After a robust week of issuance, the US investment-grade corporate primary is quiet today as the jobs report took center stage.
November nonfarm payrolls increased by 227,000 jobs and last month's unemployment rate edged up to 4.2% from 4.1%, Reuters reported this morning. Economists polled by Reuters estimated 200,000 jobs and a 4.2% rate.
"Nothing within this release will prevent the FOMC from cutting on December 18th," BMO said in a report after the data.
US Treasuries saw yields dip after the report, with the 10-year note yield benchmark slipping to 4.13%. The CME FedWatch Tool forecasts a 87.3% probability that the FOMC will cut the fed funds rate by 25bp on December 18. US stocks opened the morning trading session higher.
"This jobs report came out right in the Goldilocks zone, not too hot so as to derail interest rate cuts in December (or next year), but also not too cold, which could have spooked financial markets about the underlying health of the U.S. economy," said Josh Jamner, investment strategy analyst at ClearBridge Investments. "The just right report should be a benefit to risk assets at the margin."
The jobs report was one of two significant releases today, in addition to a slate of Fed speakers.
The high-yield arena is still active, with one issue expected to price today. That offering joins a busy slate of issues already priced.
And in the ECM primary, US syndicate desks raised a hefty US$10.9bn from 18 offerings this week, marking the third busiest week of the year amid robust fundraising conditions in the final weeks of 2024. The week was dominated by large convertible bond sales.
In the IG primary yesterday, two offerings were priced totaling US$1.25bn, lifting weekly and December IG supply to US$23.2bn, according to IFR data. The average new issue concession on yesterday's offerings was 5.0bp and the average order book was 4.61x subscribed, according to the data. The average progression from initial price thoughts to pricing was 17.67bp tighter.
Weekly supply fell short of syndicate IG supply expectations of around US$26bn, BMO said.
In the HY primary, four issues were priced totaling US$2.375bn, pushing weekly and December HY issuance to US$4.775bn.
The average IG bond spread edged out by 1bp to 81bp on Thursday and the HY bond spread remained unchanged at 266bp, according to ICE BofA data. US yields across asset classes edged higher on Thursday.
"IG index spreads widened 0.5-1bp during yesterday’s session and sit unchanged or modestly narrower on the week ahead of this morning’s pivotal employment report," BMO said.
For the week ended December 4, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$2.039bn and the all corporate high-yield debt funds/ETFs net inflow was US$429.2m. The all domestic equity funds/ETFs net inflow was US$12.029bn and the all nondomestic equity funds/ETFs net outflow was US$791.34m.
HIGH GRADE
The investment-grade bond market is not expected to draw fresh offerings today, after a total of two deals priced yesterday.
On Thursday, Atlas SP Partners raised US$1bn from its debut high-grade bond via its new financing unit, Atlas Warehouse Lending.
Leads Barclays, BNP Paribas, JP Morgan and Morgan Stanley priced the US$500m three-year senior unsecured tranche at Treasuries plus 195bp, while the US$500m five-year note landed at a spread of 220bp. Both tranches tightened around 17.5bp from the midpoint of IPTs.
Johnson Controls International was the second issuer to print a bond yesterday. The building equipment provider raised US$250m from a seven-year tap of its 4.9% 2032 notes.
LEVERAGE/HIGH YIELD
Packaging company Veritiv has the junk bond primary to itself on Friday as it prepares to price a US$350m add-on to its 10.5% 2030s, topping off a relatively busy week for the asset class.
Price talk has been set in the 105.75 area for the add-on, which has been downsized to US$350m from US$550m. In turn, a term loan B has been upsized to US$800m from US$600m.
The 2030s were trading on Thursday at a dollar price of around 106.94 to yield 8.413%, according to MarketAxess data.
Proceeds from the bond and the loan will help fund the company’s acquisition of Orora.
STRUCTURED FINANCE
The securitization primary will wrap up a moderate supply week with two CMBS deals possibly pricing later today.
Blackstone seeks to raise US$1bn with a commercial property bond to refinance a portfolio of student housing, while Taubman Realty is in the market with a US$1bn CMBS offering to refinance its Dolphin Mall in Florida.
The two offerings will contribute to active post-Thanksgiving issuance in the private-label CMBS market, which has already seen nearly US$3bn since Monday, IFR data show.
Meanwhile, dealmakers are preparing several asset-backed offerings for sale next week. The biggest thus far is an US$850m whole business securitization from sandwich chain Jersey Mike's Subs, after Blackstone said last month that it would acquire a majority stake in the chain.
Other notable deals are coming from the utility recovery sector: a US$476.1m green bond from Ameren and a US$336.7m issue from Southwestern Electric Power.
For the week, only two ABS deals landed, raising over US$1.4bn.
LATAM
The primary market for LatAm crossborder bonds is taking a breather on Friday after a busy week.
Even so, the pipeline remains active, with bankers bracing for more deals later this month.
Ecuador is marketing a US$1bn bond to fund a debt-for-nature swap to support conservation efforts in the Amazon Basin.
And Argentine issuers continue to roll out deals in a receptive market, with energy company Pampa Energia and the City of Buenos Aires talking to investors about upcoming dollar bonds.
EQUITIES
US ECM syndicate desks raised a hefty US$10.9bn from 18 offerings this week, making it the third busiest week of the year amid robust fundraising conditions in the final weeks of 2024.
The week was dominated by large convertible bond sales, and most offerings were upsized in a strong signal of buyside demand this close to Christmas.
In one of the final pricings of the week, Semtech strengthened its balance sheet by raising US$575m from an upsized follow-on stock sale.
After a day of marketing, Morgan Stanley and UBS priced the sale of 9.1m primary shares in the chip systems and cloud connectivity services provider at US$63, an 8.8% discount to Wednesday’s closing price of US$69.10.
Strong demand enabled the banks to increase the offering size from US$400m at launch.
Semtech shares have nearly tripled this year thanks to its appeal as a derivative play on the artificial intelligence boom.
The company is using the proceeds raised to pay down some of its US$1bn debt load so it can take full advantage of the opportunity.
Also late Thursday, private equity firm Thoma Bravo sold half of its stake in CyberArk Software via a US$372.5m overnight block trade.
Bank of America reoffered its purchase of 1.14m shares of the Israeli cybersecurity firm at US$326, the bottom of the US$326-$327.57 marketing range and a 0.5% discount to Thursday’s closing price (the upper end of the range).
Elsewhere, Hong Kong-listed Landsea Green harvested an upsized sum of US$62m from the sale of shares in Landsea Homes, its fourth sell-down since merging its former subsidiary with a SPAC in 2021.
Sole bookrunner B Riley Securities priced 6.1m shares of the Texas homebuilder at US$10.25, the bottom of the US$10.25-$10.50 marketing range and an 8.5% discount to Thursday’s closing price of US$11.20.
The offering was upsized from 5.1m shares at launch.