Investment-grade market eyes $30 billion supply in week ahead; AT&T, Apple bonds tighten

By Aleesia Forni and Cristal Cody

Virginia Beach, Sept. 4 – High-grade bond activity was light to close the week on Friday, with players focused on the nonfarm payrolls report ahead of the extended Labor Day holiday weekend.

The Labor Department reported that 173,000 new jobs were created during August, fewer than the 217,000 expected.

Meantime, corporate investment-grade bond funds posted their sixth straight week of outflows.

For the week ended Sept. 2, high-grade funds saw $2.27 billion of outflows.

This figure follows last week’s outflows of $1.99 billion and shrinks the year-to-date total to roughly $21 billion of inflows.

Following back-to-back weeks that saw issuers stick to the sidelines, primary activity is expected to return in full force during the week ahead, with around $30 billion of supply predicted.

Sources expect financial issuers to make up the bulk of issuance next week, along with merger and acquisition financings, though the ultimate supply total will depend largely on the market’s tone following the holiday.

Investment-grade bonds headed out flat to tighter in light trading, while credit spreads leaked wider.

AT&T Inc.’s bonds (/BBB+/A-) tightened 3 basis points to 7 bps in the secondary market on Friday.

Apple Inc.’s bonds (Aa1/AA+/) firmed 1 bp to 7 bps over the day.

Intel Corp.’s senior notes (A1/A+/ A+) were mostly unchanged but remain stronger than issuance.

In other secondary trading, Hershey Co.’s 3.2% notes due 2025 firmed about 1 bp.

The Markit CDX North American Investment Grade index ended 1 bp wider on Friday at a spread of 83 bps.

AT&T stronger

AT&T’s 3.4% notes due 2025 firmed 7 bps in secondary trading on Friday to 173 bps bid, a market source said.

The company sold $5 billion of the notes on April 23 at a spread of Treasuries plus 150 bps.

AT&T’s 4.75% bonds due 2046 were quoted late afternoon 3 bps tighter at 229 bps bid.

AT&T sold $3.5 billion of the bonds in the April 23 offering at Treasuries plus 215 bps.

The telecommunications company is based in Dallas.

Apple tightens

Apple’s 3.2% notes due 2025 traded 7 bps better at 99 bps bid in the secondary market, a source said.

The company sold $2 billion of the notes on May 6 at a spread of Treasuries plus 100 bps.

Apple’s 4.375% notes due 2045 firmed 1 bp to 144 bps bid on Friday.

The company sold $2 billion of the bonds in the May 6 offering at 140 bps over Treasuries.

The computer and mobile communications device company is based in Cupertino, Calif.

Intel mostly unchanged

Intel’s 3.7% notes due 2025 firmed 1 bp on Friday to 129 bps bid, according to a market source.

Intel sold $2.25 billion of the notes on July 22 at a spread of Treasuries plus 140 bps.

Intel’s 4.9% bonds due 2045 were unchanged at 160 bps bid.

The company priced $2 billion of the bonds at Treasuries plus 185 bps in the July 22 offering.

Intel is a semiconductor chip maker based in Santa Clara, Calif.

Hershey improves

Hershey’s 3.2% notes due 2025 firmed about 1 bp to 97 bps bid in secondary trading, a market source said.

Hershey sold $300 million of the 10-year notes (A1/A) on Aug. 18 at 105 bps over Treasuries.

The chocolate, candy and confectionary product maker is based in Hershey, Pa.

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS prices were higher on Friday, according to a market source.

Bank of America Corp.’s CDS costs rose 3 bps to 79 bps bid, 82 bps offered. Citigroup Inc.’s CDS costs were up 2 bps at 88 bps bid, 91 bps offered. JPMorgan Chase & Co.’s CDS costs increased 1 bp to 78 bps bid, 81 bps offered. Wells Fargo & Co.’s CDS costs increased 1 bp to 57 bps bid, 62 bps offered.

Merrill Lynch’s CDS costs were 3 bps higher at 82 bps bid, 85 bps offered. Morgan Stanley’s CDS costs ended 1 bp higher at 88 bps bid, 91 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 2 bps higher at 97 bps bid, 100 bps offered.

Paul Deckelman contributed to this review

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