Morning Commentary: Supply thins; Tokyo Metropolitan Government to price; Vodafone tightens

By Cristal Cody

Tupelo, Miss., May 24 – At least one issuer plans to tap the investment-grade primary market on Thursday.

The Tokyo Metropolitan Government (A+) is marketing a Rule 144A and Regulation S offering of dollar-denominated five-year notes that were initially talked to price in the mid-swaps plus 45 basis points area.

Barclays, Citigroup Global Markets, J.P. Morgan Securities and Nomura Securities International, Inc. are the bookrunners.

Supply this week included less than $3 billion of bonds sold on Monday and Tuesday, while Wednesday's session saw more than $17 billion of bonds price. Volume in the previous session was led by Vodafone Group plc’s $11.5 billion six-tranche offering of senior notes.

About $25 billion of issuance was forecast for the holiday-shortened week. The bond markets will close early Friday and will remain closed on Monday for the Memorial Day holiday.

“So far in May issuance of fixed-rate high-grade corporate bonds has been $91 [billion], down from $103 [billion] priced in April,” Yuri Seliger, analyst with BofA Merrill Lynch, said in a note released Thursday.

“Floating-rate supply, on the other hand, increased to $28 [billion] this month from $21 [billion] in April and $11 [billion] in March. As a result, May's share of floating-rate supply has reached some of the highest levels since ‘taper tantrum’ episode in late 2010 and early 2011.”

Otherwise, market participants were focused over the morning on geopolitical risks after president Donald Trump cancelled the June summit meeting with North Korea’s Kim Jong-un and announced possible tariffs on auto imports. Stocks were down across the board.

In economic data, the Labor Department reported weekly initial unemployment claims were 234,000 for the previous week, higher than the 220,000 analysts had forecasted.

Looking at the secondary market, $20.22 billion of bonds traded on Wednesday, up from $18.47 billion on Tuesday and $14.05 billion on Monday, according to Trace.

Vodafone’s new bonds traded about 6 basis points to 10 bps tighter in the secondary market, a source said.

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