Morning Commentary: Investment-grade supply quiets after strong week; new issues mixed

By Cristal Cody

Tupelo, Miss., Aug. 21 – The high-grade primary market quieted on Friday following about $45 billion of corporate and sovereign, supranational and agency issuance over the week.

Corporate issuers have priced about $36 billion of bonds week to date, while SSA issuers brought another $8.7 billion of bonds this week.

About $30 billion to $40 billion of corporate issuance was expected this week.

New issues were mixed in secondary trading after spreads leaked wider mid-week, according to market sources.

Eli Lilly & Co.’s $1.1 billion of senior notes (A2/A+/A) that priced in two tranches on Thursday traded wrapped around issuance to about 1 basis point softer.

The company priced a $250 million reopening of its 2.25% notes due May 15, 2050 at 98.777 to yield 2.307%, or a spread of Treasuries plus 93 bps.

Initial price talk was at the 140 bps spread area.

The notes were seen about 1 bp weaker at 94 bps bid.

Eli Lilly originally sold $1 billion of the 2.25% notes on May 5 at 99.609 to yield 2.268% with a Treasuries plus 110 bps spread. The total outstanding is now $1.25 billion.

Roper Technologies, Inc.’s $2.7 billion of senior notes (Baa2/BBB+) that priced in four tranches on Tuesday were last about 1 bp to 5 bps tighter in the secondary market.

The $1 billion tranche of 1.75% notes due Feb. 15, 2031 improved about 1 bp.

The notes priced at 99.839 to yield 1.767%, or a spread of 110 bps over Treasuries.

Initial price talk was at the 130 bps spread area.

Market tone was mixed at the start of the day.

The Pimco Investment Grade Corporate Bond index edged 0.01% lower to 115.92.

The iShares iBoxx Investment Grade Corporate Bond ETF rose 0.07% to 136.30.

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