The US investment-grade and high-yield corporate bond primaries are quiet on Friday after a busy week of inflation data and issuance.
In US ECM, 24 companies raised more than US$15bn this week, likely their last chance to raise capital this year before the winter break. For 2025, bankers see a robust 2025 with a new US presidential administration coming into office.
For economic data today, the slate holds just one release, import/export prices.
Next week, the US Federal Reserve will hold a two-day FOMC meeting that ends December 18 with its rate announcement and assessments of the economy.
The CME FedWatch Tool forecasts a 96.7% probability for a 25bp cut in the fed funds rate.
"The final Fed meeting of the year on Wednesday, December 18th is widely expected to bring the gift of lower policy rates," BMO said. "However, we find ourselves wary of the proverbial gift of coal in our stocking that could come in the form of a higher dotplot. Beware of the Grinch that stole steepness."
Deutsche Bank Research said central bank meetings will be in the spotlight next week, including the Fed, the BoJ and the BoE. And and in data, the bank noted the global flash PMIs due Monday and inflation prints out in the US with the PCE report on Friday, as well as retail sales and industrial production prints on Tuesday.
In the IG primary on Thursday, one offering was priced totaling US$400m, lifting weekly IG volume to US$18bn and December supply to US$41.2bn, according to IFR data. The average new issue concession for Thursday's offerings was 1.0bp and the average progression from initial price thoughts to pricing was 20.0bp tighter, according to the data. Order books were not available.
That lone borrower in the primary market Thursday could prove to be the last IG supply of 2024, BMO said.
If so, 2024 will finish with total issuance of $1.5trn, making it the largest year in the history of the IG market excluding 2020, BMO said.
In the HY primary yesterday, one issue was priced totaling US1.4bn, raising weekly issuance to US$6.25bn and December volume to US$11.475bn.
The average IG bond spread edged out by 1bp to 79bp on Thursday and the HY bond spread widened by 2bp to 266bp, according to ICE BofA data. US yields across asset classes were higher yesterday.
"High grade spreads widened 1bp during yesterday's session and sit 1-2bp narrower on the week and 1-2bp wider than YTD lows heading into this week's final session," BMO said.
For the week ended December 11, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$3.074bn and the all corporate high-yield debt funds/ETFs net outflow was US$257.34m. The all domestic equity funds/ETFs net inflow was US$10.351bn and the all non-domestic equity funds/ETFs net outflow was US$2.061bn.
"Further evidence of sustained strong demand in the IG market can be found in yesterday's mutual fund flow update from Lipper, which showed a $3.07bn inflow into IG funds during the week ending December 11," BMO said.
"IG inflows now total $27.3bn for the fourth quarter thus far, surpassing Q1's $25bn as the heaviest quarter of inflows into IG funds since the pandemic," BMO said. "For the year as a whole, 2024 has thus far seen an inflow of $81.6bn into IG funds. That compares to total inflows in 2023 and 2022 respectively of $13.5bn and -$132.7bn."
HIGH GRADE
No new investment-grade bond offerings are expected to price on Friday as supply trickles to a halt for this week.
Cousins Properties was the sole borrower in the market yesterday. The US office REIT issued a US$400m seven-year senior unsecured note at Treasuries plus 122bp via leads JP Morgan, Truist and US Bancorp.
The Baa2/BBB rated offering booked a new-issue concession of 1bp. The bond proceeds are earmarked for Cousins' US$522m purchase of Sail Tower, a Texas office property.
LEVERAGE/HIGH YIELD
The primary market for high-yield bonds is taking a break on Friday with no new deal announcements as of early morning.
The asset class saw weekly volumes reach US$6.35bn as of Thursday after an eclectic group of junk-rated issuers raised funding this week, including the parent company of luxury retailer Saks Fifth Avenue and ATM maker Diebold Nixdorf.
Diebold's new 2030 bond rallied on the break to trade late yesterday at 102.25 after pricing earlier in the week at par to yield 7.75%, according to MarketAxess data.
Windstream also returned to market yesterday with a US$1.4bn add-on to its 8.25% 2031 that was upsized from US$1bn and priced at 103.75. That bond traded up at 104.83 late yesterday afternoon.
The provider of fiber-based broadband to households and small businesses is using proceeds to refinance its 7.75% 2028s.
STRUCTURED FINANCE
One asset-backed issue may price today in what could be the final deal of 2024 for the sector.
Yesterday EquipmentShare showed price guidance on its second equipment rental securitization, which is expected to raise US$400m. The $381m Single A rated three-year tranche is assessed at US Treasuries plus 170bp-180bp. This is tighter than the plus 210bp on a comparable class in the firm's first deal that was sold on August 1. The offering can price today or Monday,
If the EquipmentShare deal prices today, it will bring ABS issuance to more than US$3bn for the week, IFR data show.
It is unlikely that any ABS deals will come to market over the remainder of the year after the EquipmentShare offering, according to market participants.
On the other hand, the RMBS sector is slated to remain active into next week, led by a slew of non-QM offerings including issues from A&D Mortgage, Balbec and MFA Financial.
Eight residential mortgage issuers have raised more than US$1.7bn since Monday.
LATAM
No new Latin America bond offerings are expected to price on Friday.
Financial experts expect Chile's central bank to cut its policy rate by 25 basis point to 5% in December, according to a poll released by the central bank yesterday. The CMP's decision is scheduled to be announced on December 18.
EQUITIES
ServiceTitan added some late-year fireworks to the recovering US IPO market by surging more than 40% on Thursday following its US$625m Nasdaq IPO.
In what was arguably the hottest new issue of 2024, ServiceTitan shares rose to US$101, 42.3% above its US$71 IPO, after the offering earlier closed 35-times oversubscribed.
Two-thirds of investors that put in orders for the offering received no shares as the Goldman Sachs and Morgan Stanley syndicate heavily cut back orders and allocated 40% of the shares to the top 10 accounts and 70% to the top 25.
Though time is running out for companies to come to market in the twilight of 2024, bitcoin miner CleanSpark raised US$550m from the sale of a convertible bond late Thursday to refinance and fund growth, marking just the latest equity-linked offering from a crypto player.
Cantor and BTIG priced the 5.5-year CB at a fixed zero-percent coupon and a 20% conversion premium, the latter at the investor-friendly end of the 20%–25% talk.
To reduce market risk, the bitcoin miner is concurrently buying back US$145m of stock to facilitate stock-borrowing on the part of arbs participating in the deal. The share repurchase was increased from US$125m at launch.
CleanSpark is also buying a capped call to offset future dilution to stock prices above US$24.66, a 100% premium to Thursday’s closing price of US$12.33.
In all, 24 companies raised more than US$15bn in US ECM this week, likely their last chance to raise capital this year before the winter break. (Though a few stragglers could seek to tap investors next week, the outcome of the FOMC meeting Wednesday will also curb opportunities.)
Australian medtech Anteris Technologies Global laid the foundation for a full migration to the US by pricing an US$88.8m Nasdaq IPO late Thursday, the last of the year.
TD Cowen, Barclays and Cantor led the sale of 14.8m shares at US$6, an 11.5% discount to the A$10.54 (US$6.78) reference price for the local ASX shares.
In anticipation of migrating its headquarters from Brisbane to Minnesota next year, Anteris will de-list its ASX ordinary shares and replace them with CHESS Depositary Interests, the ASX equivalent of American depositary shares.
CG Oncology, the year’s best-performing biotech IPO, opened the doors for new investors via a US$224m follow-on stock sale.
Morgan Stanley, Goldman Sachs, TD Cowen and Stifel priced 8m shares late Thursday at US$28, a hefty 16.9% file-to-offer discount after two days of public marketing.
The cancer drug developer’s shares are still up 47% from its US$19 IPO price in January, narrowly above ArriVent BioPharma, the year’s second-best performing biotech IPO with a 44% aftermarket gain.
Elsewhere in biotech, Candel Therapeutics secured an US$80m equity lifeline that will allow the late-stage cancer drug developer to finish Phase III trials on its prostate cancer drug and seek approval in late 2026.
Flushing Financial (US$70m) and Washington Trust Bancorp (US$65m) joined the growing list of small community banks that are selling stock to fund the "repositioning" of their underwater securities portfolios.