Steady high-grade volume eyed; SoCal Edison holds calls; new issues mixed; CVS widens

By Cristal Cody

Tupelo, Miss., March 8 – High-grade bond supply quieted on Friday after a strong week of issuance that totaled about $40 billion.

Volume surpassed market expectations of about $25 billion to $30 billion of supply on deals that included Pfizer Inc.’s $5 billion five-part offering of senior notes on Monday, Merck & Co., Inc.’s $5 billion of notes sold in four tranches on Tuesday and Dell Technologies Inc.’s $4.75 billion three-part deal on Wednesday.

In the week ahead, steady deal volume is forecast with about $25 billion of volume expected by syndicate sources.

In market activity on Friday, Southern California Edison Co. (A3/A-/A) held fixed income investor calls, a source said.

Barclays, J.P. Morgan Securities LLC, PNC Capital Markets, LLC and Wells Fargo Securities LLC were the arrangers.

Southern California Edison is a Rosemead, Calif.-based electric utility company and subsidiary of Edison International.

The Markit CDX North American Investment Grade 31 index closed the day more than 1 basis point softer at a spread of 65 bps following weaker employment data.

The Labor Department reported 20,000 job gains in February versus 180,000 expected. The unemployment rate fell in February to 3.8% from 4% in the previous month.

For the week ended March 6, Lipper US Fund Flows reported inflows declined to $1.99 billion for corporate investment-grade funds from $3.9 billion in the prior week.

Inflows to U.S. high-grade mutual funds and ETFs remained strong at $4.68 billion for the week ended Wednesday, compared with a $5.01 billion inflow in the previous week, Yunyi Zhang, a credit strategist with BofA Merrill Lynch, said in a report released on Friday.

The inflow to high-grade funds increased to $4.24 billion from $3.54 billion in the previous week, while the inflow to high-grade ETFs dropped to $440 million from $1.47 billion.

Meanwhile, the maturity breakdown of high-grade inflows “remained about evenly split” between short-term, at $2.55 billion from $2.70 billion, and excluding short-term, at $2.13 billion from $2.31 billion, Zhang said.

Pfizer, Merck mixed

In the secondary market, investment-grade bonds were mixed on Friday, according to market sources.

Pfizer’s notes headed out flat to about 9 bps weaker.

The New York-based biopharmaceutical company’s $1.75 billion tranche of 3.45% notes due March 15, 2029 softened to 78 bps bid, 76 bps offered.

The notes priced on Monday at a Treasuries plus 75 bps spread.

Merck’s notes traded about 1 bp to 2 bps wider than issuance on Friday. The company’s 3.4% notes due March 7, 2029 were quoted at 77 bps bid, 72 bps offered.

The Kenilworth, N.J.-based biopharmaceutical company sold $1.75 billion of the 10-year notes on Tuesday at a Treasuries plus 75 bps spread.

Bank paper flat to wider

Bank and financial paper ended the session mostly flat to weaker, a source said.

Wells Fargo & Co.’s 4.15% medium-term notes due Jan. 24, 2029 were unchanged at 116 bid over the afternoon, a source said.

The San Francisco-based financial services company sold $2.5 billion of the 10-year notes (A2/A-/A+) on Jan. 16 at a spread of Treasuries plus 145 bps.

CVS notes weaken

CVS Health Corp.’s senior notes (Baa2/BBB+) that priced as part of its $40 billion nine-tranche deal a year ago softened about 10 bps to 20 bps in secondary trading over the week, a market source said.

CVS Health’s 4.3% senior notes due March 25, 2028 traded on Friday at 168 bps bid.

The notes were seen on Tuesday at 156 bps bid.

CVS sold the notes in a $9 billion offering on March 6, 2018 at a spread of Treasuries plus 160 bps.

The company’s 5.05% notes due March 25, 2048 headed out at 219 bps bid, wider than where the notes traded Tuesday at 200 bps bid.

CVS Health sold $8 billion of the bonds in the March 2018 offering at a Treasuries plus 195 bps spread.

The retail pharmacy chain and pharmacy benefits manager is based in Woonsocket, R.I.

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