Morning Commentary: High-grade supply on tap; Royal Bank of Scotland eases; Libor yield rises

By Cristal Cody

Eureka Springs, Ark., Sept. 14 – Investment-grade bonds were mixed in early secondary trading with market participants focused on a strong round of supply expected and the announcement that Bayer AG will acquire Monsanto Co. for $66 billion in cash and debt.

High-grade issuers including Telus Corp., Ventas Realty LP, Peco Energy Co., Aflac Inc. and Thermo Fisher Scientific, Inc. are in the deal pipeline.

In the secondary market, Royal Bank of Scotland Group plc’s $2.65 billion offering of 3.875% senior notes due 2023 that priced a week ago traded 4 basis points softer early Wednesday and 8 bps wider than issuance.

Monsanto’s high-grade bonds that priced in 2015 were not seen in early secondary trading on Wednesday.

The Markit CDX North American Investment Grade index tightened about 1 bp over the morning to a spread of 76 bps.

The three-month Libor yield rose 1 bp to 86 bps on Wednesday.

Secondary trading volume totaled $15.79 billion on Tuesday, up from $12.55 billion on Monday, according to Trace.

RBS widens

Royal Bank of Scotland Group’s 3.875% senior notes due 2023 softened 4 bps to 258 bps bid in the secondary market, a source said.

The company sold $2.65 billion of the notes (Ba1/BBB-/BBB+) on Sept. 7 at a spread of 250 bps over Treasuries.

RBS is a banking and financial services company based in Edinburgh, Scotland.

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