Midday Commentary: Investment-grade spreads firm; Time Warner Cable rallies; telecom tightens

By Cristal Cody

Tupelo, Miss., Dec. 16 - Investment-grade credit spreads opened about 2 basis points tighter on Monday with light activity in the early session ahead of the Federal Reserve's midweek policy meeting, according to market sources.

The Markit CDX North American Investment Grade series 21 index closed unchanged on Friday at a spread of 70 bps.

Market sources anticipate the Federal Reserve may announce tapering of its quantitative easing stimulus program following the two-day meeting that ends on Wednesday.

In the high-grade secondary market on Monday, Time Warner Cable Inc.'s bonds tightened about 25 bps to unwind most of the weakness seen a week ago, a trader said.

"They rallied in pretty hard toward the end of the week," the trader said.

AT&T Inc.'s 2.35% notes due 2018 traded nearly 10 bps better from the previous week and 17 bps tighter than where the notes priced in November, according to a trader.

Verizon Communications Inc.'s 5.15% notes due 2023 also tightened.

"Toward the end of the week, [the technology, media and telecommunications sector] rallied a couple of basis points, but there's not a lot of activity today so far," the trader said.

Time Warner Cable tightens

Time Warner Cable's bonds continue to be volatile on reports the company may be up for grabs in a takeover by Comcast Corp. or Charter Communications Inc., sources said.

Time Warner Cable's 4% notes due 2021 (Baa2/BBB/BBB) firmed to 245 bps bid, 235 bps offered, a trader said early Monday.

The notes were quoted a week ago on Dec. 9 at 270 bps bid, 260 bps offered.

Time Warner Cable sold $1 billion of the notes on Sept. 7, 2011 at a spread of 210 bps over Treasuries.

The broadband communications company is based in New York City.

AT&T firms

In the telecom sector, AT&T's 2.35% notes due 2018 tightened to 83 bps bid, 78 bps offered in early trading on Monday, according to a trader.

The issue traded on Dec. 10 at 92 bps bid, 89 bps offered.

AT&T sold $1.6 billion of the five-year notes with a spread of 100 bps over Treasuries on Nov. 20.

The telecommunications company is based in Dallas.

Verizon better

In other telecom market activity, Verizon's 5.15% notes due 2023 (Baa1/BBB+/A-) firmed to 142 bps bid, 139 bps offered, a trader said.

Verizon sold $11 billion of the 10-year notes with a spread of Treasuries plus 225 bps on Sept. 11 as part of the company's record $49 billion eight-part bond offering.

The telecommunications company is based in New York City.

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