August deal slowdown forecast; Fifth Third Bank, Burlington Northern notes tighten

By Cristal Cody

Tupelo, Miss., July 27 – High-grade primary action remained quiet on Friday while syndicate sources expect a summer slowdown in the upcoming week and over August.

About $15 billion to $20 billion of volume is predicted for the week ahead and about $60 billion to $70 billion for August, according to syndicate sources on Friday.

Investment-grade issuers priced more than $20 billion of bonds over the week, on the low end of market forecasts of about $20 billion to $25 billion of supply.

Fifth Third Bank placed the largest corporate deal of the week with a $1.55 billion three-part offering of senior notes (A3/A-/A-) that came on Monday.

In the secondary market, new issues priced over the week traded mostly tighter on Friday.

Fifth Third Bank’s paper firmed 2 basis points to 6 bps.

Burlington Northern Santa Fe, LLC’s $750 million of senior debentures due Dec. 15, 2048 tightened nearly 10 bps.

Elsewhere, high-grade inflows declined over the week.

For the week ended July 25, Lipper US Fund Flows reported inflows of $1.99 billion for corporate investment-grade funds, down slightly from $2.02 billion of reported inflows in the previous week.

Flows to bonds weakened across most sectors, except junk, according to a BofA Merrill Lynch note released on Friday.

Inflows to the high-grade space, which includes corporates, agencies, mortgages and Treasuries, declined to $1.61 billion from $2.34 billion in the previous week, BofA Merrill Lynch analyst Yuri Seliger said in the note.

“The entire decline was due to short-term funds and ETFs,” Seliger said.

Those inflows fell to $690 million from $1.42 billion, he said.

High-grade inflows outside-of-short-term were flat for a third week straight at $910 million.

Investment-grade inflows were lower for funds, to $1.46 billion from $1.83 billion, and ETFs, to $150 million from $500 million, Seliger said.

The Markit CDX North American Investment Grade 30 index ended Friday modestly softer at a spread of 58 bps.

NextEra plans remarketing

NextEra Energy Capital Holdings Inc. (Baa1/A-/A-) plans to remarket its series H debentures due Sept. 1, 2020 on Aug. 6, according to a news release on Friday.

The issue currently has $700 million of notes outstanding, which originally were issued as part of NextEra Energy, Inc.’s corporate units on Sept. 16, 2015 in conjunction with a purchase contract agreement on Sept. 1, 2015.

The debentures are guaranteed by parent company NextEra Energy.

Barclays, Mizuho Securities USA LLC and Wells Fargo Securities, LLC are the remarketing agents.

NextEra Energy is an energy company based in Juno Beach, Fla.

Fifth Third tightens

Fifth Third Bank’s 3.95% notes due July 28, 2025 traded on Friday at 97 bps bid, 94 bps offered, according to a market source.

The $750 million tranche of seven-year notes priced on Monday at a Treasuries plus 103 bps spread.

Fifth Third Bank is a regional banking company based in Cincinnati.

Burlington Northern firms

Burlington Northern Santa Fe’s 4.15% senior debentures due Dec. 15, 2048 tightened to 103 bps bid, 101 bps offered in the secondary market, a source said.

The company sold $750 million of the bonds (A3/A+/) on Wednesday at a spread of 112.5 bps over Treasuries.

The notes were talked to price in the Treasuries plus 120 bps area, plus or minus 5 bps, with initial price talk in the Treasuries plus 135 bps area.

The holding company for railroad transportation subsidiaries is based in Fort Worth.

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