Morning Commentary: Buckeye, International Finance offer notes; high-grade spreads soften

By Cristal Cody

Tupelo, Miss., Jan. 18 – A few issuers are expected to tap the investment-grade bond market on Thursday.

Southwestern Electric Power Co. is preparing to price series L senior notes.

Buckeye Partners, LP is marketing fixed-to-floating rate junior subordinated notes due 2078.

Also, International Finance Corp. plans to price $2 billion of three-year notes.

Bank and financial supply has been the focus for most of the week. Citigroup Inc., Westpac Banking Corp., Deutsche Bank AG, New York Branch, PNC Bank, NA, Wells Fargo Bank NA, JPMorgan Chase & Co. and ANZ New Zealand International Ltd. have priced notes during the week.

Ten-year bank spreads ended Wednesday unchanged to 1 basis point wider, BofA Merrill Lynch analysts Yuri Seliger and Yunyi Zhang said in a note released on Thursday.

High-grade credit spreads have softened during the week with spreads going out on Wednesday unchanged to a few basis points wider, according to the note.

“A number of reasons are driving this credit underperformance, with the sticker shock of spreads near the cyclical tights providing one of them,” the analysts said. “At the same time buying out of Asia slowed down this week, potentially following the decline in 30-year Treasury yield from the highs reached last week.”

In addition, dealers typically add to their inventories during elevated volume or lower demand, but on Wednesday Trace reported they sold $1.1 billion bonds, which contributed to the weakness in high-grade spreads, the analysts said.

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