High-grade credit spreads ease after rate hike; primary quiet; RBS, Comcast soften

By Cristal Cody

Tupelo, Miss., Dec. 19 – High-grade credit spreads widened on Wednesday following the Federal Reserve’s 0.25% rate hike for the Federal Funds target range to 2.25% to 2.5%.

The Markit CDX North American Investment Grade 31 index eased 4 basis points to a spread of 85 bps.

Treasury yields slipped and stocks also closed lower with the Nasdaq down 2.17% and the S&P 500 off 1.54%.

The Federal Reserve said in a press release that the labor market has been strong and economic activity has risen at a strong rate since the last Federal Open Market Committee monetary policy meeting in November.

“In determining the timing and size of future adjustments to the target range for the Federal Funds rate, the committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective,” the Federal Reserve said.

Otherwise, activity was mostly light as traders began to close books.

Although it’s a short note, Federal Home Loan Bank System announced on Wednesday that it priced $4 billion of six-month bonds linked to the Secured Overnight Financing Rate, a new benchmark that may be used to replace Libor. The notes due June 21, 2019 priced at SOFR plus 4 bps.

The offering is the third SOFR-linked floating-rate note transaction that FHLBank has priced in 2018.

“Our issuance fosters a broader acceptance of this new index and enhances our ability to provide reliable liquidity to our members,” John Gerli, chief capital markets officer of FHLBank’s office of finance, said in a news release.

In addition to the FHLBank issue, investment-grade issuers including the European Investment Bank, Fannie Mae, Wells Fargo Bank NA, Metropolitan Life Global Funding I and the International Bank for Reconstruction and Development have priced six transactions linked to the SOFR rate in 2018.

Other than FHLBank’s deal, the primary market has been quiet with no other reported issuers week to date.

Market sources report issuance is likely wrapped up for the year with several bond deals pushed to the 2019 calendar.

In the secondary market, General Mills, Inc.’s 4.2% senior notes due April 17, 2028 firmed 2 bps after the company reported better-than-expected fiscal 2019 second-quarter earnings on Wednesday.

Royal Bank of Scotland Group plc’s $1.75 billion of 5.076% fixed-to-floating rate senior notes due Jan. 27, 2030 eased 5 bps but have recovered some weakness from earlier in the month. The notes were quoted 75 bps wider than where the issue priced in September, about 15 bps tighter than where the notes traded on Dec. 6.

Comcast Corp.’s senior notes (A3/A-/A-) that priced as part of a $27 billion 12-part deal in October continue to be among the most active investment-grade issues traded in the secondary market, according to Trace data. The company’s 4.7% notes due Oct. 15, 2048 headed out about 2 bps weaker.

General Mills firms

General Mills’ 4.2% notes due April 17, 2028 tightened 2 bps to 167 bps bid in the secondary market, a source said on Wednesday.

General Mills sold $1.4 billion of the notes (Baa2/BBB) on April 3 at a spread of 145 bps over Treasuries as part of a $6.05 billion eight-part deal.

The maker of consumer food products is based in Minneapolis.

RBS notes ease

Royal Bank of Scotland Group’s 5.076% fixed-to-floating rate senior notes due Jan. 27, 2030 traded 5 bps wider on Wednesday at 275 bps bid, a source said.

The bank sold $1.75 billion of the notes (Baa2/BBB-/BBB+) on Sept. 24 at par to yield a Treasuries plus 200 bps spread.

The coupon will convert to a floating rate of Libor plus 190.5 bps on the Jan. 27, 2029 optional redemption date.

Royal Bank of Scotland Group is a banking and financial services company based in Edinburgh, Scotland.

Comcast softens

Comcast’s 4.7% notes due Oct. 15, 2048 eased 2 bps to 155 bps bid during the session, a market source said.

Comcast sold $4 billion of the 30-year bonds on Oct. 12 at a spread of 150 bps over Treasuries.

The media and technology company is based in Philadelphia.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.