High-grade supply thins; light volume on tap for week ahead, November; Duke, BNG eye deals

By Cristal Cody

Tupelo, Miss., Oct. 26 – The investment-grade primary market stayed quiet on Friday as the week closed out short of supply forecasts with volatility scaring off issuers.

More than $14 billion of bonds, including $6 billion of corporate issuance, priced over the week.

Syndicate sources had expected about $15 billion to $20 billion of deal volume.

New issuance in the week ahead is expected to remain thin while November also will offer few days of pricing action due to the mid-term elections, the Federal Reserve’s monetary policy meeting and the Veterans Day and Thanksgiving Day holidays, sources said.

About $15 billion to $20 billion of investment-grade issuance is forecasted for the upcoming week, with as little as $5 billion of supply anticipated, depending on market volatility, according to syndicate sources.

For November, syndicate sources expect about $75 billion to $85 billion of deal volume.

Near-term deals

A couple of issuers intend to tap the primary market in the near-term horizon.

Duke Energy Carolinas LLC is marketing a benchmark-sized dollar-denominated offering of green first and refunding mortgage bonds.

Bank Nederlandse Gemeenten NV also plans a Rule 144A and Regulation S offering of three-year sustainable bonds.

Secondary mixed

Bonds were mixed in the secondary market on Friday.

Constellation Brands, Inc.’s $2.15 billion of senior notes (Baa3/BBB/) priced in four tranches on Monday were wrapped around issuance to about 1 basis point tighter.

Kimberly-Clark Corp.’s 3.95% senior notes due Nov. 1, 2028 priced on Wednesday tightened about 4 bps.

The Markit CDX North American Investment Grade 31 index softened about 2 bps to close Friday at a spread of 70 bps.

For the week ended Oct. 24, Lipper US Fund Flows reported inflows of $415 million for corporate investment-grade funds, up from minus $54 million of inflows reported in the prior week.

In the overall high-grade bond market, which includes corporates, Treasuries, agencies and mortgages, outflows for the past week declined to $600 million from a $950 million outflow in the prior week, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

Inflows to short-term high grade rose to $1.46 billion from $850 million, while outflows outside of short-term increased to $2.06 billion from $1.80 billion in the previous week.

“High grade outflows continue to be driven by funds with a $750 [million] outflow this past week and a $1.2 [billion] outflow in the prior week,” Seliger said.

Duke plans roadshow

Duke Energy Carolinas (Aa2/A/) will hold a roadshow and conduct fixed-income investor calls on Wednesday for a benchmark-sized dollar-denominated offering of green first and refunding mortgage bonds, according to a market source.

BofA Merrill Lynch, BNP Paribas Securities Corp., MUFG, Scotia Capital (USA) Inc. and TD Securities (USA) LLC are the arrangers.

The Charlotte, N.C.-based company generates, transmits, distributes and sells electricity and is a wholly owned subsidiary of Duke Energy Corp.

BNG holds investor calls

Bank Nederlandse Gemeenten (Aaa/AAA/AA+) began a round of fixed-income investor calls on Friday for a Rule 144A and Regulation S offering of three-year sustainable bonds, according to a market source.

BNP Paribas Securities, Citigroup Global Markets Inc. and TD Securities are the arrangers.

The banking services company is based in The Hague.

Constellation mixed

In the secondary market, Constellation Brands’ 4.65% notes due Nov. 15, 2028 traded on Friday at 149 bps bid, 146 bps offered, a source said.

The $500 million tranche priced on Monday at a Treasuries plus 150 bps spread.

The company’s $500 million of 5.25% notes due Nov. 15. 2048 were flat at 190 bps bid, 185 bps offered.

The 30-year notes priced at a spread of 190 bps over Treasuries.

Constellation Brands is a Victor, N.Y.-based producer, importer and distributor of beer, wine and liquor.

Kimberly-Clark firms

Kimberly-Clark’s 3.95% senior notes due Nov. 1 2028 (A2/A/) priced on Wednesday firmed to 81 bps bid, 79 bps offered in secondary trading, a source said.

The notes were sold in a $500 million tranche with a spread of 85 bps over Treasuries.

The consumer paper products company is based in Irving, Texas.

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