High-grade corporate issuers skip holiday week; Panasonic starts roadshow; inflows decline

By Cristal Cody

Tupelo, Miss., July 5 – The high-grade bond market remained quiet Friday, reopening after the Independence Day holiday with zero corporate supply week to date.

The focus at the start of the day centered on the 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, 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.”

Panasonic Corp. (A3/A-/BBB) started a global roadshow on Friday in the U.S., Europe and Asia markets 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.

Week to date, corporate issuers have stayed out of the primary market, while two deals priced on Wednesday from Fannie Mae and KfW.

Fannie Mae sold $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 or more of supply forecast by syndicate sources.

On Friday, Lipper US Fund Flows reported corporate investment-grade funds had inflows of $1.76 billion for the week ended Wednesday, compared to $3.24 billion of inflows in the prior week and $3.65 billion a week earlier.

The Markit CDX North American Investment Grade 32 index eased more than 1 bp from where the index ended on Wednesday. The index closed on Friday at a spread of 53 bps.

In the secondary market, energy bonds traded mostly better during the session, a source said.

Southwestern Electric Power Co.’s 4.1% senior notes due Sept. 15, 2028 improved 7 bps over the day.

In other secondary trading, McDonald’s Corp.’s senior medium-term notes (Baa1/BBB+/BBB) firmed about 2 bps to 14 bps across the company’s bond maturities.

Southwestern Electric firms

Southwestern Electric Power’s 4.1% senior notes due Sept. 15, 2028 tightened 7 bps in secondary trading on Friday to head out at 101 bps bid, according to a market source.

The company sold $575 million of the notes (Baa2/A-/BBB+) on Sept. 11 at par to yield a spread of 112.5 bps over Treasuries.

Southwestern Electric Power is a Columbus, Ohio-based electric power company.

McDonald’s notes tighten

McDonald’s 4.45% notes due Sept. 1, 2048 firmed about 3 bps on Friday to 129 bps bid, a market source said.

The notes priced on Aug. 13, 2018 in a $750 million tranche at 99.521 to yield 4.479%, or a spread of 143 bps over Treasuries.

The fast food chain is based in Chicago.

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