Supply resumes; Waste Management sells $2.5 billion notes; high-grade funds post outflows

By Cristal Cody

Tupelo, Miss., Nov. 5 – The investment-grade primary market stirred on Thursday following three consecutive sessions of zero deal volume as votes in the U.S. presidential election continue to be counted.

Waste Management, Inc. priced $2.5 billion of guaranteed fixed-rate senior notes (Baa1/A-/BBB+) in four tranches to strong demand and on the tight side of guidance, a source said.

Book orders totaled $19.8 billion with a final book demand of more than $14 billion.

The offering is the first corporate issue of the week.

In other supply, Hydro-Quebec priced C$500 million of 40-year debentures (Aa2/AA-/DBRS: AA) over the day.

Zero to about $10 billion of dollar-denominated investment-grade corporate volume was expected by syndicate sources this week.

Investment-grade corporate funds saw outflows of $1.58 billion for the week ended Wednesday, Refinitive Lipper US Fund Flows reported.

High-grade corporate funds had $3.42 billion of inflows in the previous week and $6.76 billion of inflows in the week prior.

Market tone remained positive over Thursday’s session as votes continued to be counted in the presidential election and the Federal Reserve wrapped its two-day monetary policy meeting.

The Federal Reserve said it will maintain its zero to 0.25% target range for the federal funds rate.

“The path of the economy will depend significantly on the course of the virus,” the Fed said in a release following the policy meeting. “The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

The committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and expects to “maintain an accommodative stance of monetary policy until these outcomes are achieved.”

Coming up on Friday, the Labor Department will release the October non-farm payroll report.

Equities continued to rally over the day with the Dow Jones industrial average up 1.95%, the S&P 500 up 1.95% and the Nasdaq 2.59% better.

The PIMCO Investment Grade Corporate Bond index, which closed Wednesday with a 1.17% gain, finished 0.21% better at $115.68.

The iShares iBoxx Investment Grade Corporate Bond ETF rose 0.32% to $136.55 after closing the previous session up 1.33%.

High-grade credit spreads have tightened more than 11 basis points through the first four sessions of the week.

The Markit CDX North American Investment Grade 35 index closed Thursday 3.4 bps tighter at a spread of 53.85 bps.

Lowe’s rallies

In the secondary market, Waste Management’s notes traded wrapped around issuance on the five-year tranche to 1 bp tighter on the bid side across the tranches due March 15, 2028, March 15, 2031 and Nov. 15, 2050, a source said.

Lowe's Cos., Inc.’s notes (Baa1/BBB+/) priced in October were among the most active issues in the secondary market on Wednesday and continued to trade better than issuance on Thursday, a source said.

The company’s 1.7% notes due Oct. 15, 2030 were up modestly on the day at the 101 area going out.

The notes priced in a $1.25 billion tranche on Oct. 7 at 99.617 to yield 1.742% and a spread of Treasuries plus 95 bps.

The Mooresville, N.C.-based home improvement company’s 3% bonds due Oct. 15, 2050 headed out in the 107 area after trading at 105 on heavy activity on Wednesday.

Lowe’s sold $1.75 billion of the 30-year bonds in the October offering at 99.902 to yield 3.005%, or a Treasuries plus 140 bps spread.

High-grade secondary market volume this week includes $16.51 billion of bonds traded on Wednesday, $18.38 billion on Tuesday and $18.92 billion on Monday, according to Trace.

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