Export Development Canada prices; post-holiday supply eyed; Kraft Heinz softens on downgrade

By Cristal Cody

Tupelo, Miss., Feb. 14 – Export Development Canada priced $2 billion of three-year global notes in the high-grade primary market on Friday.

Investment-grade issuers sold more than $31 billion of bonds over the week, in line with the $25 billion to $35 billion of supply on average anticipated.

Looking ahead, deal volume is expected to stay strong with about $25 billion to $30 billion of issuance forecast for the holiday-shortened week ahead, according to syndicate sources.

The bond markets will be closed on Monday for the Presidents Day holiday.

A potential $5 billion-plus offering of notes (Baa2/BBB/) from Otis Worldwide Corp. as part of its spin-off from United Technologies Corp. is expected in the primary market in the week ahead, sources report.

The offering will follow Carrier Global Corp.’s $9.25 billion six-part sale of senior notes on Thursday as part of its spin-off from United Technologies.

Elsewhere, high-grade inflows were strong “across the board” for bonds and stocks in the past week ended Wednesday, Yuri Seliger, a credit strategist for BofA Securities, Inc., said in a report released Friday.

Total inflows to the fixed income market soared to $13.91 billion, the highest this year and third largest on record, from $11.7 billion in the prior week, Seliger said.

“High-grade inflows remained elevated, but below the record level a week earlier,” he said. “This decline was offset by higher inflows to high yield, munis and mortgages.”

Inflows to high grade declined but remained heavy at $7.27 billion from $9.32 billion in the previous week on the back of slower inflows to short-term and excluding short-term, according to the report.

Short-term inflows fell to $2.63 billion this past week from $2.73 billion.

Excluding short-term inflows dipped to $4.59 billion from $6.58 billion.

The decline was driven by funds, with inflows down to $3.72 billion from $5.71 billion a week earlier, Seliger said.

ETF inflows were slightly lower at $3.55 billion from $3.6 billion in the previous week.

The Markit CDX North American Investment Grade 33 index softened modestly to end Friday at a spread of 44.25 basis points.

Export Development Canada prices

Export Development Canada (Aaa/AAA) priced $2 billion of 1.375% three-year global notes at mid-swaps plus 5 bps, or a spread of Treasuries plus 5.7 bps, according to a market source and an FWP filing with the Securities and Exchange Commission.

Initial price talk was in the mid-swaps plus 7 bps area.

The notes were sold at 99.81 to yield 1.44%.

BNP Paribas Securities Corp., BofA Securities, Inc., RBC Capital Markets, LLC, Scotia Capital (USA) Inc. and TD Securities (USA) LLC were the bookrunners.

Ottawa-based Export Development Canada is a Canadian government-owned export credit agency.

Secondary market

In the secondary market, Kraft Heinz Foods Co.’s senior notes (Baa3/BBB/BB+) traded heavily on Friday after the company was downgraded to junk by S&P Global Ratings and Fitch Ratings, according to market sources.

The Chicago-based food company retains an investment-grade rating from Moody’s Investors Service.

Kraft Heinz Foods’ 4.625% notes due Jan. 30, 2029 closed down at 107.65 from where the notes went out at 109.41 on Thursday and off from the issue’s 112 handle at the start of the week.

The company sold $1.1 billion of the notes on June 4, 2018 at 99.41 to yield 4.7% and a 175 bps over Treasuries spread.

New issues were mostly tighter in the secondary market, a source said.

Amphenol Corp.’s $400 million of 2.05% senior notes due March 1, 2025 (Baa1/BBB+/) firmed about 3 bps.

The notes priced Thursday at 99.829 to yield 2.086% and a spread of 65 bps over Treasuries, tighter than guidance in the 70 bps area, plus or minus 3 bps, and initial talk in the 87.5 bps spread area.

The designer, manufacturer and marketer of electric, electronic and fiber optic components is based in Wallingford, Conn.

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