Morning Commentary: Investment-grade credit spreads firm; AT&T mixed; Verizon tightens

By Cristal Cody

Tupelo, Miss., Feb. 3 – High-grade corporate bonds traded mostly better after credit spreads improved on Monday and edged tighter early Tuesday, according to market sources.

“Positive developments out of Greece and a climbing crude price have shifted the sentiment this morning to be more risk on than we’ve seen recently,” RBC Capital Markets, LLC analysts said in a note. “Credit spreads are moving tighter this morning as government bonds are slightly lower.”

The Markit CDX North American Investment Grade index closed 2 basis points tighter at a spread of 69 bps on Monday.

Bonds in the telecommunications sector traded about 2 bps to 5 bps tighter, a source said.

AT&T Inc.’s bonds were mixed but stayed mostly better following the credit ratings downgrade on Monday by Moody’s Investors Service and Standard & Poor’s.

Moody’s downgraded AT&T’s ratings to Baa1 from A3 and Standard & Poor’s dropped the company’s ratings to BBB+ from A- based on concerns of additional debt following the company’s $18.2 billion bid for government airwaves.

Verizon Communications Inc.’s 3.5% notes due 2024 firmed 5 bps in the secondary market.

AT&T bonds firm

AT&T’s 4.8% bonds due 2044 (Baa1/BBB+/A) traded 2 bps tighter at 207 bps offered, a source said.

AT&T sold $2 billion of the notes on June 3 at a spread of Treasuries plus 140 bps.

The telecommunications company is based in Dallas.

Verizon notes improve

Verizon’s 3.5% notes due 2024 (Baa1/BBB+/A-) firmed 5 bps to 142 bps offered, according to a market source.

Verizon sold $2.5 billion of the notes at 135 bps over Treasuries on Oct. 22.

The telecommunications company is based in New York City.

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