At least a dozen investment-grade bond offerings are expected to price on Monday, while in the high-yield arena a number of issuers have announced new deals that are slated to price later in the week.
As the dust settles on the US Federal Reserve's FOMC decision last week, Deutsche Bank Research noted in a report that some of the main highlights for this coming week are likely to be the core US PCE reading on Friday, an abundance of Fedspeak giving insight into last week's surprise 50bps cut, and the flash global PMIs today.
"Fedspeak will probably dominate the week until we reach that core PCE number," Deutsche Bank said.
As for markets, Deutsche Bank said that looking back at last week now, risk assets put in a strong performance, as the Fed delivered a rate cut and US data continued to point away from a downturn.
"That combination of the Fed easing into a soft landing has historically proved to be a very favourable one for US equities, and last week was no different, with the S&P 500 up by +1.36% over the week," Deutsche Bank said.
Meanwhile, for sovereign bonds there was a more mixed performance, but a clear pattern was a curve steepening on both sides of the Atlantic, Deutsche Bank said.
Last week in the IG primary 21 tranches were priced totaling US$15.9bn, pushing September volume to 170 tranches totaling US$135.7bn, according to IFR data.
Following last week’s downside surprise in terms of issuance, falling short of expectations of US$22bn-$23bn, it is fair to wonder if the expected downshift in second-half corporate supply is finally starting, BMO said in a report today.
"At least for one week, the answer appears to be no," BMO said. "This week, syndicate desks are expecting approximately $23bn in new IG supply, which is considerably above the average for the final week of September of $15.5bn since 2016."
The IG volume sold this week would give this month a very strong chance of setting a new September record, which was US$169bn set in 2020, BMO said.
On Friday one HY offering was priced totaling US$750m, lifting weekly issuance to eight tranches totaling US$6.725bn and September volume to 37 tranches totaling US$26.830bn, according to IFR data.
The average IG bond spread was unchanged at 93bp on Friday and the HY bonds spread widened by 5bp to 315bp, according to ICE BofA data.
"High grade spreads were unchanged on Friday, leaving last week’s total narrowing for the IG index at 5-6bp," BMO said.
HIGH GRADE
A rush of US investment-grade corporate bond deals will kick start the week's supply, with at least 12 offerings expected to price on Monday.
Telecom company T-Mobile is issuing a three-part bond deal today, comprising five, 10 and 30-year tenors. REITs Invitation Homes and Simon Property Group are in the market.
Insurance services provider First American Financial announced a US$350m offering of 10-year senior unsecured notes. Insurer Guardian Life is selling a five-year funding agreement-backed note, while the financing entity of truck maker Paccar is marketing a five-year senior bond.
Direct lender New Mountain Finance is selling a US$300m three-year senior unsecured note.
There will be a large batch of Yankee offerings, including the US financing subsidiary of Korean carmaker Hyundai, Australia and New Zealand Bank, Industrial Bank of Korea, Indian infrastructure finance company REC Limited and insurer AIA Group.
LEVERAGE/HIGH YIELD
The primaries for US high-yield bonds is off to a busy start this week as a wave of borrowers pile into the market following the Federal Reserve’s 50bp rate cut last week.
Just one deal is expected to price today, namely a US$200m add-on from food distributor KeHE.
But tomorrow is expected to see pricings from branding company Matthews International, oil and gas outfit Wildfire, online furniture store Wayfair, miner Coronado, E&P firm EnQuest and real-estate investment trust Pebblebrook Hotel.
Meanwhile, Mativ Holdings, a manufacturer of specialty materials, is aiming for a Wednesday pricing on a US$400m five-year non-call two offering after releasing initial price thoughts of mid 8% area.
Windstream is also out with a deal in the wake of its merger announcement with REIT Uniti. It is talking low 9% area on an US$800m seven-year non-call three bond ahead of expected pricing on Thursday.
Elsewhere, Cerdia Finanz, a chemicals company based in Germany, has also started marketing an US$800m seven-year non-call three issue to redeem its 10.5% 2027s and pay a dividend to shareholders.
STRUCTURED FINANCE
Dealmakers have lined up at least seven asset-backed issues for sale this week after they priced 14 offerings that raised over US$11bn the week before.
The auto sector will headline this week's docket, led by a US$1.26bn lease securitization from General Motors and a US$921.1m subprime trade from Warburg Pincus's Exeter Finance.
This morning, Captive Automotive started marketing a US$379.4m triple net lease offering whose proceeds will pay down a prior deal and partly pay down a warehouse line.
Joining the Ares-backed financing firm, Marriott Vacation announced a US$445m timeshare securitization and ITE released price guidance on a US$470.5m railcar deal.
Elsewhere, the RMBS primary is poised to slow from back-to-back weeks of heavy issuance, which totaled US$11.6bn, IFR data show.
The non-QM sector features two deals for pricing this week – a US$554m offering from Annaly and a US$399.6m issue from Morgan Stanley.
LATAM
Moody's and Fitch on Friday assigned Ba3/BB- first-time ratings to LD Celulose and to the company's proposed offering of up to US$650m of senior secured notes due in 2032. The global coordinators on the long seven-year non-call three green deal are Itau, UBS and Citigroup, according to a roadshow presentation
Fitch on Friday upgraded Brazilian aircraft manufacturer Embraer to BBB- from BB+. That comes after S&P raised the issuer's rating to investment grade in February. Moody's, however, affirmed a Ba1 for the company earlier this month.
In reaction to Petroperu's government support package, S&P removed the company from negative watch on Friday, but kept the rating at B.
Moody's, meanwhile, changed Peru's outlook to stable from negative, affirming the Baa1 ratings, and said "the adoption of political reforms alleviates medium-term concerns about institutional stability that could have durably weighed on governability."
Also on Friday, LatAm sovereign five-year CDS widened 18bp-19bp for Colombia and Brazil, and 8bp-14bp for Mexico, Peru and Chile, according to Lucror Analytics.
EQUITIES
Only one IPO hopeful moved forward early Monday following last week’s interest rate cut, though bankers remain optimistic about more deals launching in coming weeks.
StandardAero launched an up to US$1.1bn NYSE IPO, testing the sometimes lukewarm investor support for larger sponsor-backed new issues in recent years.
JP Morgan and Morgan Stanley are leading a syndicate of 17 banks marketing 46.5m primary shares in the aviation repair and maintenance firm at US$20-$23 for pricing next Tuesday, October 1.
BlackRock, Janus Henderson Investors and Norges Bank Investment Management have agreed upfront to invest US$275m in the offering, equating to roughly 25% of the deal.
The Carlyle-backed aircraft engine repair company is potentially the first US$1bn-plus US IPO since cold storage REIT Lineage raised US$4.4bn from its Nasdaq IPO in July and the largest from a PE sponsor since TPG-backed Viking’s US$1.5bn debut in May.
The offering gives StandardAero an enterprise value of roughly US$10bn, or twice the US$5bn Carlyle paid for the business in 2019. StandardAero is using the proceeds to pay down some of its US$3.3bn debt used to fund its buyout. Carlyle's stake will be diluted to 68.2% from 79.5%.
The IPO also follows in the footsteps of aircraft parts maker Loar, whose shares have surged 166% since it went public in April to deliver the year’s best post-IPO performance.