Investment-grade primary market quiets ahead of holiday; Charter, Bayer notes tighten

By Cristal Cody

Tupelo, Miss., July 2 – The high-grade bond markets stayed mostly quiet on Monday with no reported deal volume.

With the bond markets set to close early on Tuesday and remain closed on Wednesday for the Independence Day holiday, little supply is expected this week.

Volume forecasts for the week range from zero to up to $5 billion. Syndicate sources forecast about $75 billion to $85 billion of new issuance in July.

“Historical patterns suggest that July is another slow month with an 8-year average volume of $82 [billon] or 7.5% of annual supply,” according to a BofA Merrill Lynch research note released on Monday. “Although issuance surprised to the upside in July 2015 and July 2017 reaching $131 [billion] and $125 [billion], respectively, they were driven by heavy M&A-related issuance.”

The bulk of mergers-and-acquisitions-related debt financing was done in June, while other high-grade companies will be in earnings blackout periods until mid-July when supply is expected to pick back up, the note said.

BofA Merrill Lynch analysts expect about $70 billion to $75 billion of issuance in July.

An offering remains in the pipeline from Toyota Motor Credit Corp., which has held fixed-income investor calls last week in the United States, Europe and Asia for three tranches of senior notes.

The Markit CDX North American Investment Grade 30 index closed modestly softer at a spread of 68 basis points.

In the secondary market, Charter Communications, Inc.’s senior secured notes priced Thursday traded about 2 bps tighter on Monday.

Bayer AG’s new notes were quoted in secondary trading about 3 bps to 9 bps better from Friday’s levels.

Walmart Inc.’s notes priced as part of a $16 billion transaction on June 20 were flat to tighter on the day.

Charter improves

Charter Communications’ 4.5% notes due Feb. 1, 2024 were seen Monday trading at 174 bps bid, a market source said.

The notes were quoted on Friday at 176 bps bid, 173 bps offered in the secondary market.

Charter subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. sold $1.1 billion of the notes (Ba1/BBB-/BBB-) on Thursday at a Treasuries plus 180 bps spread.

The broadband communications company is based in Stamford, Conn.

Bayer tightens

Bayer’s 4.375% notes due Dec. 15, 2028 were quoted on Monday at 150 bps bid, compared to where the notes were seen going out on Friday at 159 bps bid, according to a market source.

Bayer sold $3.5 billion of the notes on June 18 as part of a $15 billion eight-part issue at a spread of 155 bps over Treasuries.

The health care and agriculture products company is based in Leverkusen, Germany.

Walmart mixed

Walmart’s 3.4% notes due June 26, 2023 were unchanged on the day at 55 bps bid, a market source said.

The company sold $2.75 billion of the notes on June 20 at a 60 bps spread over Treasuries.

Walmart’s $2.75 billion tranche of 3.7% notes due June 26, 2028 firmed about 3 bps from Friday to 75 bps bid, the source said.

The notes priced in the June 20 offering at a Treasuries plus 80 bps spread.

The discount retailer is based in Bentonville, Ark.

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