Lexington Realty upsizes; strong deal pace anticipated; Oglethorpe, Southern Co. Gas eyed

By Cristal Cody

Tupelo, Miss., Aug. 14 – High-grade supply continued on Friday with one issuer in the primary market, sources report.

Lexington Realty Trust priced $400 million of 10-year senior notes (Baa2/BBB-/BBB) to strong demand.

The deal was upsized from $300 million and priced at a spread of Treasuries plus 210 basis points, tighter than initial talk at the Treasuries plus 275 bps area and guidance of Treasuries plus 225 bps.

Lexington Realty Trust held fixed income investor calls for the offering on Thursday.

Investment-grade supply blew past market estimates this week to close out with more than $47 billion of issuance. About $25 billion to $30 billion of deal volume was expected for the week.

Additional supply is being eyed from other companies that held fixed income investor calls this week, including Oglethorpe Power Corp. and Southern Co. Gas.

Oglethorpe (Baa1//BBB+) continued a second scheduled day of investor calls on Friday for a possible deal.

Southern Co. subsidiary Southern Co. Gas (Baa1/A-/BBB+) also held fixed income investor calls on Thursday and Friday.

Looking ahead to next week, no letup in the deal pace is expected, syndicate sources report.

Market sources are anticipating about $30 billion to $40 billion of investment-grade volume with issuance likely front-loaded over the week.

Supply this week was led by Chevron U.S.A. Inc.’s $4 billion seven-tranche offering of senior notes (Aa2/AA) on Monday, Comcast Corp.’s $4.5 billion three-part sale of senior notes (A3/A-/A-) on Tuesday, CVS Health Corp.’s $4 billion of senior notes (Baa2/BBB) priced in three tranches on Wednesday and Apple Inc.’s $5.5 billion four-tranche offering of notes (Aa1/AA+) on Thursday.

The Markit CDX North American Investment Grade 33 index eased more than 1 basis point to close Friday at a spread of 67.93 bps.

The iShares iBoxx Investment Grade Corporate Bond ETF lost 60 cents to end at $135.41.

The Pimco Investment Grade Corporate Bond index fell 61 cents to $115.24.

Fed purchases slow

Meanwhile, the Federal Reserve’s bond purchases under the secondary market corporate credit facility created in response to the Covid-19 pandemic are slowing, BofA Securities, Inc. analysts said in a research report released Friday.

The Federal Reserve’s weekly report “implies the Fed bought just $12 [million a day] of corporate bonds and ETFs on average this past week, the lowest daily pace so far since purchases began on May 12th and down again from $24 [million] the prior week,” the report said. “As the Fed has communicated the pace of SMCCF purchases slows as market conditions improve, which has been the case consistently.”

The Federal Reserve Board announced in July that it will extend the Covid-19 pandemic impact-response lending facilities, including the primary and secondary market corporate credit facilities, to Dec. 31 from Sept. 30. A commercial paper funding facility is set to expire on March 17, 2021.

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