Morning Commentary: Kommunalbanken on deck; strong May supply forecast; CVS paper active

By Cristal Cody

Tupelo, Miss., April 25 – Kommunalbanken is expected to tap the high-grade primary market on Wednesday with a $1 billion offering of three-year notes.

The spread on the notes was set at mid-swaps plus 4 basis points, tighter than initial price guidance in the mid-swaps plus 5 bps area, a source said.

Sabal Trail Transmission LLC also is expected to price senior notes soon following fixed income investor calls on Tuesday, according to a market source.

High-grade bond volume was heavy in the previous trading session on Tuesday with new paper priced from issuers including Royal Bank of Canada, U.S. Bank NA, U.S. Bancorp, SunTrust Banks, Inc. and Bacardi Ltd.

Deal volume is expected to ramp up in May after the bulk of companies exit earnings blackout periods, a market source said.

About $25 billion to $30 billion of bond supply is forecast for this week, according to market sources.

Secondary volume robust

In other activity, the secondary market saw strong trading volume on Tuesday with $20.59 billion of bonds traded, up from $18.85 billion on Monday, according to Trace.

CVS Health Corp.’s 4.3% senior notes due March 25, 2028 (Baa1/BBB+) that priced in a $40 billion nine-tranche transaction on March 6 were among the top traded investment-grade bonds on Tuesday.

CVS Health’s 4.3% notes due March 25, 2028 were last seen early Wednesday at 98.50, up modestly from where the notes went out in the previous session at 98.48, a source said. The notes last traded on Tuesday nearly 6 bps tighter in the 146 bps area, according to another market source.

The Woonsocket, R.I.-based retail pharmacy chain and pharmacy benefits manager sold $9 billion of the 10-year notes at 98.594 to yield 4.475%, or a spread of Treasuries plus 160 bps.

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