Midday Commentary: High-grade bonds open better after leak wider; Verizon eases; Citi weaker

By Cristal Cody

Tupelo, Miss., March 27 - Investment-grade bond spreads tightened in early trading on Thursday after leaking wider on Wednesday, according to market sources.

The Markit CDX North American Investment Grade series 22 index eased 1 basis point to a spread of 72 bps in the previous session.

In early trading on Thursday, Verizon Communications Inc.'s notes (Baa1/BBB+/A-) widened as the telecommunications company's bonds remain among the most active high-grade issues for the week, a source said.

Citigroup Inc.'s shares traded 5% lower over the morning after failing the Federal Reserve's annual bank stress test, while "reaction in Citigroup's CDS and bond spreads [has] been fairly muted," RBC Capital Markets, LLC analysts said in a note.

Citi's paper and CDS prices traded 2 bps to 3 bps wider, the analysts said.

The New York City-based financial services company's 1.35% senior notes due 2017 (Baa2/A-/A), priced on March 4 in a $1 billion offering at 99.959 to yield 1.364%, fell in early trading to 99.31 from 99.70 on Wednesday, according to a market source.

Verizon weaker

Verizon's 6.55% bonds due 2043 eased 4 bps to 160 bps offered after trading better earlier in the week, according to a market source.

Verizon sold $15 billion of the bonds at Treasuries plus 265 bps in a $49 billion eight-part offering on Sept. 11.

The telecommunications company is based in New York City.

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