Steady post-holiday high-grade supply eyed; corporate inflows climb; Takeda, Mondelez firm

By Cristal Cody

Tupelo, Miss., July 2 – The investment-grade primary market remained quiet ahead of the early close on Thursday with steady issuance expected to resume after the Independence Day holiday.

The financial markets closed at 2 p.m. ET and will reopen on Monday.

Investment-grade issuers priced about $15 billion of bonds in the first two sessions of the week, in line with the $10 billion to $15 billion of volume expected by market participants.

Issuance was led by Takeda Pharmaceutical Co., Ltd.’s $7 billion four-part offering of senior notes (Baa2/BBB+/) that priced on Monday.

Looking ahead to deal action after the holiday, about $20 billion to $25 billion of volume is expected, according to syndicate sources.

Meanwhile, investment-grade corporate fund inflows jumped to $7.07 billion for the past week ended Wednesday from $4.26 billion in the prior week, according to Refinitive Lipper US Fund Flows.

Looking at high-grade bond fund and ETF inflows for corporate bonds, agencies, Treasuries and mortgages inflows, inflows remained strong for the past week through Tuesday, according to a BofA Securities, Inc. research note.

U.S. investment-grade bond fund and ETF inflows totaled $8.01 billion for the past week, following a $12.83 billion inflow in the prior full week.

High-grade inflows were “broad-based” over the short week and included $4.92 billion for ETFs, $3.09 billion for funds, $2.93 billion for short-term and $5.09 billion for excluding short-term inflows, the BofA note said.

Elsewhere, Labor Department data released early in the day surprised to the upside.

The June non-farm payroll report showed 4.8 million jobs were added over the month, higher than the 3.06 million gain forecast by market analysts.

The unemployment rate fell from 13.3% to 11.1% in June, better than the 12.5% unemployment rate forecast.

Market tone was mostly steady over the session.

The iShares iBoxx Investment Grade Corporate Bond ETF edged up 0.24% to 135.05.

The PIMCO Investment Grade Corporate Bond index softened 0.13% to close at 114.31.

Investment-grade credit spreads ended the short week about 7 basis points tighter.

The Markit CDX North American Investment Grade 33 index improved nearly 1 bp on Thursday to a spread of 74 bps.

New issues tighten

New issues priced this week were seen trading tighter than issuance in the secondary market.

Takeda Pharmaceutical’s $7 billion of senior notes (Baa2/BBB+/) priced in four tranches on Monday improved about 5 bps to 12 bps, a source said.

The company’s 2.05% notes due March 31, 2030 firmed to 136 bps bid.

The notes were priced in a $2.5 billion tranche at a spread of Treasuries plus 145 bps.

Initial price talk was in the 175 bps spread area with guidance firmed to the 150 bps area, plus or minus 5 bps.

Takeda’s 3.025% notes due July 9, 2040 came in to 153 bps bid.

The $1.5 billion tranche of 20-year notes priced at a spread of 165 bps over Treasuries.

Guidance on the notes was at the 170 bps area, plus or minus 5 bps, compared to initial talk in the 195 bps area.

Mondelez International, Inc.’s new 0.625% notes due July 1, 2022 (Baa1/BBB/) tightened about 3 bps in the secondary market, a source said.

The company sold $1 billion of the notes on Tuesday at a spread of 48 bps over Treasuries.

Initial guidance was at the 80 bps to 85 bps spread area.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.