The US Federal Reserve started its FOMC meeting on Tuesday, leaving US corporate bond primaries to reactivate, with FIGs at the forefront, while US stock markets took a breather after yesterday's tech-induced free fall.
At least five IG issues are expected to price today, including an offering from JP Morgan.
The US high-yield primary is also active today with at least two offerings sailing into the market, including Carnival and Vermillion Energy.
Meanwhile, markets have settled down after a raucous session on Monday that saw tech stocks hammered the most on news of a new Chinese AI competitor, DeepSeek, coming online that was developed for a fraction of the cost of current US projects, raising questions for investors.
"News over the weekend about a popular but inexpensive Chinese DeepSeek AI reversed the rally on the back of the 'Stargate' $500bn AI infrastructure project, announced last week," Bank of America Research said in a report late yesterday. The Nasdaq was down 3.1%.
"In terms of the last 24 hours, markets have experienced an aggressive selloff led by US tech, as there were growing questions about the sustainability of their valuations given DeepSeek’s new AI model," Deutsche Bank Research said in a report today.
US stocks opened mixed this morning with the Nasdaq higher.
Tuesday is a busy day for economic data releases, with some of the week's key reports out, particularly the December durable goods report at 08:30am New York time and then at 09:00am the S&P Global/Case-Shiller Home Price Indices.
The Fed begins its two-day FOMC meeting, which will conclude at 2:00pm on Wednesday, followed by a Fed rate announcement and a press conference held by Fed Chairman Jerome Powell. The CME's FedWatch Tool forecasts a 99.5% probability that the FOMC will leave the fed funds rate unchanged at 425bp-450bp.
Given the ructions in Monday's markets, US corporate bond primaries were subdued.
In the IG primary yesterday, just two offerings were priced totaling US$850m, pushing January IG volume to US$163.8bn, according to IFR data. The average new issue concession for the IG deals on Monday was not available and the average order book was 2.00x subscribed, according to the data. The average move from initial price thoughts to pricing was negative 20.23bp.
In the HY primary yesterday, one offering was priced totaling US$315m, raising January HY volume to US$8.645bn.
The average IG bond spread edged out by 1bp to 81bp on Monday and the HY bond spread widened by 6bp to 266bp, according to ICE BofA data. US yields across asset classes were mixed on Monday.
"IG index spreads widened 1bp during yesterday’s session headlined by an impressive equity market selloff on the back of DeepSeek news," BMO said.
"While some degree of widening is to be expected amid an equity decline on the magnitude of the one observed yesterday, underlying IG market metrics continued to suggest strength."
HIGH GRADE
There are at least five investment-grade bond deals coming to market on Tuesday, with the majority of the offerings originating from financial borrowers.
Aircraft lessor Aircastle is issuing a five-year senior unsecured note. Elsewhere, American Express is issuing a three-part senior unsecured bond.
Consumer lender Capital One Financial is looking to land an 11-year non-call 10 senior unsecured bond in a fixed-to-floating rate format.
Canadian bank Toronto-Dominion is in the market for three and seven-year fixed-rate senior unsecured notes, along with a three-year floater. And US money-center bank JP Morgan is issuing perpetual preferred stock, making it the second of the big US banks to bring a Tier 1 capital transaction.
LEVERAGE/HIGH YIELD
The pace of issuance in the primary market for junk bonds is picking up as some larger trades emerge from the pipeline.
On the pricing roster today is cruise operator Carnival, which is approaching investors with a US$2bn eight-year non-call three unsecured offering.
Proceeds will refinance its existing 10.375% senior priority notes due 2028.
Vermillion Energy is also readying pricing today on a US$400m eight-year non-call three senior unsecured note to refinance its existing 5.625% 2025s.
Elsewhere, building products manufacturer Quikrete Holdings is out with a US$6.2bn dual-tranche offering to help fund its US$11.5bn acquisition of Summit Materials.
Leads have set initial price thoughts in the high 6% area on a US$3.95bn seven-year non-call three secured offering.
A US$2.25bn unsecured eight-year non-call three bond is expected to come 50bp-75bp over the shorter-dated tranche. Pricing is expected on Friday.
STRUCTURED FINANCE
At least two asset-backed issues are expected to price today after a pair of offerings Monday raised over US$1bn.
Sunrun is poised to complete a US$628.5m solar securitization. Price guidance on the US$276.5m seven-year Single A rated tranche is US Treasuries plus 215bp-225bp.
Post Road is ready to seal its US$406.1m equipment deal. The US$226.1m Triple A class with a two-year tenor is assessed at 81bp-83bp over US Treasuries.
Another offering moving toward pricing is Enterprise's US$1bn auto fleet issue. Yesterday's guidance showed the US$321.7m Triple A three-year tranche at US Treasuries plus 70bp-72bp.
As for the CMBS market, more issuers are making their way to market. A joint venture between Simon Property and Institutional Mall Investors yesterday announced a US$1.2bn bond backed by a high-end shopping center it owns in Houston.
The CRE-CLO segment continues its fast start in 2025. FS Credit yesterday announced a US$890.2m offering for sale later this week.
LATAM
Latin American O&G producer GeoPark is expected to price a five-year non-call two senior unsecured bond today. Price thoughts are in the 9% area. Deutsche Bank, BTG Pactual and JP Morgan are the bookrunners.
Ambipar, a Brazilian environmental management company, has also announced a US$400–$500m offering of eight-year non-call four senior unsecured bonds. The bookrunners, Bank of America, Bradesco and UBS, have opened price thoughts in the 11% area. Pricing is also expected today.
EQUITIES
Smithfield Foods priced its Nasdaq IPO below range and downsized the offering for proceeds of US$521.7m, another disappointing outcome for the slowly recovering US IPO market.
Morgan Stanley, Bank of America, Goldman Sachs, Barclays and Citigroup priced the sale of 26.1m shares in the Virginia-based pork processor at US$20.00, below the US$23-$27m range.
In a late twist, Long Wan, the chairman of Smithfield’s parent WH Group, agreed to buy 3.2m shares in the offering for US$64m, a move WH said reflected his confidence in Smithfield’s future.
The offering was downsized from 34.8m shares at launch but still evenly split between primary shares sold by Smithfield and secondary shares offloaded by WH (13m each instead of 17.4m). WH will continue to own more than 90% of Smithfield but could sell more shares at a later date.
The books closed greater than 6x oversubscribed with the aid of long-only anchor demand, a banker on the deal said. The company and WH were heavily involved in the allocation process and placed 70% of the shares to the top 10 investors and 80% to the top 20.
Smithfield shares will begin trading on Nasdaq later on Tuesday under the symbol “SFD”.
Smithfield’s battle to get across the line follows last week’s difficult US$1.75bn debut of LNG exporter Venture Global, which closed Monday’s session at US$19.93 or more than 20% below its US$25.00 IPO price.
There are still five other IPOs left to price this week.
Diabetes pump maker Beta Bionics is up next with its already upsized Nasdaq IPO of up to US$170m pricing after the close on Wednesday.
Early on Tuesday and ahead of books closing at 4:00pm, Beta recast the terms as 10m shares at US$16-$17, up from 7.5m shares at US$14-$16 at launch last week.
Natural gas E&P Infinity Natural Resources (US$278m), BDC MSC Income Fund (US$75m) and biotechs Maze Therapeutics (US$132.6m) and Metsera (US$292m) are all pricing IPOs late Thursday.
Looking ahead to next week, Brussels-based Titan Cement International early Tuesday launched an up to US$432m NYSE IPO of its US construction materials unit, Titan America, for pricing on Thursday, February 6.
In a holdover from last week, Sunrise Realty Trust raised US$69m late Monday from a follow-on stock sale.
Raymond James, Keefe Bruyette & Woods and Oppenheimer & Co led the slightly upsized sale of 5.8m shares of the commercial lender at US$12, up from 5.5m shares and a 15% discount to the US$14.14 price at launch a week ago.
Rival biotechs Akero Therapeutics (US$300m) and 89Bio (US$250m) launched twin follow-ons late Monday that are being marketed through today’s session for pricing after the close.
Both look to capitalize on strong clinical trial results Akero reported yesterday from a Phase IIb trial of a promising liver disease drug, which caused its shares to nearly double on Monday, with 89Bio rising 26% on positive read-throughs.