With US corporate primaries idle this Friday, the focus was on the US employment report for December, which came in higher than expected as the jobs market continued to remain robust, indicating a healthy and energized economy.
Nonfarm payrolls increased by 256,000 jobs last month after rising by a downwardly revised 212,000 in November, while the unemployment rate fell to 4.1% from 4.2%, Reuters reported this morning. Economists polled by Reuters had forecast payrolls advancing by 160,000 jobs following a previously reported 227,000 surge in November.
Markets, however, reacted to the good news by turning south as expectations for further rate cuts by the Federal Reserve were lowered. US stocks nose-dived at the open.
"This is the highest print since November 2023's +675k," BMO said in a report today after the data. "Overall, it was a very strong showing for the labor market that reinforces the Fed's pause messaging."
BMO noted that ahead of the jobs report release, the US Treasury market was slightly cheaper and since the headlines, it has seen the price action extend further, with the 10-year benchmark note yield reaching 4.77%.
The Fed last month cut its benchmark overnight interest rate by another quarter-point to the 4.25%-4.50% range, bringing the total of reductions since it kicked off its easing cycle in September to 100bp.
The only other economic data report due today is the University of Michigan's Survey of Consumers at 10:00am New York time. No Fed speakers are scheduled for today.
In a shortened market session on Thursday, no offerings were priced in the IG and the HY primary markets. US stock markets were closed and the bond market closed at 2:00pm New York time in honor of a day of mourning for the late President Jimmy Carter.
The US structured finance market was active yesterday, with two auto ABS deals, including one from GM, pricing before the early close. While the LatAm bond primary was quiet yesterday, the region opened for business earlier this week when Mexico priced a large offering.
The average IG bond spread remained unchanged at 83bp on Thursday and the HY bond spread edged in by 2bp to 282bp, according to ICE BofA data. US yields across asset classes were mixed on Thursday.
"High grade spreads were mostly unchanged during yesterday’s abbreviated session and sit unchanged or a basis point wider on the week heading into this morning’s jobs report, the most significant macro impact of the week," BMO said.
For the week ended January 8, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$3.039bn and the all corporate high-yield debt funds/ETFs net outflow was US$27.46m. The all domestic equity funds/ETFs net outflow was US$1.887bn and the all non-domestic equity funds/ETFs net inflow was US$130.04m.
"While this week has been heavily focused on supply, we note data on the demand side with mutual fund flow data from Lipper for the week ending January 8 released yesterday showing a $3.04bn inflow for IG funds," BMO said.
"Demand from mutual funds was a vital component of last year’s outsized demand for corporate debt that helped digest 2024’s extremely strong supply," BMO said.
"Specifically, mutual fund flows for IG funds in 2024 totaled $82bn according to Lipper data. That's the strongest year of inflows since the pandemic and above the average inflow of the five years preceding 2020 ($71bn)," BMO said.
For 2025, BMO said it expects demand from mutual funds to remain very strong over the year, with rates remaining relatively elevated.
HIGH GRADE
The US investment-grade bond market is not expected to draw any fresh offerings on Friday, ending a front-loaded week for new supply.
Looking forward, the next two weeks will remain busy as issuers continue to make the most of a healthy new-issue market, said one syndicate banker.
"The expectation for this month was somewhere around US$175bn," said a syndicate banker on Thursday. "That was sort of the average guesstimate, and we're currently at US$80bn. So we're halfway there."
Indeed, the pipeline for new supply is building up again. Hyundai Capital Services, Eastern Energy Gas, Blue Owl Technology and National Life Group are holding investor calls today for potential offerings.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds is set for a quiet Friday, with no new deal announcements this morning.
The visible pipeline is empty except for a possible bond from vehicle battery maker Clarios, which is looking to raise US$4.5bn-equivalent to pay a dividend to its owners.
Part of that financing package is expected to comprise a US$1.2bn bond, which, according to one investor, could come next week.
STRUCTURED FINANCE
The asset-backed primary is running hot, with more than US$10bn in the pipeline for sale.
At least one issue is poised for pricing today, a US$301.2m consumer loan securitization from Oportun.
Yesterday, General Motors and Global Lending combined to raise more than US$1.8bn with their auto deals, bringing the week's ABS issuance near US$2bn.
Meanwhile, there are two CMBS issues slated for pricing today: a US$958.4m CRE CLO deal from ACRE Credit and a US$706.3m five-year conduit offering from a lender group led by Wells Fargo.
The CMBS primary has been active this week, with US$3.27bn of supply already priced from two issues.
As for the RMBS market, at least three non-QM issuers plan to complete their first securitizations of 2025 today, which would bring the week's supply to US$2.3bn. Pretium is set to place its US$567.8m single-family rental issue. In the non-QM arena, Invictus is poised to price its US$515.1m deal, while Lone Star seeks to raise US$299.6m from its latest offering.
LATAM
Argentina on Thursday made a bond repayment of more than US$4bn, Reuters reported yesterday.
"They say a promise is a debt... In this case, PAID!" Argentine finance secretary Pablo Quirno said in a post on X yesterday.
EQUITIES
Amylyx Pharmaceuticals snuck in a late-week US$60m overnight stock sale even though the US stock market was closed on Thursday.
Though that meant no other equity offerings launched or priced, sole bookrunner Leerink Partners still managed to price the sale of 17.1m shares in the biotech at US$3.50, a 7.2% discount to Wednesday’s closing price of US$3.77.
Once a high flyer (the stock traded at more than $40.00 in early 2023), Amylyx is trying to recover from a failed Phase III trial of its amyotrophic lateral sclerosis drug last April.
The drug, called Relyvrio, was withdrawn from the market after the FDA had conditionally approved it in 2022 based on preliminary trial results.
Amylyx’s raise lifted overall proceeds in US ECM this week to a meager US$284m as banks priced only two other registered stock sales (from Kimbell Royalty Partners and uniQure).
This is a slower start to the new year than in previous years, but considerable excitement lies around the corner with the expected launch as early as Monday of a jumbo IPO from LNG export operator Venture Global.
While the timing and size of the offering may still change, the all-primary offering could raise at least US$3bn but grow even larger based on investor demand, bankers said.
Venture Global would represent the second US IPO to hit the road from the energy sector this year after the launch earlier this week of a US$409m NYSE offering by oilfield equipment provider Flowco that is pricing on Wednesday, January 15.