High-grade deal volume slows; KfW, Fannie Mae on deck; strong post-holiday supply forecast

By Cristal Cody

Tupelo, Miss., July 2 – The investment-grade primary market saw a second consecutive session without any reported bond issuance on Tuesday.

High-grade issuer Commerzbank AG (A1/A-/BBB+) priced an upsized $1 billion of junk-rated 7% perpetual tier 1 capital subordinated notes (Ba2/BB/) on Tuesday following a roadshow.

Commerzbank offered a $500 million minimum deal size and held talks with more than 140 investors in Germany, Europe and Asia, according to a news release.

Bookrunners were UBS Securities LLC, Commerzbank, Barclays, HSBC Securities (USA) Inc. and J.P. Morgan Securities LLC.

Some deal action is expected ahead of an early market close on Wednesday from sovereign, supranational and agency issuers, which stayed out of the primary market last week.

KfW is marketing a dollar-denominated offering of three-year global notes.

Fannie Mae said it expects to price a benchmark-sized offering of notes due July 2, 2024.

The U.S. bond markets will close early at 2 p.m. ET on Wednesday and remain closed on Thursday for the Independence Day holiday.

Market sources said they expected zero up to about $5 billion of supply this week.

Coming up on Friday, Kadoma-shi, Osaka, Japan, electronics company Panasonic Corp. (A3/A-/BBB) plans to start a global roadshow for a Rule 144A and Regulation S dollar-denominated note offering, a source said.

BofA Securities, Inc., Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC are the arrangers.

Deal volume is expected to increase next week following the holiday with syndicate sources forecasting about $15 billion to $20 billion of investment-grade corporate issuance.

Overall deal volume is projected to reach the $75 billion to $80 billion area in July, sources report.

The Markit CDX North American Investment Grade 32 index improved about 1 basis point to end the day at a spread of 52 bps. Credit spreads firmed more than 1 bp on Monday.

KfW offers notes

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

The notes due Aug. 2, 2022 were initially talked to price on Wednesday at a spread in the mid-swaps plus 7 bps area.

Barclays, Morgan Stanley and RBC Capital Markets LLC are the lead managers.

KfW is a government-backed bank based in Frankfurt.

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