High-grade financial supply active; Fairfax prints after rare re-launch; January deals build

By Cristal Cody

Tupelo, Miss., Dec. 8 – High-grade bond issuance remained strong over the week as the final days of 2023 near with more than $20 billion of notes sold.

Volume came in just over the $15 billion to $20 billion range expected by market participants for the week.

Several banks and financial names were in the mix, including Toronto-Dominion Bank, Wells Fargo Bank NA, Bank of Montreal, JPMorgan Chase Bank NA and Corebridge Financial Inc.

All the deals were seen pricing better than talk with a few widening in the secondary market but most trading better than issuance, sources reported.

One new issue priced at the start of the week was re-launched in a rare move as only the second issuer of the year to re-launch an investment-grade bond deal, an informed source said.

Fairfax Financial Holdings Ltd.’s $400 million of 6% senior notes due Dec. 7, 2033 (Baa2/BBB) that priced Monday was launched at a spread of Treasuries plus 175 basis points but then was re-launched and priced 10 bps wider at a Treasuries plus 185 bps spread, according to the market source.

The bonds remained 10 bps tighter than initial talk at the 195 bps over Treasuries area.

The Rule 144A and Regulation S deal priced at 99.252 and was trading on Friday better at a dollar price near 100.75.

Book demand in the offering from was strong at $700 million with the transaction 1.75 times oversubscribed and printing with a new issue concession of 12 bps, the source said.

“There’s only one other deal all year long that was relaunched,” the source said.

Black Hills Corp.’s $450 million offering of 6.15% senior notes due May 15, 2034 (Baa2/BBB+/BBB+) brought to the primary market on Sept. 6 were priced at a spread of 195 bps over Treasuries.

“It launched at T+190 bps and relaunched at T+195 bps,” the market source noted. “That was the only other time that’s happened in the year, so it’s very rare.”

Year to date, about $1.2 trillion of high-grade corporate bonds have priced.

Looking ahead to the next week, a few deals may come ahead of the Federal Reserve’s rate decision on Wednesday with the market likely done for the rest of the year after Tuesday, a source said.

One high-grade corporate preferred issuer already has “announced they’re not going to price this year and going to move their pricing into January,” a source said of an expected $25-par deal.

Short-term inflows resume

Inflows returned with short-term corporate investment-grade debt funds/ETFs reporting $633 million of flows over the past week ended Wednesday, following outflows of $325 million in the prior week, according to Refinitiv Lipper U.S. Fund Flows.

Outflows year to date total $25 billion.

Inflows into overall high-grade bond funds and ETFs, including corporates, agencies, mortgages and Treasuries, climbed to $1.24 billion over the same time period from a $190 million inflow a week earlier, according to a BofA Securities note released Friday.

High-grade funds saw their strongest inflow in 13 weeks with $1.83 billion of inflows in the week ended Wednesday after a $430 million outflow in the prior week.

ETFs, meanwhile, posted outflows for the first time in six weeks, BofA said. Outflows totaled $590 million over the past week following $610 million of inflows a week ago.

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