Morning Commentary: High-grade primary action thin; World Bank offers five-year notes

By Cristal Cody

Tupelo, Miss., Oct. 21 – Investment-grade bond supply remained light on Wednesday with only a handful of reported issuers in the primary market, sources said.

The Federal Home Loan Bank System priced $1 billion of new two-year Global notes early in the session.

The International Bank for Reconstruction and Development, or World Bank, is expected to bring a dollar-denominated offering of five-year global sustainable development notes (Aaa/AAA/AAA) to the primary market over the day.

Initial price talk is in the mid-swaps plus 11 basis points area.

Corporate supply was thin over the morning.

Wells Fargo & Co. (A2/BBB+/A+) is selling $25-par preferred stock.

In other deal volume, Morgan Stanley (A2/BBB+/A) is offering euro-denominated fixed-to-floating rate senior notes due 2029 following its tap of the U.S. market on Friday of $1 billion of 0.864% global medium-term fixed-to-floating rate senior notes due Oct. 21, 2025.

Investment-grade corporate and sovereign, supranational and agency supply totals $14.5 billion week to date and includes $11.5 billion of corporate issuance.

About $15 billion of high-grade corporate supply was expected by market participants this week.

Volume was heaviest on Monday when $8 billion of bonds were priced.

T-Mobile tightens

Supply this week so far has been led by T-Mobile U.S. Inc. subsidiary T-Mobile USA, Inc.’s $4.75 billion Rule 144A and Regulation S four-tranche offering of new and reopened senior secured notes (Baa3/BBB-/BBB-) on Monday.

In secondary trading, T-Mobile’s notes have firmed about 4 bps to 10 bps, a market source said.

T-Mobile’s new 2.25% notes due Nov. 15, 2031 improved to 144 bps bid.

The company priced $1 billion of the 2.25% notes at a Treasuries plus 148 bps spread.

Initial talk was in the 175 bps spread area.

T-Mobile’s $1 billion tranche of 3.6% notes due Nov. 15, 2060 tightened 10 bps in the secondary market to 200 bps bid.

The 40-year notes priced with a Treasuries plus 205 bps spread, compared to talk in the 230 bps spread area.

Overall secondary trading volume this week includes $23.6 billion of high-grade corporate bonds traded on Tuesday and $15.36 billion on Monday, according to Trace.

Market tone was mixed in the high-grade space at the start of the day.

The Pimco Investment Grade Corporate Bond index edged up 0.05% to 114.77.

The iShares iBoxx Investment Grade Corporate Bond ETF softened 0.01% to $134.79.

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