Midday Commentary: Investment-grade bonds tighten; Verizon notes firm in early trading

By Cristal Cody

Tupelo, Miss., Sept. 16 - High-grade bonds traded stronger early Monday with Verizon Communication Inc.'s new tranches better across the curve, according to market sources.

"Looks like spreads are tighter all around in investment-grade," a trader said early Monday.

The Markit CDX Series 20 North American Investment Grade index, which closed Friday 1 basis point tighter at a spread of 77 bps, tightened 3 bps in Monday's morning session, the trader said.

Market focus for the first half of the week is on the two-day Federal Open Market Committee meeting that ends on Wednesday for the possibility of an announcement to taper the Federal Reserve's $85 billion monthly asset purchases, sources said.

Verizon tightens

In the secondary market, Verizon's record $49 billion eight-tranche offering of notes (Baa1/BBB+/A-) sold on Wednesday continues to trade stronger, sources said.

Verizon's 2.5% notes due 2016 firmed to 82 bps bid, 78 bps offered, 10 bps tighter than where the notes were seen going out the previous week, according to traders. Verizon sold $4.25 billion of the notes with a spread of Treasuries plus 165 bps.

Verizon's tranche of 3.65% notes due 2018 tightened to 106 bps bid, 103 bps offered. Verizon priced $4.75 billion of the 3.65% notes due 2018 with a spread of 190 bps over Treasuries.

Verizon's 4.5% notes due 2020 firmed to 137 bps bid, 132 bps offered in secondary trading on Monday. Verizon sold $4 billion of the seven-year notes at Treasuries plus 215 bps.

The tranche of 5.15% notes due 2023 also was better at 159 bps bid, 156 bps offered in Monday's session, a trader said. Verizon sold $11 billion of the 5.15% notes due 2023 with a spread of Treasuries plus 225 bps.

The New York City-based telecommunications company's 6.4% notes due 2033 traded early Monday at 178 bps bid, 175 bps offered, tighter than where Verizon sold $6 billion of the notes at a spread of Treasuries plus 250 bps.

The long tranche of 6.55% bonds due 2043 firmed to 200 bps bid, 197 bps offered early Monday. Verizon sold $15 billion of the 30-year bonds with a spread of Treasuries plus 265 bps.

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