Morning Commentary: High-grade supply thins; CI Financial, HSBC on tap; issues mixed

By Cristal Cody

Tupelo, Miss., Dec. 10 – Pricing action in the high-grade bond market is slowing to a trickle as the holidays and year-end approach. Two reported issuers were marketing deals on Thursday.

CI Financial Corp. is offering dollar-denominated registered fixed-rate notes (/BBB/DBRS: BBB (high)) during the session.

HSBC Holdings plc (A2/A-/A+) plans to price registered perpetual subordinated contingent convertible securities on Thursday.

Deal volume already has beaten market forecasts with more than $20 billion of investment-grade issues sold week to date.

About $15 billion to $20 billion of supply was expected this week.

The bulk of volume was seen on Monday and Tuesday with more than $19 billion of securities priced.

More than $40 billion of investment-grade bonds have already priced month to date, surpassing expectations of about $25 billion to $35 billion of issuance in December.

Charles Schwab firms

In the secondary market, new issues are mixed with several leaking wider mid-week, a source said.

CVS Health Corp.’s $2 billion of new and reopened senior notes (Baa2/BBB) that priced in two tranches on Monday eased about 1 basis point to 2 bps.

The company’s $750 million add-on to its 1.3% notes due Aug. 21, 2027 softened about 1 bp from issuance at a spread of Treasuries plus 67 bps.

Initial guidance was at the 85 bps to 90 bps over Treasuries area.

The company first sold $1.5 billion of the 1.3% notes on Aug. 12 at Treasuries plus 85 bps.

CVS Health’s new $1.25 billion tranche of 1.875% notes due Feb. 28, 2031 eased to 97 bps bid.

The notes priced with a spread of Treasuries plus 95 bps versus talk in the Treasuries plus 120 bps area.

Charles Schwab Corp.’s $2 billion of senior notes that priced in two tranches (A2/A/A) on Tuesday are trading about 3 bps to 4 bps tighter in the secondary market.

The company’s 0.9% notes due March 11, 2026 were last seen about 3 bps better than pricing.

Charles Schwab sold $1.25 billion of the notes at a spread of 53 bps over Treasuries.

Initial price talk was in the 70 bps spread area.

The company’s $750 million tranche of 1.65% notes due March 11, 2031 improved to 71 bps bid.

The notes priced at a spread Treasuries plus 75 bps, tighter than talk in the 90 bps over Treasuries area.

Investment-grade corporate secondary trading volume edged up to $23.91 billion on Wednesday from $23.86 billion on Tuesday and up from $22.99 billion on Monday, according to Trace.

Market tone was mostly positive over the morning in the high-grade space.

The iShares iBoxx Investment Grade Corporate Bond ETF improved 0.23% to $136.77.

The Pimco Investment Grade Corporate Bond index gained 0.14% to $116.18 at the open.

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