Morning Commentary: Las Vegas Sands continues deal calls; new issues firm in secondary

By Cristal Cody

Tupelo, Miss., July 26 – Market action slowed on Friday in the high-grade bond primary market with supply for the week to date beating market forecasts.

Investment-grade issuers priced more than $23 billion of bonds in the first four sessions of the week. Syndicate sources expected about $15 billion to $20 billion of issuance this week.

A deal is being marketed from Las Vegas Sands Corp., which will continue a second day of fixed income investor calls on Friday for a dollar-denominated three-part offering of senior notes (Baa3/BBB-/BBB-).

New issues priced on Thursday traded about 2 basis points to 3 bps tighter in the secondary market, a source said.

PepsiCo Inc.’s $2 billion two-tranche offering of senior notes (A1/A+) firmed 2 bps to 3 bps.

The company sold $1 billion of 2.625% 10-year notes at a spread of 58 bps over Treasuries.

A $1 billion tranche of 3.375% 30-year bonds priced with a Treasuries plus 80 bps spread.

American Express Co.’s $1.5 billion of 2.5% five-year senior notes (A3/BBB+/A) tightened 2 bps in the secondary market. The notes priced Thursday at a spread of 72 bps over Treasuries.

Secondary market volume totaled $21.67 billion on Thursday, compared to $20.04 billion on Wednesday, $21.8 billion on Tuesday and $17.46 billion on Monday, according to Trace data.

Meanwhile, U.S. fund and ETF investors bought more bonds for the past week ended Wednesday, while they sold stocks, Yuri Seliger, a credit strategist with BofA, said in a research note released on Friday.

Fixed income inflows climbed to $6.03 billion from $4.97 billion “in the prior week, on the back of stronger flows for HY, loans and government bonds, while inflows to high-grade bonds remained stable,” Seliger said.

Equities reported a $6.43 billion outflow following a $4.37 billion inflow in the previous week.

High-grade inflows for corporate bonds, agencies, Treasuries and mortgages declined slightly to $3.61 billion for the past week from $3.67 billion in the previous week, according to the note.

Flows were “little changed” for short-term high-grade, down to $1.29 billion from $1.37 billion in the previous week, and excluding short-term, up modestly at $2.32 billion from $2.3 billion a week earlier, Seliger said.

Flows were little changed also for high-grade funds, which declined to $2.19 billion from $2.38 billion in the previous week, and ETFs, which rose to $1.42 billion from $1.29 billion in the prior week.

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