High-grade volume thins; Alberta prices $2.5 billion notes; Quebec eyes primary; bonds mixed

By Cristal Cody

Tupelo, Miss., July 15 – Light high-grade primary action was seen on Wednesday as a summer lull kicks in.

The Province of Alberta (Aa2/AA/) priced $2 billion of 10-year notes tighter than talk.

The Federal Home Loan Bank System announced it will skip pricing a Global note on Wednesday with the agency’s next funding opportunity scheduled for July 23.

In other action, Royal Bank of Canada marketed Canadian dollar-denominated 60-year non-viability contingent capital rate reset limited recourse capital notes.

Royal Bank of Canada also plans to price C$1,000-par perpetual non-cumulative five-year fixed-rate reset first preferred shares (Baa3/BBB).

Meanwhile, coming up on Thursday, the Province of Quebec (Aa1/AA-/AA-) plans to price a dollar-denominated offering of five-year global notes.

Initial price talk is in the mid-swaps plus 33 basis points area.

Investment-grade supply week to date includes $2.5 billion of sovereign, supranational and agency issuance and $7.25 billion of corporate volume.

As little as $10 billion to about $20 billion of high-grade deal volume was expected by market participants with second quarter earnings reports in focus over the week.

Goldman Sachs Group Inc. reported better-than-expected earnings on Wednesday.

Citigroup Inc., JPMorgan Chase & Co., and Wells Fargo & Co. released second quarter results on Tuesday.

Bank of America and Morgan Stanley report on Thursday.

The high-grade market was mostly positive over the session on reported gains in coronavirus vaccine research.

Credit spreads came in more than 2 bps on the day.

The Markit CDX North American Investment Grade 33 index headed out at a spread of 71.84 bps.

The iShares iBoxx Investment Grade Corporate Bond ETF rose 0.2% to 136.57 on Wednesday.

The PIMCO Investment Grade Corporate Bond index edged down 0.7% to 115.67.

Hewlett Packard firms

In the secondary market, new issues were mixed, a source said.

Hewlett Packard Enterprise Co.’s $1.75 billion of senior notes (Baa2/BBB/BBB+) priced in two tranches on Tuesday firmed about 1 bp to 2 bps in secondary trading.

The company’s $1 billion tranche of 1.45% notes due April 1, 2024 improved about 2 bps from where the notes priced at a spread of Treasuries plus 130 bps.

Initial guidance was in the Treasuries plus 140 bps area.

Mars Inc.’s $2.5 billion of guaranteed senior notes (A1/A/) priced in four tranches on Monday traded wrapped around issuance to 2 bps to 3 bps tighter on the longer-dated tranches.

The company’s 0.875% notes due July 16, 2026 were unchanged.

Mars sold $500 million of the notes at a spread of 60 bps over Treasuries.

Initial price talk was in the Treasuries plus 95 bps area.

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