Midday Commentary: High-grade credit spreads hold tight; Morgan Stanley firms; Goldman flat

By Cristal Cody

Tupelo, Miss., April 17 - High-grade credit spreads remained tight early Thursday, while trading thinned in front of the short session and long holiday weekend, according to market sources.

"Volatility stayed modest for credit markets during the holiday-shortened week," Barclays analysts said in a morning note.

The Markit CDX North American Investment Grade series 22 index closed on Wednesday 1 basis point tighter at a spread of 68 bps.

"The biggest near-term risk for spreads is that a move higher in Treasury yields could cause a reversal of the recent in-flows," the Barclays analysts said. "While the major U.S. and European equity indices are flat to down for the year - driven in large part by emerging market concerns - investment-grade credit is 11 bps tighter year to date."

Financial paper was flat to modestly better in early trading, according to a market source.

Morgan Stanley & Co. Inc.'s 2.5% senior notes due 2019 firmed 1 bp after the company reported strong first-quarter earnings.

Goldman Sachs Group Inc.'s 4% senior notes due 2024 are wrapped around where the paper priced in February, a source said.

Morgan Stanley firms

Morgan Stanley's 2.5% notes due 2019 (Baa2/A-/A-) firmed 1 bp to 76 bps offered in early trading on Thursday, according to a market source.

Morgan Stanley sold $2 billion of the notes at a spread of Treasuries plus 95 bps on Jan. 21.

The financial services company is based in New York City.

Goldman unchanged

Goldman Sachs' 4% notes due 2024 were flat from the previous session at 136 bps offered in early trading on Thursday, a source said.

Goldman Sachs priced $3 billion of the 10-year notes (Baa1/A-/A) on Feb. 26 with a spread of 137.5 bps over Treasuries.

The financial services company is based in New York City.

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