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Primary markets may be astir this week as borrowers look to take advantage of a stable credit tone. The broader macro picture remains in focus as the Federal Reserve weighs unexpectedly higher inflation. Also, quarterly earnings from bulge-bracket banks begin rolling in Monday, a precursor to investment-grade issuance.
Set for Supply
Despite the fact that many companies remain in self-imposed earnings blackout periods, about $30 billion should still price in the U.S. high-grade market, according to an informal poll of primary dealers. That projection matches last week’s total, which exceeded expectations by about $10 billion.
Credit conditions have been supportive of borrowers looking to move forward. Investment-grade spreads have held within a single basis point band for the last two weeks, and the CDX index — a widely followed gauge of credit risk — kept relatively steady. Meanwhile, corporate-bond funds that invest in both high-grade and high-yield debt reported inflows in the week ended July 10, with $570 million in high grade and $619 million in high yield, according to Refinitiv’s Lipper U.S. Fund Flows data.
The high-yield and leveraged-loan markets will be watching a blockbuster debt offering from Sinclair Broadcast Group Inc., which wraps up lender meetings and is expected to sell $4.9 billion in bonds along with a $3.3 billion term loan and a $700 million incremental loan. The television broadcasting company will use the proceeds to finance the purchase of 21 regional sports networks from Walt Disney Co. If the bond sale meets expectations, it would be the largest junk offering in over three years, according to data compiled by Bloomberg. The loan market will also be watching how a number of deals get absorbed. Here are a few notable leveraged loans that have commitments due in the coming days:
- Nestle Skin Health $2.53 billion term loan; 970 million euro TL (due July 16)
- Ion Media Networks $1.37b term loan B (due July 17)
- Sinclair Broadcasting $3.3b, $700m TLs (due July 18)
- Pike $1.02b TL (due July 19)
The six biggest U.S. banks report their second-quarter results this week, kicked off by Citigroup Inc. on Monday. Many will be on the lookout for new debt deals to follow, as bank earnings are typically followed by issuance from the financial space. Some are wondering whether last week’s outpouring of bond sales from Japanese financials offered a taste of what we can expect from the domestic money centers. The three Japanese banks that moved forward last week — Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. — sold $13.75 billion, or just under 50% of the week’s total investment-grade supply.
Here’s the earnings calendar for the big six:
|Bank||Date and Time of Release|
|Citigroup||Monday 7/15, 8:00 a.m. EST|
|JPMorgan||Tuesday 7/16, 7:00 a.m. EST|
|Goldman Sachs||Tuesday 7/16, 7:30 a.m. EST|
|Wells Fargo||Tuesday 7/16, 8:00 a.m. EST|
|Bank of America||Wednesday 7/17, 6:45 a.m. EST|
|Morgan Stanley||Thursday 7/18, 7:30 a.m. EST|
The Macro Picture
Credit players will stay focused on macro markets, which have been thrown in many different directions in recent weeks. Late last week, higher-than-expected CPI and PPI reads did little to change investor sentiment toward the Federal Reserve’s next policy move. A cut remains priced in for the July 31 meeting. Equities, meanwhile, hit all-time highs, even as trade tensions and worries about global growth loomed in the background. While this week is expected to be lively in credit, any weak macro data could suppress activity.
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