Strong high-grade issuance forecast; DowDuPont in pipeline; ING eases; Volkswagen mixed

By Cristal Cody

Tupelo, Miss., Nov. 9 – The high-grade primary market remained quiet on Friday ahead of the long holiday weekend and what is predicted to be a heavy upcoming volume week.

The bonds markets will be closed Monday for the Veterans Day holiday.

About $25 billion to $30 billion of issuance is expected by market sources for the week ahead.

DowDuPont Inc. plans to hold fixed-income investor calls next week for a $12 billion bond deal.

Investment-grade supply this week came in line with syndicate forecasts of about $15 billion to $20 billion of issuance with nearly $23 billion of corporate bonds priced through Thursday.

In the secondary market, ING Groep NV’s $1.25 billion of 4.625% green senior notes due Jan. 6, 2026 that came on Thursday eased about 2 basis points.

Volkswagen Group of America Finance LLC’s $8 billion of notes priced in seven tranches on Wednesday were mixed with the short-dated notes tighter.

In other secondary trading, Amazon.com, Inc.’s $3.5 billion of 3.15% notes due Aug. 22, 2027 (A3/AA-/) eased about 1 bp to 75 bps bid on Friday, according to a market source.

The notes have recovered some since widening about 20 bps to the 85 bps area in October after Amazon.com’s third quarter earnings report missed profits estimates.

On Thursday, Moody’s Investors Service upgraded the company’s notes to A3 from Baa1.

The Seattle-based online commerce company sold $3.5 billion of the 3.15% notes on Aug. 15, 2017 at a spread of Treasuries plus 90 bps.

Elsewhere, CVS Health Corp.’s senior notes (Baa1/BBB+) traded flat to about 6 bps tighter on Friday.

Credit spreads were mostly unchanged on the week. The Markit CDX North American Investment Grade 31 index closed the day at a spread of 66 bps.

For the week ended Nov. 7, Lipper US Fund Flows reported inflows of $1.85 billion for corporate investment-grade funds, compared to outflows of $3.75 billion in the previous week.

“Flows for U.S. bond funds and ETFs rebounded strongly this past week after four consecutive weeks of outflows,” Yuri Seliger, an analyst with BofA Merrill Lynch, said in a report released on Friday. “The inflow to fixed income was $5.69 [billion] – the highest since January – as flows were stronger for HG, HY, loans and munis.”

The fixed income inflow was up from a $1.9 billion outflow a week earlier.

Flows for high-grade, which includes corporates, Treasuries, agencies and mortgages, “flipped” to a $1.59 billion inflow from a $1.59 billion outflow in the previous week, Seliger said.

Inflows to short-term high grade climbed to $2.65 billion in the past week, the strongest reading in five years, and up from a $2.08 billion inflow the week before.

Meanwhile, outflows from high grade excluding short-term moderated to $1.07 billion from $3.67 billion, according to the report.

DowDuPont in pipeline

DowDuPont (Baa1/A-/BBB+) intends to price $12 billion of bonds in multiple tranches following fixed income investor calls expected to be held on Tuesday, according to a market source.

Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are the arrangers.

Midland, Mich.-based DowDuPont is the holding company for Dow Chemicals Co. and Corteva Inc., which are set to be spun off in 2019.

The issuer is expected to become a stand-alone company and be renamed DuPont Inc. following the spin-offs.

ING softens

ING Groep’s 4.625% notes due Jan. 6, 2026 traded on Friday at 152 bps bid, 149 bps offered, a market source said.

The company (Baa1/A-/A+) sold $1.25 billion of the notes on Thursday at a spread of 150 bps over Treasuries.

The global financial institution is based in Amsterdam.

Volkswagen mixed

Volkswagen Group of America Finance’s 3.875% notes due Nov. 13, 2020 firmed to 88 bps bid, 85 bps offered in the secondary market, a source said.

The issuer (A3/BBB+/) priced $1.25 billion of the two-year notes on Wednesday at a spread of Treasuries plus 95 bps.

Volkswagen’s 4.75% notes due Nov. 13, 2028 widened to 177 bps bid, 173 bps offered.

The 10-year notes priced in a $1.25 billion tranche on Wednesday at spread of 165 bps over Treasuries.

Volkswagen Group of America is a Herndon, Va.-based financing arm and subsidiary of Volkswagen Group of America, Inc.

CVS mostly better

CVS Health’s 4.3% senior notes due March 25, 2028 firmed about 6 bps to 141 bps bid, according to a market source.

The notes priced in a $9 billion offering on March 6 at a spread of Treasuries plus 160 bps.

The company’s 5.05% notes due March 25, 2048 headed out flat at 173 bps bid.

CVS Health sold $8 billion of the notes in the March offering at a Treasuries plus 195 bps spread.

The retail pharmacy chain and pharmacy benefits manager is based in Woonsocket, R.I.

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