…For The Road. Usually that means a long night but deal pricing activity this Friday was quick and easy. Just one $300m deal from Deere Funding Canada priced on Friday to take an already over-the-top weekly tally to $53.45bln, way above the highest estimates of $31bln.
Deere Funding Canada’s 5yr note offering went straight to launch, tightened 12.5bp from IPTs to pricing and drew $900m of orders, good for 3x coverage. The borrower paid 9bp in new issue concessions to get the deal across the line, fitting with the broader theme of higher concessions across the week.
The week’s main event came Tuesday, when Amazon returned with a surprise $25bln eight-part offering just months after its $37bln March deal.
The transaction anchored a $32.2bln session across six borrowers and pushed weekly issuance well beyond expectations, though the response was more measured than Amazon’s prior trip to market. Books peaked near $62bln, compared with $125bln in March, while the new bonds priced 20bp-25bp inside IPTs and carried roughly 13bp-19bp of new issue concession.
That was not a failed reception, but it did show investors are asking to be paid for size, frequency and AI-related funding needs. “Investors have been calling for more spread compensation for a few weeks. They are clearly over the tech stuff and it has been a big drag on their performance,” said one senior syndicate banker. The market remains open for large deals, but this week made clear that pricing needs to reflect how much supply investors are being asked to absorb.
The rest of the week had plenty of depth...
Monday opened with $13.7bln across eight borrowers, including five Yankees, led by Banque Federative du Credit Mutuel’s $3.25bln three-part transaction and American Honda Finance’s $1.8bln three-part deal. Away from Amazon on Tuesday, Prosus raised $1.65bln, RBC added $2.3bln, and US Steel and Sunbelt Rentals each raised $1.2bln after completing investor calls.
Wednesday slowed to one deal as geopolitics moved back into focus, with Accenture Capital raising $5bln across five tranches on $19bln of demand. Thursday then brought $2.25bln across Intercorp Peru, Public Storage, Guardian Life Global Funding and Protective Life Global Funding, before Deere Funding Canada added Friday’s final $300m.
Execution was still constructive, but not as easy as earlier in the year. Deals tightened 26.4bp on average from IPTs to pricing, just shy of the 28.3bp first-half average. Book coverage averaged 3.17x, below the 4.02x first-half average, while new issue concessions averaged 7bp, well above the 2.51bp first-half average. In other words, demand is still there, but borrowers are paying more for it.
Away from credit, markets spent most of Friday’s session deadlocked by a lack of news flow on both domestic and foreign fronts. Next week is full of event risk and traders were content to step back.
Oil prices edged lower for a second day, prompting a firm bid in equities and Treasuries. Markets appear to have concluded that Iran is running out of leverage to influence events in the Middle East as the US continues its economic and logistical pressure campaign.
CPI (Tues) and retail sales (Thurs) reports will feature next week, following the kickoff of Q2 corporate earnings season early Tuesday.
Pricing of interest rate policy remains hawkishly biased, but expected soft inflation and sales data have the potential to mitigate that outlook.
Next week brings another major wild card for the primary market as the big six banks begin reporting earnings Tuesday. Any self-led issuance that follows could shape the week’s total, with syndicate desks calling for $38bln on average in new supply. We do not officially track self-led estimates, but the few desks that provided them pointed to a $20-25bln range.
