Midday Commentary: Investment-grade bonds flat on strong jobs report; Delmarva unchanged

By Cristal Cody

Tupelo, Miss., Nov. 8 - Investment-grade bonds traded mostly flat at the start of the session on Friday following a strong October jobs report, according to market sources.

The Labor Department said Friday that 204,000 jobs were added in October, above the 120,000 forecasted. The unemployment rate rose to 7.3% in October from 7.2% in September.

In the secondary market, Delmarva Power & Light Co.'s 3.5% first mortgage bonds due 2023, which were sold on Thursday, traded unchanged, a trader said.

"They're not going anywhere," the trader said.

The Markit CDX North American Investment Grade series 21 index ended Thursday 1 basis point wider at a spread of 74 bps.

Investment-grade spreads have been range-bound over the year, according to Barclays.

"U.S. corporate index spreads have been unable to move tighter than 130 [bps] in 2013, despite an ongoing rally in equities," Barclays analysts said in a note on Friday of the U.S. corporate index option-adjusted spread.

"With limited room to rally on general risk appetite and credit conditions, 130 [bps] may be near a floor for spreads unless the premium that investors have demanded for corporate bond risk since the 2008 financial crisis starts to decline."

Delmarva flat

Delmarva Power & Light's 3.5% first mortgage bonds due 2023 traded "wrapped around issuance" at 90 bps bid early Friday, according to a trader.

Delmarva Power & Light sold $300 million of the bonds (A3/A/A) with a spread of Treasuries plus 90 bps on Thursday.

The electric and natural gas utility is based in Wilmington, Del.

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