Morning Commentary: Investment-grade bond spreads tighten; bank, financial paper firms

By Cristal Cody

Tupelo, Miss., Aug. 19 – Bank and financial paper traded 1 basis point to 2 bps tighter early Tuesday after investment-grade bonds narrowed at the start of the week on light primary activity, market sources said.

The Markit CDX North American Investment Grade series 22 index ended Monday 3 bps tighter at a spread of 57 bps.

“Credit spreads continue their descent to the early July tights,” RBC Capital Markets, LLC analysts said in a note. “Both the investment grade and high yield CDS indices have now unwound 70-90% of their moves wider in July.”

In the secondary market, Bank of America Corp.’s 2.6% senior notes due 2019 traded about 1 bp better, a source said.

Morgan Stanley’s 3.875% notes due 2024 firmed 2 bps, according to a market source.

Citigroup Inc.’s 3.75% notes due 2024 traded about 1 bp tighter but are mostly range-bound, a source said.

Bank of America improves

Bank of America’s 2.6% senior notes due 2019 firmed about 1 bp to 77 bps offered, a market source said early Tuesday.

Bank of America (Baa2/A-/A) priced a $1.25 billion add-on to the notes on Jan. 15, 2014 at Treasuries plus 87 bps. The issue originally priced on Oct. 17, 2013 in a $2.5 billion offering at Treasuries plus 128 bps.

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

Morgan Stanley narrows

Morgan Stanley’s 3.875% notes due 2024 (Baa2/A-/A-) tightened 2 bps to 122 bps offered, according to a market source.

Morgan Stanley sold $3 billion of the notes at a spread of Treasuries plus 130 bps on April 23.

The financial services company is based in New York City.

Citi edges tighter

Citigroup’s 3.75% notes due 2024 (Baa2/A-/A) firmed about 1 bp to 119 bps offered, according to a market source.

Citigroup sold $1.25 billion of the 10-year notes on June 9 at a spread of Treasuries plus 115 bps.

The bank is based in New York City.

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