Midday Commentary: HP bonds rally following Moody's downgrade; Costco, AEP notes improve

By Aleesia Forni

Columbus, Ohio, Nov. 29 - Bonds from Hewlett-Packard Co. are "continuing to rally" in the investment-grade secondary market following Moody's Investors Service's downgrade of the company to Baa1 from A3, a trader said.

HP's 4.65% bond due 2021 was quoted roughly 20 basis points better since the downgrade late Wednesday.

In other trading, all three tranches of Costco Wholesale Corp.'s $3.5 billion of notes traded tighter on Thursday, the trader continued.

Both tranches of American Electric Power Co., Inc.'s $850 million issue of senior notes, which sold in two tranches on Wednesday, were quoted 4 bps better.

HP bonds rally

HP's 4.65% bond due 2021 was quoted at 350 bps bid, 340 bps offered early during Thursday's trading.

The company priced $1.5 billion of the bonds at 260 bps over Treasuries on Dec. 6, 2011.

Costco firms

Costco Wholesale's $1.2 billion of 0.65% three-year notes were trading 3 bps better at 32 bps bid, 29 bps offered early Thursday, a trader said.

The notes sold at a spread of Treasuries plus 35 bps on Wednesday.

Meanwhile, the $1.1 billion tranche of 1.125% five-year notes was quoted 4 bps tighter at 46 bps bid, 43 bps offered following Wednesday's pricing with a spread of 50 bps over Treasuries.

The $1.2 billion 1.7% 10-year notes firmed 2 bps to 68 bps bid, 65 bps offered.

The notes sold at a spread of Treasuries plus 70 bps.

The membership warehouse is based in Issaquah, Wash.

AEP notes better

In other recent deals, American Electric Power's $550 million of 1.65% five-year notes was quoted at 101 bps bid, 98 bps offered. The notes sold with a spread of Treasuries plus 105 bps.

The $300 million tranche of 2.95% 10-year notes traded at 131 bps bid, 128 bps offered.

The Columbus, Ohio-based electric utility priced the notes due 2022 with a spread of Treasuries plus 135 bps.

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