High-grade supply slows; IFC in pipeline; Diageo flat; Marriott tightens; National Bank firms

By Cristal Cody

Tupelo, Miss., Oct. 4 – High-grade market action quieted on Friday after a light week of new issuance.

Investment-grade corporate and SSA issuers priced more than $11 billion of bonds over the week.

Volume is expected to remain subdued in the upcoming week with about $10 billion to $15 billion of supply forecast, market sources said.

Issuance is eyed to pick up later in October after the Columbus Day holiday weekend and quarterly earnings blackout reporting periods end.

Meanwhile, International Finance Corp. is marketing a dollar-denominated offering of five-year global notes.

The Labor Department reported Friday that 136,000 jobs were added in September, compared to the 145,000 gain expected by market analysts. The unemployment rate fell from 3.7% to 3.5%, the lowest since December 1969, the Labor Department said.

The Markit CDX North American Investment Grade 33 index erased losses from earlier in the week and firmed about 3 basis points on Friday to close at a spread of 60 bps.

In the secondary market, new issues priced over the week were mixed.

Diageo Capital plc’s $1.6 billion of registered notes (A3/A-/) priced in two tranches on Monday traded wrapped around issuance on Friday.

Marriott International Inc.’s $550 million of 2.125% senior notes due Nov. 1, 2022 sold on Tuesday tightened 7 bps.

National Bank of Canada’s inaugural $750 million of 2.15% bail-in sustainability bonds due Oct. 7, 2022 that were brought to the market on Wednesday firmed 2 bps.

Elsewhere, high-grade inflows accelerated over the week in corporates, agencies, Treasuries and mortgages, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released Friday.

Inflows to U.S. high-grade bond funds and ETFs rose to $4.89 billion for the week ended Wednesday from a $3.88 billion inflow in the prior week.

“The inflows have now reached a relatively high level,” Seliger said. “Also over the last three weeks HG inflows have shifted almost entirely out of short-term and into intermediate and longer duration funds and ETFs.”

However, the overall inflow to bonds declined to $3.45 billion from $7.28 billion in the previous week as flows for other fixed income asset classes weakened, according to the note.

High grade inflows shifted toward funds to $2.91 billion from $1.25 billion in the prior week and away from ETFs, which declined to $1.99bn from $2.62 billion a week earlier.

IFC plans dollar issue

International Finance (Aaa/AAA/) is in the deal pipeline with a dollar-denominated offering of five-year global notes, according to a market source.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Nomura Securities International, Inc. and TD Securities (USA) LLC are the bookrunners.

Washington, D.C.-based International Finance is a member of the World Bank Group.

Diageo Capital flat

Diageo Capital’s 2.375% notes due Oct. 24, 2029 were unchanged in the secondary market on Friday at 80 bps bid, a source said.

Diageo priced $1 billion of the 10-year notes on top of guidance on Monday at a Treasuries plus 80 bps spread.

The notes are guaranteed by Diageo plc.

The premium drink company is based in London.

Marriott tightens

Marriott International’s 2.125% senior notes due Nov. 1, 2022 (Baa2/BBB/) were seen in secondary trading on Friday at 63 bps bid, 60 bps offered, a source said.

The company priced $550 million of the bonds on Tuesday at a spread of 70 bps over Treasuries.

Initial price talk was in the Treasuries plus 85 bps area.

The lodging company is based in Bethesda, Md.

National Bank improves

National Bank of Canada’s 2.15% bail-in sustainability bonds due Oct. 7, 2022 traded at 70 bps bid, 67 bps offered on Friday, according to a market source.

The bank (A3/A/A+) sold $750 million of the bonds in a Rule 144A- and Regulation S-eligible offering on Wednesday at a spread of 72 bps over Treasuries.

Initial price talk was in the Treasuries plus 85 bps area.

The financial group is based in Montreal.

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