Midday Commentary: Investment-grade bonds widen; Verizon notes rise in trading

By Cristal Cody

Tupelo, Miss., Oct. 7 - Investment-grade credit spreads opened Monday wider in the second week of the partial U.S. government shutdown with key economic releases expected to be delayed, according to market sources.

The Markit CDX North American Investment Grade series 21 index ended Friday 2 basis points tighter at a spread of 79 bps.

"The lack of any progress in Washington over the weekend is resulting in credit spreads moving 1-4 bps wider across the fixed income risk spectrum," RBC Capital Markets, LLC analysts said in a note on Monday. "U.S. speaker Boehner's insistence that the House is 'not going to pass a clean debt limit' bill without including additional measures is weighing on risk sentiment this morning."

Companies also are expected to be in blackout over the week as earnings season kicks off on Tuesday with the release of Alcoa's quarterly results, sources said.

Investment-grade bond issuance likely will slow in October, which typically is a slow month and accounts for about 8% of total annual supply on average, according to RBC.

"Last week, new issuance slowed dramatically from September's robust pace as a mix of pre-funding in early September because of tapering fears coupled with the U.S. government shutdown slowed primary activity," the RBC analysts said. "High-grade new issue supply totaled $141 billion in September, including the record $49 billion Verizon deal. The issuance of U.S. investment grade debt fell 72% last week from the last week of September."

Verizon notes rise

In the secondary market, Verizon Communication Inc.'s bonds remain among the most actively traded, according to Trace data.

Verizon's 5.15% notes due 2023 (Baa1/BBB+/A-) rose to 107 in trading, better than where the notes were quoted at 104.25 the day after the company priced the record bond deal.

Verizon sold $11 billion of the 5.15% notes due 2023 at 99.676 to yield 5.192% in the $49 billion eight-tranche offering priced on Sept. 11.

The telecommunications company is based in New York City.

© 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.