A mild CPI report this morning gave the US investment-grade corporate primary the impetus for more issuance, with at least six issues expected to price.
The high-yield primary is also active, with at least four offerings expected to price.
The economic data calendar today is dominated by the CPI release this morning, while another slate of Fed speakers will be out in force on Wednesday.
The consumer price index rose 0.2% for the fourth straight month, Reuters reported this morning. In the 12 months through October, the CPI advanced 2.6% after climbing 2.4% in September. Economists polled by Reuters had forecast the CPI gaining 0.2% and increasing 2.6% year on year.
"Overall, it was a remarkably consensus print that leaves a December cut as the most likely outcome," BMO said in a report after the data release. The CME FedWatch Tool forecasts a 79.1% probability for a 25bp fed funds rate cut by the Federal Reserve's FOMC on December 18. The next inflation report will be the PPI on Thursday morning.
In response to the data, US Treasury yields, which surged on Tuesday, slipped after the CPI report, with the benchmark 10-year note yield dropping below 4.40% to 4.37%. US stocks opened mixed to higher.
In the IG primary on Tuesday, 14 offerings priced totaling US$30.15bn, with Yankee bank bonds in the mix, according to IFR data. Yesterday's IG volume hit the upper end of syndicate estimates for this week's supply, pushing November issuance to US$32.05bn.
BMO said in a report that yesterday's volume was the fifth largest day in the IG primary market this year, with issuance dominated by the financial sector, and banks in particular.
"Financial institutions accounted for $23.5bn, or 78%, of yesterday’s total," BMO said. "That’s the largest single day of bank supply in the IG market in our data going back to the beginning of 2016."
A total of US$241.7bn in Yankee bank debt has been issued in 2024, which is already one of the strongest years for the market in recent history, BMO said.
BMO also noted that yesterday featured US$3.95bn in floating-rate issuance, which is the heaviest FRN supply in the IG primary market since April 2023.
In the HY arena, three issues were priced totaling US$1.2bn, nudging November HY volume to US$1.7bn.
The average IG bond spread was unchanged at 77bp on Tuesday and the HY bond spread tightened by 2bp to 261bp, a record post great financial crisis HY spread tight, according to ICE BofA data. US yields across asset classes edged up yesterday.
"High grade spreads were unchanged at the index level during yesterday’s session, though tone was decidedly on the weaker side with spreads trading at historical lows," BMO said.
HIGH GRADE
At least six US investment-grade corporate bond deals are expected to price on Wednesday.
Biopharmaceutical company Gilead Sciences is issuing a four-part senior unsecured note, split into five, 10, 30 and 40-year tranches. Healthcare services company Cardinal Health is bringing to market a four-part bond, too.
UK oil company BP is selling a junior subordinated note for the second time this year. The corporate hybrid offering is in the form of a perpetual non-call 10.
Swedbank is adding to this week's Yankee FIG issuance. The Nordic lender is selling five-year senior preferred notes in both fixed and floating-rate format.
Military shipbuilder Huntington Ingalls Industries is marketing five and 10-year senior unsecured bonds.
The sixth high-grade deal of the day is coming from FS KKR Capital.
LEVERAGE/HIGH YIELD
Four issuers are looking to raise a combined US$1.9bn in the US high-yield primary on Wednesday as corporates continue to ride a credit rally following the presidential election earlier this month.
Utility PG&E has set initial price talk in the 7.25% area on a US$300m tap of its 7.375% 30.5-year non-call 5.25 junior subordinated notes, which have a fixed-to-fixed reset structure.
The bond, which was priced at par in September, was changing hands this morning at a dollar price of 103.262 to yield 6.608%, according to MarketAxess data.
Molina Healthcare is also out with a US$500m 8.25-year non-call 3.25 deal, while Icahn Enterprises has returned with a US$500m senior secured five-year issue.
Elsewhere, chemicals firm Chemours is readying pricing on a US$600m 8.2-year non-call 3.2 bond to redeem euro notes due in 2026.
Meanwhile, education software company Ellucian is preparing to price a US$500m five-year non-call two offering on Thursday.
The bond is part of a larger funding package that includes US$2.385bn in term loans and that will go toward refinancing debt and paying a dividend to the company’s shareholders.
STRUCTURED FINANCE
The securitization primary will kick up a notch today as dealmakers are expected to bring more offerings to market.
Yesterday a Wells Fargo-led lender group announced a US$645.304m publicly offered five-year conduit CMBS deal, while Freddie Mac is in the market with a US$225.8m small-balance multifamily securitization.
In the RMBS sector, private equity firm Lone Star started marketing its latest non-QM offering, which is expected to raise US$206.8m.
Meanwhile, new asset-backed issues have been slower to emerge in the aftermath of the US election and the Fed's latest rate decrease last week. Ford, Volkswagen and Capital One filed with the Securities and Exchange Commission yesterday for their latest prime auto offerings.
LATAM
Banorte is expected to price a two-part Tier 1 notes offering today. Price thoughts on the perp non-call 6.5 and the perp non-call 10.5 are in the 8.75% and 9.125% areas, respectively. Barclays, Goldman Sachs and Morgan Stanley are the global coordinators for this Basel III-compliant security.
EQUITIES
The narrow funding window between post-quarterly earnings and the Thanksgiving Day holiday has seen an eclectic rush into ECM.
Tuesday saw six deals totaling US$1bn, mostly on an accelerated basis either overnight or ahead of the market open.
In a pre-open Tuesday block sale, private equity firm Advent International secured a US$159.6m secondary offering of shares in First Watch Restaurant. Dime Community Bancorp raised US$125m through a primary sale of stock ahead of the market open Tuesday in anticipation of selling off underwater Treasury securities.
The eclectic mix of small-cap issuers hitting ECM was evident, with a flurry of deals marketed overnight Tuesday.
Industrial-focused PE firm American Industrial Partners cashed out a US$152m position in V2X, the aerospace company it took public in 2022, through a secondary sale of 2.5m shares overnight at US$61.00. The offering priced at a 10% discount to the US$67.69 last sale price despite being confidentially marketed.
In more regular-way funding, IT services firm Grid Dynamics and 89bio raised US$99.2m and US$125m through primary stock sales executed overnight.
In what is arguably the most impressive financing of the week, Upstart raised US$425m from the sale of a six-year convertible bond priced at a 1% coupon and 32.5% conversion premium.
The new CB comes just two months after the AI lending platform issued a US$431.3m five-year CB priced at a 2% coupon that is convertible at a share price of US$45.66, a 30% premium at the time.
Upstart’s new CB is convertible at US$91.99.
KKR-backed OneStream launched an all-secondary sale of 15m shares late Tuesday that is expected after the market close Thursday, following the regular cadence for newly public companies.
The PE firm took OneStream public in July via an offering of 24.5m shares priced at US$20.00.
OneStream share closed Tuesday’s session at US$33.50.
Morgan Stanley, JP Morgan and KKR are leading a 19-firm syndicate marketing the OneStream first-time follow-on.
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