The first half of the year ended on Tuesday, with records set in the high-grade and high-yield primaries.

June supply in HY ended on Tuesday with four deals, which contributed to a monthly record of US$59.78bn.

Six IG deals priced yesterday totaling US$3.95bn and pushing weekly supply to US$16.45bn, according to IFR.

Monthly IG volume reached US$172.171bn, according to IFR data, becoming the busiest June ever. It also ranked sixth in all-time monthly volume, joining March, April and May in setting IG monthly issuance records this year.

The volume for the second quarter of 2020 also set a record for IG issuance, surpassing the title held by Q1 of this year. And year-to-date volume now stands at US$1.199trn, nearing the IG issuance record set in 2017 of US$1.333trn.

HIGH GRADE

The US high-grade bond market is starting the July 4th weekend early, with just one high-grade offering on Wednesday, and that is from a LatAm issuer - Raizen.

The asset class has been on a tear through the first half of the year pricing US$1.199trn through June and breaking all kinds of weekly, monthly, and quarterly records along the way.

Now the market looks forward to a summer slow down.

"July tends to be a slower summer month in the primary markets on the July 4th holiday and given that issuers are in earnings-related blackouts in the first part of the month," Bank of America noted in a report.

"However, issuance should be especially light this July following the significant frontloading in 1H20 while the revolver term-out trade is mostly done as well."

Bank of America research expects volumes to be reduced by more than 50% to some US$40bn-US$60bn of gross supply for the month.

And at least three syndicate desks told IFR that they are predicting a more moderate slow down to US$90bn-US$100bn in July.

HIGH YIELD

Four issuers raised US$2.855bn on Tuesday, taking June supply to a record breaking monthly total of US$59.78bn, according to IFR data.

That supply is easing off as the July 4 holiday approaches.

Forterra Finance, a manufacturer of water and drainage pipe and products, and construction material producer New Enterprise Stone & Lime are both expected to price new offerings on Wednesday.

Forterra is offering a US$400m five-year non-call two senior secured while New Enterprise is offering a US$200m eight-year non-call three unsecured.

With no new announcements on Wednesday the pricing of those two deals will clear the primary pipeline for the time being, ahead of the long weekend.

Average spreads on ICE BofA's high-yield index tightened 8bp to 644bp over Treasuries on Tuesday. The index is broadly flat so far in early trading Wednesday.

STRUCTURED FINANCE

Primary activity in the US structured finance market will lighten on Wednesday as bankers look to mop up the few remaining deals ahead of a three-day US holiday weekend.

Citigroup, Chimera Investment and Invictus Capital have been shopping their latest private-label residential mortgage-backed securitizations.

On Tuesday, four RMBS issues, totaling US$1.72bn, priced to solid investor demand.

Freddie Mac priced its first single-family credit risk transfer offering since the first quarter, STACR 2020-DNA3.

Fund managers have been buying RMBS on signs of an improving jobs and housing markets, and data showing the level of mortgages in forbearance is tapering off.

Meanwhile, the asset-backed securities market wrapped up its strongest quarter in more than 11 years as spreads largely recovered from their dramatic March widening that was stoked by to fears about the Covid-19 pandemic.

The US$1.6trn sector produced 3.54% total return from April to June, marking its biggest quarterly return since a 6.3% gain in the third quarter of 2009, according to an index compiled by Bloomberg and Barclays.

ABS issuance totaled US$36.31bn in the second quarter, down 47% from the same quarter in 2019, IFR data showed. nL1N2E709E

LATAM

Issuance from LatAm borrowers continues on Wednesday as one Brazilian issuer prepares to issue debt in the primary.

One of Brazil's largest energy company's, Raizen Energia, is reopening its 5.30% 2027 note, looking to add about US$200m.

Leads BNP Paribas, Citigroup, JP Morgan, MUFG, Scotiabank, Bradesco, and Santander have set initial price thoughts at high 4% area.

Proceeds of the new transaction will go toward general corporate purposes. The deal has expected ratings of BBB-/BBB.

Raizen's deal marks the third bond to be sold this week so far.

On Tuesday, Brazilian railroad operator Rumo and Peruvian financial Interbank, both sold a combined US$800m in the primary market.

EQUITIES

Investors are being selective in the US IPO market at the mid-year break.

Finishing the quarter on high note, revitalized business data analytics firm Dun & Bradstreet is returning to public markets in style, raising US$1.72bn last night after upsizing its NYSE IPO and pricing the deal above range.

A syndicate of banks led by Goldman Sachs and Bank of America placed 78.3m at US$22.00 apiece, above the US$19-$21 range marketed on deal originally sized at 65.75m shares.

Financial backers led by the Bill Foley-led Cannae Holdings, Black Knight and Chinh Chu’s CC Capital simultaneously invested an additional US$400m combined. Along with PE firm Thomas H. Lee, those backers took D&B private in leveraged buyout in February 2019.

The increased offering size accelerates planned debt reduction, one of the investment thesis of the IPO. D&B’s net leverage drops to 4.4-times Ebitda on the base number of shares sold and to 4.2-times Ebitda if the underwriters exercise their greenshoe option.

D&B will resume trading on NYSE this morning under the ticker “DNB”.

Lemonade, a provider of online home insurance, is headed for a strong outcome for its IPO later tonight after hiking the valuation on its IPO this morning, ahead of pricing after the market close.

Goldman Sachs, Morgan Stanley, Allen and Barclays kept the offering size at 11m new shares but increased the marketing range to US$26-$28, a significant move from US$23-$26 at launch.

Even so, the IPO valuation is a steep discount to the US$42.21 per share valuation the company fetched on a US$300m Series D private round last year.

Health benefits platform Accolade also seems in solid shape for an up to US$183m IPO later tonight.

Goldman Sachs, Morgan Stanley and Bank of America are well oversubscribed on the 8.75m shares being marketed at US$19-$21 apiece.

On the follow-on front, there continues to be no shortage of demand for healthcare and biotech deals.

Medical equipment supplier AdaptHealth raised US$124m of equity funding for recent acquisitions.

Biotechs Acceleron Pharma (US$450m), Chiasma (US$70m) and CRISPR Therapeutics (US$450m) also raised new funding on stock sales that were all upsized.

Proving the pandemic recap cycle is not entirely over, restaurant chain Denny’s, home of the “Grand Slam” breakfast, finally joined other restaurant stocks in raising equity.

Wells Fargo, Citizens Capital Markets and Regions Securities placed 8m shares at US$9.15, the bottom of the US$9.15-$9.60 overnight marketing range and a 9.4% discount to last sale though more than double the US$4.50 low on March 18.



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