High-grade volume slows; Alexandria Real Estate sells notes; FedEx markets trust certificates

By Cristal Cody

Tupelo, Miss., July 29 – Investment-grade supply thinned over Wednesday’s session as focus shifted to the outcome of the Federal Reserve’s July monetary policy meeting.

Alexandria Real Estate Equities, Inc. tapped the primary market with $1 billion of 1.875% guaranteed senior notes due Feb. 1, 2033 (Baa1/BBB+/) that priced tighter than guidance to strong demand.

Meanwhile, Federal Express Corp. held fixed income investor calls on Wednesday for $690 million of class AA pass-through certificates (Aa3/AA-/), according to a market source and a 424B3 filing with the Securities and Exchange Commission.

The class AA pass-through certificates come with a 13.4-year maturity and an 8.8-year weighted average life and are guaranteed by parent company FedEx Corp.

Deal volume week to date has beaten market forecasts with more than $20 billion of securities sold, led by AT&T Inc.’s $11 billion five-part offering of senior global notes (Baa2/BBB/A-) on Monday.

About $10 billion to $15 billion of investment-grade issuance was expected this week.

Deal volume was muted on Wednesday following heavy supply in the first two sessions and amidst the Federal Reserve’s policy rate decision to maintain the target range for the federal funds rate at 0 to 0.25%.

The Fed said in a statement that it remains committed to fusing its full range of tools to support the economy in response to impact from the coronavirus outbreak.

“To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions,” according to the statement.

The Federal Reserve Board said on Tuesday that it will extend its primary and secondary market corporate credit facilities to Dec. 31 from Sept. 30.

The next monetary policy meeting is scheduled for Sept. 15-16.

Market tone was positive over Wednesday’s session.

The Markit CDX North American Investment Grade 33 index firmed more than 1 basis point to a spread of 69.63 bps.

The iShares iBoxx Investment Grade Corporate Bond ETF rose 75 cents to 138.31.

The PIMCO Investment Grade Corporate Bond Index closed the day 70 cents better at 117.1.

Reliance Steel tightens

New issues were mostly improved in secondary trading, a market source said.

Reliance Steel & Aluminum Co.’s upsized $900 million two-part offering of senior notes (Baa3/BBB/BBB) priced on Tuesday tightened about 10 basis points to 11 bps.

The $400 million tranche of 1.3% notes due Aug. 15, 2025 came in to 99 bps bid.

The notes priced at a spread of Treasuries plus 110 bps, compared to initial price talk in the Treasuries plus 145 bps area.

Reliance Steel’s $500 million tranche of 2.15% notes due Aug. 15, 2030 firmed about 10 bps.

The 10-year notes priced with a spread of 160 bps over Treasuries versus talk in the 200 bps area.

The deal was upsized from an expected $800 million offering.

AT&T’s new notes were mixed in the secondary market.

A $2.25 billion tranche of 1.65% notes due Feb. 1, 2028, priced at a spread of Treasuries plus 120 bps, firmed about 7 bps.

Initial price talk was in the Treasuries plus 150 bps area.

The company’s 3.1% notes due Feb. 1, 2043 softened about 1 bp.

AT&T sold $2.5 billion of the notes at a 185 bps over Treasuries spread.

Initial price guidance was in the 205 bps spread area.

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