Morning Commentary: High-grade primary market opens March to light supply forecast

By Cristal Cody

Tupelo, Miss., March 2 – The investment-grade bond market opened the new month with little activity on Monday.

Syndicate sources expect anywhere from zero up to about $15 billion of issuance in the primary market this week.

March volume is predicted to total in the $100 billion to $125 billion range but with the potential for much less, sources report.

Last week, only three reported issuers, including one corporate issuer, sold notes after stocks plunged, credit spreads widened more than 21 basis points and Treasuries rallied on fears of a coronavirus pandemic.

About $25 billion to $30 billion of investment-grade deal volume was expected last week.

Bond supply is being eyed to come mid-week – with dozens of issuers on standby – depending on how much stability is seen in the financial markets, sources said.

Stocks overall opened Monday slightly better, while Treasuries remained strong in the risk-off trade.

The 10-year note yield was down 6 bps at 1.067% over the morning after closing Friday down 17 bps at 1.127%.

In the secondary market, high-grade energy issues were improving modestly after sinking last week.

Energy Transfer Operating LP’s 3.75% notes due May 15, 2030 (Baa3/BBB-/BBB-) rose to 100.95 early Monday, a source said.

The notes closed Friday at 100.26, down from 101.27 at the start of the session, and 37 bps wider on the day.

The issue traded a week ago at 106.18.

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.

Overall secondary market volume was heavy on Friday with $28.93 billion of high-grade corporate bonds traded, Trace data shows.

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