High-grade supply thin; January pipeline eyed; UnitedHealth, Eversource tighten

By Cristal Cody

Tupelo, Miss., Dec. 14 – The investment-grade bond market stayed quiet over Friday’s session following more than $4 billion of issuance during the week.

Bond supply approached the top of syndicate forecasts of zero issuance up to about $5 billion of volume.

A few more deals are possible before the year is over, but syndicate sources said issuance is mostly wrapped for the rest of the month.

More than $8 billion of supply has been brought to the primary market month to date.

The week ahead is forecast to see no issuance to up to $2 billion of supply, sources said.

Market sources widely expect a rate hike next week following the Federal Reserve’s two-day monetary policy meeting that ends on Wednesday.

Several deals have been delayed in December, which initially was expected to post as much as $30 billion of volume, hinting at a strong January calendar, according to market sources.

Volume in the month ahead is expected to total $100 billion to $125 billion, market sources said.

Meanwhile on Friday, UnitedHealth Group Inc.’s $3 billion four-tranche offering of senior notes (A3/A+/A-) that priced the previous day traded about 3 basis points to 8 bps tighter in the secondary market.

Eversource Energy’s $900 million of senior notes (Baa1/A/BBB+) that priced on Monday tightened about 10 bps to 14 bps during the week.

Credit spreads eased during the session. The Markit CDX North American Investment Grade 31 index closed about 2 bps softer at a spread of 79 bps.

UnitedHealth improves

UnitedHealth Group’s 3.5% notes due Feb. 15, 2024 traded on Friday at 77 bps bid, 74 bps offered, a market source said.

The issue priced on Thursday in a $750 million tranche at a spread of 80 bps over Treasuries.

UnitedHealth’s $850 million of 3.875% notes due Dec. 15, 2028 firmed to 97 bps bid, 94 bps offered.

The notes priced with a Treasuries plus 100 bps spread.

The diversified health company is based in Minnetonka, Minn.

Eversource Energy firms

Eversource Energy’s 3.8% notes due Dec. 1, 2023 tightened to 107 bps bid, 104 bps offered in secondary trading, a market source said.

The notes were sold in a $400 million tranche on Monday at a spread of 117 bps over Treasuries.

Eversource Energy’s 4.25% notes due April 1, 2029 traded better on Friday at 133 bps bid, 129 bps offered.

The Boston-based energy delivery company sold $500 million of the long 10-year notes in Monday’s offering at a spread of Treasuries plus 147 bps.

Bond flows

High-grade bond flows were negative for the week ended Dec. 12, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

Bond outflows climbed to $5.76 billion from $430 million, “with flows weakening broadly including for high grade, high yield, munis,” Seliger said.

Flows for high grade, which includes data for corporates, Treasuries, agencies and mortgages, were negative with a $2.72 billion outflow after a $320 million inflow a week earlier, he said.

“Notably the entire outflow was from funds,” Seliger said. Those outflows accelerated to $3.92 billion from $140 million for the week, according to the note.

Inflows to ETFs, which tend to be more dominated by institutional investors, increased to $1.21 billion from $460 million.

Higher inflows to short-term high grade, from $490 million to $780 million, were offset by larger outflows excluding short-term of $3.49 billion from $170 million, Seliger said.

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