Morning Commentary: High-grade deal action picks up; PNC, Swedish Export Credit on tap

By Cristal Cody

Tupelo, Miss., Aug. 30 – A couple of issuers are marketing bond deals in the high-grade primary market on Thursday.

PNC Financial Services Group, Inc. plans to price new senior notes due 2021. Morgan Stanley is the bookrunner.

Swedish Export Credit Corp. intends to price a benchmark offering of U.S. dollar-denominated two-year notes on Thursday.

The issue was initially talked to price in the mid-swaps plus 3 basis points area.

Citigroup Global Markets Ltd., Nomura International, RBC Capital Markets and TD Securities (USA) LLC are the bookrunners.

Corporate deal supply has totaled just $1 billion week to date from Caterpillar Financial Services Corp.’s $750 million reopening of medium-term floating-rate notes due March 15, 2021 on Monday and Brixmor Operating Partnership LP’s $250 million of long three-year senior floating-rate notes that priced on Tuesday.

In addition, on Wednesday, Development Bank of Japan Inc. sold $1.75 billion of senior notes in two tranches, while Oesterreichische Kontrollbank AG priced $1.5 billion of three-year notes.

The SSA deals bring week-to-date new issue supply to $4.25 billion.

Investment-grade secondary trading volume has improved over the week. On Wednesday, $15.9 billion of high-grade bonds were traded, up from $13.72 billion on Tuesday and $10.21 billion on Monday, according to Trace.

High-grade “corporate bond spreads have been flat over the last two weeks – despite a rally in stocks and high-yield credit,” BofA Merrill Lynch analysts said in a note released on Thursday. “What is holding back high grade is mainly concerns about supply volumes after Labor Day.”

Deal volume is expected to be heavy in the first week of September after the Labor Day holiday with $45 billion to $55 billion of supply predicted, according to the note.

“The trigger of more direction to spreads is whether volumes slow materially after the first week of the month,” the analysts said.

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