Midday Commentary: High-grade market quiet ahead of FOMC; Verizon, Time Warner Cable firm

By Cristal Cody

Tupelo, Miss., Dec. 18 - All eyes focused early Wednesday on the Federal Reserve's policy meeting announcement later in the day with secondary action in the investment-grade bond market fairly light in morning trading, sources said.

The Federal Open Market Committee concludes a two-day policy meeting that will be followed by a press conference from Federal Reserve chairman Ben Bernanke. Market expectations are high that the Federal Reserve will announce tapering plans to the government's quantitative easing stimulus program.

Market sources range in their expectations of when the Fed will begin to taper the asset purchases, with most set on a March start date.

The quantitative easing program has been a "big driver of flows into the corporate bond market," RBC Capital Markets, LLC analysts said in a note on Wednesday.

"Unless the market responds with a resounding nod of approval, there is one taper that we will guarantee starts this week: the tapering of new issue activity," the analysts said. "Despite the slowdown in issuance, there is nothing for syndication teams to be hanging their collective heads about as global issuance is on pace for another record year."

Secondary trading is choppy as traders close books for the year, sources said.

The Markit CDX North American Investment Grade series 21 index eased 1 basis point on Tuesday to a spread of 70 bps.

In the secondary market, Verizon Communication Inc.'s long bonds firmed 1 bp from Tuesday's session, a market source said.

Time Warner Cable Inc.'s bonds also tightened from trading on Tuesday, according to a market source. The company's bonds are among the most active investment-grade issues in the secondary market as Comcast Corp. and Charter Communications Inc. reportedly consider a takeover bid to gain market share, sources said.

Verizon edges tighter

Verizon's 6.55% bonds due 2043 firmed 1 bp to 157 bps bid in secondary trading Wednesday morning, according to a source.

The bonds have tightened more than 20 bps since October.

Verizon sold $15 billion of the 30-year bonds with a spread of Treasuries plus 265 bps. The tranche priced as part of Verizon's $49 billion eight-tranche offering of notes (Baa1/BBB+/A-) sold on Sept. 11.

The telecommunications company is based in New York City.

Time Warner Cable firms

Time Warner Cable's 4% notes due 2021 (Baa2/BBB/BBB) tightened to the 226 bps area, a market source said early Wednesday.

The notes headed out on Tuesday at 235 bps bid, 225 bps offered, better than where the issue traded on Monday at 245 bps bid, 235 bps offered. A week ago, the notes were quoted at 270 bps bid, 260 bps offered.

Time Warner Cable sold $1 billion of the notes at a spread of 210 bps over Treasuries in 2011.

The broadband communications company is based in New York City.

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