Morning Commentary: U.S. Bancorp, Owl Rock to tap high-grade primary; Quebec on deck

By Cristal Cody

Tupelo, Miss., July 16 – Investment-grade supply remains light this week but is expected to include corporate and sovereign, supranational and agency issuance on Thursday, according to market sources.

U.S. Bancorp is offering 10-year medium-term senior notes (A1/A+/AA-) with initial price talk in the Treasuries plus 105 basis points area.

Owl Rock Capital Corp. also plans to tap the primary market over the day with a 10-year senior note (Baa3/BBB-/BBB-) offering. Initial guidance is in the 425 bps to 437.5 bps over Treasuries area.

In SSA primary action, the Province of Quebec (Aa1/AA-/AA-) is offering dollar-denominated five-year global notes at mid-swaps plus 30 bps.

Initial price talk was in the mid-swaps plus 33 bps area.

High-grade issuers have priced $2.5 billion of SSA supply and $7.25 billion of corporate bonds week to date.

As little as $10 billion to about $20 billion of volume was expected by market participants for the week.

Coronavirus impact on bank and financial earnings have been in focus with the release of second-quarter earnings reports this week from Citigroup Inc., JPMorgan Chase & Co., and Wells Fargo & Co. on Tuesday, Goldman Sachs Group Inc. on Wednesday and Bank of America and Morgan Stanley on Thursday.

Investment-grade market tone started the session off positive.

The iShares iBoxx Investment Grade Corporate Bond ETF rose 0.26% to 136.95 by midmorning.

The Pimco Investment Grade Corporate Bond Index was up 0.25% at 115.96.

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

Hewlett Packard Enterprise Co.’s $1.75 billion of senior notes (Baa2/BBB/BBB+) priced in two tranches om Tuesday were last seen about 1 bp tighter than issuance.

The company’s $1 billion of 1.45% notes due April 1, 2024 were priced at a spread of Treasuries plus 130 bps.

Initial guidance was in the Treasuries plus 140 bps area.

A $750 million tranche of 1.75% notes due April 1, 2026 priced at a spread of Treasuries plus 150 bps versus initial talk in the 160 bps spread area.

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