High-grade bond primary market stalls ahead of holiday; bank, financial paper mixed

By Aleesia Forni and Cristal Cody

New York, Nov. 24 – Investment-grade borrowers stood down on Tuesday ahead of what is expected to be another quiet session on Wednesday prior to the Thanksgiving holiday.

“Probably wrapped for the week,” one market source said.

The subdued primary follows Monday’s $4.1 billion primary session and a pulled deal from Vodafone Group plc.

However, sources continue to foresee a heavy amount of issuance heading to the primary in the coming weeks ahead of the Federal Reserve’s meeting in mid-December.

Participants anticipate potential issuers rushing to the market prior to the meeting and a potential rate hike, and sources are calling for a storm of issuers to price around $20 billion to $25 billion in the week ahead.

The Canadian primary market has seen a “flurry” in preferred share deal activity this week after a lull over the past month, a source said. The market had quieted following Bank of Montreal’s $600 offering of five-year preferred shares, which priced with a 5.85% annual dividend in early October, sending bank subordinated bonds wider.

“Spreads have improved in that market,” the source said. “That market has finally settled out. The fear was that was the new normal, and people have satisfied themselves it was just a one-off.”

In secondary trading, bank and financial paper was mixed over the session.

JPMorgan Chase & Co.’s 4.25% subordinated notes due 2027 improved 4 bps.

Citigroup Inc.’s 4.4% subordinated notes due 2027 firmed about 1 bp on the day.

Bank of America Corp.’s 3.875% senior notes due 2025 were unchanged.

Goldman Sachs Group Inc.’s 4.25% subordinated notes due 2025 traded 2 bps weaker.

The Markit CDX North American Investment Grade 25 index was about 1 bp wider on Tuesday at a spread of 86 bps.

Vodafone in focus

A pulled deal from Vodafone Group sent shock waves through the market this week.

The company had announced early Monday plans to sell a benchmark offering of 30-year senior notes (Baa1/BBB+/BBB+) talked in the 250 bps area over Treasuries.

However, market sources noted that investors wanted stronger covenant protections due to the possibility that the company could decide to take on more debt soon and become credit negative.

The deal did not feature a change-of-control put, a market source said.

These concerns led to the London-based company’s ultimate decision to pull the deal from the market.

While one source noted that the pulled deal was “certainly not a good sign” for the market, another stated that it was an isolated incident and would not have a lasting effect on the high-grade market.

Bookrunners for the telecommunication company’s deal were Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

JPMorgan tightens

JPMorgan Chase’s 4.25% subordinated bonds due 2027 tightened 4 bps in secondary trading to 193 bps bid, according to a market source.

JPMorgan Chase sold $2 billion of the bonds (Baa1/A-/A) on Sept. 23 at a spread of Treasuries plus 215 bps.

The financial services company is based in New York City.

Citigroup firms

Citigroup’s 4.4% subordinated notes due 2027 traded about 1 bp tighter on Tuesday at 224 bps bid, according to a market source.

Citigroup sold $1.5 billion of the notes (Baa3/ BBB+/A-) in an Oct. 23 add-on at 233 bps over Treasuries. The company originally sold $2 billion of the notes on Sept. 23 at Treasuries plus 235 bps.

The financial services company is based in New York.

Bank of America stable

Bank of America’s 3.875% senior notes due 2025 were unchanged at 140 bps bid in late afternoon secondary trading, a market source said.

Bank of America sold $2.5 billion of the notes (Baa1/A-/A) on July 27 at 167 bps over Treasuries.

The financial services company is based in Charlotte, N.C.

Goldman eases

Goldman’s 4.25% subordinated notes due 2025 eased 2 bps over the session to 202 bps bid, according to a market source.

Goldman sold $2 billion of the notes (Baa2/BBB+/A-) on Oct. 16 at a spread of Treasuries plus 230 bps.

The financial services company is based in New York City.

© 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.