Morning Commentary: Ingersoll, Ventas, Norfolk Southern, KfW eye deals; bonds under pressure

By Cristal Cody

Tupelo, Miss., Feb. 13 – Several corporate and SSA issuers are expected to tap the investment-grade bond market on Tuesday.

Ingersoll-Rand Global Holding Co. Ltd. is on deck with a three-tranche offering of guaranteed senior notes.

Ventas Realty, LP is marketing one tranche of guaranteed senior notes.

Also, Norfolk Southern Corp. plans to sell senior notes.

In SSA supply, KfW is offering $1 billion of notes due Nov. 5, 2019.

In addition, Nederlandse Waterschapsbank NV (Aaa/AAA) plans to price $500 million of senior floating-rate notes due Feb. 24, 2020 on Tuesday, according to a market source. The notes were initially talked to price in the Libor plus 4 basis points area.

Coming up on Wednesday, Rentenbank plans to price a minimum $1 billion offering of two-year guaranteed fixed-rate notes that were initially talked to price in the mid-swaps minus 3 bps area, a source said.

Elsewhere, the Bank of New Zealand (A1/AA-/AA-) is holding a week-long deal roadshow that started Monday, according to a market source. J.P. Morgan Securities LLC is the arranger.

About $15 billion to $20 billion of bond volume is forecasted by market sources for the week.

Rally short-lived

Although credit spreads tightened about 3 bps on Monday, spreads remained under selling pressure and significantly underperformed equities, according to a BofA Merrill Lynch analyst note released on Tuesday.

Dealers bought $1.2 billion of investment-grade corporate bonds from investors on Monday despite weak supply volumes, the note said.

The Markit CDX North American Investment Grade 29 index closed on Monday about 3 bps tighter at a spread of 57 bps.

“If you were staring at the indices you would never have guessed that credit underperformed equities,” the analysts said. “However, the rally in high grade corporate bond spreads lasted only about an-hour-and-a-half in the morning before the selling pressure resumed.”

Selling pressure was concentrated in the one- to three-year maturity segment, and dealers bought $680 million of bonds in that space, according to the note.

“Since the front end is heavy in financials that means not surprisingly that dealers net bought a lot of financials, including Yankees,” the analysts said.

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