Primary halts for strong jobs data; JPMorgan, Goldman Sachs firm; Hewlett Packard soft

By Aleesia Forni and Cristal Cody

Virginia Beach, Nov. 6 – High-grade primary activity took a pause on Friday, capping off a $27 billion week for the bond market, while participants focused on the release of October’s employment data.

The Labor Department reported that U.S. payrolls increased 271,000 during the month, blowing away the 185,000 forecast and leading some players to predict that the Federal Reserve will increase interest rates at its next policy meeting.

Additionally, the unemployment rate fell to 5% from 5.1%.

One market source noted that it was looking very likely that the Fed rate hike, its first in nearly a decade, would come in mid-December.

With that in mind, players are gearing up for what is expected to be another solid week for primary activity.

The week ahead, which will be shortened due to the mid-week Veterans Day holiday, could see another $25 billion to $30 billion of issuance from a wide-ranging mix of borrowers, sources say.

Genworth MI Canada Inc. announced on Friday that the company is considering pricing a debenture offering, its first deal since 2014.

Otherwise, the Canadian primary market was mostly quiet over the week with most bank and financial companies in earnings blackout, a source said.

Bonds were mixed in secondary trading over the day after a stronger-than-expected October jobs report fueled speculation of a December interest rate hike.

In the secondary market, JPMorgan Chase & Co.’s 4.25% subordinated notes due 2027 traded 4 bps tighter during the session.

Goldman Sachs Group Inc.’s 4.25% subordinated notes due 2027 headed out 5 bps better.

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

Charter Communications Inc.’s 4.908% notes due 2025 tightened 3 bps in secondary trading.

Kraft Heinz Co.’s 3.95% notes due 2025 improved 4 bps on Friday.

Also in the secondary market, Hewlett Packard Enterprise Co.’s 4.9% senior notes due 2025 traded 4 bps wider over the day. The company on Friday ended the first full week of operations after Hewlett-Packard Co.’s official split into HP Inc. and Hewlett Packard Enterprise.

The Markit CDX North American Investment Grade 25 index closed the day 1 bp wider at a spread of 79 bps.

Lipper sees outflows

Also this week, Lipper US Fund Flows reported net outflows of $357 million for corporate investment-grade funds for the week ended Nov. 4.

The number comes on the heels of the previous week’s $236 million of inflows.

Year to date, corporate high-grade funds have seen roughly $10 billion of inflows.

JPMorgan tightens

JPMorgan Chase’s 4.25% subordinated bonds due 2027 firmed 4 bps to 202 bps bid on Friday, according to a market source.

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

The financial services company is based in New York City.

Goldman firms

Goldman’s 4.25% subordinated notes due 2025 traded 5 bps tighter at 205 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.

Citi modestly better

Citigroup’s 4.4% subordinated notes due 2027 traded late Friday afternoon about 1 bp tighter at 230 bps bid, a source said.

The notes were quoted at the start of the session 2 bps weaker at 228 bps offered.

Citigroup sold $1.5 billion of the notes (Baa3/ BBB+/A-) in a reopening on Oct. 23 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.

Charter stronger

Charter Communications’ 4.908% notes due 2025 firmed 3 bps to 231 bps bid on Friday, a market source said.

The notes (Ba1/BBB-) were quoted about 1 bp tighter at 232 bps offered earlier in the day.

The company sold $4.5 billion of the bonds on July 9 at a spread of Treasuries plus 260 bps.

The provider of cable, internet and phone services is based in Stamford, Conn.

Kraft Heinz improves

Kraft Heinz’s 3.95% notes due 2025 traded 4 bps better at 150 bps bid on Friday, a market source said.

The notes (Baa3/BBB-) were sold in a $2 billion offering on June 23 at 155 bps over Treasuries before Kraft and Heinz merged on July 2.

The combined food and beverage company is based in Pittsburgh and Northfield, Ill.

Hewlett-Packard soft

Hewlett Packard Enterprise’s 4.9% notes due 2025 eased 4 bps to 281 bps bid in the secondary market, a source said.

The company sold $2.5 billion of the notes (Baa2/BBB/A-) on Sept. 30 at Treasuries plus 290 bps.

Hewlett Packard Enterprise is a Palo Alto, Calif.-based provider of technology services.

© 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.