Midday Commentary: Investment-grade bonds open mostly better; Abbey National notes firm 8 bps

By Cristal Cody

Tupelo, Miss., Aug. 21 - Investment-grade bond spreads opened Wednesday mostly tighter ahead of the release of minutes from the last Federal Open Market Committee meeting, according to market sources.

Investors speculate the minutes will provide guidance on when the Federal Reserve will start to taper its asset purchases.

"Bonds have actually started to turn and fade with the Treasuries selling off," a trader said. "The anticipation is building for the language used in the FOMC minutes. If there is any clear indication clarifying the Fed's plan of action, it will send the market soaring or plummeting."

The Markit CDX Series 20 North American Investment Grade index ended Tuesday 2 basis points tighter at a spread of 82 bps.

In the high-grade secondary market, Abbey National Treasury Services plc's $1 billion offering of 3.05% senior notes due 2018 (A2/A/A) sold in Tuesday's session traded as much as 8 bps better early Wednesday, according to traders.

The notes firmed to 147 bps bid, 146 bps offered from where the London-based financial services company priced the issue at a spread of Treasuries plus 155 bps, one trader said.

The notes were seen by a trader at another desk 5 bps to 7 bps better at 148 bps bid, 143 bps offered.

PNC Bank NA's 1.3% notes due 2016 edged wider to 61 bps bid, 58 bps offered early Wednesday from 60 bps bid, 58 bps offered in late afternoon trading on Tuesday, a trader said. The notes were seen at 62 bps bid, 59 bps offered later in the morning, according to another trader.

The Pittsburgh-based subsidiary of PNC Financial Services Group sold $750 million of the three-year notes (A2/A/A+) at a spread of Treasuries plus 62 bps on Tuesday.

Also in the secondary market, Entergy Louisiana LLC's 4.05% mortgage bonds due 2023 traded 1 bp to 2 bps better early Wednesday at 119 bps bid, 117 bps offered, one trader said.

The Jefferson, La.-based energy provider sold $325 million of the mortgage bonds at a spread of Treasuries plus 120 bps on Monday.

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