High-grade primary market quiet; light supply forecast; credit spreads improve; bonds mixed

By Cristal Cody

Tupelo, Miss., March 2 – The investment-grade bond market opened the new month with little activity on Monday.

No reported issuers were in the primary market.

Syndicate sources expect anywhere from zero up to about $15 billion of issuance this week.

March volume is predicted to total in the $100 billion to $125 billion range but with the potential for much less, sources report.

Last week, only three reported issuers, including one corporate issuer, sold notes after stocks plunged, credit spreads widened more than 21 basis points and Treasuries rallied on fears of a coronavirus pandemic.

About $25 billion to $30 billion of investment-grade deal volume was expected last week.

Bond supply is being eyed to come mid-week – with dozens of issuers on standby – depending on how much stability is seen in the financial markets, sources said.

High-grade credit spreads recovered modestly on Monday after widening more than 21 basis points last week.

The Markit CDX North American Investment Grade 33 index firmed more than 2 bps to a spread of 65.06 bps.

Stocks overall opened Monday slightly better and ended the day strong. The Dow Jones industrial average closed up more than 1,293 points, or 5.09%.

Treasuries continued to post gains but lost steam over the day with expectations of an interest rate cut growing.

The 10-year note yield was down 6 bps at 1.067% at the start of the day and ended the session off 3.9 bps at 1.088%, a new record low. The benchmark yield closed Friday down 17 bps at 1.127%.

The Federal Reserve holds its next monetary policy meeting March 17-18.

In the secondary market, high-grade energy issues were mixed after softening last week.

Energy Transfer Operating LP’s 3.75% notes due May 15, 2030 (Baa3/BBB-/BBB-) traded better at 101.69 on Monday from 100.91 on Friday and less than 1 bp wider on the day, a market source said.

The notes closed weaker Friday at 100.26 from 101.27 at the start of the session and 37 bps wider.

The issue traded a week ago at 106.18.

The Dallas-based natural gas midstream and intrastate transportation and storage company sold $1.5 billion of the bonds on Jan. 7 at 99.843 to yield 3.769% and a Treasuries plus 255 bps spread.

Western Midstream Operating, LP’s 4.05% notes due Feb. 1, 2030 (Ba1/BBB-/BBB-) were last seen weaker at 98.32 from 98.55 on Friday and about 3 bps softer, a source said.

The Woodlands, Texas-based midstream energy assets company sold $1.2 billion of the bonds on Jan. 9 at 99.90 to yield 4.062% and a spread of 220 bps over Treasuries.

Intel notes improve

In other secondary trading, Intel Corp.’s 2.45% senior notes due Nov. 15, 2029 (A1/A+/A+) reopened on Feb. 10 climbed to 104.59 from 103.98, a source said.

The Santa Clara, Calif., semiconductor chip maker priced a $750 million add-on to the 2.45% notes due Nov. 15, 2029 on Feb. 10 at 102.125 to yield 2.201% and a Treasuries plus 65 bps spread.

Intel originally sold $1.25 billion of the notes on Nov. 18, 2019 at 99.868 to yield 2.465% and a spread of 65 bps over Treasuries.

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