[MORNING CALL:] M&A's Make Haste

$11.95bln later and ex-SSA issuance for the month of August has topped the average monthly estimate of $90bln, with $101.945bln on the books. It’s only the fourth time in the last 10 years that August issuance has topped the century mark. It also brought ex-SSA issuance for the year to $1.110.908bln, a 27.3% faster pace than last year at this time, topping the lowest annual estimate of $1.100.000bln.

Recently, some had expressed concern that we could see a slowdown in issuance as the “dog days of summer” kick in and the markets anxiously prepare for the upcoming presidential election, not to mention the upcoming FOMC rate decision meeting next month. However, others, for the same reasons, might want to push up their financing plans to avoid the volatility that is sure to ensue. And so far, they’ve been right.

Without question, Kroger’s $10.5bln 7-pt deal was the star of the show yesterday, accounting for 88% of the day’s haul, though it wasn’t the only deal of the day. Globe Life raised $450m, upsized from $300m, through a 10yr note offering, while Pricoa Global Funding sold $1bln via a 2-pt FA-backed deal. That brought ex-SSA issuance for the week to $19.15bln, just shy of the average weekly ex-SSA estimate of $19.5bln.

But ex-SSA issuance didn’t hog all the spotlight. Three SSA borrowers - European Investment Bank ($5bln), International Bank for Reconstruction and Development (6.5bln) and Development Bank of Japan ($600m) combined to add $12.1bln to the weekly overall (SSA-inclusive), which now stands at $31.25bln, just shy of the average weekly overall estimate of $35bln, with Asia Development Bank (5yr global notes) expected to add to that total today. That also brought overall issuance for the month to $118.045bln, enough to top all monthly estimates including the highest one of $115bln. Furthermore, overall issuance for the year stands at $1.393.158bln (26.2%), topping the lowest annual estimate of $1.350.000bln, and less than $27bln from the average annual estimate of $1.420.000bln, with a little more than four months remaining in 2024.

While the Kroger M&A-related deal, whose proceeds will go to fund the cash portion of its $24.6bln acquisition of Albertson, built an impressive book of $55bln at its peak, and contracted roughly 30bp from IPT/PX, it also had to pay a rather hefty premium for the privilege of being the sixth (tied with Meta Platforms) largest deal of any kind priced this year. On average, the deal priced with an average NIC of 9.3bp, The deal was the fourth M&A-related transaction of the week - Roper Technologies ($2bln), Flex Ltd ($500m) and Devon Energy ($2.25bln) – and the twenty-ninth of the year, raising $121.185bln, or 10.9% of ex-SSA issuance. Last year there were 32 M&A-related transactions which raised $128.4bln, or 10.62% of the year’s final tally.

Aside from the ADB deal, which was announced yesterday, there was no activity overnight in the high-grade primary market, but we do expect to see at least three potential borrowers tap the market today, one of which might have been a stand down from yesterday, as investors digest yesterday’s fare. As for what they will be facing, futures are indicating a positive open for the major indices. This after the Dow fell 61 points, while the S&P500 (-0.20%) and the Nasdaq (-0.33%) followed suit, ending their eight-day winning streak, as investors cautiously look ahead to the release of the minutes of the last FOMC meeting today and Fed Chair Powell’s speech at Jackson Hole on Friday.

There was a mixed reaction in the retail sector this morning after Target’s quarterly earnings beat on both the top and bottom lines, driving the stock up 15%, despite issuing a cautious sales outlook for the year, while Macy’s, while beating on the top line, missed on the bottom, sending the stock price down 8% in pre-market trading.

Treasuries were basically unchanged overnight, with the benchmark 10yr yield lower by 1bp to 3.81%, while the long bond (4.07%) and the 2yr note (3.99%) were unchanged to fractionally higher. Corporate spreads widened overnight by 1bp to where the average high grade bond is now trading 98bp over comparable Treasuries.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 08/19 WEEK, AUGUST & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 08/21 CALENDAR

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2024 HIGH GRADE ISSUANCE - 08/20 PRICINGS

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