High-grade bond supply likely done for year; Steel Dynamics mixed; AT&T, Verizon firm

By Cristal Cody

Tupelo, Miss., Dec. 20 – The week closed with no high-grade corporate bonds priced and little activity expected for the remainder of 2019.

No issuance is forecast in the upcoming week, sources report.

The bond markets will close early on Tuesday and remain closed on Wednesday for the Christmas Day holiday.

Month to date, investment-grade corporate deal volume totals more than $20 billion, market sources said.

Inflows to high-grade bond funds and ETFs declined to $970 million for the past week ended Wednesday, according to a BofA Global research note released on Friday.

“This follows four consecutive weeks of very strong inflows, including a $5.07 [billion] inflow in the prior week,” the note said.

Flows increased for high-grade ETFs to $1.97 billion from $1.41 billion in the prior week but turned negative for funds and short-term high grade.

Funds reported a $1 billion outflow following a $3.66 billion inflow in the previous week, according to the report.

Short-term high-grade outflows came to $1.14 billion this past week after a $1.37 billion inflow a week earlier.

Inflows excluding short-term declined to $2.11 billion from $3.7 billion.

On Thursday, Lipper US Fund Flows reported that corporate investment-grade funds posted outflows of $180 million for the past week ended Wednesday, compared to inflows of $4.61 billion in the previous week and $2.23 billion in the prior week.

Meanwhile, the Markit CDX North American Investment Grade 33 index closed the day modestly tighter at a spread of 45.2 basis points.

In the secondary market, high-grade-rated peers were mostly unchanged on Friday following U.S. Steel Corp.’s announcement the previous day it plans to lay off workers and close a Michigan facility.

Steel Dynamics, Inc.’s $1 billion of fixed-rate senior notes (Baa3/BBB-/BBB) that priced on Dec. 9 were flat to modestly better in thin trading volume over the session.

Elsewhere in the secondary market, AT&T Inc.’s 4.35% global senior notes due March 1, 2029 firmed about 1 bp in heavy trading volume on Friday.

Verizon Communications Inc.’s 3.875% green senior notes due Feb. 8, 2029 tightened about 2 bps.

Steel Dynamics mixed

Steel Dynamics’ 2.8% notes due Dec. 15, 2024 traded about a dime better on Friday at 100.55 from the previous session in very light trading, according to market sources.

The company sold $400 million of the five-year notes at 99.925 to yield 2.816%, or a spread of 115 bps over Treasuries.

The tranche of 3.45% senior notes due April 15, 2030 priced in the same offering were not active on Friday and headed out at 100.38 bid.

Steel Dynamics sold $600 million of the notes on Dec. 9 at 99.736 to yield 3.481% and a Treasuries plus 165 bps spread.

Steel Dynamics is a Fort Wayne, Ind.-based steel producer and metals recycler.

AT&T steady

AT&T’s 4.35% notes due March 1, 2029 (Baa2/BBB/A-) firmed about 1 bp to 109 bps bid in heavy secondary volume on Friday, a market source said.

The notes headed out at 110.79, down slightly from 110.98 on Thursday and the 111 where the notes touched in early trading on Friday.

AT&T sold $3 billion of bonds on Feb. 13, 2019 at 99.508 and a spread of Treasuries plus 170 bps.

The telecommunications company is based in Dallas.

Verizon improves

Verizon Communications’ 3.875% green senior notes due Feb. 8, 2029 traded about 2 bps better over the session at a spread of 74 bps bid, according to market sources.

The notes were down modestly at 109.98 from a 110.00 handle area on Thursday.

Verizon sold $1 billion of the notes (Baa1/BBB+/A-) on Feb. 5, 2019 at 99.411 and a spread of Treasuries plus 120 bps.

The telecommunications company is based in New York City.

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