Primary quiet; pace to slow upcoming week; Canadian Pacific Railway firms; AT&T, Verizon soft

By Aleesia Forni and Cristal Cody

Virginia Beach, Feb. 13 – Issuers stayed on the sidelines on Friday, with no new investment-grade bond deals pricing ahead of the extended holiday weekend.

Roughly $29 billion of new issuance hit the investment-grade primary bond market this week, topping what was predicted to be around a $25 billion week.

Many of the deals priced this week, including Microsoft Corp.’s jumbo $10.75 billion deal and Rockwell Automation Inc.’s $600 million offering, were met with overwhelming demand.

Even with the strong reception recent deals have seen from investors, activity is likely to slow in the week ahead.

Sources are expecting around $20 billion of high-grade paper to price during the Presidents’ Day holiday-shortened week.

Meanwhile, cash continued to flow into investment-grade bond funds.

Lipper reported inflows of $2.335 billion into corporate high-grade bond funds for the week ended Feb. 11.

The total was down from last week’s inflows of $4.376 billion, bringing the year-to-date total inflows to $12.846 billion.

Investment-grade bonds were mixed over the session on Friday, sources said.

The Markit CDX North American Investment Grade index ended 1 basis point tighter at a spread of 64 bps.

Canadian Pacific Railway Co.’s 2.9% senior notes due 2025 tightened 4 bps during the session.

AT&T Inc.’s 4.8% bonds due 2044 traded about 3 bps weaker.

Verizon Communications Inc.’s 3.5% notes due 2024 widened 5 bps over the day.

S&P reports

Standard & Poor's investment-grade composite spread remained flat at 178 bps, according to a report released by the ratings service on Friday.

By rating, the 'AA' spread widened 1 bp to 117 bps, the 'A' spread tightened 1 bp to 143 bps, and the 'BBB' spread was flat at 210 bps.

By industry, financial institutions, banks, industrials, and utilities were each flat at 218 bps, 180 bps, 251 bps, and 177 bps, respectively. Telecommunications widened by 1 bp to 296 bps.

The investment-grade composite spread is wider than its one-year moving average of 156 bps and tighter than its five-year moving average of 183 bps.

Canadian Pacific Railway strong

Canadian Pacific Railway’s 2.9% senior notes due 2025 tightened 4 bps to 102 bps bid, a market source said.

Canadian Pacific Railway sold $700 million of the notes (Baa1/ BBB+/) on Jan. 28 at a spread of Treasuries plus 112.5 bps.

The railroad operator is based in Calgary, Alta.

AT&T eases

AT&T’s 4.8% bonds due 2044 eased about 3 bps to 214 bps offered, according to a market source.

AT&T sold $2 billion of the bonds (Baa1/BBB+/A) on June 3, 2014 at Treasuries plus 140 bps.

The telecommunications company is based in Dallas.

Verizon widens

Verizon’s 3.5% notes due 2024 widened 5 bps in secondary trading to 136 bps offered, according to a market source.

Verizon sold $2.5 billion of the notes (Baa1/BBB+/A-) on Oct. 22 at a spread of Treasuries plus 135 bps.

The telecommunications company is based in New York City.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.