High-grade primary quiets on coronavirus fears; Fulton Financial offers notes; spreads widen

By Cristal Cody

Tupelo, Miss., Feb. 24 – High-grade issuers stood down on Monday as fears of a coronavirus pandemic sent stocks plunging and credit spreads wider.

Some issuers held fixed income investor calls for potential deals or marketed bonds over the session, sources report.

Fulton Financial Corp. marketed $250 million of registered fixed-to-floating-rate subordinated notes due 2030 and 2035 (Baa1//DBRS: BBB) on Monday.

Otherwise, the primary market was quiet.

Strong deal volume, though, was expected this week with syndicate sources forecasting about $25 billion to $30 billion of supply.

More than $32 billion of investment-grade corporate bonds were sold last week.

Stocks sold off Monday on reports of more than 79,000 people infected in China and growing outbreaks in South Korea, Italy and Iran.

The Dow Jones industrial average slid more than 1,000 points to close off by 3.56%. The Nasdaq and the S&P 500 both were down more than 3% on the day.

Treasury yields rallied in the risk-off trade with the 10-year note touching its lowest yield since 2016 before closing down 9 basis points at 1.377%.

The Markit CDX North American Investment Grade 33 index widened nearly 6 bps to end at a spread of 52.65 bps on Monday.

Apple, Intel soften

In the secondary market, Apple Inc.’s bonds (Aa1/AA+/) eased about 3 bps to 7 bps during the session, a source said.

The company cautioned last week that it does not expect to meet revenue guidance for the March quarter following impacted manufacturing facilities and product demand in China.

Intel Corp.’s 2.45% senior notes due Nov. 15, 2029 (A1/A+/A+) reopened on Feb. 10 softened about 8 bps to the 80 bps bid area on Monday, according to a market source.

The Santa Clara, Calif., semiconductor chip maker priced a $750 million add-on to the 2.45% notes due Nov. 15, 2029 on Feb. 10 at a Treasuries plus 65 bps spread.

Intel originally sold $1.25 billion of the notes on Nov. 18, 2019 at a spread of 65 bps over Treasuries.

International Business Machines Corp.’s 3.5% notes due May 15, 2029 (A1/A/A) eased about 3 bps to the 79 bps area, a source said.

The Armonk, N.Y.-based information technology and computer company sold $3.25 billion of the notes as part of a $20 billion eight-tranche offering on May 8, 2019 at a spread of 105 bps over Treasuries.

In other secondary trading on Monday, Kraft Heinz Foods Co.’s senior notes (Baa3/BB+/BB+) were mixed, a source said.

The company’s notes have traded heavily since the issuer was downgraded to junk by S&P Global Ratings and Fitch Ratings on Valentine’s Day.

Kraft Heinz Foods’ 4.625% notes due Jan. 30, 2029 declined to 108.80 from 108.85 on Friday but improved from where the issue traded down nearly 2 points on Feb. 14 at 107.65.

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

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