Investment-grade supply likely muted over election week, November; new bonds mixed

By Cristal Cody

Tupelo, Miss., Oct. 30 – Investment-grade primary action slowed on Friday with no reported issuers over the day as financial markets remained under pressure on growing volatility.

Market focus also remained on third-quarter earnings reports with more than 100 companies posting results on Friday, including high-grade issuers Phillips 66, AbbVie Inc., Altria Group Inc., Exxon Mobil Corp., Colgate-Palmolive Co., Weyerhaeuser Co. and Chevron Corp.

Deal volume this week beat market forecasts of about $15 billion of expected issuance with more than $18 billion of bonds sold.

Looking ahead to next week, light supply is expected amidst increasing lockdowns due to Covid-19, the U.S. presidential election on Tuesday and the Federal Reserve’s two-day monetary policy meeting that ends Thursday, market sources report.

Anywhere from zero to about $10 billion of volume could hit the primary market next week, syndicate sources said.

Deal volume also is expected to thin for November with about $50 billion to $75 billion of supply tentatively anticipated for the upcoming month, according to syndicate sources.

Credit spreads ease

Market tone was soft on Friday with stock indices down across the board.

Investment-grade credit spreads eased 1.2 basis points from the previous day, sending spreads about 5 bps wider on the week.

The Markit CDX North American Investment Grade 35 index closed Friday at a spread of 65.62 bps.

The iShares iBoxx Investment Grade Corporate Bond ETF declined 70 cents, or 0.52% to $133.73.

The Pimco Investment Grade Corporate Bond index closed off 50 cents, or 0.44% to $113.98.

The Dow Jones industrial average ended the session down 0.59%, the S&P 500 dropped 1.21% and the Nasdaq declined 2.45%.

In the secondary market, new issues priced this week were mixed, a source said.

Boeing Co.’s $4.9 billion of senior notes (Baa2/BBB-/BBB-) that priced in four tranches on Thursday softened 1 bp to 3 bps.

The company’s 3.625% notes due Feb. 1, 2031 were quoted on Friday at 281 bps bid, 277 bps offered.

Boeing sold $1.4 billion of the notes at a Treasuries plus 280 bps spread.

Price talk was at the 300 bps spread area.

Berkshire Hathaway Energy Co.’s $2 billion of senior notes (A3/A-/BBB+) brought to the market in two tranches on Tuesday firmed about 1.5 bps to 2 bps.

The $1.5 billion tranche of 2.85% notes due May 15, 2051 headed out Friday at 126 bps bid, 124 bps offered.

Berkshire Hathaway sold the notes at a 128 bps over Treasuries spread, compared to initial talk at the 150 bps area.

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