Strong high-grade supply eyed for week ahead; BofA notes firm; Verizon, BP notes ease

By Cristal Cody

Tupelo, Miss., Feb. 8 – The investment-grade market stayed quiet on Friday, bringing the week’s volume to more than $10 billion.

Corporate supply came in short of the average $15 billion to $20 billion of issuance forecasted for the week.

Investment-grade supply is expected to ramp up in the week ahead, a source said.

A possible multi-billion dollar-denominated and euro bond offering from Altria Group Inc. eyed for this week’s business after the company held fixed-income investor calls on Monday likely will come next week, a source said.

About $25 billion to $30 billion of deal volume is predicted for the week ahead, according to market sources.

Meanwhile, inflows to high-grade funds and ETFs were more than strong for the week ended Feb. 6.

“During this first week following the January FOMC, inflows to U.S. high grade funds and ETFs jumped to $6.51 [billion] – the highest weekly inflow since February 2015 and the fourth largest on record going back to 2008,” Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

There was a $1.91 billion inflow a week earlier in the space, which includes corporates, Treasuries, agencies and mortgages, according to the report.

“Most of the net buying [$4.91 billion] this past week was in the intermediate and long part of the curve,” Seliger said. “Hence investors are getting their duration exposure back after instead rotating out of duration in 4Q.”

Funds had inflows of $3.97 billion, while ETFs had inflows of $2.54 billion.

On the “back of the strong buying of high grade and also high yield,” the inflow to fixed income jumped to $10.3 billion from $5.26 billion, Seliger said.

The Markit CDX North American Investment Grade 31 index headed out on Friday about 1 basis point softer at a spread of 69 bps.

New issues were mixed in secondary trading on Friday.

Bank of America Corp.’s $3 billion of 3.974% medium-term fixed-to-floating rate senior notes due Feb. 7, 2030 improved about 6 bps from where the notes priced on Monday.

Verizon Communications Inc.’s 3.875% green bonds due Feb. 8, 2029 priced Tuesday softened about 3 bps to 4 bps to trade wrapped around issuance.

BP Capital Markets America Inc.’s guaranteed senior notes (A1/A-/) brought to the market on Wednesday in new and reopened tranches widened about 2 bps to 3 bps.

Bank of America firms

Bank of America’s 3.974% medium-term fixed-to-floating rate senior notes due Feb. 7, 2030 (A3/A-/A+) traded better than issuance at 119 bps bid on Friday, according to a market source.

Bank of America sold $3 billion of the notes on Monday at par to yield a spread of Treasuries plus 125 bps.

The rate will reset to a floating rate of Libor plus 121 bps on Feb. 7, 2029.

The financial services company is based in Charlotte, N.C.

Verizon widens

Verizon Communications’ 3.875% notes due Feb. 8, 2029 (Baa1/BBB+/A-) priced Tuesday traded wrapped around issuance on Friday at 120 bps bid, a market source said.

The notes softened about 3 bps to 4 bps from Thursday’s session.

Verizon sold $1 billion of the bonds at a spread of Treasuries plus 120 bps.

The telecommunications company is based in New York City.

BP Capital weakens

BP Capital Markets’ add-on to its 4.234% notes due Nov. 6, 2028 eased about 3 bps to 94 bps bid in the secondary market after trading about 1 bp to 2 bps tighter in the previous session, a source said.

The issue was reopened on Wednesday in a $1 billion tranche at a Treasuries plus 92 bps spread.

BP Capital originally sold $1 billion of the 10-year notes on Nov. 1 at par to yield a Treasuries plus 110 bps spread. The total outstanding is now $2 billion.

The notes are guaranteed by London-based parent oil and gas company BP plc.

BP Capital Markets America is a Chicago-based aviation and marine fuels provider.

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