High-grade supply slows amid blackouts; Everest Reinsurance in pipeline; inflows dip

By Cristal Cody

Tupelo, Miss., Oct. 2 – The investment-grade primary market stayed quiet over Friday’s session following a better-than-expected September unemployment rate and a jolt to equities over the announcement the U.S. president tested Covid-19-positive.

A bond deal is expected soon from Everest Reinsurance Holdings, Inc. (Baa1/A-/) after the company held fixed-income investor calls on Thursday for two tranches of registered senior notes due in 2030 and 2050, sources said.

Corporate and sovereign, supranational and agency issuers priced more than $18 billion of investment-grade notes over the week, compared to about $20 billion to $25 billion of volume forecast.

For the week ahead, syndicate sources are anticipating about $15 billion to $20 billion of supply with issuance expected to thin considerably due to earnings-related blackout periods.

Meanwhile, U.S. high-grade bond funds and ETFs slowed over the past week ended Wednesday, according to a BofA Securities, Inc. research note released Friday.

Investment-grade bond funds and ETFs reported inflows of $4.69 billion for the past week, down from $5.63 billion in the prior week and the lowest since April.

ETF inflows declined to $1.45 billion from $1.86 billion a week earlier, while funds inflows fell to $3.24 billion from $3.77 billion.

Short-term inflows declined to $2.31 billion from $2.52 billion in the prior week, and excluding short-term inflows dropped to $2.39 billion from $3.11 billion, according to the report.

Credit spreads ease

In other action, the Labor Department announced the unemployment rate declined 0.5% to 7.9% in September, while total non-farm payroll employment rose by 661,000 over the month.

Market analysts had expected an 8.2% jobless rate and an increase of 859,000 jobs in September.

High-grade bonds and stocks mostly softened following the report that president Trump and first lady Melania Trump tested positive for the virus.

Mondelez International, Inc.’s $1.25 billion of new and reopened notes (Baa1/BBB/) priced in two tranches on Wednesday weakened on Friday but remained better than issuance, a source said.

The company sold $625 million of 1.875% notes due Oct. 15, 2032 at 99.765 to yield 1.897%, or a spread of Treasuries plus 122 basis points.

Mondelez priced a $625 million add-on to its 2.625% notes due Sept. 4, 2050 at 96.353 to yield 2.806%, or a 135 bps over Treasuries spread.

The Markit CDX North American Investment Grade 35 index eased about 1 bp to close Friday at a spread of 59.2 bps.

The Nasdaq closed down 1.42%, while the Dow Jones industrial average was off 0.53% on the day.

The iShares iBoxx Investment Grade Corporate Bond ETF ended 0.01% better at 134.81.

The PIMCO Investment Grade Corporate Bond index finished up 0.16% at 114.87.

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