Banks remain under pressure; utilities print with strong performance; outflows decline

By Cristal Cody

Tupelo, Miss., March 24 – The bank space continued to be rocked by events over the week that kicked off following Credit Suisse Group AG’s weekend acquisition by UBS Group AG and with no let-up seen Friday as Deutsche Bank AG came under pressure.

Deutsche Bank’s split-rated paper was down more than 1 point and trading on handles in the 80s, while its junk subordinated notes were down more than 9 points in heavy secondary trading, a source said.

The 7.079% notes due Feb. 10, 2034 (Baa3/BB+) dropped nearly 1.25 points to an 85 handle on over $15 million of volume.

The pressure sent other financial names including BNP Paribas SA, Barclays Bank plc, Societe Generale, Lloyds Banking Group plc, UBS, Wells Fargo & Co. and Ally Financial Inc. lower on Friday.

Despite the bank fallout, after more than a week of no supply, the week saw strong demand for high-grade deals in other sectors, including utilities, sources reported.

Monday opened with investment-grade bond offerings from CenterPoint Energy Houston Electric, LLC and Duke Energy Ohio Inc.

CenterPoint Energy’s $900 million of 10- and 30-year bonds (A2/A/A) priced 30 basis points to 35 bps tighter than talk.

The $300 million green tranche of 5.3% bonds due 2053 priced with a spread of 165 bps over Treasuries, better than talk at the 200 bps spread area.

Duke Energy’s $750 million of 10- and 30-year bonds (A2/A) also priced 30 bps to 35 bps better than talk and stronger on the long end.

The $375 million tranche of 5.65% notes due 2053 came at a spread of 200 bps over Treasuries. Talk was at the Treasuries plus 235 bps area.

The market remained strong on Tuesday with deals from energy suppliers continuing to price better than guidance.

On Tuesday, Duke Energy Indiana, LLC sold $500 million of 5.4% notes due 2053 (Aa3/A) at Treasuries plus 170 bps, 40 bps tighter than talk.

Indiana Michigan Power placed its $500 million of 5.625% notes due 2053 (A3/A-/A-) during the session at 190 bps over Treasuries, also 40 bps tighter than talk.

Oklahoma Gas & Electric Co. found strong demand on Tuesday for its $350 million of 5.6% notes due 2053. The notes (A3/A-/A) were talked at the 225 bps over Treasuries area and priced at a 190 bps spread.

Short tenors also priced tight. Southwest Gas Corp.’s $350 million of 5.45% notes due 2028 (Baa1/BBB/A) were sold Tuesday at a 175 bps spread over Treasuries, better than talk at the 210 bps spread area.

On Thursday, Public Service Electric & Gas sold $900 million of green bonds (A1/A) in two tranches about 30 bps tighter than initial talk and on the tightest side of guidance. The $500 million of 4.65% notes due 2033 priced at a spread of 122 bps over Treasuries. Initial talk was at the Treasuries plus 155 bps to 160 bps area with guidance firmed to the 125 bps area, plus or minus 3 bps.

Week to date, about $21 billion of investment-grade notes were sold in three sessions, with the market quiet on Wednesday as focus shifted to the Federal Reserve’s rate decision.

The utilities space brought about $4.25 billion of high-grade paper to the primary market over the week.

New issuance so far this month is lighter than expected, a source said.

More than $75 billion of investment-grade paper has priced month to date, while about $150 billion to $170 billion was anticipated for the month.

Outflows moderate

Corporate investment-grade fund outflows continued over the week but moderated from the prior week.

Funds outflows were $865 million for the week ended Wednesday, down from $3.89 billion of outflows in the prior week, according to Refinitiv Lipper US Fund Flows.

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