Morning Commentary: Moody’s, Texas Instruments offer notes; hefty June deal pipeline forecast

By Cristal Cody

Tupelo, Miss., June 1 – In a rare Friday deal session, at least two bond issuers are expected to tap the high-grade primary market.

Moody’s Corp. is marketing senior notes, while Texas Instruments Inc. is offering an add-on to its 4.15% notes due May 15, 2048. Texas Instruments priced $1.3 billion of the notes on April 30.

Supply has been light over the short market week that may end up as the lowest volume week of the year to date, a source said.

On Thursday, BB&T Corp. priced a $1.5 billion two-tranche offering of notes, while about $3.4 billion of high-grade bonds priced on Wednesday from L3 Technologies, Inc., Southern California Edison Co., Dominion Energy, Inc. and MetLife Inc. The markets were closed on Monday for the Memorial Day holiday and reported supply stayed quiet in the first session back on Tuesday.

Syndicate sources had expected about $20 billion of volume for the week.

Because of the light volume as May closed, June’s deal pipeline is expected to be heftier than usual, according to BofA Merrill Lynch analysts.

“June is seasonally a slow month for supply with 8-year average volume of $72.3 [billion], or 6.6% of annual supply,” the analysts said in a note released Friday. “However, with only $5 [billion] of new issue supply this week due to Italy-induced global market weakness, much of this week's activity was likely postponed till next week, adding to the June pipeline.

“On top of that, there is still an overhang of M&A-related supply, as some M&A deals with expected June closing dates have not yet obtained debt financing.”

BofA Merrill Lynch analysts now expect about $90 billion to $100 billion of new supply in June.

In economic data released over the morning, the Labor Department reported that 223,000 jobs were added in May, above analysts’ forecast of an increase of 190,000 for the month. The unemployment rate was 3.8%, compared to the market forecast of 3.9%.

Elsewhere, investment-grade secondary trading has been strong over the last two sessions. On Thursday, $22.52 billion of bonds were traded, compared to $21.91 billion on Wednesday and $16.94 billion on Tuesday, according to Trace.

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