Morning Commentary: Primary quiets after busy week for issuance; AT&T softens; Time Warner gains

By Cristal Cody

Tupelo, Miss., Nov. 10 – The high-grade primary market stayed fairly quiet early Friday after capping off the eighth highest volume week on record for corporate and SSA issuance, according to market sources.

More than $60 billion of bonds have priced in the first four sessions, including more than $45 billion of corporate bonds.

About $30 billion of corporate issuance was forecast by market sources for the week, though deal action was expected to be strong.

Weakness was weighing on financial markets as the session opened, a source said.

The three-month Libor yield was up 1 basis point to 1.41% early Friday, according to a market source.

Amid the heavy issuance on Thursday with more than $13 billion of bonds priced, secondary trading volume dropped to $16.97 billion during the session, according to Trace.

Secondary market volume totaled $19.26 billion on Wednesday, $19.8 billion on Tuesday and $14.08 billion on Monday.

Time Warner improves

AT&T Inc.’s bonds (Baa1/BBB+/A-) remained weak in early secondary trading on Friday on reports the Justice Department may require divestures to complete its $85.4 billion cash and stock acquisition of Time Warner Inc., according to market sources.

AT&T was expected to close the acquisition of Time Warner before the end of the year.

AT&T’s 3.9% notes due Aug. 14, 2027 traded at 99.48 early Friday. The bonds last traded on Thursday at 101.27. The 3.9% notes eased 5 bps to 173 bps bid in the previous session.

AT&T sold $5 billion of the notes on July 27 at 99.827 to yield 3.92% and a spread of 160 bps over Treasuries.

Time Warner’s 2.95% notes due July 15, 2026 (Baa2/BBB/BBB+) were quoted at 94.76 in secondary trading over the morning from 94.67 on Thursday. The notes headed out on Thursday 9 bps tighter at 134 bps bid.

The New York-based media and entertainment company sold $800 million of the notes on May 5, 2016 at 98.70 to yield 3.1%, or a spread of Treasuries plus 135 bps.

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