T-Mobile eyed; front-loaded supply forecast; UnitedHealth, U.S. Bancorp firm; telecom mixed

By Cristal Cody

Tupelo, Miss., July 26 – High-grade issuers stayed out of the primary market on Friday following a strong week of volume that beat forecasts.

Investment-grade issuers priced more than $23 billion of bonds in the first four sessions of the week, compared to about $15 billion to $20 billion of supply forecast.

A potential bond deal in the $10 billion to $15 billion range from T-Mobile U.S. Inc. is being eyed to price after the company on Friday received federal antitrust approval to acquire Sprint Corp.

Also, a deal was marketed during the session from Las Vegas Sands Corp., which continued a second day of fixed income investor calls for a dollar-denominated three-part offering of senior notes (Baa3/BBB-/BBB-).

Looking to next week, market focus shifts to a possible rate cut at the Federal Reserve’s monetary policy meeting. A trim of 25 basis points is anticipated by market participants following the Fed’s two-day meeting that ends Wednesday.

About $20 billion to $25 billion of deal volume is forecast with issuance expected to be front-loaded ahead of the Fed’s meeting, market sources said.

The Markit CDX North American Investment Grade 32 index closed Friday mostly unchanged at a spread of 51 bps.

New issues priced this week are trading mostly better than issuance, according to market sources.

PepsiCo Inc.’s $2 billion two-tranche offering of senior notes (A1/A+/) headed out about 1 bp to 3 bps tighter on Friday.

American Express Co.’s $1.5 billion of 2.5% senior notes due July 30, 2024 traded 1 bp better than issuance.

UnitedHealth Group Inc.’s $5.5 billion of senior notes (A3/A+/A-) priced in five tranches on Tuesday were about 3 bps to 6 bps tighter than issuance on Friday.

New bank and financial paper headed out mostly stronger.

U.S. Bancorp’s $2.25 billion of notes priced in two tranches on Wednesday firmed about 1 bp to 8 bps in the secondary market.

In other secondary trading, bonds in the telecommunications sector were mixed following the Justice Department’s announcement on the T-Mobile and Sprint merger.

AT&T Inc.’s 4.35% notes due March 1, 2029 softened 1 bp on the day.

Verizon Communications Inc.’s 3.875% green senior notes due Feb. 8, 2029 were unchanged on Friday.

Meanwhile, U.S. fund and ETF investors bought more bonds for the past week ended Wednesday, while they sold stocks, Yuri Seliger, a credit strategist with BofA Merrill Lynch, said in a research note released on Friday.

Fixed income inflows climbed to $6.03 billion from $4.97 billion “in the prior week, on the back of stronger flows for HY, loans and government bonds, while inflows to high-grade bonds remained stable,” Seliger said.

Equities reported a $6.43 billion outflow following a $4.37 billion inflow in the previous week.

High-grade inflows for corporate bonds, agencies, Treasuries and mortgages declined slightly to $3.61 billion for the past week from $3.67 billion in the previous week, according to the note.

Flows were “little changed” for short-term high-grade, down to $1.29 billion from $1.37 billion in the previous week, and excluding short-term, up modestly at $2.32 billion from $2.3 billion a week earlier, Seliger said.

Flows were little changed also for high-grade funds, which declined to $2.19 billion from $2.38 billion in the previous week, and ETFs, which rose to $1.42 billion from $1.29 billion in the prior week.

T-Mobile deal eyed

The Department of Justice said on Friday that its antitrust division and the attorneys general offices of five states filed a civil lawsuit to block the T-Mobile and Sprint transaction, but said that at the same time a proposed settlement was filed that would resolve antitrust concerns.

The settlement would require stipulations such as the divesture of Sprint’s prepaid business, including Boost Mobile, Virgin Mobile, and Sprint prepaid, and certain spectrum assets to Dish Network Corp.

A potential high-grade senior secured bond deal to fund the acquisition is projected in the $10 billion to $15 billion range, a market source said on Friday.

T-Mobile held a previously reported roadshow in the United States and Europe from April 30 through May 8 for a possible bond offering.

Barclays, Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC were the arrangers.

The merger transaction values Sprint at about $59 billion and values the combined company at about $146 billion.

The all-stock acquisition was announced on April 29, 2018 and was expected to close this summer following regulatory approvals.

T-Mobile said in a release announcing the deal that the combined company will have a foundation of secured investment-grade debt at closing.

Sprint is an Overland Park, Kan.-based telecommunications company.

T-Mobile is a mobile communications subsidiary of Bonn, Germany-based telecommunications company Deutsche Telekom AG.

PepsiCo improves

In the secondary market on Friday, PepsiCo’s 3.375% bonds due July 29, 2049 traded at 77 bps bid, 75 bps offered, a source said.

The bonds priced Thursday at a Treasuries plus 80 bps spread.

The food and beverage company is based in Purchase, N.Y.

American Express firms

American Express’ 2.5% notes due July 30, 2024 were seen at 71 bps bid, 69 bps offered in secondary trading on Friday, a market source said.

The company sold $1.5 billion of the notes (A3/BBB+/A) on Thursday at a spread of 72 bps over Treasuries.

The credit card services company is based in New York.

UnitedHealth notes firm

UnitedHealth Group’s 2.875% notes due Aug. 15, 2029 traded during the session at 77 bps bid, 74 bps offered, a market source said.

The notes priced in a $1 billion tranche on Tuesday at a spread of 80 bps over Treasuries.

The diversified health company is based in Minnetonka, Minn.

U.S. Bancorp sub notes tighten

U.S. Bancorp’s 2.4% senior notes due July 30, 2024 (A1/A+/AA-) traded on Friday at 59 bps bid, 56 bps offered, according to a market source.

The company sold $1.25 billion of the notes on Wednesday at a spread of 60 bps over Treasuries.

U.S. Bancorp’s $1 billion tranche of 3% subordinated notes due July 30, 2029 (A1/A-/A+) tightened to 87 bps bid, 85 bps offered in the secondary market.

The notes priced at a spread of Treasuries over 95 bps.

Minneapolis-based U.S. Bancorp is a holding company and parent of U.S. Bank NA.

AT&T eases

AT&T’s 4.35% notes due March 1, 2029 traded 1 bp softer on Friday at 133 bps bid, a market source said.

AT&T sold $3 billion of the 10-year notes on Feb. 13 at a spread of Treasuries plus 170 bps.

The telecommunications company is based in Dallas.

Verizon firms

Verizon Communications’ 3.875% green senior notes due Feb. 8, 2029 were flat on the day at 90 bps bid, a market source said.

Verizon sold $1 billion of the notes (Baa1/BBB+/A-) on Feb. 5 at a spread of Treasuries plus 120 bps.

The telecommunications company is based in New York City.

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