Primary quiets as year-end slowdown sets in; spreads weaken; ‘everything’s wider’

By Aleesia Forni and Cristal Cody

Virginia Beach, Dec. 12 – The primary was muted on Friday to close a slower week for the investment-grade bond market.

A sour tone to the market kept most issuers on the sidelines this week, with around $7 billion of new issuance pricing.

The total is a sharp decline from last week’s frenzied $49 billion of supply and fell far short of what sources had expected to be around a $15 billion week.

Meanwhile, cash continued to flow into investment-grade bond funds, with Lipper reporting net inflows of $2.01 billion for the week ended Dec. 10.

This compares to the previous week’s inflows of $3.236 billion, pushing the year-to-date total inflows to more than $84 billion.

Another subdued primary is expected for the week ahead, with sources calling for around $5 billion of new issuance as the market heads toward the end of the calendar year.

“There could be a few, but it’s going to be pretty quiet for the most part,” one market source said.

Investment-grade corporate bonds and credit spreads mostly weakened over the day on Friday, according to market sources.

“Everything’s wider,” a trader said late afternoon. “I didn’t see as much flow today. There is a big rally in Treasuries.”

The Markit CDX North American Investment Grade series 23 index eased more than 3 basis points to a spread of 72 bps.

Goldman Sachs Group Inc.’s senior floating-rate notes due 2017 priced on Thursday eased 2 bps in the secondary market.

Morgan Stanley & Co. Inc.’s 4.35% subordinated notes due 2026 widened about 4 bps over the session, a trader said.

State Street Corp.’s new 3.3% senior notes due 2024 bucked the weak trend and headed out tighter on Friday, according to a trader.

Amazon.com, Inc.’s 3.8% senior notes due 2024 brought in the previous week traded mostly unchanged.

The 3.95% senior notes due 2024 that DirecTV Holdings LLC and DirecTV Financing Co. Inc. priced a week ago were softer in secondary trading, a trader said.

S&P reports

Standard & Poor’s said that the investment-grade composite spread remained flat at 172 bps on Friday.

By rating, the AA, A, and BBB spreads were unchanged at 119 bps, 142 bps, and 204 bps, respectively.

By industry, financial institutions, banks and utilities remained flat at 216 bps, 174 bps and 176 bps, respectively. Industrials widened by 1 bp to 258 bps. Telecommunications widened by 2 bps to 288 bps.

The investment-grade composite spread is wider than its one-year moving average of 153 bps and tighter than its five-year moving average of 184 bps.

Goldman softer

Goldman Sachs’ floating-rate notes due 2017 traded earlier on Friday wider at 82 bps bid, 77 bps offered, a trader said.

Goldman sold $1 billion of the notes (Baa1/A-/A) on Thursday at par to yield Libor plus 80 bps.

The financial services company is based in New York City.

Morgan Stanley widens

Morgan Stanley’s 4.35% subordinated notes due 2026 eased to 218 bps bid, 213 bps offered earlier on Friday, a trader said.

The notes were quoted over the morning at 209 bps offered and on Tuesday at 200 bps offered.

Morgan Stanley sold $2.25 billion of the notes (Baa3/BBB+/BBB+) on Sept. 3 at Treasuries plus 195 bps.

The financial services company is based in New York City.

State Street improves

State Street’s 3.3% notes due 2024 firmed to 112 bps bid, 109 bps offered in secondary trading on Friday, a trader said.

State Street sold $1 billion of the 10-year notes (A1/A+/AA-) on Wednesday at a spread of Treasuries plus 115 bps.

The financial holding company is based in Boston.

Amazon steady

Amazon.com’s 3.8% notes due 2024 notes (Baa1/AA-/) were quoted trading mostly unchanged at 152 bps bid, 148 bps offered in afternoon trading on Friday, according to a trader.

The company sold $1.25 billion of the 10-year notes at Treasuries plus 155 bps on Dec. 2.

The online retailer is based in Seattle.

DirecTV eases

DirecTV’s 3.95% notes due 2025 (Baa2/BBB/BBB-) traded in the 173 bps bid, 169 bps offered area on Friday, a trader said.

The bonds were quoted on Thursday at 168 bps offered.

DirecTV Holdings and DirecTV Financing sold $1.2 billion of the 10-year notes on Dec. 2 at a spread of Treasuries plus 175 bps.

The digital entertainment company is based in El Segundo, Calif.

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