The US investment-grade primary is back in action on Tuesday, with more FIG bonds for sale after the MLK holiday and the US presidential inauguration yesterday.
Three IG issues are expected to price today, including an offering from Goldman Sachs. The high-yield corporate primary is quiet today.
In the structured finance primary, at least US$5bn of asset-backed supply is expected this week following the prior week's US$13bn of offerings. The auto sector will continue to drive primary activity.
US ECM syndicate desks are off to their slowest January in memory, although they did manage to price the year's first IPO last Thursday.
The crush from tariff news did not occur on Monday as President Donald Trump took office and signed a slew of executive orders.
"The first round of tariff-focused announcements from the second Trump administration avoided the worst of potential outcomes, which has provided a stable backdrop to credit markets to open the week, with spreads unchanged or modestly narrower in early trading," BMO said said in a report today.
This morning US Treasury yields are lower, with the benchmark 10-year yield dipping to 4.56%, well below its highs of last week. US stocks opened sharply higher, in part responding to news related to executive orders on deregulation and energy developments.
The US economic data releases this week are not expected to be as jarring as those released in the previous two weeks, but they will still command some attention, especially on Friday. Today the calendar carries just one report, the Philadelphia Fed's Nonmanufacturing Business Outlook Survey. Given that the FOMC meeting is next week, no Fed speakers are scheduled as the quiet period begins.
The IG primary saw action on Friday, when Bank of America, the last of the big US banks, came to market with a US$10bn offering, lifting weekly IG issuance to US$58.45bn, beating expectations of about US$40bn for the week, and pushing January volume to US$138.7bn, according to IFR Data. The average new issue concession for IG deals last week was 1.92bp and the average order book was 3.41x subscribed, according to the data. The average move from initial price thoughts to pricing on IG deals last week was 26.33bp tighter.
For the week ahead, syndicate desks are projecting a significant slowdown in the pace of IG supply, with consensus expectations for approximately US$23bn-$24bn, BMO said.
"That projection is appreciably above the historical average for the week following post-earnings bank supply, which has seen an average of $17bn since 2016," BMO said.
In the HY primary last week, US$3.825bn was sold, lifting January issuance to US$7.125bn.
The average IG bond spread was 82bp in the last US market session and the HY bond spread was 264bp, according to ICE BofA data. US yields across asset classes were unchanged in the last market session.
"High grade spreads narrowed 1-2bp last week ahead of the pivotal first week of President Trump’s second term which will finally give the market some insight into the prioritization of his policies upon taking office," BMO said. "The potential for headlines at any given time, particularly in the week ahead, is one that seemingly lends itself to volatility, which is typically not a friend of credit spreads."
Separately, in 2024 total US corporate market average daily notional volume grew for the third year in a row and set a record for the second year in a row, reaching US$46bn, a 21% year-over-year jump, according to Greenwich MarketView.
Also, secondary market activity is growing faster. In 2021, the equivalent of 0.33% of bonds outstanding traded each day and in 2024, turnover grew to 0.44%, Greenwich said.
HIGH GRADE
The US investment-grade bond market is drawing at least three bond offerings on Tuesday, all from bank borrowers.
Goldman Sachs is taking a second bite out of the US bond market this year after issuing US$1.9bn of perpetual preferred stock last Thursday. The US investment bank is selling a four-part senior unsecured note, including a rare long-dated 31-year non-call tranche.
Royal Bank of Canada is also selling a four-part senior unsecured note, comprising four-year non-call three and six-year non-call five tranches in both floating and fixed-to-floating structures.
Bank of New Zealand is issuing a US$500m 10-year non-call five Tier 2 note. Leads set IPTs for the 144a/Reg S transaction at Treasuries plus 150bp area.
LEVERAGE/HIGH YIELD
The primary market for US junk bonds is off to a relatively active start after two borrowers announced deals today.
Ardonagh is the first out of the gates on Tuesday with a couple of add-ons to refinance debt.
The UK-based insurance broker is tapping its 7.75% senior secured 2031s and its 8.875% senior 2032s for US$250m each.
Last week, those bonds were respectively trading at dollar prices of 103.50 and 103.803 for yields of 6.756% and 7.768%, according to MarketAxess data.
Proceeds will be used to prepay certain amounts drawn under a private term loan facility. Pricing is expected later today.
Casino operator Rivers Enterprise has started marketing a US$600m eight-year non-call three secured note.
Proceeds are going to refinance debt. Roadshows will continue through Thursday.
STRUCTURED FINANCE
At least US$5bn of asset-backed supply is lined up for sale this week following last week's sizzling US$13bn of new securities, which were met with enthusiastic demand.
The auto sector will continue to drive primary activity. The prime loan segment will be active, with Toyota's US$1.39bn offering and World Omni's US$970.4m deal. The sub-prime category will be lively given Exeter's US$1bn trade and Bridgecrest's US$503.2m issue.
Bank of Nova Scotia this morning released price guidance on its US$150m auto credit risk transfer deal. The US$93.75m Aa1 tranche with a 1.49-year weighted-average life is assessed at US Treasuries plus 95bp-100bp.
In addition to fresh auto paper, Stonebriar is in the market with a US$906.6m equipment securitization, while Island Finance is ready to complete its first consumer loan deal, which is expected to raise US$292.5m.
Meanwhile, the CMBS primary is slated to resume after pausing last week due to the annual CRE Finance Council conference in Miami. Stockbridge Capital is marketing a US$270m two-year floating-rate SASB offering to refinance two office buildings leased to online gaming platform operator Roblox.
As for the RMBS market, more non-QM issuers are preparing to tap the sector for funding. Hildene and Angel Oak are in the market with a US$515.3m deal and a US$342m offering, respectively.
LATAM
LatAm borrowers are preparing roll out more crossborder bonds in coming days after an already active start to the year.
ATP Tower Holdings has kicked off marketing for a US dollar senior secured bond as the Latin American telecom infrastructure company looks to fund a tender for its 4.05% 2026s.
Arcos Dorados, the franchisee for McDonald's in Latin America, is also preparing a new bond issue to fund a tender for its outstanding 5.875% 2027s, according to an SEC filing.
The company is offering to buy back about US$386m of outstanding 2027s at par. On Friday, the 2027s changed hands at a dollar price of 99.783, according to MarketAxess data.
The deal announcement comes after Fitch upgraded the credit to BBB- from BB+ last week. Moody's, meanwhile, has assigned a Ba1 rating to the new bond issue.
EQUITIES
Smithfield Foods early Tuesday launched a Nasdaq IPO of up to US$939.6m to enable its Chinese parent, WH Group, to cut its stake and fund capex.
A nine-firm syndicate led by Morgan Stanley, Bank of America and Goldman Sachs expects to price the sale of 34.8m shares at US$23-$27 after the market closes on Monday, January 27.
WH is selling half of the shares in the offering (17.2m shares) to cut its stake to about 91.2%, while Smithfield is selling the balance to fund capital investments in infrastructure, automation and capacity expansion.
The terms value the pork processor at up to US$12bn including debt or about 8.7x its 2024 adjusted Ebitda of up to US$1.38bn per preliminary estimates in Smithfield’s filing.
Two other IPOs launched early Tuesday as US ECM syndicate desks look to step up the pace of activity in a window that runs through to the financial "staleness" deadline on February 14 (when IPO aspirants must update their financials to include fourth-quarter 2024 numbers).
Hong Kong-listed Ascentage Pharma is undertaking three days of marketing to price a US$149m Nasdaq IPO.
JP Morgan and Citigroup are leading the sale of 7.3m ADSs for pricing late Thursday, January 23. Each ADS represents four HKEx shares currently trading at HK$39.60.
Ascentage is using the money to help fund US trials for a leukemia drug already approved in China.
The drug registered sales of US$125m in the nine months ended September 30 and is currently undergoing a Phase III trial in the US, Australia and Canada under FDA guidelines, with results expected in 2026.
Infinity Natural Resources launched the sale of 13.3m shares at US$18-$21 for proceeds of up to US$279.3m.
A syndicate led by Citigroup, Raymond James and RBC Capital Markets expects to price the Appalachian Basin-focused E&P after the market closes on Thursday, January 30.
This week’s biggest ECM event is the up to US$2.3bn NYSE IPO of LNG project developer Venture Global, though the offering is facing investor pushback on valuation grounds ahead of pricing late Thursday.
Goldman Sachs, JP Morgan and Bank of America are marketing 50m shares of the LNG supplier at US$40-$46 each, but remained tight-lipped about the status of the offering.
Even though Venture Global is the largest energy IPO attempted in a decade, there are reports of strong pushback from the buyside on the US$100bn-plus valuation target.