KfW prices $3 billion as lone reported issuer; deal volume thins; AT&T paper improves

By Cristal Cody

Tupelo, Miss., Jan. 24 – KfW priced $3 billion of long 10-year notes on Wednesday as the lone reported issuer in the high-grade primary market.

No corporate issuers were seen during the session, and the rare lack of supply was not attributed to any one reason, according to sources.

Total weekly volume likely will miss syndicate forecasts with less than $5 billion of corporate bonds priced week to date, one source said.

About $20 billion to $25 billion of issuance was expected for the week.

Including KfW’s deal, SSA volume for the week to date totals $8 billion.

KfW priced its notes on the tight side of initial guidance.

Issuance in corporate bonds is expected to pick up in the upcoming weeks after companies exit earnings blackout periods, sources report.

In the secondary market on Wednesday, AT&T Inc.’s 3.9% notes due Aug. 14, 2027 (Baa1/BBB+/A-) headed out flat on the day at 129 bps bid but have tightened more than 20 basis points from the 152 bps area since mid-December, a source said.

The Dallas-based telecommunications company sold $5 billion of the notes on July 27, 2017 at a spread of 160 bps over Treasuries.

AT&T is scheduled to go to trial in March to gain approval for its $85.4 billion cash and stock acquisition of Time Warner Inc. The Justice Department filed suit in late 2017 to block the deal.

Time Warner’s 2.95% notes due July 15, 2026 (Baa2/BBB/BBB+) traded about 1 bp better on Wednesday at 133 bps bid, according to the market source. The notes are mostly unchanged from where the bonds traded in mid-December in the 132 bps area.

The New York-based media and entertainment company sold $800 million of the notes on May 5, 2016 at a spread of Treasuries plus 135 bps.

The Markit CDX North American Investment Grade 29 index ended the session more than 0.5 bp softer at a spread of 46.7 bps.

KfW sells on tight side

KfW (Aaa/AAA/AAA) priced $3 billion of 2.875% long 10-year global notes on Wednesday at a spread of mid-swaps plus 20 bps, on the tight side of initial talk, according to a market source and an FWP filing with the Securities and Exchange Commission.

The notes due April 3, 2028 were initially talked to price in the mid-swaps plus 23 bps area.

The issue priced at 99.995 with a spread of 65 bps over Treasuries.

BofA Merrill Lynch, J.P. Morgan Securities plc and TD Securities (USA) LLC were the lead managers.

KfW is a government-backed bank based in Frankfurt.

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