Morning Commentary: High-grade supply eyed; Kroger, MidAmerican Energy, Amphenol on tap

By Cristal Cody

Tupelo, Miss., Jan. 7 – Investment-grade issuers are expected to come out in force this week with syndicate sources predicting about $25 billion to $30 billion of volume.

Several issuers already announced plans early Monday to tap the primary market.

Kroger Co. is on deck with a two-part offering of 10- and 30-year senior notes.

MidAmerican Energy Co. intends to sell first mortgage bonds due 2029 and 2049.

Also, Amphenol Corp. is marketing senior notes.

While strong supply is anticipated, syndicate sources cautioned that market tone and continued volatility will dictate deal windows this week.

About 30 issuers remain in the deal pipeline, one source said.

High-grade issuers including John Deere Capital Corp., Berkshire Hathaway Finance Corp. and Ford Motor Credit Co. LLC priced more than $11 billion of bonds in the first week of 2019, sources report.

“With recent market volatility this is the weakest start to the year since at least 2006,” according to a BofA Merrill Lynch research note released on Monday. “Many corporate issuers will be in 4Q18 earnings-related blackouts over the coming weeks, implying that a lot of the pent-up supply from December could be delayed further.”

Secondary active

While the new year started off light on issuance, secondary market action ended the holiday-shortened week on a strong note. Friday’s session saw $20.4 billion of investment-grade issues trade, while trading volume totaled $17.94 billion on Thursday and $15.11 billion on Wednesday, according to Trace.

Kroger’s existing senior notes (Baa1/BBB/BBB-) were mostly unchanged over the morning, a source said.

The company’s 3.7% notes due 2027 headed out last week in the 183 basis points bid area, a market source said.

The notes were not active at the start of Monday’s session and were last seen on Friday trading at a price of 94.88, a source said.

The Cincinnati-based grocery retailer sold $600 million of the notes on July 17, 2017 at 99.941 to yield 3.707% and a Treasuries plus 140 bps spread.

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