The US investment-grade corporate primary today is taking its usual Friday hiatus, while the high-yield market is game for one more offering to end the week.
Most of the market's focus today is economic data and big bank earnings.
US producer prices were unchanged in September, Reuters reported this morning, pointing to a still-favorable inflation outlook and supporting views that the Federal Reserve would cut interest rates again next month. Economists polled by Reuters had forecast the PPI edging up 0.1%. The PPI report follows yesterday's CPI release, which was above expectations.
"Overall, this is a relatively benign update on producer prices and one that we doubt will materially shift policy expectations," BMO said.
Meanwhile, JP Morgan and Wells Fargo weighed in with earnings reports. Wells Fargo's profit beat analysts' expectations in the third quarter, Reuters reported, and JP Morgan's third-quarter profit beat expectations as strong investment banking performance and rising interest payments offset a hit from bigger loan loss provisions.
These bank reports are expected to be followed by bond offering announcements.
US stocks opened the session mixed to higher, after closing lower yesterday.
"Treasuries were weaker ahead of the data and since the headlines hit the tapes, the front-end of the market has outperformed while duration remains under pressure," BMO said.
Yesterday one offering was priced in the IG primary totaling US$300m, lifting supply for the week to US$16.05bn and for October to US$29.15, according to IFR data. The average new issue concession was 7bp and the average order book was 5x subscribed, according to the data. The average move from initial price thoughts to pricing was 22.50bp tighter.
The HY primary saw two issues priced totaling US$1.55bn, pushing weekly supply to US$4.86bn and October issuance to US$8.51bn, according to IFR data.
The average IG bond spread edged in by 1bp to 84bp, a record post financial crisis low, on Thursday, and the HY bond spread gapped out by 5bp to 299bp, according to ICE BofA data.
For the week ended October 9, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$1.828bn and the all corporate high-yield debt funds/ETFs net outflow was US$146m. The all domestic equity funds/ETFs net outflow was US$557m and the all nondomestic equity funds/ETFs net inflow was US$6.778bn.
HIGH GRADE
The US investment-grade bond market is not expected to draw fresh deals today, with market participants looking ahead to next week.
The biggest US banks are expected to dominate the supply slate next week as they emerge out of earnings blackouts. JP Morgan analysts penned a forecast for around US$20bn-$24bn of bank holdco issuance next week.
On Thursday, a single offering from Carlyle Secured Lending priced at a spread of 300bp over Treasuries. The borrower raised US$300m from the sale of a five-year senior unsecured note.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds remains active on Friday, with one more issuer expected to price a deal today.
Aircraft lessor Azorra has set price talk of 7.75% area on a 5.5-year non-call two offering, which has been upsized to US$550m from US$500m. Proceeds are going toward debt repayments.
With this deal, the asset class will see US$5.41bn in supply this week.
Elsewhere, Rise Baking has announced US$650m seven-year non-call three offering. Proceeds from the bond and a US$650m term loan B will help fund a US$2bn acquisition of the company by Platinum Equity and Butterfly Equity.
The baked goods manufacturer will market the deal through the week of October 21.
STRUCTURED FINANCE
The asset-backed primary will close out a robust week of issuance with at least one deal for sale today.
Fried chicken chain Bojangles is seeking to price a US$575m five-year Triple B rated note backed by revenues from its franchise and corporate-owned restaurants. Price guidance is US Treasuries plus 275bp-290bp.
The whole business securitization will add to this week's ABS supply, which has already topped US$14bn, IFR data show.
Next week's asset-backed volume is expected to slow but would still come in at a solid pace. One of the biggest upcoming deals is Nissan's US$1bn prime auto securitization, which is the car maker's fourth such offering this year.
LATAM
Latin America concluded another busy week for corporate issuers, with YPF, Braskem, and the Chile Electricity sector raising a total of US$2.64bn.
EQUITIES
Banks made the most of what may be one of their last chances to price new issues before the US presidential election in early November.
Four of this week’s five IPOs priced as planned, the most in one week since early February.
With the US listing of Brazil’s Moove Lubricants the sole casualty (it was postponed late Wednesday), the new issue market raised a combined US$1.1bn or nearly a third of the US$3.5bn raised overall in US ECM this week.
Ceribell found itself in the enviable position of being able to handpick which investors should get stock in its US$180.3m Nasdaq IPO priced late Thursday.
Bank of America and JP Morgan priced the upsized sale of 10.6m shares of the fast-growing medtech at US$17, the top of the upwardly revised US$16–$17 marketing range.
The banks already responded to runaway investor demand Wednesday morning by increasing the offering size and range from 6.7m at US$14–$16 at launch.
Ceribell shares will begin trading on Nasdaq under the symbol “CBLL”.
Investors took a more selective approach towards the twin biotech IPOs priced late Thursday.
Upstream Bio was the obvious favorite between the two, securing an upsized sum of US$255m from its Nasdaq IPO after pricing at the top of the range.
Investors were drawn in by the Phase II biotech’s potential blockbuster drug that has broad potential to treat asthma, COPD and other respiratory illnesses.
JP Morgan, TD Cowen, Piper Sandler and William Blair priced 15m shares at US$17, top of the US$15-$17 range and increased from 12.5m shares at launch.
Upstream shares will begin trading on Nasdaq under the symbol “UPB”.
Camp4 Therapeutics struggled to bring new investors into the tent with a US$75m Nasdaq IPO that was also upsized, but only to compensate for reduced proceeds after pricing three dollars below the range.
JP Morgan, Leerink Partners, Piper Sandler and William Blair sold 6.8m shares, up from 5m shares at launch, at US$11, well below the US$14-$16 range.
The IPO represents a down-round from the US$16.50 mark at which existing shareholders supported a US$100.5m Series B private placement.
Camp4 only had US$12.9m of cash left heading into the IPO. It now has enough money to finish an ongoing Phase I trial of its treatment for a rare cause of health problems caused by dangerous buildups of ammonia in bodily fluids.
No IPOs or other stock sales are currently scheduled to price next week.