High-grade primary slows ahead of holiday; light supply eyed; Keysight, PepsiCo bonds firm

By Cristal Cody

Tupelo, Miss., Oct. 11 – Investment-grade primary action stayed quiet on Friday ahead of a long holiday weekend and the start of earnings blackout reporting periods.

Desks started to thin early in the session ahead of the Columbus Day holiday on Monday, sources report.

Corporate issuers priced more than $9 billion of bonds this week, while sovereign, supranational and agency volume totaled more than $17 billion.

Supply is expected to remain light in the week ahead as the focus shifts to U.S. bank earnings reports. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. release third quarter results on Tuesday, followed by Bank of America Corp. on Wednesday and Morgan Stanley on Thursday.

Potential bank supply is being eyed following the reports, a source said.

About $10 billion to $15 billion of investment-grade issuance is expected to print over the upcoming short market week, according to syndicate sources.

LeasePlan Corp. NV (Baa1/BBB-/BBB+/) will start a roadshow in London on Monday and continue it Tuesday in the U.S. market for a dollar-denominated offering of five-year notes, a source said.

Credit spreads ended Friday more than 3 basis points tighter. The Markit CDX North American Investment Grade 33 index closed the day at a spread of 56.5 bps.

In the secondary market, Keysight Technologies Inc.’s 3% notes due Oct. 30, 2029 sold on Monday were ending the week nearly 10 bps tighter than issuance on the bid side.

PepsiCo, Inc.’s $1 billion of 2.875% green senior notes due Oct. 15, 2049 that priced at the start of the week firmed about 5 bps.

In other secondary trading, Italy’s $7 billion of global notes priced in three tranches on Wednesday in its first dollar issuance since 2010 were mixed. The five- and 10-year tranches traded about 1 bp to 3 bps tighter, while the 30-year notes eased more than 5 bps.

Inflows in the overall high-grade market, including corporates, agencies, Treasuries and mortgage bonds, declined for the past week ended Wednesday to $3.8 billion from $4.89 billion a week earlier, according to a BofA Merrill Lynch note released on Friday.

The jump in short-term high-grade inflows to $1.59 billion from $70 million in the previous week was offset by a decline in inflows excluding short-term to $2.21 billion from $4.83 billion, BofA Merrill Lynch credit strategist Yuri Seliger said in the report.

High-grade inflows for funds fell to $2.4 billion from $2.91 billion and declined for ETFs to $1.4 billion from $1.99 billion.

In the overall fixed income market, inflows to U.S. bond fund and ETFs climbed to $6.21 billion for the past week from a $3.45 billion inflow a week earlier, Seliger said.

“The higher inflow to fixed income was driven by stronger flows for high yield, government bonds, global EM and munis, partially offset by weaker flows for high grade and leveraged loans,” he said.

Keysight tightens

Keysight Technologies’ 3% notes due Oct. 30, 2029 traded at 136 bps bid, 133 bps offered in the secondary market, a source said Friday.

The company sold $500 million of the 10-year notes (Baa2/BBB/BBB) on Monday at a spread of 145 bps over Treasuries.

Keysight is a Santa Rosa, Calif.-based electronic measurement technology company.

PepsiCo green bonds firm

PepsiCo’s 2.875% green senior notes due Oct. 15, 2049 (A1/A+) were quoted in secondary trading on Friday at 87 bps bid, 84 bps offered, according to a market source.

The company sold $1 billion of the notes on Monday at a spread of Treasuries plus 92 bps.

PepsiCo is a Purchase, N.Y.-based food and beverage company.

Italy notes mixed

Italy’s 2.375% notes due Oct. 17, 2024 traded Friday at 100 bps bid, 97 bps offered, a market source said.

Italy (Baa3/BBB/BBB) sold $2.5 billion of the notes on Wednesday at a spread of Treasuries plus 103.5 bps.

The notes came at mid-swaps plus 105 bps, tighter than guidance in the mid-swaps plus 120 bps area.

Italy’s $2.5% billion of 4% notes due Oct. 17, 2049 eased to 201 bps bid, 196 bps offered in secondary trading.

The $2.5 billion tranche of 30-year notes priced at a Treasuries plus 194.75 bps spread. The notes priced at mid-swaps plus 235 bps, compared to guidance in the mid-swaps plus 245 bps area.

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