Morning Commentary: High-grade supply quiets after heavy volume; Entergy postpones deal

By Cristal Cody

Tupelo, Miss., March 18 – The investment-grade bond market quieted on Wednesday after supply surged to more than $27 billion on Tuesday.

No reported issuers were marketing bonds as the financial markets sank again on coronavirus-related volatility.

Federal Home Loan Bank System announced it will not issue a Global note on Wednesday with its next funding opportunity scheduled for April 14.

Stocks tanked over the morning with the S&P 500 index down 5.33% and the Dow Jones industrial average off 5.71% after closing Tuesday better.

Treasuries mostly declined on Tuesday and continued to soften early Wednesday, pushing the 10-year benchmark note yield past 1%. The 10-year note yield was up 8 basis points at 1.08% by mid-morning after closing Tuesday up nearly 27 bps.

“Well, it’s Wednesday, and we face another day right out of a post-apocalyptic zombie movie,” Confluence Investment Management strategists said in a note. “While there is still no sign of zombie armies marching on Washington, there is a more worrying sign that global financial markets are seizing up in a desperate scramble for liquidity.”

On Tuesday, high-grade supply issuers in the primary market included Consumers Energy Co., Exxon Mobil Corp., PepsiCo. Inc., Progressive Corp., Union Electric Co. and Verizon Communications Inc.

Entergy Corp. postponed its two-part offering of senior notes scheduled for Tuesday, a source said. The deal had included five-year notes that were initially talked to price at the Treasuries plus 275 bps area and 10-year notes with price talk in the Treasuries plus 287.5 bps area.

In the secondary market, Progressive’s $1 billion of senior notes (A2/A/A) that priced in two tranches on Tuesday tightened about 15 bps to 18 bps, a source said.

The Mayfield Village, Ohio-based insurer sold $500 million of 3.2% 10-year notes at par to yield a spread of 225 bps over Treasuries.

Initial price talk was in the Treasuries plus 250 bps area.

A $500 million tranche of 3.95% 30-year notes priced at 99.148 to yield 3.999% and with a Treasuries plus 245 bps spread.

The 30-year notes were guided to print in the 262.5 bps spread area.

Overall secondary market volume totaled $25.53 billion in high-grade corporate issues on Tuesday, up from $21.71 billion on Monday, according to Trace data.

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