High-grade volume thins; American Airlines sells; financial paper widens; credit spreads ease

By Cristal Cody

Eureka Springs, Ark., June 27 – Investment-grade bond markets remained volatile on Monday as investors flocked to safer haven securities including Treasuries and municipal bonds following the United Kingdom’s vote to leave the European Union.

The only deal seen in the U.S. investment-grade primary market was a transaction from American Airlines, Inc. The company sold $226.95 million of class B enhanced equipment trust certificates.

Credit spreads continued to soften over the day after widening 10 basis points on Friday. The Markit CDX North American Investment Grade index closed 4 bps wider at a spread of 91 bps.

The financial markets are expected to remain volatile in the near term over Brexit concerns.

Barclays plc’s 4.375% senior notes due 2026 were quoted 32 basis points wider early on Monday.

Also, Wells Fargo & Co.’s 4.4% subordinated notes due 2046 were seen 14 bps weaker in the secondary market.

American Airlines in market

American Airlines sold $226.95 million of 4.375% class B enhanced equipment trust certificates with a final expected distribution date of June 15, 2024, according to an 8-K filing with the Securities and Exchange Commission on Monday.

The sale is a continuation of the company's offering of series 2016-2 enhanced equipment trust certificates, which included class AA and class A certificates, that closed on May 16.

Proceeds will be used to finance the purchase of five Airbus aircraft and three Boeing aircraft scheduled to be delivered from June through August and for general corporate purposes.

The Fort Worth, Texas-based commercial airline is a subsidiary of AMR Corp.

Barclays widens

Barclays’ 4.375% notes due 2026 were quoted 32 bps wider at 258 bps offered early on Monday, a source said.

Barclays sold $2.5 billion of the notes (Baa3/BBB/A) on Jan. 5 at a spread of Treasuries plus 220 bps.

The financial services company is based in London.

Wells Fargo softens

Wells Fargo’s 4.4% notes due 2046 traded 14 bps weaker earlier in the session at 203 bps offered, according to a market source.

Wells Fargo sold $2 billion of the notes on June 7 at 188 bps over Treasuries.

The financial services company is based in San Francisco.

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