Unusually for a Friday, the US investment-grade primary is expecting at least two offerings to price after a very unusual week that saw a historic election and an FOMC meeting.
The high-yield primary expects just one issue to price, an offering from Champ Acquisition.
The reverberations of the US election, which saw former President Donald Trump make a comeback on Tuesday, and the Federal Reserve's FOMC cutting the fed funds rate by 25bp Thursday, continue to play out in the markets as well as in the nation and the world. As 2025 unfolds, potential financial impacts from the election are seen across the board, from IPOs to climate financings.
"Markets put in another very strong performance over the last 24 hours, with US risk assets continuing their post-election surge," Deutsche Bank Research said in a report today. "So there’s an incredibly buoyant mood right now, and the S&P 500 has also just recorded its strongest 3-day move (+4.56%) since 2022."
As for the Fed, the policy decision was a widely expected 25bp cut, which took the target range for the fed funds rate down to 4.50-4.75%.
"The language in the FOMC statement was largely unchanged, keeping the view that the risks to achieving its employment and inflation goals are roughly in balance,” Deutsche Bank said.
Bank of America Research said in a report late yesterday, "IG spreads are rallying largely on the reduction in risks following the conclusion of the US elections. The November FOMC further contributed to this risk reduction momentum."
Federal Reserve Chair Jerome Powell emphasized that the Fed was on a steady course to continue lowering rates toward a neutral level, BofA said, adding that that means another cut is likely in December, as expected by the market.
The economic data calendar shows just one release today, the University of Michigan's preliminary November Survey of Consumers, while Fed speakers are on the prowl again today after a brief blackout period that ended when the Federal Reserve concluded its two-day FOMC meeting yesterday.
No offerings were priced in the IG primary or HY primary on Thursday.
The average IG bond spread narrowed Thursday by 2bp to 78bp, a post financial crisis record, and the HY bond spread edged in by 1bp to 273bp, also a record, according to ICE BofA data. US yields across asset classes edged down yesterday.
"High grade spreads narrowed another 2bp during yesterday’s session in the wake of a mostly unremarkable FOMC meeting," BMO said. "For the week as a whole, IG index spreads narrowed 8bp in the largest weekly narrowing for the IG index since June 2023."
For the week ended November 6, Lipper US Fund Flows showed that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$3.297bn and the all corporate high-yield debt funds/ETFs net inflow was US$454.97m. The all domestic equity funds/ETFs net inflow was US$6.893bn and the all non-domestic equity funds/ETFs net outflow was US$233.39m.
HIGH GRADE
At least two bond offerings are expected to price in the high-grade market today, bringing a rare pair of deals on a usually quiet Friday.
Insurer Athene is issuing a seven-year funding agreement-backed note via its Athene Global Funding entity. Active leads set IPTs for the bond deal at 130bp area over Treasuries.
Utility Oncor Electric Delivery is selling a first mortgage bond, capped at a size of US$550m. Bookrunners started marketing the five-year bond at a spread of 75bp area.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds is expected to see some activity on Friday as Champ Acquisition prepares to close the books on a US$500m seven-year non-call three bond today.
Left lead Bank of America has accelerated pricing on the B2/B rated debut bond from November 12 and has set talk on the issue at 8.5% area.
The commemorative products company better known as Jostens is looking to raise funding to pay its shareholder Platinum Equity a dividend and to refinance debt.
The issuer is hitting the markets as credit rallies on expectations that the new Trump administration will follow through with more corporate tax cuts and impose a lighter touch when it comes to regulation.
The average high-yield bond spread hit another post financial crisis tight of 273bp on Thursday, according to ICE BofA data.
"Jostens is not an easy credit, so the fact that Jostens is going to [market] to do a dividend recap is testament to the market being in a good place," the banker said.
STRUCTURED FINANCE
The securitization primary will be muted today but dealmakers will resume pricing activity in earnest next week.
Market participants managed to squeeze in a number of mortgage offerings before moving to the sidelines ahead of the results of the US election and the Federal Reserve's latest rate cut.
On Monday and Tuesday, six agency and non-agency CMBS issues collectively raised US$3.3bn, while four private-label RMBS deals brought in US$1.2bn.
LATAM
Banorte has mandated Barclays, Goldman Sachs and Morgan Stanley as global coordinators for a US dollar perpetual AT1 bond.
The roadshow began today with virtual meetings. There will be virtual and in-person meetings in London on Monday and in New York on Tuesday.
The other bookrunners are BNP Paribas and MUFG.
The Basel III-compliant security has expected issue ratings of Ba2 from Moody’s and BB– from S&P.
EQUITIES
Syndicate desks priced six secondary stock sales for proceeds of US$3.3bn late Thursday amid a late-week rush of equity issuance following this week’s euphoric post-election stock rally.
GE Aerospace (General Electric) sold its remaining 3% stake in GE HealthCare Technologies via a US$1.17bn block sale, the evening’s largest offering.
JP Morgan, Citigroup and Morgan Stanley offloaded their three-way purchase of 13.28m shares in the medical equipment maker at US$88.33, or a zero discount to Thursday’s closing price. As with previous offerings from GE, the clean-up was conducted as a tax-efficient debt-for-equity exchange.
Another of Wall Street’s favorite repeat clients, American International Group offloaded US$936m of shares in carved-out life unit CoreBridge Financial.
JP Morgan and Morgan Stanley reoffered their joint purchase of 40m shares at US$31.20, a 2% discount to the US$31.85 last sale (which was also the upper end of the US$31.20-$31.85 reoffer range).
Informatica returned to ECM for the first-time since its NYSE IPO in 2021 to facilitate a US$408m first-time secondary sale by co-sponsors Permira Advisors and the Canada Pension Plan Investment Board.
Goldman Sachs late on Thursday led the overnight sale of 16m shares or about 5.2% of the data management software firm at US$25.50, a 5.9% discount to Thursday's closing price of US$27.10. The offering was four-times covered, enabling Goldman to allocate two-thirds of the shares to the top 10 accounts.
Thursday also brought primary raises from REIT Cousins Properties (US$188m), kidney drug maker Travere Therapeutics (US$125m) and New Jersey-based commercial bank Valley National Bancorp (US$400m). Bankers expect the step-up in the pace of activity to flow into next week as sponsors rush to monetize in the post-earnings window and with stocks posting new record highs following Tuesday’s election result.