JPMorgan, American Honda price; credit spreads end week tighter; bank paper tightens

By Cristal Cody

Tupelo, Miss., March 15 – Primary action continued in the high-grade bond market on Friday with two reported deals priced.

JPMorgan Chase & Co. sold $2.25 billion of four-year fixed-to-floating rate notes.

American Honda Finance Corp. brought $400 million of 18-month floating-rate medium-term notes to the market.

The transactions bring week-to-date corporate deal volume to more than $27 billion, beating market forecasts of about $25 billion of supply.

JPMorgan Chase’s deal follows other bank and financial issuers over the week, including BB&T Corp., Bank of America Corp. and Citigroup Inc.

Looking to the week ahead, about $20 billion to $25 billion of bond supply is expected by syndicate sources.

Market focus also will be on the Federal Reserve’s upcoming monetary policy meeting on Tuesday and Wednesday.

The Markit CDX North American Investment Grade 31 index ended the day mostly unchanged at a spread of 58 basis points, about 7 bps tighter on the week.

Investment-grade corporate spreads have tightened 5 bps to 121 bps from 126 bps over the past six week, according to a Wells Fargo Securities, LLC research report on Friday.

In the secondary market, new issues priced this week remained mostly tighter than issuance on Friday, a source said.

JPMorgan’s notes tightened nearly 3 bps in aftermarket trading.

Bank of America’s $5 billion of fixed-to-floating rate senior notes (A2/A-/A+) that priced on Tuesday traded about 1 bp to 4 bps better.

Citigroup’s $2.5 billion of 3.98% fixed-to-floating rate senior notes due March 20, 2030 that were sold on Wednesday firmed more than 3 bps.

Meanwhile, inflows were stronger over the week ended Wednesday, according to a BofA Merrill Lynch report released on Friday.

Bond buying accelerated to $7.01 billion from $2.74 billion in the previous week on stronger flows for government and high-yield issues, while inflows to the high-grade space remained mostly stable, said Yuri Seliger, a BofA Merrill Lynch credit strategist.

The net inflow to high-grade, which includes corporates, Treasuries, agencies and mortgages, rose to $5.1 billion from $4.68 billion in the previous week and $5.01 billion for the week ended Feb. 27.

“The split between short-term and [excluding] short-term flows was also little changed,” Seliger said.

Short-term high-grade inflows declined slightly to $2.36 billion from $2.55 billion, while excluding short-term inflows increased to $2.74 billion from $2.13 billion, the report said.

A decline in inflows to funds, to $2.58 billion from $4.24 billion, was offset by an increase in inflows to ETFs to $2.52 billion from $0.44 billion.

U.S. stock funds and ETFs saw the second largest inflow on record this week after investors bought $27.26 billion for the week ended March 13, behind the $38.3 billion record in March 2018, Seliger said.

JPMorgan sells $2.25 billion

JPMorgan Chase (A2/A-/AA-) priced $2.25 billion of 3.207% fixed-to-floating rate notes due April 1, 2023 on Friday at a spread of Treasuries plus 80 bps, according to a market source.

The rate will convert to a floating rate of Libor plus 69.5 bps after the initial fixed-rate period.

The notes were initially talked to price in the Treasuries plus 85 bps area.

J.P. Morgan Securities LLC was the bookrunner.

In aftermarket trading on Friday, the notes firmed to 77.5 bps bid.

The financial services company is based in New York City.

American Honda prices

American Honda Finance (A2/A) priced $400 million of floating-rate medium-term notes due Oct. 19, 2020 on Friday at par to yield Libor plus 28 bps, according to an FWP filing with the Securities and Exchange Commission.

The interest rate will initially reset on April 19, 2019 and will reset on each interest payment date.

BofA Merrill Lynch and SG Americas Securities, LLC were the bookrunners.

American Honda Finance is a Torrance, Calif.-based financing arm of American Honda Motor Co.

Bank of America firms

Bank of America’s $2.25 billion of 3.458% notes due March 15, 2025 traded on Friday at 101 bps bid, 98 bps offered, a market source said.

The bank sold the notes on Tuesday at par to yield a spread of Treasuries plus 105 bps. The notes will convert March 15, 2024 to a floating rate of Libor plus 97 bps after the initial fixed-rate period.

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

Citigroup improves

Citigroup’s 3.98% fixed-to-floating rate senior notes due March 20, 2030 (A3/BBB+/A) were quoted better in the secondary market at 134 bps bid, 132 bps offered on Friday, a source said.

The company sold $2.5 billion of the notes on Wednesday at par to yield a spread of Treasuries plus 137.5 bps.

The coupon will reset March 20, 2029 to a floating rate of Libor plus 133.8 bps.

The financial services company is based in New York.

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