High-grade primary muted as slowdown sets in; spreads soften; Apple, Amazon weaker

By Aleesia Forni and Cristal Cody

Virginia Beach, Dec. 15 – The high-grade bond market was empty of any new issuance activity on Monday, as the market winds down ahead of the end of the calendar year.

Sources are calling for around $5 billion of supply for the week in what is expected to be the last round of primary activity for 2014.

This follows last week’s slower $7 billion tally, a sharp decline from the first week of December, which saw more than $49 billion price.

“Probably won’t see much [new issuance] until January,” one market source said.

Investment-grade corporate bonds continued to weaken on Monday ahead of the two-day Federal Reserve policy meeting, according to market sources.

The Markit CDX North American Investment Grade series 23 index eased 2 basis points to a spread of 74 bps after widening more than 3 bps on Friday.

In the secondary market, Apple Inc.’s 3.45% notes due 2024 softened, according to a market source.

Amazon.com, Inc.’s 4.95% senior notes due 2044 priced in early December traded 2 bps weaker than issuance, a market source said.

Freddie Mac passes

Freddie Mac announced on Monday that it would forgo issuing Reference Notes on its Dec. 15 announcement date, according to a company news release.

The government-sponsored enterprise is based in McLean, Va.

Apple weaker

Apple’s 3.45% notes due 2024 (Aa1/AA+/) were quoted wider at 94 bps bid early Monday, a market source said.

The notes traded unchanged at 81 bps offered on Friday.

Apple’s notes closed the day lower at 103.712 to yield 2.993% after trading as high as 105.985 to yield 2.723% over the morning, a source said. The notes last traded on Friday at 104.071 to yield 2.95%.

Apple sold $2.5 billion of the notes at a spread of Treasuries plus 77 bps on April 29, 2014. The notes priced at 99.916 to yield 3.46%.

The computer and mobile communications device company is based in Cupertino, Calif.

Amazon eases

Amazon.com’s 4.95% notes due 2044 (Baa1/AA-/) traded 3 bps weaker at 207 bps offered on Monday, a market source said.

The bonds ended the session higher at 104.19 to yield 4.686% from 101.765 to yield 4.837% earlier in the day, a source said. The bonds traded on Friday at 102.085 to yield 4.817%.

The company sold $1.5 billion of the notes at 99.236 to yield 5.065% and with a spread of Treasuries plus 205 bps on Dec. 2.

The online retailer is based in Seattle.

Bank/brokerage CDS costs

Investment-grade bank and brokerage CDS prices were mostly flat on Monday, according to a market source.

Bank of America Corp.’s CDS costs were flat at 69 bps bid, 73 bps offered. Citigroup Inc.’s CDS costs were also flat at 71 bps bid, 75 bps offered. JPMorgan Chase & Co.’s CDS costs were flat at 63 bps bid, 67 bps offered. Wells Fargo & Co.’s CDS costs were flat at 46 bps bid, 50 bps offered.

Merrill Lynch’s CDS costs were unchanged at 72 bps bid, 76 bps offered. Morgan Stanley’s CDS costs ended 1 bp wider at 82 bps bid, 86 bps offered. Goldman Sachs Group’s CDS costs were unchanged at 85 bps bid, 88 bps offered.

Paul Deckelman contributed to this review.

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