14th May 2025

Taking advantage of the softer-than-expected inflationary data and an abrupt drop in credit spreads (+97bp), seven high-grade corporate borrowers tapped the market yesterday adding $6.6bln to Monday’s $18.85bln, bringing ex-SSA issuance for the week to $25.45bln, just below the lowest weekly estimate of $27.5bln. The average weekly estimate is calling for $35bln to cross the tape this week, and we should be able t get closer to the average today where, despite another inflationary data point – April PPI (0.2% m-o-m, 2.5% y-o-y) – we fully expect the parade of high-grade issuance to continue.

As matter of fact, there is already one deal on today’s docket. Announced overnight, Woodside Finance Ltd is marketing a 4-pt offering of 3s, 5s, 7s and 10yr notes. And we’ve been told to expect at least six more to join them, post data release. One will be Societe Generale who chose not to wait, announcing a 3-pt offering of 4nc3 F-T-Fs and/or FRNs and 6nc5 F-T-Fs.

Included in yesterday’s haul was the twenty-second M&A-related transaction of the year. Capital Power raised $1.2bln via a 2-pt offering to help fund its $2.2bln acquisition of two power plants from LS Power Equity Advisors. That brings the total raised through M&A-related transactions to $83.45bln (11.4%) for the year.

But the largest deal of the day belonged to triple-A rated National Securities Clearing Corp who raised $1.75bln through a 3-pt offering. Though the deal drew only $3.5bln in investor interest (2.05x covered), it did priced with an average NIC of +1bp. Combined, the seven deals contracted an average of 26.8bp; were 3.59x covered; and price with an average NIC of 1bp.

We also saw our first SSA offering of the month yesterday when Tennessee Valley Authority raised $1.5bln via a 10yr note offering. We’’l add to that

Another reason we’re expecting another full boat today is the continued tightening of credit spreads, not to mention a calming in the Treasury market. Whereas the benchmark 10yr note has seen its yield jump 11bp this week, for the first time in four days, yields edged lower overnight. After closing at 4.49% last night, the benchmark 10yr note yield fell 3bp overnight to 4.46%, while the long bond yield fell 4bp to 4.90%.

As for the 2yr note, the most susceptible to the vagaries of underlying interest rates, it saw its yield fall 2bp overnight to 4.00%. As previously mentioned, corporate spreads continue to tighten, to where the average high-grade bond is now trading 94bp over comparable Treasuries, tighter by 12bp on the week and 27bp from a month ago.

The softer CPI data had traders in the Fed Funds futures market pushing back their timetable for the Fed to start cutting interest rates. The odds of a rate cut next month fell from 30.55 last week to just 8.3%, while July’s chances fell from 56.7% last week to 34.2%. Now it looks like the best odds (51.3%) of a rate cut isn’t until September.

As for market conditions in the stock market this morning, as investors wait for, not only the PPI data release, but April’s advance retail sales number (0.0%), futures are indicating a fairly mooted, but positive open for the three major indices. This after the Dow, the only index to close in the red, closed 270 points lower, dragged down by UnitedHealth (-14%) after the company suspended its annual forecast and announced the stepping down of its CEO.

On the other hand, the S&P500 (+0.72%) and the Nasdaq (+1.61%) continued to forge higher on news that Nvidia will be selling AI chips to Saudi Arabia and Amazon’s intention to invest $5bln in Saudi Arabia’s AI initiative. As a matter of fact, the S&P500 erased all of this year’s prior losses, turning positive for the year.

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2025 HIGH GRADE ISSUANCE - 05/12 WEEK, MAY & 2025 ESTIMATES

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2025 HIGH GRADE ISSUANCE - RECENT MANDATES

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2025 HIGH GRADE ISSUANCE - 5/14 CALENDAR

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2025 HIGH GRADE ISSUANCE - 5/13 PRICINGS

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