Morning Commentary: Busy post-holiday high-grade supply forecast; Federal Realty firms

By Cristal Cody

Tupelo, Miss., Oct. 9 – The high-grade primary market stayed quiet at the start of Friday’s session with week-to-date issuance surpassing deal forecasts.

Investment-grade issuers have sold more than $23 billion of corporate and sovereign, supranational and agency bonds this week, compared to expectations of about $15 billion to $20 billion of supply for the week.

Light activity is expected ahead of the long holiday weekend with the bond markets scheduled to be closed on Monday for the Columbus Day holiday.

Next week, syndicate sources said they expect steady supply in the primary market. Despite a shortened week, about $15 billion to $20 billion of volume is anticipated with the potential for more if banks return to the market after earnings releases.

Quarterly earnings reports are due from the big banks next week, starting with JPMorgan Chase & Co. and Citigroup Inc. on Tuesday.

Recent deals improve

In the secondary market, new high-grade corporate issues are trading mostly better.

Federal Realty Investment Trust’s 1.25% green notes due Feb. 15, 2026 (A3/A-) that priced on Thursday tightened to 97 basis points bid, a market source said.

Federal Realty sold $400 million of the notes at 99.339 to yield 1.379%, or a spread of Treasuries plus 105 bps.

The notes had priced tighter than guidance at the 115 bps spread area, plus or minus 5 bps.

Lowe's Cos., Inc.’s $4 billion of notes (Baa1/BBB+) that priced in three tranches on Wednesday firmed about 3 bps to 7 bps on the long end.

The $1.75 billion tranche of 3% bonds due Oct. 15, 2050 tightened to 133 bps bid, a source said.

Lowe’s priced the notes at a spread of Treasuries plus 140 bps, or 99.902 to yield 3.005%.

Initial price talk was in the 180 bps over Treasuries area with guidance at the 145 bps area, plus or minus 5 bps.

Overall, this week has seen $25.09 billion of high-grade corporate bonds traded on Thursday, $23.3 billion on Wednesday, $23.58 billion on Tuesday and $18.84 billion on Monday, according to Trace.

Meanwhile, market tone was mixed early in the session with the Pimco Investment Grade Corporate Bond index down 0.14% at 114.61.

The iShares iBoxx Investment Grade Corporate Bond ETF improved 0.15% to 134.83.

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