The US corporate bond primaries are open for business on Tuesday after the Columbus Day holiday yesterday.
BMO said in a report today that after last week’s issuance of US$16.05bn met expectations, market participants are looking for approximately US$28bn in IG supply this week. Bank issuance, especially in the wake of earnings reports from the big six banks, is expected to contribute to the bulk of that weekly IG volume.
"Banks will naturally be in focus this week as they represent the majority of companies reporting," BMO said.
Two big banks reported earnings last Friday and one of them, JP Morgan, is in the the market today with a four-part bond offering. The bank joins one other issuer, Adani Hybrid Energy, to price in the IG primary market today.
"Total bank supply now stands at $365bn through September compared to $327bn through the first nine months of 2023, an 11.6% increase," BMO said in another report on October 3. "That’s mostly in line with our projection of an increase in bank supply of about 10% this year alongside TLAC funding needs for GSIBs and some impact of LTD requirements at the regional bank level."
Those volume figures add up to an estimated full-year 2024 bank supply of approximately US$450bn, BMO said, which, if realized, implies another US$85bn in issuance before the end of the year.
No offerings are expected in the high-yield primary today.
US stock markets, which were active on Monday with two indexes setting records, opened mixed today.
"Even though it was a partial US holiday with US fixed income closed, the S&P 500 (+0.77%) notched up its 46th record high of 2024 last night," Deutsche Bank Research said in a report today. "The next hurdle is US earnings seasons that swings back into action today with Bank of America, Citigroup, Goldman Sachs and Johnson & Johnson all reporting."
Meanwhile, Boeing is moving a step closer to bringing an equity raise to buttress its balance sheet after pre-announcing steep third-quarter losses and revealing plans to cut its workforce by 10%, IFR reported on Monday. And this morning, Boeing submitted a filing with the SEC saying it could raise up to US$25bn through a stock and debt offering and entered into a US$10bn credit agreement.
In economic data today, two reports are expected, including October's Empire State Manufacturing Survey.
The average IG bond spread was unchanged at 84bp on Monday and the HY bond spread edged in 1bp to 297bp, according to ICE BofA data, and yields across asset classes were mixed.
HIGH GRADE
At least two US investment-grade bond offerings are expected to price Tuesday.
JPMorgan Chase is issuing a four-part senior holdco bond, comprising four-year non-call three, six-year non-call five and 11-year non-call 10 fixed-to-floating tranches. The offering also included a four-year non-call three floater.
Indian renewable energy company Adani Green Energy is marketing a partially amortizing 20-year bond at 7% area, following investor meetings earlier this month. The sale is expected to raise around US$1.2bn. The bonds have a weighted average life of 13.6 years.
LEVERAGE/HIGH YIELD
Chobani is kicking off the week with a US$500m PIK toggle note to pay a dividend to its indirect parent, FHU US Holdings.
The food and beverage company is approaching investors with a five-year non-call one that will pay a PIK rate of 75bp over cash interest. Marketing is taking place today and Wednesday.
This comes as Rise Baking is also showing a US$650m seven-year non-call three offering.
Proceeds from the bond and a US$650m term loan B will be used to help fund the US$2bn acquisition of the company by Platinum Equity and Butterfly Equity.
STRUCTURED FINANCE
The asset-backed primary is bracing for an active calendar ahead of a major industry conference in Florida next week.
Dealmakers said there is still plenty of demand to meet the latest supply after the market recorded the busiest week last week for the ABS sector so far in 2024 during which volume totaled US$15bn.
Offerings this week are once again dominated by the auto sector with new issues from Honda, Nissan, Bridgecrest, First Help and Lithia.
In the esoteric space, Concord is prepared to price by a US$850m five-year note this week backed by music royalties. Guidance is US Treasuries plus 190bp-195bp.
As for the CMBS market, property developer Tishman Speyer is seeking to sell a US$3.5bn bond to refinance a mortgage backed by the iconic Rockefeller Center in New York City. The deal would be the biggest CMBS issue of the year so far.
After this week's deals are completed, over 5,000 structured finance bankers, investors, lawyers and other industry participants are expected to flock to the Fontainebleau resort in Miami Beach for the 30th edition of the ABS East conference. The event will kick off on October 20 and conclude on October 23.
LATAM
El Salvador announced on Friday that it would be paying US$940m to buy back several series of outstanding bonds.
Also on Friday, Globo Comunicacao e Participacoes said it had received tenders totaling US$316.5m for its 2030 and 2032 notes by the early deadline.
EQUITIES
Boeing filed with the SEC early Tuesday to raise up to US$25bn from the sale of equity, debt and/or convertible bonds, bringing the struggling aircraft maker another step closer to a widely speculated capital raise to stabilize its finances and avoid a credit rating downgrade to junk.
The mixed shelf filing comes as analysts have speculated that Boeing could soon bring a US$7.5bn-$15bn sale of common stock and mandatory convertible securities.
The move also comes just days after new CEO Kelly Ortberg cleared the decks by taking a US$5bn charge to cover production delays and strike costs, pre-announced a hefty third quarter loss and outlined plans to fire 10% of the company's workforce.
Boeing also revealed early Tuesday that it had secured a new US$10bn line of credit.
While the company has not launched any capital raise, Bank of America, Citibank, Goldman Sachs and JP Morgan are named joint lead arrangers and book managers on the supplemental line of credit and would likely handle the stock sale as well.
US ECM activity showed other signs of life early Tuesday after a quiet start to the week due in part the Monday’s federal holiday.
Guidewire Software is looking to raise US$500m from the sale of a new five-year convertible bond that will allow it to pay down an existing CB due next March.
JP Morgan and Goldman Sachs are marketing the new CB through Tuesday at a 1.375%-1.875% coupon and a 27.5%-32.5% premium for pricing after the close.
The insurance software provider is using some of the proceeds to repay some of the US$400m outstanding on a 1.25% CB due in March next year.
The existing CB converts into stock at US$113.75, below Monday’s US$187.92 closing price.
At the midpoint of premium talk, the new CB would be convertible at share prices above US$244.30, though a portion of the proceeds are being used to purchase a derivative to lift the effective conversion price even higher.
The US IPO calendar also perked up as Peak Resources launched an up to US$70.5m offering for pricing during the week of October 21.
Janney Montgomery Scott is leading the sale of 4.7m units of the oil and natural gas limited partnership at US$13-$15. Roth Capital and Texas Capital Securities are also acting as joint bookrunners.