High-grade primary action quiets as focus turns to Fed; Vodafone, Moller-Maersk, KKR improve

By Cristal Cody

Tupelo, Miss., June 19 – The investment-grade primary market stayed quiet over Wednesday’s session with no reported issuers pricing bonds.

The Federal Reserve on Wednesday refrained from any interest rate changes following its two-day monetary policy meeting.

The Fed said in a press release following the Federal Open Market Committee meeting that it would leave the target range for the federal funds rate at 2.25% to 2.5%.

“The committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the committee's symmetric 2% objective as the most likely outcomes, but uncertainties about this outlook have increased,” the FOMC release said. “In light of these uncertainties and muted inflation pressures, the committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.”

Nine FOMC members approved the monetary policy action, while one member voted against it, according to the release. St. Louis Federal Reserve Bank president James Bullard “preferred at this meeting to lower the target range for the federal funds rate by 25 basis points,” the FOMC release said.

Expectations for a rate cut going forward are heavy, one source said.

Meanwhile, spreads continued to improve on Wednesday after tightening 2 bps in the previous session. The Markit CDX North American Investment Grade 32 index closed more than 2 bps better on the day at a spread of 55 bps.

High-grade issuers have priced about $5 billion of bonds week to date with Monday’s session seeing more than $4 billion of supply.

About $15 billion to $20 billion of investment-grade corporate issuance was anticipated by market sources this week, though some expected as little as $10 billion of volume.

Vodafone notes active

Vodafone Group plc announced on Wednesday that it closed on its $2.25 billion two-tranche registered offering of notes (Baa2/BBB+/BBB+) that priced a week ago.

The company’s notes are trading higher in price than issuance.

In secondary trading on Wednesday, the 4.875% notes due June 19, 2049 hit the 101.20 area before ending the day at 100.79, according to a market source.

The notes went out on Tuesday at 100.24.

The $1.75 billion tranche of 30-year notes priced on June 12 at 98.251 and a spread of 237.5 bps over Treasuries.

Vodafone’s 5.125% notes due June 19, 2059 traded at par over the day. The notes went out in the previous session at 100.05.

The company sold $500 million of 5.125% notes due June 19, 2059 at 98.527 and a Treasuries plus 260 bps spread.

The London-based telecommunications company said it plans to apply to list the notes on the New York Stock Exchange.

Bonds in the telecom sector from AT&T Inc. and Verizon Communications Inc. have been trading mostly better over the past few sessions, according to a market source.

New issues improve

New issues priced this week are trading mostly flat to tighter in the secondary market, a source said.

A.P. Moller-Mærsk A/S’ 4.5% notes due June 20, 2029 priced on Monday firmed to the 245 bps area.

The Copenhagen, Denmark-based integrated container shipping company (Baa3/BBB) sold $500 million of the notes at a Treasuries plus 250 bps spread.

KKR & Co. Inc. subsidiary KKR Group Finance Co. VI LLC’s new 3.75% senior notes due July 1, 2029 (/A/A) have improved about 8 bps in secondary trading since pricing on Monday. The New York-based global investment company sold $500 million of the notes at a Treasuries plus 170 bps spread.

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