High-grade volume subsides after solid week; United Technologies firms; McDonald’s mixed

By Cristal Cody

Tupelo, Miss., Aug. 17 – Investment-grade issuers stayed to the sidelines on Friday following strong volume earlier in the week.

Week to date supply totals more than $29 billion. Market sources had expected about $25 billion to $30 billion of new issuance.

Primary action for the week was led by an $11 billion seven-tranche offering of notes from United Technologies Corp. on Monday, a $3 billion four-part bond deal from AstraZeneca plc on Tuesday and a $3.75 billion offering of floating-rate notes from AT&T Inc. on Thursday.

In the secondary market, new issues traded mostly better.

United Technologies’ senior notes (Baa1/BBB+) tightened about 3 basis points to 4 bps on the day.

McDonald’s Corp. senior medium-term notes (Baa1/BBB+/) priced in a $1.8 billion three-tranche deal on Monday traded flat to about 3 bps tighter during the session.

AstraZeneca’s 4% notes due Jan. 17, 2029 were unchanged on Friday but modestly better than issuance.

The Markit CDX North American Investment Grade 30 index ended the session about 1 bp better at a spread of 61 bps.

New deal volume is expected to thin as August closes with many out for late summer vacations before supply ramps up in September, according to market sources.

Some new financial issues are likely in the Canadian high-grade bond market as banks exit earnings blackout periods beginning Aug. 22, a source said.

Elsewhere, high-grade inflows mostly declined during the week.

For the week ended Aug. 15, Lipper US Fund Flows reported inflows of $1.45 billion for corporate investment-grade funds, down from $2.8 billion in the previous week but higher than the $1.21 billion in the week prior.

Inflows to the overall high-grade space, which includes corporates, mortgages, Treasuries and agencies, declined to $2.07 billion from $2.41 billion in the previous week, according to a BofA Merrill Lynch research report released on Friday that cites data from EPFR Global and BofA Merrill Lynch Global Research.

“Inflows to U.S. funds and ETFs weakened this past week for most fixed-income asset classes as well as for equities,” according to the note.

High-grade ETFs were an exception and saw an inflow of $560 million following a $110 million outflow in the past week, the note said.

Inflows to short-term high grade also improved slightly $1.95 billion from $1.92 billion last week, while inflows to outside-of-short-term high-grade funds and ETFs declined to $120 million from $490 million.

United Technologies tightens

In the secondary market, United Technologies’ 3.65% notes due Aug. 16, 2023 firmed about 3 bps in secondary trading on Friday to 83 bps bid, a market source said.

The company sold $2.25 billion of the five-year notes on Monday at a 90 bps over Treasuries spread.

United Technologies’ 4.125% notes due Nov. 16, 2028 were quoted about 4 bps tighter at 116 bps bid.

The $3 billion tranche of 10-year notes were sold in the transaction on Monday at a spread of 125 bps over Treasuries.

United Technologies is a Hartford, Conn.-based company that provides technology products and services to the building and aerospace industries.

McDonald’s flat to better

McDonald’s reopened 3.8% notes due April 1, 2028 were steady in secondary trading on Friday at 95 bps bid, a market source said.

McDonald’s priced a $550 million tap of the notes on Monday at a Treasuries plus 98 bps spread.

The company originally sold $500 million of the 10-year notes at a spread of 100 bps over Treasuries on March 14. The total outstanding is $1.05 billion.

McDonald’s new 4.45% notes due Sept. 1, 2048 tightened 3 bps during the session to 137 bps bid.

The notes priced in a $750 million tranche in Monday’s offering at a spread of 143 bps over Treasuries.

The fast food chain is based in Chicago.

AstraZeneca steady

AstraZeneca’s 4% notes due Jan. 17, 2029 headed out unchanged in the secondary market on Friday at 99.875, a source said.

The company sold $1 billion of the notes (A3/BBB+/A-) on Tuesday as part of a $3 billion four-part offering at 99.59 to yield 4.049%, or a Treasuries plus 115 bps spread.

The biopharmaceutical company is based in Cambridge, England.

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