Morning Commentary: High-grade supply thin; Alberta launches dollar-denominated notes

By Cristal Cody

Tupelo, Miss., July 15 – A summer lull in high-grade supply is beginning with light primary action expected on Wednesday.

The Province of Alberta (Aa2/AA) launched a dollar-denominated offering of 10-year global notes at the start of the day at mid-swaps plus 72 basis points, according to a market source.

Initial price talk was in the mid-swaps plus 74 bps area.

The Federal Home Loan Bank System announced it will skip pricing a Global note on Wednesday with the agency’s next funding opportunity scheduled for July 23.

Supply so far this week includes $500 million of sovereign, supranational and agency issuance and $7.25 billion of corporate volume.

As little as $10 billion to about $20 billion of high-grade deal volume was expected by market participants with second quarter earnings reports and the impact from the coronavirus in focus over the week.

Goldman Sachs Group Inc. reported better-than-expected earnings on Wednesday.

Citigroup Inc., JPMorgan Chase & Co., and Wells Fargo & Co. released second quarter results on Tuesday.

Bank of America and Morgan Stanley report on Thursday.

Elsewhere, market tone was mixed over the morning.

The iShares iBoxx Investment Grade Corporate Bond ETF improved 0.04% to 136.35 after ending Tuesday up 0.58%.

The Pimco Investment Grade Corporate Bond Index declined 0.22% to 115.5 following a 0.61% gain in the prior session.

In the secondary market, new issues were mixed, a source said.

Hewlett Packard Enterprise Co.’s $1.75 billion of senior notes (Baa2/BBB/BBB+) priced in two tranches om Tuesday firmed about 1 bp to 2 bps in secondary trading.

The company’s $1 billion tranche of 1.45% notes due April 1, 2024 improved about 2 bps from where the notes priced at a spread of Treasuries plus 130 bps.

Initial guidance was in the Treasuries plus 140 bps area.

Mars Inc.’s $2.5 billion of guaranteed senior notes (A1/A) priced in four tranches on Monday traded wrapped around issuance to 2 bps to 3 bps tighter on the longer-dated tranches.

The company’s 0.875% notes due July 16, 2026 were unchanged.

Mars sold $500 million of the notes at a spread of 60 bps over Treasuries.

Initial price talk was in the Treasuries plus 95 bps area.

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