Morning Commentary: High-grade market quiet post-holiday; Panasonic kicks off deal roadshow

By Cristal Cody

Tupelo, Miss., July 5 – The high-grade bond market reopened on a sleepy note Friday following the Independence Day holiday with light activity expected over the session.

Panasonic Corp. (A3/A-/BBB) begins a global roadshow in the United States, Europe and Asia markets on Friday for a Rule 144A and Regulation S dollar-denominated note offering, according to a market source.

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

Panasonic is an electronics company based in Kadoma-shi, Osaka, Japan.

Otherwise, no issuance is expected on Friday.

The focus at the start of the day centered on the U.S. Labor Department’s release of the June jobs report and a diminishing chance of a rate cut at the Federal Reserve’s July 30-31 monetary policy meeting. The non-farm payroll report rose by 224,000, much higher than the 160,000-jobs gain analysts expected.

The unemployment rate increased to 3.7% in June from a flat reading of 3.6% in May.

“Today’s data is overall bullish for the economy and thus reduces the odds of a rate cut at the July meeting,” according to a Confluence Investment Management, LLC note on Wednesday. “In response, we are seeing a pop in Treasury yields, a stronger dollar, weaker gold and equity futures.”

Week to date, corporate issuers have stayed out of the primary market.

The only high-grade bond issues reported to have priced this week were on Wednesday from Fannie Mae and KfW.

Fannie Mae priced $2 billion of 1.75% Benchmark Notes due July 2, 2024 at 99.621 to yield 1.83%, or a spread of 9 basis points over Treasuries.

KfW priced a $4 billion registered offering of three-year guaranteed global notes tighter than initial talk.

The 1.75% three-year guaranteed global notes priced Wednesday at 99.949 and a spread of mid-swaps plus 6 bps, or Treasuries plus 6.9 bps.

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

Investment-grade issuers are expected to hit the market running in the week ahead with about $15 billion to $20 billion of supply forecast by syndicate sources.

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