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Midday Commentary: ABN flat, Citigroup eases in early trading; spreads in 'holding pattern'
By Cristal Cody
Tupelo, Miss., Oct. 25 - Investment-grade bonds traded flat to slightly wider early Friday but are better on the week, according to market sources.
"Credit spreads remain in a holding pattern near the tightest levels of the cycle as a slew of earnings releases are being met with a collective yawn by credit investors," RBC Capital Markets, LLC analysts said in a note on Friday.
The Markit CDX North American Investment Grade series 21 index, which closed Thursday unchanged at a spread of 72 basis points, is tighter on the week and year, according to Barclays.
"The end of the government shutdown and the slightly weaker-than-expected September employment report - which allayed the market's tapering concerns - led investment-grade credit to tighten to within 1 bp from post-crisis tights in both cash and CDS this week," Barclays analysts said in a note on Friday.
"The CDX index has significantly outperformed the cash index this year. In spread terms, the CDX.IG index is more than 40 [bps] tighter since Dec. 31, 2012, after adjusting for rolls."
More than $40 billion of new high-grade bond issuance hit the market over the week, according to a market source.
In the secondary market, ABN Amro Bank NV's new 2.5% notes due 2018 traded mostly unchanged from the previous session.
Citigroup Inc.'s 3.875% senior notes due 2023 sold on Monday widened about 4 bps from where the notes traded on Thursday, a source said.
ABN flat
ABN Amro Bank's 2.5% notes due 2018 (A2/A/A+) were seen early Friday at 118 bps offered and later in the morning at 120 bps offered, a trader said.
The notes, sold in a $1 billion offering on Wednesday at a spread of Treasuries plus 127 bps, traded at 120 bps bid, 118 bps offered on Thursday.
The bank and financial services company is based in Amsterdam.
Citigroup eases
Citigroup's 3.875% senior notes due 2023 (Baa2/A-/A) eased to 140 bps bid, 135 bps offered in secondary trading early Friday, a trader said.
The notes were quoted early Thursday at 136 bps bid, 133 bps offered.
Citigroup sold $2 billion of the notes at a spread of Treasuries plus 130 bps on Monday.
The financial services company is based in New York.
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