Morning Commentary: Lexington Realty Trust markets notes; Oglethorpe Power eyes primary

By Cristal Cody

Tupelo, Miss., Aug. 14 – High-grade supply is expected to continue on Friday with at least one issuer offering bonds, sources report.

Lexington Realty Trust plans to price fixed-rate senior notes (Baa2/BBB-/BBB) following fixed income investor calls held on Thursday.

Additional supply is being eyed from other companies conducting fixed income investor calls this week, including Oglethorpe Power Corp.

Oglethorpe (Baa1//BBB+) will continue a second scheduled day of investor calls on Friday for a possible deal.

Investment-grade issuers priced more than $47 billion of bonds in the first four sessions of the week, beating market forecasts of about $25 billion to $30 billion of expected deal volume for the week.

Corporate supply included more than $13 billion of bonds on Monday, over $18 billion of securities on Tuesday, over $8 billion of notes on Wednesday and more than $7 billion of volume on Thursday.

Issuance this week has been led by Apple Inc.’s $5.5 billion of notes (Aa1/AA+) that priced in four tranches in the previous session.

Meanwhile, the Federal Reserve’s bond purchases under the secondary market corporate credit facility created in response to the Covid-19 pandemic are slowing, BofA Securities, Inc. analysts said in a research report released Friday.

The Federal Reserve’s weekly report “implies the Fed bought just $12 [million a day] of corporate bonds and ETFs on average this past week, the lowest daily pace so far since purchases began on May 12th and down again from $24 [million] the prior week,” the report said. “As the Fed has communicated the pace of SMCCF purchases slows as market conditions improve, which has been the case consistently.”

The Federal Reserve Board announced in July that it will extend the Covid-19 pandemic impact-response lending facilities, including the primary and secondary market corporate credit facilities, to Dec. 31 from Sept. 30. A commercial paper funding facility is set to expire on March 17, 2021.

Market tone was risk-off over the morning, a source said.

The iShares iBoxx Investment Grade Corporate Bond ETF was down a dime at $135.93.

The Pimco Investment Grade Corporate Bond index fell 33 cents to $115.53 in early trading.

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