Week closes with no new deals; supply falls short of expectations; spreads firm; Verizon soft

By Aleesia Forni and Cristal Cody

Virginia Beach, July 18 – The primary market saw no new issuers bring deals on Friday, capping off a week that fell short of earlier expectations.

In total, the investment-grade bond market saw $10.8 billion of new issuance during the week.

Sources had predicted around $15 billion to $20 billion of supply.

The week’s primary activity was also down slightly from last week’s total supply of roughly $12 billion.

In other market news, Lipper reported inflows of $1.637 billion into corporate investment-grade funds for the week ended July 16, up significantly from last week’s $417.4 million of inflows.

This brings the year-to-date total to roughly $46 billion.

The week ahead is expected to be “somewhat similar” to this week, with around $15 billion of supply predicted.

Investment-grade bond spreads tightened over the session on Friday after widening on overseas events on Thursday, sources report.

The Markit CDX North American Investment Grade series 22 index firmed 2 basis points to a spread of 58 bps.

Verizon Communications Inc.’s bonds (Baa1/BBB+/A-) were softer on the day but mostly unchanged in late afternoon secondary trading, according to market sources.

Verizon eases

Verizon’s 6.55% bonds due 2043 traded 4 bps to 5 bps wider early Friday at 164 bps offered, a source said.

The notes ended the day slightly higher at 125.60 to yield 4.892% from 125.54 to yield 4.895% on Thursday, according to a market source.

Verizon sold $15 billion of the bonds at Treasuries plus 265 bps, or 99.883 to yield 6.559%, on Sept. 11.

The telecommunications company is based in New York City.

Bank/brokerage CDSs flat to lower

Investment-grade bank and brokerage CDS prices were unchanged to lower on Thursday, according to a market source.

Bank of America Corp.’s CDS costs were flat at 69 bps bid, 72 bps offered. Citigroup Inc.’s CDS costs decreased 1 bp to 66 bps bid, 69 bps offered. JPMorgan Chase & Co.’s CDS costs also tightened 1 bp to 56 bps bid, 59 bps offered. Wells Fargo & Co.’s CDS costs also were unchanged at 45 bps bid, 50 bps offered.

Merrill Lynch’s CDS costs closed unchanged at 73 bps bid, 77 bps offered. Morgan Stanley’s CDS costs also closed flat at 66 bps bid, 71 bps offered. Goldman Sachs Group, Inc.’s CDS costs declined 2 bps to 71 bps bid, 76 bps offered.

Paul Deckelman contributed to this review.

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