High-grade supply quiet, hits month’s deal forecast; credit spreads, energy bonds widen

By Cristal Cody

Tupelo, Miss., Feb. 28 – The investment-grade primary market stayed quiet on Friday, ending a week with little activity.

Only three reported issuers tapped the primary market this week as stocks plunged, credit spreads widened and Treasuries rallied in a risk-off trade on growing fears of a coronavirus pandemic and limited supply chains.

High-grade credit spreads have widened more than 21 basis points since the start of the week.

The Markit CDX North American Investment Grade 33 index closed Friday more than 3 bps softer at a spread of 67.51 bps.

Stocks remained mostly weak on Friday with only the Nasdaq closing out of the red.

Treasuries continue to rally in the risk-off trade.

The 10-year note ended the day down 17 bps at 1.127%.

The benchmark 10-year note has touched all-time yield lows over the past four sessions.

The week’s lone corporate issue came from Fulton Financial Corp.’s $375 million sale of fixed-to-floating rate subordinated notes in two tranches on Tuesday.

In the sovereign, supranational and agency market, CPPIB Capital Inc. priced $1 billion of five-year notes on Wednesday and the European Investment Bank sold $1 billion of four-year floating-rate notes on Thursday.

About $25 billion to $30 billion of investment-grade deal volume was expected this week.

Still, volume for the month hit syndicate forecasts of about $90 billion to $100 billion.

High-grade volume totaled $98.43 billion in February from 103 bond issues, according to Prospect News data.

Energy issues soften

In the secondary market, Energy Transfer Operating LP 3.75% notes due May 15, 2030 (Baa3/BBB-/BBB-) continued to soften in trading on Friday, sources said.

The issue gapped out 37 bps over the day.

The notes closed down at 100.26 from 101.27 at the start of the session.

Another source quoted the issue down at 100.89 on Friday afternoon from 102.61 in the prior session.

The notes traded at 106.18 on Monday.

The Dallas-based natural gas midstream and intrastate transportation and storage company sold $1.5 billion of the bonds on Jan. 7 at 99.843 to yield 3.769% and a Treasuries plus 255 bps spread.

Western Midstream Operating, LP’s 4.05% notes due Feb. 1, 2030 (Ba1/BBB-/BBB-) softened to 98.55 from 99.21 on Thursday and moved out about 28 bps on the day, a source said.

The Woodlands, Texas-based midstream energy assets company sold $1.2 billion of the bonds on Jan. 9 at 99.90 to yield 4.062% and a spread of 220 bps over Treasuries.

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