The US investment-grade corporate primary remains active on Thursday with at least four offerings slated for sale as the critical jobs reports looms.
The high-yield market, meanwhile, expects at least one offering today.
The economic data menu is full of releases today including the Challenger job cut report, weekly jobless claims and the ISM Services PMI. The most critical economic report of the week comes on Friday when the September jobs report is released at 8:30am New York time.
Yesterday bonds sold off after a stronger-than-expected report from ADP on private payrolls in September, which forecast 145,00 jobs created versus the 125,000 expected by economists.
The stronger numbers in the ADP report led investors to dial back the chance of aggressive rate cuts over the coming months, Deutsche Bank Research said in a report today.
"So that was an important sign of strength in the US labour market, particularly ahead of tomorrow’s all-important jobs report, and it also ended a run of 5 consecutive months where the ADP reading had kept slowing down," Deutsche Bank said.
In the IG primary yesterday three issues in three tranches were priced totaling US$1.5bn, lifting weekly supply to US$12.85bn and October volume to US$10.5bn, according to IFR data.
The average new issue concession for yesterday's offerings was negative 0.5bp and the average order book was 7.56x subscribed, the data show. The average move from initial price thoughts to pricing was 35.667bp tighter.
"With expectations for a light slate today, it’s likely that the week will fall short of expectations," BMO said in a report. Syndicate forecasts were for about US$21bn of IG supply this week.
Separately, Bank of America Research said in a report late yesterday that the pipeline of announced deals with potential IG funding implications slightly declined to US$263bn in September, down from US$266bn in August.
"Note that the trend has been for the pipeline to decline over the past 24 months, down from $304bn average in 2023 and $346bn average in 2022," BofA said. "The current pipeline implies M&A-related supply over the next eight months of $107bn, below the $154bn over the prior eight months."
The HY arena saw three issues priced on Wednesday, the first offerings for the month of October, totaling US$2.7bn, lifting weekly issuance to US$4.705bn.
The average IG bond spread edged in 1bp to 91bp on Wednesday and the HY bond spread narrowed by 1bp to 306bp, according to ICE BofA data.
"High grade spreads narrowed 1-2bp yesterday and now sit 1bp narrower on the week," BMO said. "With yesterday’s narrowing, spreads are now at their tightest levels since June 12 and just 3bp off YTD lows ahead of tomorrow’s crucial jobs report."
HIGH GRADE
At least four US high-grade bond offerings are expected to price on Thursday.
Spices maker McCormick is issuing a US$500m 10-year senior unsecured bond, with IPTs set at US Treasuries plus 115bp area.
Insurer Athene is selling a five-year funding agreement-backed note via its financing entity. National Bank of Canada is targeting the five-year maturity with senior unsecured offering.
Alternative asset manager Apollo Global Management is also expected to bring a deal today.
LEVERAGE/HIGH YIELD
The pace of new issuance among junk-rated borrowers could be set to slow on Thursday with no new deal announcements as of early morning.
So far, the only pricing scheduled to take place today comes from Germany’s IHO Verwaltungs, which has set the final terms on its sustainability-linked PIK toggle trade.
The borrower is raising funds in both euros and US dollars via a four-part offering that was upsized from the equivalent of about US$1.7bn to just over US$2bn.
STRUCTURED FINANCE
The securitization market is poised for an active session with dealmakers seeking to push at least seven offerings across the finish line by the end of the week.
In the asset-backed sector, Ford this morning launched and increased its dealer floorplan issue to US$1.59bn from US$1.15bn. NextGear is also in the market with a floorplan deal, which will bring US$328.7m. American Credit Acceptance is seeking to price a US$468m subprime auto offering.
In the meantime, the CMBS market continues to churn out supply. Price guidance was released yesterday for FS Investment's US$746.9m CRE CLO deal and Velocity's US$296.6m commercial and residential securitization. There is also a US$835m hotel-backed bond from Atrium Hospitality set to price by the end of the week.
As for the RMBS sector, MFA Financial showed guidance yesterday on a US$306.1m non-performing loan issue.
On Wednesday, five issuers across the structured finance space raised over US$2.5bn.
LATAM
South American development bank Fonplata raised SFr130m (US$153m) this morning from a five-year sustainable bond, pricing it at par to yield 2.0725%. Deutsche Bank and UBS were the bookrunners.
LatAm sovereign five-year CDS yesterday tightened 5bp for Brazil, 2bp-3bp for Colombia, Mexico and Peru, and remained flat for Chile, according to Lucror Analytics.
EQUITIES
StandardAero delivered a 36.5% gain on debut Wednesday after pricing its NYSE IPO above the marketing range for proceeds of US$1.44bn, injecting renewed enthusiasm for the US new issue market even as funding opportunities narrow in the final quarter of 2024.
Shares of the Carlyle-backed aerospace maintenance services firm closed their opening session at US$32.75, well above the US$24 mark (US$1 above the US$20-$23 marketing range) at which a JP Morgan and Morgan Stanley-led syndicate priced the 60m-share offering late Tuesday.
Investors were less enthusiastic about net lease retail landlord FrontView REIT, which closed Wednesday at US$18.72, 1.5% below the US$19 mark at which it raised US$250.8m from its NYSE IPO.
In an otherwise quiet night for US ECM as issuers avoided clashing with the Jewish holiday, Pennant raised US$108.5m late Wednesday from a marketed follow-on stock sale.
After two days of marketing, a syndicate led by Citigroup and Truist Securities priced the sale of 3.5m shares of the nursing home operator at US$31, a 13% file-to-offer discount.
The offering capitalized on a 128% gain this year in Pennant shares ahead of pricing.
Pennant was raising equity for the first time since its spin-off from skilled nursing company Ensign in 2019. The proceeds will repay some of the US$114.9m drawn on its US$250m revolver.