Tone improves on strong payrolls; Bayer, Enterprise bonds continue tightening in secondary

By Aleesia Forni

Virginia Beach, Oct. 3 – The high-grade bond market was unsurprisingly quiet on Friday, with the market’s focus firmly set on the release of September’s payrolls data.

The Labor Department reported that the U.S. economy added 248,000 jobs during September, compared to expectations of 215,000 jobs.

The unemployment rate fell to 5.9%.

The market’s tone was decidedly more positive on Friday following the strong jobs report, closing a volatile week for high-grade bonds.

Roughly $20.5 billion of new issuance sold in the investment-grade primary market this week, falling in line with what sources had predicted to be a $20 billion to $25 billion week.

Meanwhile, cash continues to pour into corporate investment-grade bond funds, with Lipper reporting staggering net inflows of $3.13 billion for the week ended Oct. 1.

In the secondary market, spreads continued to trade tighter following the weakness seen earlier during the week.

The Markit CDX North American Investment Grade series 22 index was 1 basis point tighter at a spread of 62 bps.

Recent deals from both Bayer US Finance LLC’s and Enterprise Products Operating LLC traded better during Friday’s session.

Bayer firms

Bayer’s new $7 billion of senior notes continued to trade better during the session on Friday, a market source said.

The company’s recently priced $2 billion of 2.375% five-year notes traded 4 bps tighter on the day at 70 bps bid, 66 bps offered.

The notes sold with a spread of Treasuries plus 80 bps on Wednesday.

Bayer’s $1.5 billion of 3% notes due 2021, which priced at Treasuries plus 90 bps, traded at 82 bps bid, 78 bps offered.

The company’s $1.75 billion of 3.375% 10-year notes traded around 3 bps better at 99 bps bid, 96 bps offered following Wednesday’s pricing at Treasuries plus 110 bps.

The German chemical and pharmaceutical company is based in Leverkusen.

Enterprise tightens

In other secondary action, Enterprise’s $2.75 billion of senior notes (Baa1/BBB+/), which sold in four parts on Thursday, also firmed on Friday.

The new $800 million of 2.55% five-year notes traded 4 bps better on the day at 79 bps bid after pricing with a spread of Treasuries plus 85 bps.

The company’s $1.15 billion of 3.75% bonds due 2024, which priced at Treasuries plus 135 bps, traded 3 bps better on the day at 129 bps bid, 126 bps offered.

Finally, the $400 million of 4.95% bonds due 2054 traded 8 bps better at 180 bps bid, 178 bps offered.

The bonds were sold with a spread of Treasuries plus 190 bps.

The midstream energy services provider is based in Houston.

Bank/brokerage CDS costs

Investment-grade bank and brokerage CDS prices were lower on Friday, according to a market source.

Bank of America Corp.’s CDS costs fell 4 bps to 70 bps bid, 74 bps offered. Citigroup Inc.’s CDS costs were 4 bps lower at 69 bps bid, 73 bps offered. JPMorgan Chase & Co.’s CDS costs declined 5 bps to 45 bps bid, 48 bps offered. Wells Fargo & Co.’s CDS costs ended 4 bps lower at 45 bps bid, 48 bps offered.

Merrill Lynch’s CDS costs were 4 bps lower at 74 bps bid, 77 bps offered. Morgan Stanley’s CDS costs ended 6 bps lower at 80 bps bid, 84 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 6 bps lower at 82 bps bid, 86 bps offered.

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