High-grade primary slows; little deal volume likely for rest of year; inflows resume

By Cristal Cody

Tupelo, Miss., Dec. 9 – The investment-grade primary market dusted off what’s expected to be among the last of the year’s issuance by mid-week.

Some more pricing action could hit the primary market next week ahead of the Federal Reserve’s policy statement on Wednesday with the markets typically closing for the rest of the year, sources said.

Volume was heaviest at the week’s start with $4 billion in corporate issuance and $1.25 billion in the sovereign, supranational and agency space.

Deals mostly priced tighter than talk and were seen better in secondary trading, according to market sources.

Energy Transfer LP priced $2.5 billion of notes (Baa3/BBB-) in two parts with both tranches printing 25 basis points tighter than initial talk.

Energy Transfer’s 5.75% notes due 2033, which priced at spread of 215 bps over Treasuries, were talked at the 245 bps spread area.

Duke Energy Corp.’s $1 billion of notes (Baa2/BBB) sold in two tranches on Monday came 27 bps better than talk. The 5% notes due 2027 priced at 123 bps over Treasuries, in from talk in the 150 bps spread area.

Both energy deals tightened in the secondary market, a source said.

Duke’s 5% notes due 2027 firmed 8 bps.

Energy Transfer’s 10-year notes tightened to 209 bps offered.

In the SSA space, Royal Bank of Canada’s $1.25 billion of 4.784% covered notes due 2025 (AAA/AAA) priced on top of talk at SOFR mid-swaps plus 85 bps.

Primary supply slowed considerably by Tuesday with one deal from Brandywine Operating Partnership, LP, which sold $350 million of 7.55% notes due 2028 (Baa3/BBB-) on top of talk at Treasuries plus 400 bps.

The issue broke 8 bps tighter at 392 bps offered in aftermarket trading, a source said.

One last deal for the week was seen on Wednesday from National Rural Utilities Cooperative Finance Corp.

The company found demand as the flavor of the day and sold $400 million of 4.8% notes due 2028 (A2/A) in an offering upsized from $350 million, a source said.

Book demand hit more than $1.1 billion.

The deal priced 15 bps tighter than talk at Treasuries plus 120 bps.

Only $4.75 billion of bonds priced over the week, well off the $10 billion to $15 billion anticipated for the week.

December issuance also is totaling so far around $5 billion and may not get much closer to the $25 billion of supply anticipated for the month, sources said.

Last year, the high-grade primary market effectively shut down after Dec. 9, a source noted.

Market participants are eyeing possible deal windows ahead of the Federal Reserve’s monetary rate decision due out Wednesday.

Inflows return

High-grade corporate investment funds had inflows for the past week ended Wednesday of $1.2 billion following heavy outflows of $6.92 billion in the prior week, according to Refinitiv Lipper US Fund Flows.

Corporate investment-grade funds have posted net outflows of about $125 billion year to date.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.