Corporate supply quiet; Fannie Mae prices; high-grade inflows heavy; new issues remain tight

By Cristal Cody

Tupelo, Miss., Feb. 7 – Investment-grade issuers stayed on the sidelines on Thursday with no corporate deals priced during the session.

The only reported issuance was a $2 billion offering of five-year notes that Fannie Mae priced early Thursday.

Week to date, investment-grade issuers have sold more than $10 billion of bonds.

About $15 billion to $20 billion of supply was forecasted for the week with some sources expecting only about $10 billion of issuance.

Most of the Asian markets have been closed this week for the Lunar New Year holiday.

Deal volume is expected to pick up in the week ahead, a source said.

For the week ended Wednesday, Lipper US Fund Flows reported net inflows jumped to $2.67 billion for corporate investment-grade funds, up from $34 million in the previous week.

Inflows to investment-grade bond funds and exchange-traded funds have been substantial this week “after the super-dovish FOMC meeting,” according to a research note by BofA Merrill Lynch credit strategist Hans Mikkelsen.

Inflows to high-grade bond funds totaled $1.4 billion on Tuesday, “identical to the average daily number over the past three business days, which is really close to the peak pace historically,” he said.

Credit spreads had tightened nearly 10 basis points following the Federal Reserve’s decision to leave rates unchanged last week before softening on Wednesday.

The weakness in the high-grade space “is just temporary, and we should expect to resume the rally soon – if not before then the latest on Tuesday next week when everybody (including Japan) are back from the holidays,” Mikkelsen said.

Investment-grade credit spreads eased about 1 bp on Wednesday and softened another 4 bps over Thursday’s session to a spread of 68 bps.

Bonds mixed

Bonds were mixed during the session with new issues remaining mostly better than issuance.

Morgan Stanley’s 4.431% fixed-to-floating notes due 2030 were steady over the day and headed out more than 40 bps better than where the notes priced last month.

Wells Fargo & Co.’s 4.15% notes due 2029 were unchanged during the session. The notes are trading more 25 bps tighter than where the issue priced in January.

Fox Corp.’s 4.709% notes due 2029 priced in January softened 2 bps during the session, though the notes remain more than 50 bps tighter than issuance.

BP Capital Markets America Inc.’s $2 billion of senior notes (A1/A-/) priced in a new and a reopened tranche on Wednesday earlier were quoted 2 bps to 4 bps tighter in secondary trading.

The company’s $1 billion of 3.41% notes due Feb. 11, 2026, priced at a spread of 82 bps over Treasuries, firmed about 2 bps.

BP’s reopened 4.234% notes due Nov. 6, 2028 tightened about 4 bps in secondary trading.

The company priced a $1 billion add-on to the tranche at a Treasuries plus 92 bps spread.

Bank of Nova Scotia’s $1.25 billion of 3.4% senior notes due Feb. 11, 2024 (A2/A-/AA-) firmed about 1 bp after issuance, a source said.

The notes priced at a spread of 92 bps over Treasuries.

Morgan Stanley flat

Morgan Stanley’s 4.431% global medium-term fixed-to-floating-rate senior notes due Jan. 23, 2030 traded flat on the day at 125 bps bid, according to a market source.

The company (A3/BBB+/A) priced $3 billion of the notes on Jan. 17 at par to yield a spread of Treasuries plus 170 bps.

The coupon will reset to a floating rate of Libor plus 162.8 bps from Jan. 23, 2029 to but excluding the maturity date.

Morgan Stanley is a New York-based financial products and services company.

Wells Fargo stable

Wells Fargo’s 4.15% medium-term notes due Jan. 24, 2029 were unchanged on Thursday at 119 bps bid in secondary trading, a source said.

The $2.5 billion tranche of 4.15% 10-year notes (A2/A-/A+) priced on Jan. 16 at a spread of Treasuries plus 145 bps.

The financial services company is based in San Francisco.

Fox notes ease

Fox’s 4.709% notes due Jan. 25, 2029 eased 2 bps to 149 bps bid in the secondary market on Thursday, a source said.

The company (Baa2/BBB/) sold $2 billion of the 10-year notes on Jan. 15 at a Treasuries plus 200 bps spread.

The mass media company is based in New York City.

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