The US investment-grade corporate primary expects at least five offerings to price on Thursday as issuers continue to pile into the market.
The high-yield primary anticipates at least two issues pricing today. From the Latin American market, El Salvador is expected to price a US$1bn 30-year bond offering today.
Key economic data out this morning included weekly jobless claims and the PPI report.
"Given the modestly bearish nature of the data, a softer tone in US rates has been established," BMO said.
The probability of a fed funds rate cut of 25bp at the December 18 FOMC meeting dropped to 75.9% this morning from 82.5% late yesterday, according to the CME FedWatch Tool.
Among the Fed speakers on the road today is Federal Reserve Chair Jerome Powell, who will be participating on a panel hosted by the Dallas Regional Chamber, the World Affairs Council of DFW and the Federal Reserve Bank of Dallas.
In the IG primary on Wednesday, seven issues were priced totaling US$11bn, lifting weekly IG issuance to US$41.14bn and November volume to US$43.05bn, according to IFR data. The average new issue concession for yesterday's offerings was 2.15bp and the average order book was 3.56x subscribed, according to the data. The average progression from initial price thoughts to pricing was 25.88bp tighter.
This week's IG supply is now well beyond syndicate expectations of US$28bn.
In the HY primary, four offerings were priced totaling US$2.35bn, pushing weekly volume to US$3.55bn and November supply to US$4.05bn.
The average IG bond spread edged out 1bp to 78bp on Wednesday and the HY bond spread widened by 3bp to 264bp, according to ICE BofA data. US yields across asset classes on Wednesday were mixed.
"IG index spreads widened 1-2bp during yesterday’s session, underperforming both credit derivatives and equities despite a modest positive surprise in October inflation CPI data," BMO said.
HIGH GRADE
The US high-grade bond market is expected to draw a handful of offerings today, as it did yesterday. At least five borrowers are expected to price deals on Thursday.
UK lender NatWest Group is raising Additional Tier 1 capital via an offering of a perpetual non-call 10 notes in the US dollar market. The deal has an investment-grade rating of Baa3/BB–/BBB–.
Utility Dominion Energy is in the market with a corporate hybrid offering. Leads set IPTs for the 30.5-year non-call 10.25 transaction at 7% area. Fellow utility Consolidated Edison Company of New York is selling at three-part bond, including 10 and 30-year fixed notes, along with a three-year floater. The issuer is the operating subsidiary of utility company Consolidated Edison.
Ares Strategic Income Fund is issuing a three-year senior unsecured bond. And US regional lender Zions Bancorporation is issuing a 11-year non-call 10 subordinated note, a popular structure for bank issuers this week.
LEVERAGE/HIGH YIELD
After four issuers raised US$2.35bn in the US high-yield bond market on Wednesday, two more deals are expected today.
Molina Healthcare printed an upsized US$750m offering of 8.25-year non-call 3.25 notes at 6.25% yesterday, while Icahn Enterprises priced a US$500m non-callable senior secured five-year issue at 10%.
Also on Wednesday, chemicals firm Chemours completed a US$600m offering of 8.2-year non-call 3.2 bonds at 8%, and PG&E printed an upsized US$500m tap of its 7.375% 30.5-year non-call 5.25 junior subordinated notes at 6.7%.
Today’s expected deals include a US$500m five-year non-call two offering from education software company Ellucian and a US$500m long four-year non-call two offering from UK-based Global Auto Holdings.
STRUCTURED FINANCE
The asset-backed supply pipeline is refilling with new deals as issuers make a push to lock in funding before month-end.
This morning, General Motors began marketing a US$888.7m securitization backed by loans that finance car dealer inventories. The American automaker is offering US$267.1m of two-year notes and US$534.3m of three-year securities. It will retain a US$87.3m portion of the deal.
The GM dealer floorplan issue joins a US$700m mobile payment plan offering from wireless carrier Verizon and a US$500m whole business securitization from fast food franchiser Wingstop for pricing in coming days.
As for the CMBS market, Freddie Mac this morning launched its US$225.8m small-balance multifamily issue. The US$131.0m four-year class was launched at US Treasuries plus 47bp, in line with price guidance.
Meanwhile, a Wells Fargo-led lender group released guidance on its US$645.3m five-year conduit CMBS deal. The US$300.1m Triple A rated certificate is assessed in the 97bp area over US Treasuries.
LATAM
El Salvador is expected to price a US$1bn 30-year bond offering today, with Bank of America as sole bookrunner. Initial price thoughts are in the high 9% area.
Yesterday, Mexican bank Banorte raised US$1.5bn through a two-part offering of Additional Tier 1 notes. The Mexican bank priced at par both a US$750m 8.375% perp non-call 6.5 and a US$750m 8.75% perp non-call 10.5.
Barclays, Goldman Sachs and Morgan Stanley were the global coordinators and bookrunners for this Basel III-compliant security. BNP Paribas and MUFG were joint bookrunners.
EQUITIES
US ECM activity slowed on Wednesday, with only a single deal priced overnight and two others, a follow-on and a convertible bond, launched for pricing after Thursday’s close.
Ventas secured US$677m from an all-primary block trade via Wells Fargo.
The bank off-loaded 10.6m shares or 2.5% of the healthcare REIT at US$63.90, the bottom of the US$63.90–$64.45 reoffer range and a slim 0.9% discount to Wednesday’s closing price (also US$64.45).
The offering is structured as a forward sale in which Wells Fargo borrowed shares from third parties and sold them into the market.
Ventas can settle the forward-sale arrangement over the next year by delivering new stock to Wells Fargo, limiting dilution until the REIT needs the money. The offering follows an active year of issuance by owners of senior housing communities, one of this year’s strongest REIT subsectors.
Zai Lab launched a US$200m follow-on stock sale late Wednesday that could provide a bridge to profitability for the Nasdaq and Hong Kong-listed drug company.
Goldman Sachs, Jefferies and Leerink Partners are marketing a fixed size offering across Thursday’s session for pricing after the close.
Zai Lab's Nasdaq ADSs rose 3.4% to US$29.95 on Wednesday on the back of strong quarterly financial results.
Synaptics launched a US$400m seven-year convertible bond late Wednesday that is one part defensive and another part aggressive.
JP Morgan, Barclays, Deutsche Bank and Mitsubishi UFG are marketing the CB through Thursday at a 1%–1.5% coupon and 27.5%–32.5% conversion premium for pricing after the close.
The embattled software company is buying back US$100m of stock concurrently with the deal while also spending a portion of the money raised on a capped call, underscoring the passive-aggressive nature of the financing.
Synaptics’ shares closed Wednesday’s session at US$74.50, down nearly 35% this year.