Morning Commentary: Duke Energy offers two tranches; market eyes steady volume for week

By Cristal Cody

Tupelo, Miss., Nov. 5 – Duke Energy Carolinas LLC (Aa2/A) announced plans on Monday to price two tranches of first and refunding mortgage bonds following a roadshow last week.

The company held a roadshow and fixed income investor calls on Wednesday for the offering of green first and refunding mortgage bonds.

BNP Paribas Securities Corp., BofA Merrill Lynch, MUFG, Scotia Capital (USA) Inc. and TD Securities (USA) LLC are the bookrunners.

High-grade market sources expect about $15 billion to as much as $30 billion of issuance this week, though deal windows will be fewer with the mid-term U.S. elections on Tuesday, conclusion of the Federal Reserve’s monetary policy meeting on Thursday and the upcoming Veterans Day holiday weekend.

No major policy changes are expected from the Federal Reserve since the meeting will not include a press conference, but the potential for a rate hike is December is growing, a source said.

Investment-grade issuers priced more than $19 billion of bonds last week.

Syndicate sources expect about $75 billion to $85 billion of supply on average with the potential for as much as $120 billion of new issuance in November.

“Looking ahead, November is the last major issuance window of the year after companies exit earnings-related blackouts,” according to a BofA Merrill Lynch research note released on Monday. “Given the modest issuance volume in October, we look for a slightly stronger November.”

October high-grade volume totaled less than $100 billion for the month and was down 25% year over year, according to the note.

“New issue performance deteriorated in October driven partially by significant equity market volatility,” the note said. “The average new issue concession widened to 6 [basis points] from 5.4 bps in September, and the average break performance narrowed to 2.7 bps tighter from 3 bps tighter in September.”

Elsewhere, the high-grade secondary market ended Friday with $19.31 billion of bonds traded, according to Trace.

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