Midday Commentary: High-grade bonds trade flat ahead of debt ceiling deadline

By Cristal Cody

Tupelo, Miss., Oct. 16 - The investment-grade bond market remained flat early Wednesday on the 16th day of the partial U.S. government shutdown and ahead of Thursday's deadline to raise the debt ceiling to avoid a debt default, according to market sources.

"Credit spreads closed relatively unchanged yesterday as investors patiently awaited a resolution in Washington," RBC Capital Markets, LLC analysts said in a note on Wednesday. "However, budget discussions stalled late in the day, which caused risk appetite to weaken. We continue to see strong investor demand for new issues."

Leucadia National Corp.'s new 5.5% notes due 2023 (Ba2/BBB/BBB-), which priced on Tuesday, traded about 7 basis points better in aftermarket trading, according to a source.

The Markit CDX North American Investment Grade series 21 index ended the previous session flat at a spread of 77 bps.

In other secondary trading, Verizon Communication Inc.'s bonds (Baa1/BBB+/A-) sold in September continue to be among the most actively traded investment-grade paper, according to market sources.

Verizon active

Verizon's 5.15% notes due 2023 traded slightly weaker in the 107 area, a source said.

The company sold $11 billion of the 5.15% notes due 2023 at 99.676 to yield 5.192% as part of the $49 billion eight-tranche offering brought on Sept. 11.

The telecommunications company is based in New York City.

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