Morning Commentary: Mondelez, Jefferies, Veritex on deck; light October supply eyed

By Cristal Cody

Tupelo, Miss., Sept. 30 – A handful of issuers are marketing bonds early Wednesday in the high-grade primary market after steady supply in the first two sessions of the week.

Mondelez International, Inc., which priced $1 billion of notes (Baa1/BBB) in two tranches on Sept. 2, is returning to the primary market as the third quarter closes.

The company is offering new fixed-rate notes and an add-on to its 2.625% notes due Sept. 4, 2050.

Mondelez priced $500 million of the 30-year notes in the Sept. 2 offering at 99.444 to yield 2.652%, or a 127 basis points over Treasuries spread.

Jefferies Group LLC and Jefferies Group Capital Finance Inc. are marketing new fixed-rate senior notes (Baa3/BBB/BBB) on Wednesday.

Also, Veritex Holdings, Inc. plans to price 10-year fixed-to-floating rate subordinated notes (Kroll: BBB-).

Corporate and sovereign, supranational and agency issuance totals about $14 billion week to date.

High-grade issuers priced more than $8 billion of bonds on Tuesday and over $5 billion of notes on Monday.

Deal volume so far has been led by Pernod Ricard International Finance LLC’s $2 billion three-part sale of guaranteed senior notes (Baa1/BBB+/BBB+) that priced on Monday.

About $20 billion to $25 billion of issuance is expected by market participants this week.

Thin fourth-quarter action

Investment-grade deal volume in October is expected to slow to about $75 billion to $100 billion, though the total could be much less, sources report.

“After careful deliberations we are sticking with our outlook for $100 [billion] of gross IG issuance in 4Q,” including $50 billion of volume in October, $40 billion in November and $10 billion in December, BofA Securities, Inc. analysts said in a research note released on Wednesday.

Companies will be entering third-quarter earnings reporting-related blackout periods after the quarter ends Wednesday.

“After that there is a window of about two weeks before the elections, but we think many issuers frontloaded that activity,” the BofA Securities analysts said. “Of course, we can't prove that the refi trade is over, but we think so.”

Market tone was mixed over the morning.

The iShares iBoxx Investment Grade Corporate Bond ETF declined 0.11% to 134.58.

The Pimco Investment Grade Corporate Bond index was down 0.23% at 114.75.

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