High grade issuance fell short of expectations in a holiday shortened week that opened on shaky footing following a weekend of headlines.
While sentiment steadied as the week progressed, activity remained back-loaded, with the bulk of supply pricing in the second half of the week. In total, 19 borrowers raised $24.15bln across 32 tranches, including the first Friday deal of the year, though volume ultimately failed to clear the average estimate in our weekly poll. Huntington Bancshares priced a $1.75bln two-part offering on Friday, but the late addition was not enough to materially lift weekly totals.
Issuance was heavily concentrated in financials, with 17 of the week’s 19 deals coming from the sector and accounting for roughly 92% of total supply.
Regional banks led activity, pricing six deals over the course of the week. PNC set the tone with a $3bln three-part transaction, followed by US Bancorp’s $2.25bln two-part deal on Wednesday. KeyBank also accessed the market with a $750m 11nc10 offering, all of which saw strong execution. That momentum carried into Thursday, when Truist raised $2.85bln across three tranches and Citizens followed with a $1.15bln two-part deal. Huntington Bancshares rounded out regional bank issuance on Friday, marking the first Friday print of the year. Collectively, the group achieved 4.7x oversubscription, highlighting continued investor demand for new issue bank debt.
Business development companies also featured during the week, though deal sizes were more modest.
Five issuers raised a combined $2.35bln, including offerings from Blue Owl Technology Finance Corp, Goldman Sachs BDC, Golub Capital Private Credit Fund, Bain Capital Specialty Finance, and Ares Strategic Income Fund. Demand for the group was solid, with average oversubscription of 4.3x.
Overall demand metrics remained supportive. Deals were 4.89x oversubscribed on average, exceeding the 4.39x year to date average, while borrowers paid just 0.28bp in new issue concessions. As was the case last week, the majority of this week’s new issues were trading tighter in the secondary market by Friday morning, with the average tranche 1.8bp tighter.
Away from credit, the macro backdrop quieted considerably toward the end of the week after a volatile start. Major equity indices finished mixed, with the Dow falling 0.58%, while the S&P edged up 0.03% and the Nasdaq added 0.28%. Attention now turns to next week’s big tech earnings, with equity market performance likely to hinge on those results.
The Federal Reserve’s policy meeting will also be in focus, though expectations are for a relatively uneventful outcome. Fed Funds futures are pricing just a 2.8% probability of a rate cut, and no dot plot updates are scheduled. The key watch will be whether Governors Waller or Bowman dissent in favor of cuts, which could offer insight into the rate path in the absence of updated projections.
Looking ahead, issuance is expected to broaden beyond financials as more companies emerge from earnings blackout periods. Several large cap technology firms are set to report next week, and borrowers are also likely to return to a more front-loaded issuance pattern as they look to get ahead of the Federal Reserve’s policy meeting on Wednesday. Syndicate desks are forecasting $26bln of supply on average next week, with estimates ranging from $20bln to $36bln.