Morning Commentary: Investment-grade bond market action thins; AT&T notes active in secondary

By Cristal Cody

Tupelo, Miss., Dec. 18 – Primary action remained quiet in the high-grade bond market early Monday with light activity expected over the week.

Little to no issuance is expected ahead of the Christmas Day holiday with market participants forecasting up to about $2 billion of volume for the week.

Focus over the morning centered on tax reform and the growing chance of a final passage of the tax bill before the holidays.

The three-month Libor yield was up 1 basis point at the start of the session to 1.61%.

In the secondary market, AT&T Inc.’s bonds (Baa1/BBB+/A-) were active in early trading, according to a market source.

AT&T’s 3.9% notes due Aug. 14, 2027 traded up slightly to 100.51 in mid-morning trading from the 100.40 area on Friday. The notes saw two large trades over the morning at 100.40 and 100.30.

AT&T sold $5 billion of the notes on July 27 at 99.827 to yield 3.92% and a spread of 160 bps over Treasuries.

The company was expected to close this year on its $85.4 billion cash and stock acquisition of Time Warner Inc. The Justice Department has filed a federal lawsuit to block the deal, and a trial date is set for March 19, 2018.

Time Warner’s 2.95% notes due July 15, 2026 (Baa2/BBB/BBB+) softened to 94.75 in thin trading on Monday from 95.13 on Friday.

The New York-based media and entertainment company sold $800 million of the notes on May 5, 2016 at 98.70 to yield 3.1%, or a spread of Treasuries plus 135 bps.

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