Investment-grade supply quiets; credit, secondary spreads firm; AT&T, Time Warner mixed

By Cristal Cody

Tupelo, Miss., Dec. 20 – The high-grade bond market stayed quiet on Wednesday as attention focused on the House and Senate vote to approve the tax reform bill, now headed for President Trump to sign into law.

The tax cut is expected to cause a decline in high-grade bond issuance in 2018 but remain positive on investment-grade credit, according to market sources.

The Markit CDX North American Investment Grade 29 index tightened about 1 basis point over the day to close at a spread of 49 bps.

The S&P Global Ratings investment-grade composite spread tightened 3 bps on Wednesday to 137 bps, a new post-financial crisis low first set at 140 bps on July 30, 2014, a source said.

While the primary market remains quiet with no issuance seen week to date, secondary trading is active and spreads are mostly improving, sources reported.

On Wednesday AT&T Inc.’s bonds (Baa1/BBB+/A-) were mixed in the secondary market.

AT&T’s $85.4 billion cash and stock acquisition of Time Warner Inc. was scheduled to close before the end of the year, but the Justice Department filed a federal lawsuit to stop the merger. A trial date is set for March 19, 2018.

Time Warner’s bonds (Baa2/BBB/BBB+) were mostly flat on the day.

Secondary market volume rose to $14.51 billion on Tuesday from $12.85 billion on Monday, according to Trace.

AT&T eases

AT&T’s 3.9% notes due Aug. 14, 2027 traded 1 bp softer on Wednesday at 153 bps bid, a source said.

AT&T sold $5 billion of the notes on July 27 at a spread of 160 bps over Treasuries.

The telecommunications company is based in Dallas.

Time Warner stable

Time Warner’s 2.95% notes due July 15, 2026 (Baa2/BBB/BBB+) headed out flat at 129 bps bid, according to a market source.

The company sold $800 million of the notes on May 5, 2016 at a spread of Treasuries plus 135 bps.

Time Warner is a New York-based media and entertainment company.

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