High-grade supply slows; Lloyds Banking, QVC, TPG tap primary; bonds mixed on earnings

By Cristal Cody

Tupelo, Miss., Jan. 29 – Primary action slowed on Wednesday in the investment-grade bond market as market focus shifted to the Federal Reserve’s monetary policy decision during the session.

Lloyds Banking Group plc sold $1 billion of six-year fixed-rate reset notes.

QVC, Inc. priced an upsized $575 million of 4.75% split-rated registered seven-year senior notes (Ba2/BBB-/BBB-) at par to yield a Treasuries plus 322 basis points spread following a roadshow on Tuesday, a source said. The deal tightened from guidance in the 5% area and initial talk in the 5.25% area.

The issue was upsized from $500 million.

Also on Wednesday, TPG Specialty Lending Inc. brought a $50 million add-on to its 3.875% notes due Nov. 1, 2024 to the primary market, selling the notes 50 bps tighter than where the issue first priced in October.

Week to date, high-grade deal volume totals more than $7 billion, led by Union Pacific Corp.’s $3 billion four-part offering of registered fixed-rate senior that priced on Tuesday.

About $20 billion to $25 billion of high-grade volume was expected for the week, according to syndicate sources.

On Wednesday, the Federal Reserve left rates unchanged to maintain the target range for the federal funds rate at 1.5% to 1.75%.

“Information received since the Federal Open Market Committee met in December indicates that the labor market remains strong and that economic activity has been rising at a moderate rate,” according to the FOMC statement released Wednesday. “The committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the committee's symmetric 2 percent objective.”

The FOMC’s next meeting is scheduled for March 17-18.

The Markit CDX North American Investment Grade 33 index eased more than 1 bp to end the day at a spread of 47.87 bps.

In the secondary market, Apple Inc.’s bonds (Aa1/AA+/) traded flat to about 4 bps tighter after the company posted strong first quarter earnings results on Tuesday, a source said.

McDonald’s Corp.’s senior medium-term notes (Baa1/BBB+/) were mixed but mostly improved about 1 bp to 4 bps following better-than-expected fourth quarter earnings released on Wednesday.

Boeing Co.’s senior notes (A3/A-/) headed out unchanged to 5 bps tighter in the secondary market after the company released weaker-than-expected fourth quarter profit results on Wednesday, according to a market source.

Lloyds prices $1 billion

Lloyds Banking Group priced $1 billion of 2.438% senior fixed-to-fixed rate notes due Feb. 5, 2026 at par to yield a spread of 100 bps over Treasuries on Wednesday, according to a market source and an FWP filing with the Securities and Exchange Commission.

Initial price talk was in the Treasuries plus 120 bps area.

The rate on the notes (A3/BBB+/A+) will reset Feb. 5, 2025 to Treasuries plus 100 bps.

Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Lloyds Securities Inc. and Morgan Stanley & Co. LLC were the bookrunners.

The bank and financial services group is based in London.

TPG reopens notes

TPG Specialty Lending priced a $50 million add-on to its 3.875% notes due Nov. 1, 2024 (Baa3/BBB-/BBB-) on Wednesday at 102.075 to yield 3.389%, according to an FWP filing.

The notes priced at a spread of 195 bps over Treasuries.

Bookrunners were BofA Securities, Inc., J.P. Morgan Securities LLC, Citigroup, SunTrust Robinson Humphrey, Inc., Mizuho Securities USA LLC, Goldman Sachs, Morgan Stanley, RBC Capital Markets, LLC, SMBC Nikko Securities America, Inc., MUFG and HSBC Securities (USA) Inc.

The notes were originally brought to the market in a $300 million issue on Oct. 25, 2019 at 99.032 to yield 4.091% and a spread of 245 bps over Treasuries. The total outstanding is now $350 million.

TPG Specialty Lending is a Fort Worth, Texas-based specialty finance company focused on lending to middle-market companies.

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