Morning Commentary: Block tightens; Sysco widen; credit spreads flat

By Cristal Cody

Tupelo, Miss., Sept. 29 – High-grade bonds were mixed in secondary trading at the start of Tuesday’s session with a weak market tone expected to keep primary action thin over the day.

Block Financial LLC’s 4.125% senior notes due 2020 that priced on Friday traded 10 basis points better than issuance.

Sysco Corp.’s 3.75% senior notes due 2025 that priced earlier in the month widened about 5 bps in the secondary market.

The three-month Libor yield was unchanged at 33 bps over the morning.

The Markit CDX North American Investment Grade 25 index was flat early Tuesday after widening 4 bps in the previous session to a spread of 92 bps.

Meanwhile there was little by way of respite for the troubled commodities sector.

“Minerals and mining continue to seek new levels,” one trader said.

Among the notable names, the split-rated bonds of Teck Resources Ltd. and the barely investment-grade notes of Freeport-McMoRan Inc. remain under pressure, the trader said.

Glencore AG’s 4% notes due 2025 were at 68 bid and yielding 9% at late morning.

The notes were up a couple of points from Monday on the company’s reassurances that it remains financially robust, the source added. They had plunged 8 to 10 points in trading on Monday.

Block Financial firms

Block Financial’s new 4.125% senior notes due 2020 tightened to 265 bps offered in secondary trading, a market source said.

The company sold $650 million of the notes at Treasuries plus 275 bps on Friday as part of a $1 billion two-tranche offering.

The notes are guaranteed by parent company H&R Block, Inc.

The tax preparation and financial services company is based in Kansas City, Mo.

Sysco notes ease

Sysco’s 3.75% notes due 2025 eased about 5 bps to 158 bps offered, according to a market source.

Sysco sold $750 million of the notes (A2/A-) on Sept. 23 at a spread of Treasuries plus 160 bps.

The food service marketing and distribution company is based in Houston.

-Paul A. Harris contributed to this report

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