High-grade supply thin; Alberta prices on top of talk; SOFR volume grows; Amazon.com eases

By Cristal Cody

Tupelo, Miss., Oct. 25 – High-grade corporate issuers stayed out of the primary market on Thursday as volatility continues to hamper supply and focus turned to earnings releases.

The Province of Alberta priced $2.25 billion of five-year global bonds on top of talk at a spread of mid-swaps plus 25 basis points.

Also on Thursday, Fannie Mae priced a $5 billion offering of floating-rate corporate notes in three tranches based on the Secured Overnight Financing Rate.

The offering saw demand of more than $18 billion and is Fannie Mae’s second issuance of SOFR securities since pricing its first deal in July.

Fannie Mae said in a press release that the second transaction was designed to provide additional points on the SOFR curve and serve as a benchmark for market participants.

“By combining our first issuance that has now rolled down the curve, the market has the benefit of six maturity points,” Nadine Bates, senior vice president and treasurer at Fannie Mae, said in the release. “The total orders exceeded $18 billion from a broad array of investors, attesting to the market’s increased readiness and acceptance of SOFR.”

The benchmark may be used to replace Libor, which will be phased out by 2021.

Fannie Mae notes that since its initial transaction in July, “there has been significant momentum in the SOFR market for floating-rate securities, including S&P’s confirmation of SOFR as an anchor rate for S&P-rated money market funds, the Federal Reserve’s announcement that enables issuers to shorten the lockout period ahead of coupon payments for some floating-rate securities to two days and additional SOFR transactions from a variety of issuers.”

In addition to Fannie Mae’s two deals, Wells Fargo Bank NA sold $1 billion of floating-rate notes due March 25, 2020 at SOFR plus 48 bps on Sept. 18.

Other bonds issued with the benchmark include Metropolitan Life Global Funding I’s $1 billion of two-year floating-rate notes priced on Aug. 30 at a spread of 57 bps plus SOFR and the International Bank for Reconstruction and Development’s $1 billion of two-year floating-rate notes priced on Aug. 14 at SOFR plus 22 bps.

Elsewhere in the high-grade market on Thursday, Royal Bank of Canada priced an upsized C$350 million, or 14 million shares, of series BO non-cumulative five-year rate reset preferred stock with a 4.8% annual dividend for the initial period ending Feb. 24, 2024.

High-grade supply looks set to fall short of syndicate forecasts for a second consecutive week. Investment-grade issuers have priced more than $14 billion of bonds, including $6 billion of corporate notes, week to date.

Syndicate sources forecasted about $15 billion to $20 billion of deal volume for the week.

Alberta prices $2.25 billion

Alberta (Aa1/AA/) priced $2.25 billion of 3.35% five-year global bonds on Thursday at a spread of mid-swaps plus 25 bps, or Treasuries plus 39.7 bps, according to an FWP filing with the Securities and Exchange Commission.

The bonds due Nov. 1, 2023 were initially talked to print in the mid-swaps plus 25 bps area.

The issue priced at 99.90 to yield 3.372%.

National Bank of Canada Financial Inc., RBC Capital Markets, LLC, Scotia Capital (USA) Inc. and TD Securities (USA) LLC were the bookrunners.

Fannie Mae prices $5 billion

Fannie Mae priced $5 billion offering of the floating-rate corporate notes in three tranches during the session, according to a news release.

A $2 billion tranche of six-month notes priced at a spread of SOFR plus 4 bps.

Fannie Mae sold $1.5 billion of 12-month notes at SOFR plus 7 bps.

The final $1.5 billion tranche of 18-month floating-rate notes were sold at SOFR plus 10 bps.

J.P. Morgan Securities LLC, Nomura Securities International, Inc. and TD Securities were the bookrunners.

The mortgage credit provider is based in Washington, D.C.

Bonds mixed

The Markit CDX North American Investment Grade 31 index firmed nearly 2 bps to close at a spread of 68 bps after softening 3 bps in the previous session.

New issues priced this week are trading about 2 bps tighter on average from issuance, according to a BofA Merrill Lynch research report released on Thursday.

Constellation Brands, Inc.’s $1.5 billion of fixed-rate senior notes priced in three tranches on Monday were quoted about 3 bps to 4 bps better than issuance in the secondary market.

Elsewhere in the secondary market, Amazon.com, Inc.’s $3.5 billion of 3.15% notes due Aug. 22, 2027 (Baa1/AA-/) have widened about 20 bps since closing flat on Monday at 65 bps bid, a source said.

The bonds ended Thursday 5 bps weaker at 85 bps bid on reaction to missed profits estimates in the company’s third quarter earnings report.

On Tuesday, the issue eased about 9 bps and widened another 5 bps to 6 bps on Wednesday.

The Seattle-based online commerce company sold $3.5 billion of the notes on Aug. 15, 2017 at a spread of Treasuries plus 90 bps.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.