Investment-grade primary slows; bonds print tight; uptick in deals eyed in week ahead

By Cristal Cody

Tupelo, Miss., Feb. 3 – High-grade issuers, including Oracle Corp., found ample demand in a week where supply fell slightly short of expectations.

Corporate borrowers were in the primary market just two days – Monday and again on Thursday following the Federal Reserve’s midweek interest rate hike of 25 basis points.

The supply Thursday helped bring weekly volume to $18 billion, still below what market participants were expecting in the $20 billion to $25 billion range for the week.

Major deals included Elevance Health Inc.’s $2.6 billion three-tranche offering and International Business Machines Corp.’s $3.25 billion three-part issuance on Monday and Oracle’s $5.25 billion four-part transaction on Thursday.

Oracle’s deal was a blowout for investment demand – the notes (Baa2/BBB/BBB) had a final order book total of $34 billion, a source said.

The tranches priced 35 basis points to 40 bps tighter than initial talk and ended up pricing 3 bps to 5 bps tighter than guidance after the bonds were relaunched, the source said.

Oracle’s $1.5 billion of 4.9% notes due 2033 priced at a spread of 150 bps over Treasuries. Initial price talk had the paper coming in the 185 bps over Treasuries area. Guidance was at the 155 bps area with the notes relaunched at a spread of 150 bps over Treasuries.

Oracle’s bonds broke about 1 bp to 2 bps tighter in aftermarket trading, a source said.

Deals firmed an average of 30.08 bps from initial price talk this week, compared to the 27.1 bps average in the prior week, according to a market source.

Elevance Health’s senior notes (Baa2/A/BBB) tightened 28 bps from talk on the three-year notes and 33 bps across the 10- and 30-year tranches, a source said.

The $1 billion of 4.75% notes due 2033 priced at a spread of 122 bps over Treasuries, better than talk at the 155 bps spread area.

IBM’s notes (A3/A-) priced 20 bps to 25 bps tighter than the initial talk across the maturities, according to a market source.

IBM’s $750 million tranche of 4.75% notes due 2033 were talked at a spread in the 140 bps area over Treasuries. The notes priced at 120 bps over Treasuries.

Active February pipeline

January ended with more than $140 billion of high-grade corporate bonds sold over the month.

February supply is expected to total about $100 billion, sources said.

A busy deal pace is likely in the upcoming week following this week’s bond performance and strong jobs data on Friday, according to market sources.

About $25 billion to $30 billion of high-grade notes are expected to print next week with more corporate issuers likely to emerge if market tone holds, sources said.

The Labor Department reported on Friday that U.S. non-farm payroll numbers for January climbed by 517,000, far outpacing the 188,000 jobs gain expected by analysts.

The unemployment rate fell to a seasonally adjusted 3.4%, below a widely expected increase of 3.6%, from the 3.5% rate in December.

The U.S. unemployment rate is at its lowest level in more than 53 years, according to a market note on Friday from Confluence Investment Management.

New green deal

The high-grade space also saw new green issuance from Alexandria Real Estate Equities, Inc. on Thursday, with the sector likely to rebound from 2022 in 2023.

Moody’s said in a Jan. 31 note that it forecasts around $950 billion of global green, social, sustainability and sustainability-linked bonds, up 10% from an estimated $862 billion in 2022 but below record volumes of $1.05 trillion in 2021.

The space is forecast to see $550 billion of green bonds, $150 billion of social bonds, $175 billion of sustainability bonds and $75 billion of sustainability-linked bonds in 2023, Moody’s said.

Alexandria Real Estate’s $500 million tranche of 4.75% green notes due 2035 (Baa1/BBB+) priced better than talk in the Treasuries plus 175 bps area at a spread of 137.5 bps over Treasuries, a market source said.

The issue was trading nearly 10 bps tighter in the secondary market, a source said.

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