JPMorgan Chase – U.S. CREDIT WEEK AHEAD: Telecom Giants Pour Billions Into 5G
Corporate credit investors are bracing for another busy week in primary markets after Verizon Communications Inc. sold the largest investment-grade bond of the year.
Wall Street syndicate desks are projecting as much as $40 billion in fresh supply next week after $53.5 billion was raised this week, surpassing forecasts that called for as much as $50 billion. Verizon, the largest U.S. wireless carrier, contributed $25 billion of that tally to help finance purchases of 5G airwaves.
The deal is the largest this year and ties Boeing Co. for the sixth largest high-grade debt sale on record. Book orders peaked at $109 billion, allowing the company to pay zero to seven basis points in new issue concessions after initially dangling premiums of 33 basis points to 38 basis points.
Verizon signed a $25 billion delayed-draw term loan in late February to support the acquisition of spectrum and rival AT&T Inc. entered a new term loan for $14.7 billion in February for similar purposes. Both facilities are expected to be largely repaid with new bonds once drawn.
Read more: Verizon, AT&T Spectrum Deals to Add Billions to Bond Pipeline
“I would expect them to capitalize on any momentum seen in their sector, so if Verizon received some enthusiasm for their deal, AT&T will likely follow suit,” said Scott Kimball, co-head of U.S. fixed income at BMO Global Asset Management.
Federal Reserve Chair Jerome Powell will likely reaffirm his no-tightening policy stance at the Fed policy meeting on Wednesday. Financial market mainstays from Guggenheim Investments to JPMorgan Chase & Co. are growing increasingly bullish on credit, brushing off worries over rising inflation and Treasury yields that have weighed on the asset class in recent months.
“Demand will be there but for specific credit stories and themes, like companies expected to benefit from reopening and anything that’s commodity-related,” said Matt Brill, head of U.S. investment-grade credit at Invesco Ltd. “It’s not going to be a blanket beta trade.”