Morning Commentary: High-grade spreads firm as primary heats up; Gilead, Walgreens improve

By Cristal Cody

Tupelo, Miss., Nov. 18 – High-grade credit spreads opened slightly tighter early Tuesday following the strongest secondary trading day of the year, market sources said.

The Markit CDX North American Investment Grade series 23 index closed on Monday 1 basis point wider at a spread of 66 bps.

“Credit spreads are wider yesterday despite the strongest secondary trading volumes for a Monday in 2014,” RBC Capital Markets, LLC analysts said in a note on Tuesday. “A robust new issue market hasn’t slowed the secondary market. Year to date, new issue volume totals continue to exceed last year’s pace as sustained stimulus from policy makers will continue the trend.”

More than $8 billion of U.S. investment-grade bonds priced on Monday.

Issuers including Entergy Louisiana LLC, Fluor Corp. and Johnson & Johnson plan to tap the market on Tuesday.

Final Trace count for secondary trading on Monday was $15.7 billion, a source said.

Gilead Sciences Inc.’s 3.5% notes due 2025 were quoted nearly 20 bps tighter than where the notes priced a week ago.

Walgreens Boots Alliance Inc.’s 3.3% notes due 2021 brought at the start of the month firmed in trading, a source said.

Gilead Sciences tightens

Gilead Sciences’ 3.5% notes due 2025 (A3/A-/) were quoted better at 96 bps offered, a market source said.

The company sold $1.75 billion of the notes on Nov. 12 at Treasuries plus 115 bps.

The biopharmaceutical company is based in Foster City, Calif.

Walgreens firms

Walgreens’ 3.3% notes due 2021 (Baa2/BBB/) tightened to 91 bps offered in secondary trading, according to a market source.

The company sold $1.25 billion of 3.3% notes due 2021 at 125 bps over Treasuries on Nov. 6.

Walgreens Booths Alliance is a wholly owned subsidiary of Deerfield, Ill.-based drugstore chain Walgreen Co.

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