Midday Commentary: Investment-grade bond spreads hold tight; Sysco improves; AT&T firms

By Cristal Cody

Tupelo, Miss., Dec. 10 - Investment-grade bond spreads held tight early Tuesday after bonds headed out better in Monday's session, market sources said.

The Markit CDX North American Investment Grade series 21 index firmed 2 basis points on Monday to a spread of 67 bps.

"Another day, another fresh cycle tight for the CDX IG index as credit investors remain upbeat into year-end, despite a record supply and risks associated with the potential exit of QE," RBC Capital Markets, LLC analysts said in a note on Tuesday. "Cash bond spreads remain 10-15 bps above the June tights, perhaps reflecting some liquidity risk."

In the secondary market, Sysco Corp.'s bonds improved modestly from the wides seen on Monday after the company announced it will acquire US Foods, Inc. for about $3.5 billion in cash and stock and assume or refinance about $4.7 billion of debt, a trader said.

In other trading, Sprint Corp.'s $2.5 billion 10.5-year junk bond deal shopped on Monday left little impact on the high-grade telecom sector, a trader said.

AT&T Inc.'s 2.35% notes due 2018 sold in late November traded about 8 bps better from issuance, a trader said.

Sysco better

Sysco's 2.6% notes due 2022 (A1/A/) traded early Tuesday at 85 bps bid, 75 bps offered, a trader said.

The notes were quoted 25 bps wider on Monday at 90 bps bid, 80 bps offered following Sysco's acquisition announcement.

The Houston-based food service marketing and distribution company sold $450 million of the notes on June 6, 2012 with a spread of Treasuries plus 110 bps.

AT&T firms

In other trading early Tuesday, AT&T's 2.35% notes due 2018 firmed to 92 bps bid, 89 bps offered, a trader said.

AT&T sold $1.6 billion of the five-year notes with a spread of 100 bps over Treasuries on Nov. 20.

The telecommunications company is based in Dallas.

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