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Morning Commentary: Corporate, SSA high-grade supply on deck; some Fed deal pressure expected
By Cristal Cody
Tupelo, Miss., March 20 – Corporate and SSA issuance is expected in the high-grade bond market on Tuesday.
Entergy Louisiana, LLC is marketing collateral trust mortgage bonds.
Virginia Electric and Power Co. plans to price 10-year senior notes.
Also, Kommunalbanken AS is in the deal pipeline with a $1 billion offering of two-year notes that were initially talked to price in the mid-swaps flat area.
BMO Capital Markets Corp., Citigroup Global Markets and TD Securities (USA) LLC are the lead managers of the Rule 144A and Regulation S transaction.
Investment-grade bond supply is forecast by market participants to stay light in the $20 billion area over the week.
Getting ahead of Fed
The Federal Reserve begins its two-day monetary policy meeting on Tuesday. The Fed is widely expected by market sources to raise rates by 25 basis points when the meeting concludes on Wednesday.
During Tuesday’s session, the investment-grade bond market could see “some supply pressures as companies try to get ahead of the Fed,” BofA Merrill Lynch analysts said in a note.
“While the FOMC-related uncertainties are especially high this time, as credit investors we think this is more likely than not a ‘sell the rumor, buy the news’ situation, as the Fed will go out of their way to produce a dovish rate hike,” BofA Merrill Lynch analysts said in the note.
“Also keep in mind that since the last rate hike the widening Libor-OIS spread has effectively tightened financial conditions by the equivalent of an additional rate hike.”
Elsewhere, secondary market volume on Monday included $15.33 billion of investment-grade bonds traded, according to Trace data.
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