The US investment-grade corporate primary welcomes the last of the six big US banks to the bond market on Friday, normally an idle session for borrowing.
US banks dominated the issuance flood yesterday, with five of the big six banks combined selling over US$26bn and setting a new record for issuance from the big banks, BMO said in a report today. "The previous recordholder was January 16 of last year, which saw the large American banks combine for $23.25bn."
On Thursday, nine IG offerings were priced in the primary totaling US$29.45bn, lifting weekly issuance to US$48.45bn, surpassing syndicate IG supply expectations of US$40bn for the week, and boosting January volume to US$128.7bn, where expectations are for up to US$170bn-$175bn, according to IFR and syndicate data.
The average new issue concession for the IG deals on Thursday was 1.73bp and the average order book was 3.20x subscribed, according to the data. The average move from initial price thoughts to pricing was 26.28bp tighter.
The last of the six banks is out today, with Bank of America offering a five-part benchmark issue.
All six banks reported stellar earnings this week.
And yesterday’s massive supply from the large American banks had no measurable impact on secondary market performance, with the banking index unchanged on the day, in line with the broad IG index, BMO said.
No high-yield issues are expected today and no issues were priced in the HY primary yesterday as the surge in issuance that some had expected this month has not yet materialized.
"New issue activity has been on and off in this high rate-vol environment, with two sessions printing a combined $3.8bn but otherwise blank tape," Bank of America Research said in a report yesterday. "This continues to support the strong technical backdrop with flows stabilizing recently. New deals are performing well on the break."
The pace of economic data releases – after a busy week of inflation and consumer data – slows this morning, with December residential construction and industrial production.
The average IG bond spread was unchanged at 83bp on Thursday and the HY bond spread edged out by 1bp to 273bp, according to ICE BofA data. US yields across asset classes were lower on Thursday.
"High grade spreads were mostly unchanged during yesterday’s session," BMO said. "Volume in the secondary IG market remained extremely strong yesterday, with TRACE estimating IG market activity more than 60% of daily norms over the past year. Client activity was skewed strongly toward better selling, though that’s likely primarily attributable to yesterday’s heavy supply from large American banks."
For the week ended January 15, Lipper US Fund Flows reported that the all short-intermediate investment-grade debt funds/ETFs net inflow was US$592m and the all corporate high-yield debt funds/ETFs net outflow was US$59.83m. The all domestic equity funds/ETFs net outflow was US$3.885bn and the all non-domestic equity funds/ETFs net outflow was US$2.055bn.
HIGH GRADE
The US investment-grade bond market will have at least one deal Friday.
Bank of America is bringing a five-part senior unsecured offering. The SEC-registered transaction comprises fixed-to-floating tranches in four-year non-call three, six-year non-call five and 11-year non-call 10 formats, with IPTs set at US Treasuries plus 90bp area, 100bp area and 115bp area, respectively.
The offering from the US money center bank also includes four-year non-call three and six-year non-call five floater bonds.
With Bank of America's deal, the six biggest US banks will all have come to the high-grade bond primary this week.
LEVERAGE/HIGH YIELD
After a brief surge of issuance earlier in the week, activity in the primary market for junk bonds slowed, and Friday looks to be another no-deal day for the asset class.
In the secondary, the 6.75% 2030 issued by vehicle battery maker Clarios as part of a US$4.5bn dividend recap gave back some gains yesterday.
It changed hands on Thursday afternoon at 100.875 after trading just above 101.00 earlier in the week, according to MarketAxess data.
The other big trade of the week, an US$850m 7% 2033 from Waste Pro, has been drifting higher to trade at 100.875 yesterday after pricing at par on Monday.
STRUCTURED FINANCE
At least one asset-backed offering is poised to price on Friday, bringing the week's issuance to over US$13bn, which would mark the busiest week for ABS supply since last June.
Fiber network operator Uniti is slated to complete its inaugural US$589m securitization today. The company released price guidance yesterday on its five-year three-part offering. The US$426m senior tranche is assessed in the 175bp area over US Treasuries.
With most of this week's business in the books, dealmakers are preparing for another busy week, with at least eight deals already in the market. The auto sector will continue to drive the upcoming, led by a US$1.39bn prime deal from Toyota and a US$1bn sub-prime trade from Exeter.
Meanwhile, the RMBS market is closing out an active week as seven issuers combined raised over US$2.5bn. The sector pipeline remains full, featuring a US$549.6m home equity issue from Woodward Capital and a US$342m non-QM deal from Angel Oak.
No CMBS deals priced this week because of the annual CRE Finance Council conference, one of the biggest industry events, which took place in Miami from Sunday to Wednesday.
LATAM
The primary market for LatAm crossborder issuers looks to be taking a breather today after a busy Thursday that saw four issuers raise US$3.7bn.
The deals yesterday involved a string of top quality names from the region. From Mexico came El Puerto de Liverpool, a retailer that rarely accesses the dollar bond market, as well as frequent issuer Fibra Uno, a real-estate investment trust.
Liverpool's US$1bn two-tranche offering, which generated US$4.4bn in demand, will help it purchase a minority stake in US retailer Nordstrom.
Central American development bank Cabei also came with a US$1.5bn three-year sustainability-linked bond that saw order books reach US$4bn in size, while Argentine energy company Tecpetrol raised US$400m through an eight-year bond.
Elsewhere, Pluspetrol, an E&P company that has operations in various countries in Latin America, has approved a US$1bn bond program, according to a filing in Argentina.
In December, the company acquired key assets in the massive Vaca Muerta shale field in Argentina from Exxon, and a local analyst said that the company is expected to issue bonds to cover financing for that purchase.
EQUITIES
Bankers priced the first IPO of the year but brought few other offerings this week as several large investor conferences kept investors distracted and issuers sidelined.
Flowco staged an impressive NYSE debut on Thursday, rising nearly 24% in the first day of trading.
Overflowing investor demand enabled the oil field services firm to price its NYSE IPO of 17.8m shares at US$24.00, above the US$21-$23 marketing range, for proceeds of US$427.2m.
After opening at US$29 just after 1:00pm Thursday, the shares held on through the afternoon session before closing at US$29.70.
The order book closed nearly 20x covered, prompting the syndicate led by JP Morgan, Jefferies, Piper Sandler and Evercore to place 80% of the shares with long-only investors. Half the shares in the offering went to 10 institutional investors and 70% to the top 25.
While Flowco came at an attractive discount to comps, Venture Global’s much-anticipated US$2.3bn NYSE IPO is looking shakier ahead of pricing next week. There is widespread talk of investor pushback due to the LNG producer’s big premium to Cheniere Energy.
A banker close to the deal conceded Venture Global was seeking a big valuation, but said it was a new business that investors needed time to evaluate.
Management was confident about being able to price the IPO as planned next Thursday, January 23, the banker said.
Goldman Sachs, JP Morgan and Bank of America are leading the sale of 50m Venture Global shares at US$40-$46.
Monday’s federal holiday, doubling as the incoming Trump administration’s inauguration, means markets will be closed for business at the start of the week, though bankers remain hopeful that next week will bring greater ECM activity.
While few IPOs are on file and ready to launch, reports that the new administration is planning more than 100 executive orders on the first day and will provide greater certainty about its policy priorities could bolster confidence and bring more issuance.
Biotech issuance could accelerate following the JP Morgan Healthcare Conference, which closed Thursday afternoon and, in most years, provides a springboard to ECM activity in its wake.