Primary quiet ahead of Thanksgiving holiday; Verizon, Goldman Sachs better in secondary

By Aleesia Forni and Cristal Cody

Virginia Beach, Nov. 26 – The investment-grade bond market was quiet to close out the week on Wednesday ahead of the Thanksgiving holiday.

In total, the primary market absorbed $10.5 billion of new issuance this week, falling in line with what sources had expected to be a $10 billion to $15 billion week.

Wednesday’s session also wrapped up a frenzied month of new issuance for the investment-grade primary market, with more than $110 billion of new issuance pricing in November.

Even with the onslaught of issuance the market has seen in recent weeks, momentum is expected to carry over into the week ahead.

Sources are calling for around $25 billion to $30 billion of supply for the opening month of December.

The final month of 2014 is expected to be “very active,” one source noted, adding that December could see up to $60 billion of new issuance.

Although U.S. investment-grade bond market activity stayed fairly quiet on Wednesday, two Canadian companies brought C$1.1 billion of issuance over the day, according to informed sources.

Montreal-based Metro Inc. sold C$600 million of senior notes (/BBB/DBRS: BBB) in a two-tranche offering.

The company priced C$300 million of series C notes due Dec. 1, 2021 with a spread of 153 basis points over the interpolated Government of Canada bond curve and C$300 million of series D notes due Dec. 1, 2044 at 255 bps over the Government of Canada benchmark.

National Bank Financial Inc., BMO Nesbitt Burns Inc. and CIBC World Markets Inc. were the lead managers.

Toronto-based Manufacturers Life Insurance Co. tapped the Canadian market with a C$500 million offering of 2.64% fixed-, floating-rate subordinated debentures due Jan. 15, 2025 at 99.997 to yield 2.64%.

The debentures (A1/AA-/DBRS: A) priced with a spread of 116 bps versus the interpolated Government of Canada bond curve.

RBC Dominion Securities Inc., BMO Nesbitt Burns and TD Securities Inc. were the bookrunners.

The U.S. secondary market saw light activity as traders digested a heavy round of economic data and desks thinned in front of the Thanksgiving Day holiday, sources said.

“It’s a very quiet day,” one market source said. “It really seems like it should have been an early close.”

The bond markets will be closed on Thursday for the holiday and will close early on Friday.

Verizon Communications Inc.’s 3.5% notes due 2024 improved 1 bp to 2 bps in secondary trading, according to a market source.

Goldman Sachs Group Inc.’s 2.625% notes due 2019 brought in January are ending the year stronger, a source said.

Verizon active

Verizon’s 3.5% notes due 2024 (Baa1/BBB+/A-) traded 1 bp to 2 bps better at 131 bps offered, a market source said.

The notes were quoted up at 99.56 to yield 3.553% in afternoon trading from 99.43 to yield 3.569% on Tuesday, according to a source.

Verizon sold $2.5 billion of the notes on Oct. 22 at 99.34 to yield 3.579% with a spread of Treasuries plus 135 bps.

The telecommunications company is based in New York City.

Goldman improves

Goldman Sachs’ 2.625% notes due 2019 were quoted at 79 bps offered in secondary trading, according to a market source.

The notes traded higher at 102.64 to yield 1.962% on Wednesday from 101.05 to yield 2.358% in Tuesday’s session, a source said.

Goldman Sachs sold $2.5 billion of the five-year notes on Jan. 28, 2014 at 99.684 to yield 2.639%, or a spread of 112.5 bps over Treasuries.

The financial services company is based in New York City.

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