Midday Commentary: ABN flat, Citigroup eases in early trading; spreads in 'holding pattern'

By Cristal Cody

Tupelo, Miss., Oct. 25 - Investment-grade bonds traded flat to slightly wider early Friday but are better on the week, according to market sources.

"Credit spreads remain in a holding pattern near the tightest levels of the cycle as a slew of earnings releases are being met with a collective yawn by credit investors," RBC Capital Markets, LLC analysts said in a note on Friday.

The Markit CDX North American Investment Grade series 21 index, which closed Thursday unchanged at a spread of 72 basis points, is tighter on the week and year, according to Barclays.

"The end of the government shutdown and the slightly weaker-than-expected September employment report - which allayed the market's tapering concerns - led investment-grade credit to tighten to within 1 bp from post-crisis tights in both cash and CDS this week," Barclays analysts said in a note on Friday.

"The CDX index has significantly outperformed the cash index this year. In spread terms, the CDX.IG index is more than 40 [bps] tighter since Dec. 31, 2012, after adjusting for rolls."

More than $40 billion of new high-grade bond issuance hit the market over the week, according to a market source.

In the secondary market, ABN Amro Bank NV's new 2.5% notes due 2018 traded mostly unchanged from the previous session.

Citigroup Inc.'s 3.875% senior notes due 2023 sold on Monday widened about 4 bps from where the notes traded on Thursday, a source said.

ABN flat

ABN Amro Bank's 2.5% notes due 2018 (A2/A/A+) were seen early Friday at 118 bps offered and later in the morning at 120 bps offered, a trader said.

The notes, sold in a $1 billion offering on Wednesday at a spread of Treasuries plus 127 bps, traded at 120 bps bid, 118 bps offered on Thursday.

The bank and financial services company is based in Amsterdam.

Citigroup eases

Citigroup's 3.875% senior notes due 2023 (Baa2/A-/A) eased to 140 bps bid, 135 bps offered in secondary trading early Friday, a trader said.

The notes were quoted early Thursday at 136 bps bid, 133 bps offered.

Citigroup sold $2 billion of the notes at a spread of Treasuries plus 130 bps on Monday.

The financial services company is based in New York.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.