Morning Commentary: High-grade credit spreads tight; Verizon firms; Marathon Petroleum flat

By Cristal Cody

Tupelo, Miss., Dec. 18 – High-grade corporate bonds and credit spreads continued to firm early Thursday after tightening late Wednesday as traders absorb that the Federal Reserve likely will not raise rates quickly, sources said.

The Markit CDX North American Investment Grade series 23 index tightened 6 basis points to a spread of 70 bps on Wednesday following the conclusion of the two-day Federal Open Market Committee policy meeting. The CDX was quoted opening 3 bps tighter on Thursday.

“Credit spreads tightened for the first time in weeks yesterday as sentiment seems to have shifted slightly as investors question whether the recent sell-off has been overdone,” RBC Capital Markets, LLC analysts said in a note. “This is not to say that the tides are turning but that the market is taking a moment to reassess.”

Verizon Communications Inc.’s 4.15% senior notes due 2024 were quoted nearly 10 bps tighter in the secondary market, a source said.

Marathon Petroleum Corp.’s 3.625% senior notes due 2024 traded flat to 1 bp tighter, but remain more than 50 bps wider than where the issue priced in September, a source said.

Verizon tightens

Verizon’s 4.15% notes due 2024 (Baa1/BBB+/A-) firmed 9 bps to 149 bps offered, according to a market source.

The notes traded slightly lower over the morning at 103.78 to yield 3.652% from 104.05 to yield 3.618% in the previous session, a source said.

Verizon sold $1.25 billion of the notes on March 10, 2014 at 99.838 to yield 4.17%. The notes priced at a spread of Treasuries plus 140 bps.

The telecommunications company is based in New York City.

Marathon Petroleum flat

Marathon Petroleum’s 3.625% notes due 2024 (Baa2/BBB/) traded flat to 1 bp tighter at 184 bps offered, a market source said.

The notes edged up to 97.37 to yield 3.953% early Thursday from where the bonds last traded at 97.23 to yield 3.97% on Wednesday, a source said.

The company sold $750 million of the notes at 99.641 to yield 3.67% and with a spread of Treasuries plus 125 bps on Sept. 2.

The crude oil refiner is based in Findlay, Ohio.

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