The US investment-grade and high-yield primaries are quiet on Friday as headlines from a surprisingly strong September jobs report dominate markets.
September's employment report of 254,000 jobs created far outpaced the 150,000 consensus and 159,000 jobs in August, BMO said in a report today, adding that this is the highest since March's 310,000.
"Today’s data hit a grand slam with payrolls coming in strong, positive revisions, and unemployment falling," said Lindsay Rosner, head of multi-sector Investing in Goldman Sachs Asset Management. "The economy is heading into the post-season solidly. This is a beat on every aspect and the Fed must be smiling as they got their bats out! This is a credit positive as the fundamentals of this economy are on strong footing."
BMO said, "Overall, it was a strong employment report that points toward a 25bp cut next month and materially undermines the potential for 50bp."
US Treasuries were slightly weaker ahead of the release and since the data hit, BMO said, adding that the selloff extended in flattening fashion, which is consistent with the policy implications. The 10-year yield reached 3.965% from around 3.87% prior to the release.
On Thursday the IG primary saw four issues priced totaling US$2.6bn, lifting weekly IG volume to US$15.45bn and October issuance to US$13.1bn, according to IFR data. Volume fell short of syndicate forecasts of around US$20bn for the week.
The average new issue concession for yesterday's offerings was 0.67bp and the average order book was 3.62x subscribed, according to the data. The average move from initial price thoughts to pricing was 31.38bp tighter.
In the HY arena yesterday, one issue was priced totaling US$950m, pushing weekly issuance to US$5.65bn and October volume to US$3.65bn.
The average IG bond spread edged in 1bp to 90bp on Thursday, and the HY bond spread narrowed by 2bp to 304bp, according to ICE BofA data.
"IG index spreads closed 0-1bp narrower during yesterday’s session on relatively light volume ahead of this morning’s employment report," BMO said.
For the week ended October 2, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$3.820bn and the all corporate high-yield debt funds/ETFs net inflow was US$2.208bn. The all domestic equity funds/ETFs net inflow was US$30.723bn and the all nondomestic equity funds/ETFs net inflow was US$2.039bn.
"As further evidence of the very strong demand in the IG space, we note yesterday’s Lipper fund flow data for the week ending October 2," BMO said. "IG funds saw an inflow of $3.8bn, the largest inflow for IG funds since the week ending April 3 and the third largest inflow of the year."
"Similarly, high yields funds brought in $2.21bn for the week ending October 2, the largest such inflow for high yield funds since the week ending July 17," BMO said.
HIGH GRADE
The US investment-grade bond market is not expected to draw fresh offerings today, following yesterday's four deals.
On Thursday, National Bank of Canada issued the largest offering, raising US$1bn from a sale of five-year senior unsecured notes. Alternative asset manager Apollo printed a US$500m 30-year non-call 10 junior subordinated note at a coupon of 6%, while achieving a tight back-end spread for the deal.
The financing subsidiary of insurer Athene and spices maker McCormick also issued bonds yesterday.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds is taking a break on Friday after a relatively slow week for the asset class.
This comes after IHO Verwaltungs raised just the equivalent of over US$2bn in euros and dollars yesterday through a four-part sustainability-linked PIK toggle offering.
The holding company of German auto parts supplier Schaeffler hit the market at a tough time for the country's auto sector, but managed to generate sufficient demand despite those challenges.
Even so, the dollar tranches – a 2030 and a 2032 – were trading lower at 99.75 late Wednesday after pricing at par, according to MarketAxess data.
STRUCTURED FINANCE
Dealmakers are turning their focus on asset-backed issuance for next week, while they seek to wrap up this week's supply of 11 issues that raised over US$6bn.
There is at least one ABS deal left for sale today, a US$468m subprime auto offering from American Credit Acceptance.
Next week's ABS calendar is filling up with more than US$9bn of offerings readied for sale. Hyundai is slated to print the biggest issue, a US$1.3bn prime auto deal.
Upcoming deals from other regular issuers include a US$1bn equipment bond from Dell and a US$783m auto lease securitization from Tesla.
There is also a burst of solar supply coming from three issuers: Sunnova, Hawha and Brookfield.
In the CMBS sector, there is a US$835m SASB issue from Atrium Hospitality expected to price today. It would add to the US$3.6bn of private-label supply that has priced this week.
LATAM
Argentina's Banco de Galicia y Buenos Aires priced a US$350m offering of 7.75% four-year senior unsecured notes yesterday at a yield of 7.875%.
Bank of America, Citigroup and JP Morgan were the bookrunners in this upsized transaction.
Argentine oil and gas producer YPF announced today the expiration of its offer to exchange up to US$500m of its outstanding 8.5% senior notes due 2025 for newly issued 8.75% senior notes due 2031.
YPF will issue US$461.7m principal amount of new notes in exchange US$486m of notes tendered. Bank of America, Citigroup, JP Morgan and Santander were the dealer managers
LatAm sovereign five-year CDS yesterday tightened 4bp for Colombia, moving little elsewhere in the region, according to Lucror Analytics.
EQUITIES
ECM bankers still managed to raise nearly US$3bn from eight offerings this week, despite calendar disruptions, geopolitical tensions and a slow start to October for stocks.
Yet nearly half of the week’s ECM proceeds came from one deal.
StandardAero was the week’s highlight, soaring by more than a third in Wednesday’s debut session after pricing an upsized NYSE IPO above the range for proceeds of US$1.66bn (including a quickly exercised 15% greenshoe).
This week's other IPOs from FrontView REIT (US$250m), BingEx (US$66m) and Chain Bridge Bancorp (US$40m) generated less enthusiasm from investors.
Beijing-based BingEx late Thursday sold 4m American depositary shares, or 5.8%, of the enlarged share capital, priced at US$16.50 versus US$15–$17 range.
BingEx ADSs will begin trading on Nasdaq later today under the symbol “FLX”, with each ADS representing three ordinary shares of the logistics company.
ECM syndicate desks will remain focused on IPOs near-term.
Childcare operator Kindercare Learning is looking to price a US$648m NYSE IPO next Tuesday, October 8.
Brazilian energy conglomerate Cosan is also looking to spin off its Moove Lubricants motor oil subsidiary in a US$437m NYSE IPO on Thursday, October 10.
A small number of filings and launches are expected through the rest of the October as IPO issuers shy away from going public in the weeks immediately lead up to the US presidential election on November 5.