After front-loading most of its supply this week, the US investment-grade primary market is riding out the fallout from data releases today with just one offering expected to price.
The high-yield primary is showing more hardiness with three issues slated for sale.
Markets were startled by economic data releases this morning.
The September consumer price index, a key inflation gauge for markets and for influencing rate decisions, came in slightly higher than expected.
The CPI increased 0.2% last month after gaining 0.2% in August, Reuters reported today. In the 12 months through September, the CPI climbed 2.4%, the smallest year-on-year rise since February 2021 and followed a 2.5% advance in August.
Economists polled by Reuters had forecast the CPI edging up 0.1% and rising 2.3% year on year. The annual increase in inflation has slowed from a peak of 9.1% in June 2022, Reuters reported.
The biggest data surprise came from weekly jobless claims, which surged higher to 258,000, well above the 230,000 level economists polled by Reuters had forecast for the latest week. Reuters reported the claims were partially boosted by Hurricane Helene and furloughs at Boeing amid a nearly four-week-old strike at the US planemaker.
"On net, this morning's data reinforces our expectations for a 25bp cut in November," BMO said.
On Wednesday three offerings were priced in the IG primary totaling US$2.4bn, lifting weekly volume to US$15.75bn and October issuance to US$28.85bn, according to IFR data. The average new issue concession was 0.17bp and the average order book was 2.34x subscribed, according to the data. The average move from initial price thoughts to pricing was 22.50bp tighter.
In the HY primary yesterday two issues were priced totaling US$1.01bn, pushing weekly volume to US$3.31bn and October supply to US$6.96bn, IFR data show.
The average IG bond spread on Wednesday set a new post financial crisis low on Wednesday narrowing by 2bp to 85bp, tighter than the record 86bp reached on June 25 2021, according to ICE BofA data. The HY bond spread tightened by 5bp to 294bp, according to the data.
HIGH GRADE
The US investment-grade market will have at least one bond offering on Thursday, after three deals priced yesterday.
Carlyle Secured Lending is issuing a five-year senior unsecured note. The offering's proceeds will repay its 4.75% and 4.5% 2024 notes.
Active leads Barclays, Bank of America, JP Morgan and Morgan Stanley set IPTs at Treasuries plus 325bp area, a juicy spread compared to what has been paid by similar issuers this year.
On Wednesday, three deals priced from Blackstone Secured Lending, Ares Management and Cooperatieve Rabobank. Rabobank raised the most funds, pricing a two-part US$1.25bn senior preferred issue split into five-year fixed and floating-rate notes.
LEVERAGE/HIGH YIELD
Another batch of borrowers is expected price deals on Thursday in what remains an active primary market for high-yield bonds.
On the pricing roster today are UK E&P company Ithaca Energy, aircraft lessor Azorra and Magnera, a newly formed specialty materials company.
Ithaca is out with price talk of 8.50% area on a US$700m five-year non-call two bond, tight to initial price thoughts of high 8% area.
STRUCTURED FINANCE
The asset-backed primary is humming along with at least two more issues totaling over US$2.1bn on track to price by the end of the week.
Carmaker Toyota is seeking to clear a US$1.25bn prime auto offering, its fourth one in 2024. The US$438m Triple A rated note with a two-year tenor has guidance of US Treasuries plus 58bp-60bp.
Data center firm Centersquare is ready to land its first securitization, which is expected to raise US$885m. The green bond comprises two five-year 144A notes and a seven-year 4a2 security.
Yesterday five ABS deals brought in US$3.3bn, increasing the week's issuance to over US$10bn, IFR data show.
LATAM
Yesterday, YPF raised US$420m from an 7.875% eight-year bond that priced to yield 8.2%. Citigroup, Itau, JP Morgan and Santander were the bookrunners.
Also on Wednesday, Brazilian plastics producer Braskem printed at par a US$850m offering of 10-year bonds at 8%. Citigroup, Itau, Morgan Stanley, Santander and SMBC were the bookrunners.
Ecopetrol has delayed closing a US$1.75bn offering of seven-year senior unsecured notes that it launched on Tuesday afternoon, a person familiar with the deal said. The transaction launched at 7.65%.
The Colombian petrol company did not immediately respond to a request for comment about the bond offering.
EQUITIES
Brazilian energy conglomerate Cosan opted to postpone the NYSE IPO of its Moove Lubricants motor oil unit just ahead of pricing late Wednesday.
The decision came despite Moove’s syndicate telling investors just hours earlier that the sale of 25m shares would come at US$12.50–$13.50, or US$1–$2 below the bottom of the US$14.50–$17.50 marketing range.
JP Morgan, Bank of America, Citigroup, Itau, BTG Pactual and Santander said the offering was covered with interest from long-only and sector-dedicated investors, though evidently not at an acceptable price for Cosan (which owns 70%) and co-investor CVC Capital Partners (the other 30%).
On a better note for the tentative recovery in the US new issue market, KinderCare Learning shares rose 8.9% on debut Wednesday after the childcare center operator priced its NYSE IPO towards the bottom of the range for proceeds of US$576m.
Investors appear more bullish towards Thursday’s trio of healthcare IPOs from Ceribell, Camp4 Therapeutics and Upstream Bio.
Ceribell now expects to raise up to US$180.3m from its Nasdaq IPO after upsizing the offering by 70% on Wednesday.
The medtech company upped both the offering size to 10.6m shares and the asking price to US$16–$17, up from 6.7m shares at US$14–$16 at launch.
Venture backers led by TPG (12.3%) and Longitude Venture Partners (0.6%) are now investing US$40m in the offering upfront.
The offering, led by Bank of America and JP Morgan, is multiple times covered with pricing now expected to come at the top end or above the marketing range.
Upstream Bio’s US$212.5m Nasdaq IPO, which will help fund Phase II trials on a potential blockbuster asthma drug, also looks headed for a strong conclusion.
The offering, led by JP Morgan, TD Cowen, Piper Sandler and William Blair, is multiple times covered after marketing 12.5m shares at US$15-$17 for pricing late Thursday.
The deal is backed with an asthma drug that is potentially 300-times more potent than an existing drug made by Amgen and AstraZeneca.
Camp4 Therapeutics is also building support for an up to US$80m Nasdaq IPO that will keep the cash-strapped biotech going for at least one more year.
JP Morgan, Leerink Partners, Piper Sandler and William Blair are leading the offering of 5m shares of the early-stage rare disease specialist at US$14-$16.
Camp4 carried only US$12.6m of cash at the end of June and needs more money to fund Phase I trial on an RNA gene therapy treatment for a rare cause of kidney and other systemic illnesses.