Midday Commentary: Investment-grade bonds firm after job data; AT&T widens; Kohl's flat

By Cristal Cody

Tupelo, Miss., Sept. 6 - Investment-grade bonds firmed early Friday after the Labor Department released the August job report but soon took back the gains over the morning session, according to market sources.

"Things initially tightened post the economic numbers this morning, but have since return to unchanged for the day," a trader said.

The Labor Department reported that the August non-farm payroll added 169,000 jobs versus the 180,000 forecast. The unemployment rate was little changed at 7.3%.

High-grade bonds in general are 2 basis points to 4 bps wider on the two-day average, the trader said.

In the secondary market, activity continues to be heavy in the technology, media and telecommunications sector following Verizon Communication Inc.'s announcement on Monday that it will purchase Vodafone Group plc's 45% stake in Verizon Wireless, a trader said.

Market sources expect the New York City-based telecommunications company to sell as much as $25 billion in bonds in various currencies to help finance the acquisition.

"It seems as if the entire sector is repricing around the Verizon deal," a trader said. "A name that deviated from the generic widening was AT&T - widened out by as much as 15 [bps] in some specific issues."

Verizon's bonds also are weaker with the company's 2.45% notes due 2022 (Baa1/BBB+/A-) trading in the 148 bps bid area - 20 bps wider than Tuesday's session, a trader said.

Kohl's flat

In the new issue secondary market, Kohl's Corp.'s $300 million offering of 4.75% notes due 2023 (Baa1/BB+/BBB+) traded wrapped around the issue price on the bid side at 180 bps bid, 175 bps offered early Friday, according to a trader.

Kohl's priced the notes at a spread of Treasuries plus 180 bps on Thursday.

The Menomonee Falls, Wis.-based department store chain's existing 3.25% notes due 2023 traded on Friday at 124 bps over the bond curve, another market source said. Kohl's sold $350 million of the 3.25% 10-year notes in September 2012 at a spread of Treasuries plus 145 bps.

TD quiet

Toronto-Dominion Bank's $3.75 billion three-part offering of floating-rate and fixed-rate notes (Aa3/A+/) priced on Thursday were not seen in secondary trading, sources said.

The Toronto-based financial services and banking company's fixed-rate tranches of 1.5% notes due 2016 and 2.625% notes due 2018 were not active in the secondary market late Thursday or early Friday, according to traders.

"Haven't seen any trading yet," one source said Friday morning.

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