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Morning Commentary: Rentenbank on tap with $1 billion offering, updates talk; bonds open soft
By Cristal Cody
Tupelo, Miss., Feb. 14 – Few high-grade issuers announced plans early Wednesday to tap the primary market, as action stayed fairly quiet amid a market focus on the release of economic data, including the January core consumer price index.
Rentenbank plans to price a minimum $1 billion offering of two-year guaranteed notes that were initially talked to price in the mid-swaps minus 3 basis points area with guidance early Wednesday set at mid-swaps minus 4 bps, a source said.
In other deal activity, the Bank of New Zealand (A1/AA-/AA-) is in the middle of a roadshow that started Monday, according to a market source. J.P. Morgan Securities LLC is the arranger.
About $15 billion to $20 billion of bond volume is forecasted by market sources for the week.
The three-month Libor yield ticked up 1 bp to 1.83% early Wednesday, a source said.
In the secondary market, high-grade bonds ended Tuesday weaker, according to BofA Merrill Lynch research note released on Wednesday.
Corporate bonds were weaker on “bloated dealer inventories and the lack of real money demand given high uncertainties,” BofA Merrill Lynch analyst Hans Mikkelsen said in the note. “Credit was especially weak as dealers tried to reduce inventories.”
Inventories declined $1.8 billion and were led by one- to three-year maturities and seven- to 12-year maturities, the note said.
“Still high-grade cash bond spreads once again ended wider on the day ranging from 3-5 bps in the front-end, 2-5 bps in Yankee banks, 2-3 bps in energy, 1-4 bps in telecom and 1-2 bps for 10-year senior banks,” Mikkelsen said.
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