European Investment Bank prices; high-grade supply thin; inflows drop; credit spreads widen

By Cristal Cody

Tupelo, Miss., Feb. 27 – The European Investment Bank priced $1 billion of four-year floating-rate notes in the investment-grade primary market on Thursday as the sole reported issuer.

Supply has been thin week to date with just one reported corporate issuer and two sovereign, supranational and agency deals so far.

Fulton Financial Corp. sold $375 million sale of fixed-to-floating rate subordinated notes in two tranches on Tuesday.

CPPIB Capital Inc. priced $1 billion of five-year notes in SSA issuance on Wednesday.

Meanwhile, First Citizens BancShares, Inc. started marketing $300 million of registered fixed-to-floating-rate subordinated notes due 2030 on Wednesday.

About $25 billion to $30 billion of investment-grade deal volume was expected this week but issuers have pulled back as the number of coronavirus infections grows globally, sparking fears of a pandemic and limited supply chains.

High-grade credit spreads have moved out about 18 basis points since the start of the week.

The Markit CDX North American Investment Grade 33 index widened almost 7 bps on Thursday to end the day at a spread of 64.48 bps.

Inflows declined for the past week ended Wednesday, Lipper US Fund Flows reported on Thursday.

Corporate investment-grade fund inflows totaled $3.65 billion, down from $5.14 billion in the previous week and $6.23 billion in the week prior.

Net inflows year to date totals more than $42 billion.

Stocks took another dive on Thursday with all the indexes down by more than 4% and the Dow Jones industrial average off more than 1,100 points, or 4.42%, on the day.

Treasuries continue to rally. The benchmark 10-year note has touched all-time yield lows on Tuesday, Wednesday and Thursday.

The 10-year Treasury note closed Thursday 1 bp better at 1.299%.

In the secondary market, high-grade bonds were mixed.

EIB raises $1 billion

The European Investment Bank (Aaa/AAA/AAA) priced $1 billion of floating-rate notes due March 5, 2024 on Thursday at SOFR plus 28 bps, according to a market source.

Initial price talk on the four-year notes was in the SOFR plus 29 bps area.

Citigroup Global Markets Inc., HSBC Securities (USA) Inc., RBC Capital Markets, LLC, Standard Chartered Bank and TD Securities (USA) LLC were the bookrunners.

The lender for the European Union is based in Kirchberg, Luxembourg.

Goldman, Morgan Stanley gain

In the secondary market, Goldman Sachs Group Inc.’s $2 billion of 2.6% senior notes due Feb. 7, 2030 (A3/BBB+/A) priced on Feb. 5 were among the most active high-grade issues traded on Wednesday and improved on Thursday, a source said.

The notes headed out at 101.02, up from 100.94 on Wednesday and 100.67 on Monday. Over the morning, the issue touched a new high of 101.06.

Goldman Sachs sold the notes at 99.96 to yield 2.06% and a spread of Treasuries plus 95 bps.

Morgan Stanley’s 2.699% global medium-term senior fixed-to-floating-rate notes due Jan. 22, 2031 improved to 102.32 from 102.20 in the prior session, but were seen about 9 bps wider, a source said.

Morgan Stanley (A3/BBB+/A) sold $3.5 billion of the notes on Jan. 16 at par to yield a spread of Treasuries plus 90 bps.

Energy Transfer softens

In the energy space, Energy Transfer Operating LP 3.75% notes due May 15, 2030 (Baa3/BBB-/BBB-) slid after improving on Wednesday, sources said.

The notes softened to 101.68 from 103.08 on Wednesday and widened about 5 bps.

The Dallas-based natural gas midstream and intrastate transportation and storage company sold $1.5 billion of the bonds on Jan. 7 at 99.843 to yield 3.769% and a Treasuries plus 255 bps spread.

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