Strong high-grade volume eyed for week ahead; Fiserv eyes deal; HCA, Home Depot firm

By Cristal Cody

Tupelo, Miss., June 7 – The investment-grade bond market remained mostly quiet on Friday after a week of strong issuance that beat market forecasts.

Stericycle, Inc. priced a $600 million split-rated offering of 5.375% senior notes due July 15, 2024 (BBB-/BB+) at par during the session.

More than $24 billion of high-grade bonds have priced week to date, compared to about $10 billion to $15 billion of issuance expected.

Market focus over the session turned to the Labor Department’s release of the non-farm jobs numbers for May. The month saw 75,000 jobs added, well below the 175,000 jobs gain forecasted. The unemployment rate was flat at 3.6%. Treasury yields closed lower on the day across the curve.

Looking to the week ahead, deal supply is expected to stay strong with market sources forecasting about $20 billion to $25 billion of high-grade issuance.

Fiserv, Inc. will hold a roadshow in Europe in the upcoming week after conducting U.S. fixed income investor calls for a potential multi-currency, multi-tranche bond offering.

The last issuer to bring a multi-currency deal was Fidelity National Information Services, Inc., which priced $1 billion of 10-year senior notes, a €5 billion six-part offering of euro-denominated notes and a £1.25 billion two-tranche offering of sterling-denominated notes on May 14.

The Markit CDX North American Investment Grade 32 index ended the day about 1 basis point better at a spread of 63 bps.

In the secondary market, new issues were ending the week mostly tighter, a source said.

HCA Inc.’s $5 billion three-tranche offering of senior secured notes (Baa3/BBB-/BB+) that priced on Wednesday tightened about 6 bps to 12 bps in the secondary market.

Also, Home Depot Inc.’s $1.4 billion of senior notes (A2/A) that priced in new issue and reopened tranches on Monday firmed about 8 bps to 9 bps.

In other new issue trading, Morgan Stanley’s new global medium-term floating-rate senior notes due June 10, 2022 that priced on Wednesday at the Secured Overnight Financing Rate improved about 1 bp.

Inflows pick up

Meanwhile, this week also saw the biggest inflow for U.S. funds and ETFs since February 2015, Yuri Seliger, a credit strategist with BofA Securities, said in a global research note released on Friday.

U.S. fund and ETF investors bought $11.93 billion of bonds for the week ended Wednesday, compared to a $1.98 billion inflow to fixed income in the previous week.

“A pick-up in bond buying was not unexpected, as investors typically chase returns,” Seliger said.

The biggest driver was a $7.88 billion inflow to government bond ETFs, while government bond funds actually had a small $16 million outflow, the report said.

Inflows to the high-grade space, including corporate bonds, Treasuries, agencies and mortgages, rose to $5.76 billion from $2.67 billion a week earlier.

Inflows to the short-term high-grade space increased to $2.25 billion from $43 million in the prior week. Excluding short-term debt, inflows rose to $3.51 billion this week from $22.4 billion in the previous week.

High-grade flows were stronger for both funds and ETFs, according to the report.

Fund inflows rose to $3.18 billion this week from $1.66 billion a week ago, while ETF inflows improved to $2.58 billion from $1.01 billion.

The inflow to government bonds, mostly ETFs, jumped to $7.73 billion, the second highest on record, this week from $1.40 billion in the previous week, Seliger said.

As previously reported, corporate investment-grade funds had inflows of $924 million for the week ended Wednesday after two consecutive weeks of outflows, Lipper US Fund Flows said on Thursday.

Fiserv eyes primary markets

Fiserv (Baa2/BBB) will hold a roadshow in Europe in the week ahead after holding U.S. fixed income investor calls for a senior note offering that may be spread across dollar, euro and sterling denominations, according to market sources.

A deal size of $10 billion or more is forecast.

The multi-tranche senior note offering is expected to be registered with the U.S. Securities and Exchange Commission.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC are the arrangers.

The company held investor calls in the U.S. market on Wednesday and plans to continue with investor meetings next week in Europe from Tuesday through Thursday.

Fiserv announced in January that it plans to acquire junk-rated First Data Corp. (Ba3/BB-) in an all-stock transaction valued at about $22.7 billion. The merger is scheduled to close before the end of the year.

The provider of financial services technology is based in Brookfield, Wis.

HCA notes tighten

In the secondary market, HCA’s 4.125% senior secured notes due June 15, 2029 traded on Friday at 189 bps bid, 183 bps offered, a source said.

The company sold $2 billion of the 10-year notes on Wednesday at 99.497 to yield 4.187% and a spread of 205 bps over Treasuries, on the tight side of guidance in the 210 bps area.

Initial price guidance was in the Treasuries plus 235 bps area.

HCA’s $2 billion of 5.25% notes due June 15, 2049 were quoted better at 264 bps bid, 259 bps offered in secondary trading.

The notes priced Wednesday at 99.528 to yield 5.349%, or a Treasuries plus 270 bps spread. The issue was guided to price in the 275 bps spread area, compared to initial guidance in the Treasuries plus 290 bps area.

HCA is a subsidiary of HCA Healthcare, Inc., a Nashville, Tenn.-based for-profit operator of health care facilities.

Home Depot firms

Home Depot’s 2.95% notes due June 15, 2029 traded on Friday at 85 bps bid, 82 bps offered, according to a market source.

The company priced $1 billion of the 10-year notes on Monday at 99.426 to yield 3.017% and a spread of Treasuries plus 93 bps.

Home Depot is an Atlanta-based home improvement retailer.

Morgan Stanley improves

Morgan Stanley’s floating-rate notes due June 10, 2022 firmed to SOFR plus 82 bps bid in secondary trading, a market source said.

The company (A3/BBB+/A) sold $750 million of the notes on Wednesday at par to yield SOFR plus 83 bps.

The notes were initially talked to print in the SOFR plus 90 bps area.

Morgan Stanley is a New York-based financial products and services company.

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