The primary US capital markets will remain relatively muted today, with at least one investment-grade bond offering slated to price on the eve of the presidential election.
Today’s schedule of economic data releases is also light, with factory orders data, which hit the tape this morning, the only major report on the docket. In addition to the election, this week’s other key event is the Federal Open Market Committee meeting. The Fed will announce its all-important interest rate decision on Thursday.
In this environment, syndicate desks in the US are anticipating just a few billion dollars of new investment-grade corporate bond issuance this week (after US$27.45bn of bonds printed last week).
“While the week is obviously expected to be very light in the primary market with this week’s event risk, there is an expectation that at least some supply will come to market with consensus projections for approximately $3bn in issuance,” BMO said in a report this morning.
“That falls in line with the experience of 2020, when election week saw $2.5bn in IG supply.”
The average investment-grade bond spread was unchanged at 86bp on Friday, and the high-yield spread tightened by 5bp to 283bp, according to ICE BofA data.
HIGH GRADE
At least one investment-grade bond offering is expected to price today.
Canadian telecom company Videotron is in the market for a 10-year senior unsecured note offering. Active leads Bank of America and JP Morgan set IPTs at Treasuries plus 160bp area.
Borrowers are not expected to deliver much additional supply this week, with syndicate bankers penning a forecast for only US$5bn of issuance for the period.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds is off to a slow start this week as markets focus on Tuesday’s presidential election, with no deals announced as of early morning.
In the secondary market, the 8.75% 2029s from Great Canadian Gaming bounced nicely on the break to change hands on Friday at 101.00 after pricing at par the day before, according to MarketAxess data.
The recently issued 6.375% 2030s from Newell Brands have also inched higher to trade this morning at a dollar price of 100.875 after pricing at par last week.
STRUCTURED FINANCE
The securitization primary is poised for a muted session today as dealmakers move to the sidelines ahead of US Election Day.
Market participants anticipate supply activity will pick up later in the week, especially if credit markets remain calm following the election outcomes.
Last week's asset-backed issuance topped US$8bn, with offerings from a variety of assets, bringing year-to-date supply within striking distance of the US$300bn mark.
In the meantime, the CMBS and RMBS sectors posted one of their busiest weeks of the year, with issuers landing more than US$5bn and US$4bn last week, respectively.
LATAM
The Latin American bond market remains subdued, amid third-quarter earnings season and in the lead-up to the US elections.
South American development bank Fonplata took a major step forward with its plan to diversify funding by completing the registration of a bond issuance program in Mexico late last week, with a shelf of Ps20bn (US$1bn).
CAF, the region’s development bank, announced a US$300m program to protect biodiversity in Latin America and the Caribbean. This announcement was made at the close of the COP16 meetings in Cali, Colombia, according to a press release today.
EQUITIES
Coming off a historic week in US ECM, Xcel Energy squeezed US$1.2m of equity from investors early Monday before America heads to the polls.
Ahead of Monday’s opening bell, Barclays and Bank of America priced the sale of 18.3m shares at US$65.50, inside the US$65.36-$66.69 marketing range and at a 1.8% discount to Friday's closing price (also the top of the marketing range).
On Friday, the Minnesota power utility said it planned to spend US$45bn over the next five years updating its power grid, in part in response to sharply rising demand for power from new data centers.
Taking a page from Boeing’s playbook, the banks confidentially marketed the offering to select investors over the weekend.
By structuring the offering as a forward sale, Xcel can fund capex as the money is needed while limiting upfront dilution for existing shareholders.
Xcel continues a string of large offerings in US ECM, including Boeing’s landmark US$24.3bn raise last week as well as US$1bn-plus deals from Keurig Dr Pepper (US$2bn) and NextEra Energy (US$1.5bn), all priced last week.
Elsewhere, nuclear power company Centrus Energy is seeking US$350m from the sale of a new six-year convertible bond.
Bank of America and JP Morgan are marketing the security for one day at a coupon of 2.25%-2.75% and a conversion premium of 22.5%-27.5% for pricing after Monday’s close.