Morning Commentary: PepsiCo firms; General Motors stronger; IG CDX better on week

By Cristal Cody

Tupelo, Miss., Feb. 23 – High-grade corporate bonds traded mostly better ahead of expected supply later on Tuesday.

PepsiCo Inc.’s new 2.85% senior notes due 2026 were quoted 7 basis points tighter in the secondary market.

General Motors Co.’s senior notes (Ba1/BBB-/BBB-) brought on Thursday traded about 5 bps better.

“Both IG and HY spreads have reversed course and tightened given the rally in equities and bump in oil prices above $33,” RBC Capital Markets LLC analysts said in a note on Tuesday. “On a 12 month basis, spreads remain elevated.”

The Markit CDX North American Investment Grade index opened the day mostly unchanged at a spread of 113 bps.

The high-grade CDX is 8.6 bps tighter from a week ago, according to a Barclays report on Tuesday. The index has ranged from a low of 60.7 bps to a high of 124.4 bps over the past 12 months, Barclays said.

Over the morning, the three-month Libor yield was unchanged at 62 bps.

On Monday, $16.65 billion of high-grade issues were traded, according to Trace.

PepsiCo notes tighten

PepsiCo’s 2.85% notes due 2026 firmed 7 bps to 104 bps offered in secondary trading, a market source said.

The company sold $750 million of the 10-year notes (A1/A/A) at 110 bps over Treasuries on Friday as part of a $2.5 billion four-tranche sale.

PepsiCo is a Purchase, N.Y.-based global food and beverage company.

General Motors stronger

General Motors’ 6.6% notes due 2036 traded about 5 bps tighter at 382 bps offered early Tuesday, according to a market source.

The company sold $1.25 billion of the bonds on Thursday at 400 bps over Treasuries.

General Motors’ tranche of 6.75% notes due 2046 brought in Thursday’s offering firmed about 5 bps to 393 bps offered.

General Motors priced $750 million of the 30-year bonds at Treasuries plus 415 bps,

The automaker is based in Detroit.

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