Morning Commentary: High-grade supply quiet amid pandemic fears; investor calls ongoing

By Cristal Cody

Tupelo, Miss., Feb. 25 – Investment-grade supply stayed quiet at the start of Tuesday’s session following zero reported issuance on Monday as issuers pull back from the primary market on growing coronavirus pandemic fears.

Stocks plunged and high-grade credit spreads widened more than 6 basis points on Monday and remained soft early Tuesday.

Still, several high-grade companies are holding fixed income investor calls or marketing possible bond deals, sources said.

Fulton Financial Corp. marketed $250 million of registered fixed-to-floating rate subordinated notes due 2030 and 2035 (Baa1//DBRS: BBB) on Monday.

Gaming and Leisure Properties, Inc. (Ba1/BBB-/BBB-) held fixed income investor calls on Monday for a possible transaction. BofA Securities, Inc., J.P. Morgan Securities LLC, Fifth Third Securities, Inc. and Wells Fargo Securities LLC are the arrangers.

Meanwhile, Mid-America Apartment Communities, Inc. (Baa1/BBB+/BBB+) held investor calls on Friday with a possible bond deal to follow. JPMorgan, U.S. Bancorp Investments, Inc. and Wells Fargo were the arrangers.

Healthcare Realty Trust Inc. (Baa2/BBB/BBB) also held fixed income investor calls on Friday for a possible note offering via Jefferies LLC and U.S. Bancorp.

In addition, a possible transaction is being eyed from Piedmont Office Realty Trust, Inc. (Baa2/BBB) after the company held fixed income investor calls on Thursday. BofA Securities, JPMorgan, SunTrust Robinson Humphrey Inc. and U.S. Bancorp were the arrangers.

About $25 billion to $30 billion of investment-grade deal volume was expected this week.

More than $32 billion of investment-grade corporate bonds were sold last week.

As the coronavirus spreads outside China, “longer maturity IG corporate yields have reached new record lows, which is obviously negative for credit spreads,” according to a BofA Securities research note released on Tuesday.

Following Monday’s weakness, investment-grade credit spreads are at the wides of the year, the report noted.

“Equities appear to be pricing to the baseline scenario whereas Treasuries price more to fears,” the report said. “Given the yield-sensitivity of IG credit, that makes spreads priced somewhere in between.”

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