Morning Commentary: Retail Properties of America plans bond tap; financial supply eyed

By Cristal Cody

Tupelo, Miss., July 17 – Retail Properties of America, Inc. (Baa3/BBB-/BBB+) plans to bring a reopening of existing notes to the primary market on Friday following fixed income investor calls last week, sources report.

The company expects to price an add-on to its 4% senior notes due March 15, 2025, which were first issued in a $250 million offering on March 12, 2015.

Investment-grade issuers have priced about $9 billion of corporate bonds and $5.75 billion of sovereign, supranational and agency supply week to date.

As little as $10 billion to about $20 billion of volume was expected by market participants for the week with bank and financial earnings releases grabbing focus.

Potential financial supply is being eyed to hit the primary market in the upcoming week with banks now out of earnings blackout-related reporting periods, a source said.

U.S. Bancorp priced $1.25 billion of 10-year medium-term senior notes (A1/A+/A+) on Thursday more than 20 basis points tighter than talk a day after posting second-quarter earnings results.

Citigroup Inc., JPMorgan Chase & Co., Wells Fargo & Co., Goldman Sachs Group Inc., Bank of America and Morgan Stanley all released second-quarter revenue results this week.

In other activity, the Federal Reserve Board announced on Friday that it has modified the Main Street Lending Program created under the Cares Act to provide greater access to credit for nonprofit organizations including educational institutions, hospitals and social service groups.

“Nonprofits provide vital services across the country and employ millions of Americans,” Federal Reserve Chair Jerome H. Powell said in a release. “We have listened carefully and adapted our approach so that we can best support them in carrying out their vital mission during this extraordinary time.”

Criteria modified includes lowering the minimum employment threshold for nonprofits to 10 employees from 50 and easing a limit on donation-based funding.

“The Main Street nonprofit loan terms generally mirror those for Main Street for-profit business loans, including the interest rate, principal and interest payment deferral, five-year term, and minimum and maximum loan sizes,” the Fed said.

The rate on the loans is Libor plus 300 bps.

Investment-grade market tone stayed positive at the start of the day.

The iShares iBoxx Investment Grade Corporate Bond ETF was up 0.07% to 137.05.

The Pimco Investment Grade Corporate Bond Index improved 0.29% in early trading to 115.99.

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