Morning Commentary: CVS, Charter active; dollar price of index bonds at lowest in five years

By Cristal Cody

Tupelo, Miss., July 17 – New bonds from CVS Health Corp. and Charter Communications Inc. remain active in the secondary market, while trading over Friday’s session is expected to be light, sources said.

CVS Health’s senior notes (Baa1/BBB+) were mostly better.

Charter Communications’ senior secured notes (Ba1/BBB-) traded tighter.

The Markit CDX North American Investment Grade series 23 index was unchanged early Friday after it closed 2 basis points better at a spread of 65 bps on Thursday.

“The spread on all cash bonds closed 0.5 bps tighter yesterday at 136.5 bps, driven by 1 bps tightening in the materials, communications, and utilities sectors,” according to a RBC Capital Markets, LLC market note on Friday.

The average dollar price of the U.S. corporate index is at its lowest point in five years, Barclays Bank plc analysts said in a note on Friday.

“With 10 [year] and 30 [year] Treasury yields 70 [bps] and 90 [bps] above year-to-date lows, respectively, the average dollar price of the U.S. corporate index has declined significantly and is now trading below $105 for the first time in five years,” Barclays analysts said.

“As a result, nearly 40% of bonds in the index now trade below par, compared with 5% at the end of January. Because Treasury yields have been on a fairly consistent downward trend since 2009, this is the first time in five years that we are seeing a significant share of the market trade significantly below par.”

CVS mixed

CVS Health’s 3.875% notes due 2025 eased 1 bp to 153 bps offered in secondary trading, a source said.

The company sold $3 billion of the notes on Monday at 155 bps over Treasuries.

CVS Health’s 5.125% bonds due 2045 tightened 6 bps to 177 bps offered.

The company sold $3.5 billion of the bonds on Monday at Treasuries plus 190 bps.

The pharmacy retailer is based in Scarsdale, N.Y.

Charter tighter

Charter Communications’ 4.908% notes due 2025 traded 6 bps tighter at 252 bps bid early Friday, according to a market source.

The company sold $4.5 billion of the notes on July 9 at a spread of Treasuries plus 260 bps.

The provider of cable, internet and phone services is based in Stamford, Conn.

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