The US investment-grade and high-yield corporate primaries continue to push out offerings ahead of the inflation data releases later in the week.
The IG primary expects four offerings to price, while the HY primary saw two deal announcements with one of those expected to price today.
The economic data releases today include NFIB Small Business Optimism and trade data, as well as a handful of Fed speakers.
On Monday five IG issues were priced totaling US$6.25bn, lifting October issuance to US$19.35bn, according to IFR data. The average new issue concession for the IG offerings was 2.0bp and the average order book was 3.31x covered, according to the data. The average move from initial price thoughts to pricing was 29.75bp tighter.
"Despite extremely narrow spreads, demand for corporate bonds remains very strong as evidenced by yesterday’s primary market slate that featured five borrowers," BMO said.
In the HY primary, one issue was priced totaling US$500m, pushing volume for October to US$4.15bn.
The average IG bond spread narrowed by 1bp to 86bp on Monday and the HY bond spread widened by 6bp to 295bp, according to ICE BofA data.
"High grade spreads narrowed 1bp during yesterday’s session on relatively light secondary market volume," BMO said. "With yesterday’s narrowing, spreads are now at new YTD lows and very near the narrowest levels since the pandemic."
HIGH GRADE
At least four investment-grade bond offerings are expected to price on Tuesday.
Japanese agricultural lender Norinchukin Bank is marketing a five-year green bond in US dollars. Bookrunners JP Morgan and Citigroup set IPTs at Treasuries plus 155bp area. Norinchukin last sold paper in the US market in March 2023.
UK lender Standard Chartered is issuing a six-year non-call five senior unsecured note, following in the footsteps of KBC Group, which printed an identical structure at a spread of 107bp on Monday.
The third Yankee deal today is coming from Royal Bank of Canada. The Canadian borrower is expected to issue a five-part note that comprises short-term maturities.
US insurer Mutual of Omaha is in the market with a US$300m five-year funding agreement-backed note.
LEVERAGE/HIGH YIELD
The pipeline for junk bond issues continues to grow as two more borrowers joined the queue today.
Cleveland-Cliffs is back in the market, this time with a US$1.6bn dual-tranche offering to help fund its acquisition of Canadian steelmaker Stelco.
The steel producer is approaching investors with a five-year non-call two offering and an 8.5-year non-call 3.5 bond, both US$800m.
Initial price thoughts have respectively been set in the area of 7% and 7.5% ahead of expected pricing today.
Azorra is also out with a US$500m 5.5-year non-call two senior note that it plans to price on Thursday. The commercial aircraft lessor is using proceeds to refinance debt.
STRUCTURED FINANCE
Dealmakers are preparing more asset-backed offerings for sale after they raised over US$900m with three deals yesterday.
At least six issuers yesterday released price guidance. Four of them come from the auto sector, one from consumer loans and one from timeshare.
The esoteric space is also busy, led by Bojangles seeking refinancing with a US$625m whole business securitization and Centersquare aiming to place a US$885m data center deal.
Meanwhile, the CMBS primary is active this week. Atrium priced a US$835m single-asset single-borrower issue, which is backed by a group of hotels, while Gerrity sold a US$225m SASB bond backed by a portfolio of shopping centers.
As for the RMBS sector, guidance is out this morning on Redwood's US$375m prime jumbo issue and Invictus's US$553.4m non-QM deal. Yesterday, MFA Financial priced a US$349.3m non-performing mortgage security.
LATAM
Ecopetrol is expected to price today a seven-year senior unsecured note. Price thoughts are in the 8% area. BBVA, JP Morgan and Santander are the bookrunners.
Ecopetrol also commenced today an offer to buy back its outstanding 5.375% notes due 2026.
On Monday, special purpose vehicle Chile Electricity Lux MPC II raised US$1.44bn from a 5.58% 11-year bond, pricing it at 165bp over US Treasuries. Goldman Sachs, Itau and JP Morgan were the leads.
Brazilian plastics producer Braskem is holding today its second day of meetings with fixed income investors for a potential US dollar offering of senior unsecured 10-year bonds. The deal is expected to price tomorrow. Citigroup, Itau, Morgan Stanley, Santander and SMBC are the bookrunners.
EQUITIES
Ares Management is raising US$1.35bn from the sale of a three-year mandatory convertible security to help fund a major acquisition.
Morgan Stanley and Citigroup early Tuesday launched the one-day marketed sale of 27m mandatory preferred shares at US$50 for pricing after the close.
The banks are marketing the security at talk of a 6.5%-7% dividend and a 17.5%-22.5% conversion premium.
The proceeds will help fund Ares' acquisition of the international business of real estate asset manager GCP Capital Partners (excluding its China operations) for US$3.7bn in cash and stock.
Shares of the alternative asset manager closed Monday at US$160.56, up 32% this year to put conversion at US$187.87, the midpoint of talk.
The dividend on the mandatory is also higher than the 2.3% yield on Ares common stock, making the new security attractive to outright CB buyers.
Scholar Rock is looking to tap into investor interest in its spinal muscular atrophy drug through a US$275m follow-on stock sale.
JP Morgan, Jefferies and Piper Sandler are marketing the fixed-size offering across Tuesday’s session versus the late-stage biotech’s closing price of US$34.28. The shares surged 362% in Monday's session following the earlier release of promising late-stage data on its drug.