In the wake of strong earnings, US banks have started their borrowing journeys into the US investment-grade corporate primary.
Citigroup, Goldman Sachs, Wells Fargo, Morgan Stanley and JP Morgan are in the corporate bond market today.
"The January supply wave from large American banks is naturally well anticipated by the market, with demand ready to absorb the issuance," BMO said in a report this morning.
At least nine offerings are expected to price in the IG primary today. No issues are expected in the HY primary.
Indeed, it could become an outsized day of bank supply, BMO said. "For reference, the largest single day of big six supply on record came on January 16 of last year when three banks combined for a total of $23.25bn."
"After JP Morgan, Goldman, Citi, and Wells delivered nearly best case results yesterday, Bank of America and Morgan Stanley join the chorus this morning with strong Q4 earnings," BMO said.
LatAm is in the IG mix today with corporate offerings from Fibra Uno, Tecpetrol and El Puerto de Liverpool.
In the ECM arena, the Houston-based oil field services firm Flowco's US$427m NYSE IPO priced above range late Wednesday as investors swarmed the year's first new issue. A syndicate led by JP Morgan, Jefferies, Piper Sandler and Evercore led the sale of 17.8m Flowco shares at US$24, or US$1 above the US$21-$23 marketing range.
More key economic data reports were slated for release on Thursday, including retail sales, weekly jobless claims and the January Philadelphia Fed manufacturing survey.
"It was a mixed round of data with solid consumption figures while the uptick in initial jobless claims (albeit in-range) served as a reminder of the fluctuations in the employment outlook," BMO said in a separate report after the releases.
US Treasuries were better post-data, BMO said, but yields remain slightly higher on the day.
The two major US inflation reports were released earlier this week, with the key CPI report coming in yesterday morning softer than expected, which triggered a market rally in stocks and bonds, especially US Treasuries.
"That bond rally was a global phenomenon yesterday," Deutsche Bank Research said in a report today. "When it came to equities, the decline in bond yields unleashed a significant rally, with the S&P 500 up +1.83% on the day."
On Wednesday, three IG offerings were priced in the primary totaling US$2.25bn, lifting weekly issuance to US$19bn and January volume to US$99.25bn, according to IFR data. The average new issue concession for the IG deals on Wednesday was negative 0.67bp and the average order book was 6.19x subscribed, according to the data. The average move from initial price thoughts to pricing was 26.88bp tighter.
Citadel LP's US$1bn offering yesterday was 10x subscribed.
No issues were priced in the HY primary yesterday.
The average IG bond spread edged in 1bp to 83bp on Wednesday and the HY bond spread tightened by 8bp to 272bp, according to ICE BofA data. US yields across asset classes were lower on Wednesday.
"High grade spreads narrowed 1-2bp alongside a sharp rally in risk assets in response to yesterday’s cooler-than-expected December CPI report, a ceasefire in the Middle East, and strong bank earning," BMO said. "Yesterday’s encouraging reading on the inflation front likely tips the probabilities of a break in the recent range in credit spreads to the downside if President Trump’s initial actions are not as severe as market participants fear."
HIGH GRADE
At least nine US investment-grade bond deals are expected to price on Thursday.
As anticipated, the biggest US banks are delivering bond offerings from all parts of the capital structure after coming out of earnings blackouts this week.
Goldman Sachs is issuing a perpetual non-call five preferred note eligible for Tier 1 capital, while Citigroup is selling an 11-year non-call 10 subordinated note for Tier 2 capital and Morgan Stanley is preparing a four-part deal.
Wells Fargo is readying senior unsecured bonds through a three-part offering, split into three-year non-call two and six-year non-call five fixed-to-floating-rate notes, along with a three-year non-call two floater. Elsewhere, JP Morgan announced a four-part offering of senior unsecured notes.
REIT Extra Space Storage is marketing a US$300m tap of its 5.5% 2030 senior note, and private-credit fund Blue Owl Credit Income is selling a tap of its 6.6% 2029 note.
From Latin America, Mexican REIT Fibra Uno is issuing a two-part sustainability-linked note via its financing entity, Trust 1401, and Mexican conglomerate El Puerto de Liverpool is selling seven and 10-year senior unsecured notes.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds looks set for another quiet day in what for some has been a disappointing start to the year.
"Investors have positioned for an active calendar but so far we haven’t gotten it," said one portfolio manager.
Eight borrowers front-loaded bond sales this week ahead of CPI data on Wednesday, but since then the pace of issuance has ground to a halt.
In the secondaries, the new US$700m 6.75% five-year issued by Clarios as part of a US$4.5bn dividend recap is performing well.
It was trading at a dollar price of 101.00 yesterday after pricing at par earlier in the week, according to MarketAxess data. Books on the bond peaked at around US$6bn, according to one investor.
STRUCTURED FINANCE
Dealmakers are shifting their focus to next week's asset-backed supply now that most of this week's offerings have been completed.
There are at least seven ABS issues lined up for sale next week. Auto supply will keep coming with a US$1.39bn prime deal from Toyota, a US$970.4m prime offering from World Omni, a US$150m prime issue from Bank of Nova Scotia and a US$503.2m subprime offering from Bridgecrest. The equipment sector will remain active with a US$906.6m trade from Stonebriar and a US$868.1m offering from MassMutual. Island Finance will make its US$292.5m debut in the consumer loan segment.
Meanwhile, there is at least one deal poised to price this week. Uniti is planning to price its US$589m inaugural fiber securitization tomorrow, a person familiar with the deal said this morning.
So far this week, 13 issuers have raised US$12.8bn, bringing the month's issuance to US$15.2bn, IFR data show.
LATAM
Activity in the market for crossborder bonds out of Latin America is picking up steam as several borrowers prepare to raise funding on Thursday.
Central American development bank Cabei has already built a book of close to US$4bn on a US$1.5bn three-year sustainability-linked bond, which is expected to price today at mid-swaps plus 70bp.
Mexican real-estate investment trust Fibra UNO is also readying pricing today on its own sustainability-linked offering, comprising seven and 12-year bonds. Leads have set initial price thoughts in the 7.7%-7.8% and 8.25% area, respectively.
Elsewhere, Mexican retailer El Puerto de Liverpool is raising funding this afternoon to help finance its purchase of a minority stake in US retailer Nordstrom. It has set IPTs in the area of 210bp and 240bp over US Treasuries on seven and 12-year bonds, respectively.
And farther south, Argentine energy company Tecpetrol has released IPTs in the high 7% area on an eight-year senior unsecured bond ahead of pricing today.
EQUITIES
Flowco priced its NYSE IPO above range for proceeds of US$427.2m late Wednesday as investors swarmed the year's first new issue.
The Houston-based oil field services firm made light work of the offering, closing the books around 20-times oversubscribed with strong demand from long-only investors and energy sector specialists.
A syndicate led by JP Morgan, Jefferies, Piper Sandler and Evercore led the sale 17.8m Flowco shares at US$24, or US$1 above the US$21-$23 marketing range.
Investors did not have to wait long for the first new issue of 2025.
A press release announcing the bullish result appeared at 4:35pm New York time, soon after the market’s closing bell.
The offering was backed with US$125m of cornerstone demand from BlackRock and American Century Investment.
The shares will begin trading on the NYSE on Thursday under the symbol “FLOC”.
Elsewhere, Priority Technology returned a less-than-expected US$70.3m of cash to selling shareholders via a marketed stock sale.
After an earlier wall cross followed by one day of marketing, joint books KBW and TD Cowen late Wednesday priced the sale of 9.1m shares or 12% of the payments processor at US$7.75, or a 19% file-to-offer discount versus Tuesday's closing price of US$9.57.
The offering was downsized from 9.2m shares at launch after shares of the payments firm and former SPAC slumped 15.8% to US$8.06 while the offering was marketed during Wednesday’s session.