Morning Commentary: High-grade bond market mostly quiet; TD Bank eases; credit spreads flat

By Cristal Cody

Eureka Springs, Ark., Nov. 4 – The high-grade bond market opened mostly quiet on Friday with attention focused on economic data reports, the growing odds of a December rate hike by the Federal Reserve and the upcoming U.S. presidential election.

The Labor Department announced that the total non-farm payroll report rose by 161,000 jobs in October. The unemployment rate was little changed at 4.9%.

Investment-grade bonds were mixed in the secondary market.

Toronto-Dominion Bank’s 3.625% non-viability contingent capital subordinated notes due 2031 that priced in September traded about 2 basis points softer but remain more than 20 bps better than issuance.

The Markit CDX North American Investment Grade index was mostly unchanged at a spread of 79 bps.

The three-month Libor yield was steady over the morning at 88 bps.

Secondary trading volume dropped to $15.85 billion on Thursday, compared to $17.50 billion on Wednesday, $19.75 billion on Tuesday and $15.88 billion on Monday, according to Trace.

TD Bank softens

Toronto-Dominion Bank’s 3.625% notes due 2031 eased about 2 bps to 179 bps offered, according to a market source.

The notes (A2/A-/DBRS: AL) priced in a $1.5 billion offering on Sept. 8 at a spread of 205 bps over Treasuries.

The notes bear a 3.625% fixed rate to but excluding Sept. 15, 2026 and then bear a rate at five-year mid-swaps plus 220.5 bps thereafter to but excluding Sept. 15, 2031.

The bank and financial services company is based in Toronto.

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