by 25bp, rather than 50bp, when they meet next week.
Today the CME Fedwatch Tool forecasts a 53% probability for a 25bp fed funds rate cut, versus and a 72% probability yesterday.
On Thursday four investment-grade bond offerings priced for a total of US$14.6bn, bringing weekly supply to US$37.825bn, IFR data show, within the volume range forecast for the period. This year US$1.247trn of high-grade bonds have priced, already more than the US$1.213trn printed during all of 2023, the data show.
"Reception to yesterday’s deals was somewhat mixed, with the slate seeing strong order book coverage with books more than 3.5x oversubscribed though the strong demand was at least partially driven by new issue concession of approximately 6.5bp on average," BMO said in a report this morning. "Excluding [Wednesday}, which saw just $100mn in supply, that’s the largest daily average concession since August 20."
Four high-yield bonds priced on Thursday to raise US$3.425bn, bringing weekly volume to US$12.39bn, according to IFR data. So far this year, US$214.3bn of bonds have priced, compared with US$174bn for all of last year.
The average investment-grade bond spread narrowed by 2bp to 99bp on Thursday, and the HY bond spread tightened by 5bp to 339bp, according to ICE BofA data.
For the week ended September 11, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$1.84bn and the all corporate high-yield debt funds/ETFs net inflow was US$632.74m. The all domestic equity funds/ETFs net outflow was US$5.282bn and the all non-domestic equity funds/ETFs net inflow was US$3.222bn.
HIGH GRADE
Just one issuer is hitting the primary market for investment-grade bonds on Friday after four borrowers raised US$14.6bn yesterday.
Voya Financial is out with a US$400m 10-year senior unsecured note today, with proceeds going to refinance its outstanding 2025 notes.
Server maker Hewlett Packard Enterprise sold the majority of yesterday's paper through a US$9bn multi-tranche offering. The transaction was upsized from an initially indicated US$6.5bn.
There was some financial issuance on Thursday, too. US money-center bank Citigroup raised US$4.1bn through a mix of subordinated and senior unsecured issuance.
Grocery center REIT Kimco Realty and Brazilian energy company Raizen were the two other borrowers that accessed the market yesterday.
LEVERAGE/HIGH YIELD
Resorts World New York is topping off a busy week in the primary markets with a small US$100m tap of its 7.25% 2029s today.
The casino operator is issuing through co-issuers Genting New York and Genny Capital as it seeks to raise money to refinance debt.
Left lead Citigroup has set initial price guidance of 100.00-100.50 ahead of expected pricing today.
With this deal, the asset class will see US$12.49bn in new supply this week.
STRUCTURED FINANCE
Sky Leasing is in the market today with a US$569.5 aircraft issue, wrapping up a week that has already seen 15 ABS issuers raise over US$11bn.
Dealmakers are now stepping up their efforts in marketing next week's supply.
Once again the auto sector will account for the majority of the upcoming ABS issuance which includes a US$1.29bn prime securitization from Ford and a US$1.20bn subprime deal from Santander.
The esoteric sector will remain active. Landmark is readying a US$265m data center issue, while Apollo's PK AirFinance is back with a US$633m aircraft securitization.
In the meantime, the RMBS market is closing out a heavy volume week after issuers raised about US$5bn.
There are at least two residential mortgage offerings in the pipeline: a US$255.6m non-QM securitization from Balbec and a US$197.8m home equity agreement issue from Unlock
LATAM
LatAm issuers remain sidelined on Friday after a relatively busy week for the asset class.
The region's borrowers raised a combined US$3.865bn over the past four days, including deals from development bank IDB and its private sector arm.
Argentine utility Edenor, however, threw in the towel earlier this week after it failed to land a seven-year amortizer, even with price guidance fixed at a double digit yield of 11.125%.
Other deals, meanwhile, are holding up well in the secondary market.
The new 2041 from Fiemex, a newly formed entity holding energy assets in Mexico, traded as high as 102.00 yesterday after pricing at par earlier in the week, according to MarketAxess data.
The 7.75% 2031 issued this week by Colombia's Termocandelaria was changing hands this morning at a dollar price of around 99.25 after pricing at 98.68.
EQUITIES
The long-running breakup of General Electric took yet another step late Thursday via an upsized US$1.2bn block sale of GE Healthcare Technologies shares by its slimmed-down former parent.
Morgan Stanley and Citigroup offloaded their joint purchase of 15m shares or 3.2% of GE HealthCare at US$86, a 1.7% discount to Thursday’s closing price of US$87.46.
The offering, which was upsized from 10m shares at launch, cuts the remaining stake held by General Electric, or GE Aerospace as it is also known, to about 3.3%.
GE spun-off GE HealthCare in early 2023 but retained a 19.9% stake it has subsequently sold down through multiple follow-ons. GE also spun off its clean power unit, GE Vernova, earlier this year.
The GE HealthCare block capped a solid US$7bn week for US ECM that also included three biotech IPO pricings on Thursday.
Bicara Therapeutics drew the most interest, pricing a US$315m Nasdaq IPO that was upsized twice before pricing at the top of the range.
Morgan Stanley, TD Cowen, Cantor and Stifel led the sale of 17.5m shares in the mid-stage cancer specialist at US$18.00.
Having already upped the offering size by 25% on Wednesday, the banks increased the number of shares sold by another 20% at pricing.
Bicara benefited from comparisons to Nasdaq-listed Dutch biotech Merus, whose shares are up nearly 50% this year.
Bicara is using the money from its IPO to fund Phase II/III trials on a cancer drug that would be a direct competitor to one Merus has in Phase III.
Bicara shares will open Nasdaq trading today under the symbol “BCAX”.
MBX Biosciences drew on investor enthusiasm for GLP-1 weight loss drugs to upsize its Nasdaq IPO and price the offering at the top of the marketing range for proceeds of US$163.2m.
JP Morgan, Jefferies, Stifel and Guggenheim Securities priced 10.2m MBX shares (up 20% from 8.5m at launch) at US$16, the top of the US$14–$16 marketing range.
MBX is using the money to help launch clinical trials on its long-acting GLP-1 weight loss drug as soon as next year. It has two other drugs in clinical trials, including a Phase II treatment for a rare disease.
MBX shares will trade on Nasdaq under the symbol “MBX”.
Zenas BioPharma raised US$224m from a Nasdaq IPO that was also upsized but priced within the range.
The castoff drug developer led by founder Leon “Lonnie” Moulder priced the sale of 13.2m shares, up from 11.2m at launch, at US$17 or the middle of the US$16-$18 marketing range.
Morgan Stanley, Jefferies, Citigroup and Guggenheim Securities led the offering.