Morning Commentary: Brixmor offers floaters; high-grade supply, secondary market light

By Cristal Cody

Tupelo, Miss., Aug. 28 – Brixmor Operating Partnership LP (Baa3/BBB-/BBB-) plans to tap the high-grade primary market with a new offering of four-year floating-rate notes.

Otherwise, market activity remained light over the morning with many desks thinly staffed this week and investors’ focus on the U.S.-Mexico trade deal that president Donald Trump announced on Monday.

Syndicate sources predict up to about $5 billion of bond issuance for the week in front of the Labor Day holiday.

On Monday, Caterpillar Financial Services Corp. was the sole reported investment-grade issuer with a $750 million reopening of medium-term floating-rate notes due March 15, 2021.

Secondary market volume also was light on Monday with $10.21 billion of high-grade bonds traded, down from $13.39 billion of trading volume in the same period a week ago, according to Trace.

Overall investment-grade volume is expected to reach $1.17 trillion for the year, down from $1.39 trillion in 2017, according to a BofA Merrill Lynch research note released on Tuesday. High-grade new issue volumes have averaged $1.22 trillion per year since 2013.

Industrial issuers account for nearly 60% of the market, while financials make up 34% and utilities another 8%, according to the report.

CDX indices make up the most liquid part of the market, averaging $22.3 billion in daily trading volumes since 2013, above high-grade bonds, at $14.8 billion, and single-name CDS, at $3.1 billion, the note said.

“Since 1997, high-grade index spreads have averaged 155 [basis points], ranging between 53 bps in October of 1997 and 622 bps in December of 2008,” according to the note. “The current spread is 119 bps. Default rates for high-grade bonds are very low, with default losses averaging just 13 bps per year historically, highlighting that mark to market risk – including liquidity risk – is the most important driver of high-grade spreads.”

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