The US investment-grade corporate bond primary expects just two offerings on Thursday as markets gyrate following economic data and some disappointing earnings reports.
The high-yield primary is planning at least two offerings including a laggard from yesterday's session. In the US ECM arena, IPOs priced yesterday saw good reception, with Loar and Rubrik pricing above range.
Meanwhile, economic data continue to call the tune, especially with the timing of rates cuts.
US economic growth slowed more than expected in the first quarter, but an acceleration in inflation suggested that the Federal Reserve would not cut interest rates before September, Reuters reported this morning. The probability for the central bank keeping the Fed funds rate at its current level for the June 12 and July 31 FOMC meetings increased this morning to 90.3% and 69.8%, respectively.
The 10-year US Treasury yield rose to to 4.7% after the data, its highest since November 2. Since then in the trading session the 10-year note yield has crossed 4.71%. US stocks opened sharply down in response to the data and to some poor earnings results overnight.
On Wednesday one IG offering was priced totaling US$2bn, lifting weekly IG issuance to US$12.5bn and April IG volume to US$92.78, according to IFR data.
The IG primary is expected to fall short of supply forecasts for at least US$20bn for this week. However, BMO said it sees that April will likely remain on track to reach estimates for US$100bn of supply, particularly with issuance next week expected to be front-loaded given an FOMC meeting on Wednesday.
In the HY primary two offerings were priced totaling US$1.1bn, while a third offering from Tenneco totaling US$364.5m did not cross the finish line.
"Thus far in 2024, a total of $110bn in high yield debt has come to market, the strongest supply in the high yield market through the year’s first four months since the exceptional 2021 with high yield supply running 78% ahead of last year’s pace," BMO said.
The average IG bond spread remained unchanged at 92bp on Wednesday and the HY bond spread edged in 1bp to 319bp, according to ICE BofA data.
HIGH GRADE
At least two deals are expected to price on Thursday in the investment-grade bond market, after one trade – a US$2bn fundraising from OCP – printed yesterday.
Today, GXO Logistics is out with an offering of five and 10-year senior unsecured notes, and Banco del Estado de Chile is marketing an Additional Tier 1 trade.
LEVERAGE/HIGH YIELD
The primary market for US high-yield bonds is expected to see at least two deals price today despite an unsteady backdrop for credit.
Tenneco is still readying pricing on a US$364.5m 5.5-year non-call life bond after releasing talk yesterday at a discount of 88.
RBC, Jefferies, TD and Deutsche Bank are leading the deal intended to offload some of the unsecured hung debt left over from Apollo’s acquisition of the automotive products company in 2022, according to CreditSights analysts.
Also on the pricing roster today is a US$1.325bn six-year non-call three offering from Brightline East, a high-speed train operator.
The deal is part of a larger refinancing package that also includes an investment-grade tax-exempt bond, subordinated municipal debt and preferred securities.
STRUCTURED FINANCE
The securitization primary will slow today after four asset-backed issuers raised over US$1.9bn yesterday.
The biggest ABS offering that priced on Wednesday was a US$1.1bn consumer loan securitization from OneMain. The US$803.6m Triple A rated class A note came in at Treasuries plus 140bp. It carried a weighted-average life of 7.56 years.
Another consumer ABS issue is slated to price by the end of the week. Buy-now-pay-later lender Affirm has been in the market with a US$602.8m offering. The largest tranche is a Triple A money market piece whose price guidance is 110bp-115bp over Treasuries.
In the CMBS sector, Great Wolf Resorts, which is jointly owned by Blackstone and Centerbridge, it out with a US$1.3bn deal to refinance nine water parks it operates. The US$687m Triple A note has guidance of 175bp area above SOFR.
LATAM
Banco del Estado de Chile is expected to price an offering of perpetual non-call five Additional Tier 1 notes today. Initial price thoughts are in the 8.25% area.
BNP Paribas, HSBC and JP Morgan are global coordinators on the transaction. Bank of America, Citigroup, Credit Agricole and Goldman Sachs are joint bookrunners.
Meanwhile, Antofagasta began investor calls today for a possible new benchmark dollar-denominated 10-year bond. The global coordinators are Citigroup and JP Morgan.
And Pan American Energy, through its Argentine unit, is expected to price today a benchmark US dollar bond offering. Citigroup, Itau, JP Morgan and Santander are the bookrunners.
The IDB is set to price today a £500m (US$623m) nine-year global bond at 40bp over mid-swaps.
LatAm sovereign five-year CDS were flat yesterday, according to Lucror Analytics.
EQUITIES
The US IPO market drew robust levels of support for at least two of the three deals that priced late Wednesday.
Aerospace parts maker Loar (US$308m) and cybersecurity software firm Rubrik (US$752m) each priced their NYSE IPOs above the range with massive levels of oversubscription.
The third deal from clearing/trading firm Marex (a US$292.3m Nasdaq IPO) met with price sensitivity but still priced within range.
A beneficiary of Boeing’s 737 aircraft delivery troubles, Loar sold 11m shares at US$28, two dollars above the US$24-$26 range.
Joint bookrunners Jefferies, Morgan Stanley and Moelis earlier closed the books more than 30-times oversubscribed.
The terms value Loar at a slight discount to comp TransDigm based on forward earnings but with more room to move versus another comp, Heico.
Loar shares will trade on NYSE later on Thursday under the symbol “LOAR”.
Marking this year's first software IPO, Rubrik opted to price its NYSE IPO of 23.5m shares at US$32, above the US$28-$31 range, for proceeds of US$752m.
The order book closed more than 20-times covered late Tuesday, prompting the syndicate led by Goldman Sachs, Barclays, Citigroup and Wells Fargo to increase the size of the offering slightly from 23m shares at launch.
Despite talk Rubrik might price the IPO even higher, the company’s ongoing losses at a time when investors are wary of investing in unprofitable companies may have called for a conservative approach.
Rubrik shares will debut on NYSE later on Thursday under the symbol “RBRK”.
Marex priced a full-sized Nasdaq IPO of 15.4m shares at US$19, the lower half of its US$18-$21 marketing range.
The outcome was consistent with earlier guidance from the Barclays and Goldman Sachs-led syndicate that the clearing firm and market maker’s IPO of 15.38m shares was oversubscribed with price sensitivity around the middle of the range.
Ion Investment, an acquisitive financial technology company, agreed upfront to buy US$50m of the offering.
Marex shares will begin trading on Nasdaq later on Thursday under the symbol “MRX”.