Bank of Montreal reopens notes; steady supply forecast; Verizon green bonds on tap

By Cristal Cody

Tupelo, Miss., Feb. 1 – Bank of Montreal priced a $103 million reopening of its two-year medium-term floating-rate notes on Friday in an otherwise quiet high-grade session.

Issuers priced more than $17 billion of bonds over the week.

Looking ahead to the Feb. 4 week, market sources expect about $15 billion to $20 billion of volume with the potential for an upside.

Verizon Communications Inc. will start the week with a round of fixed income investor calls on Monday for a dollar-denominated offering of green bonds.

Also, a possible deal may be forthcoming from Altria Group Inc., which intends to hold fixed income investor calls on Monday, a source said.

Barclays, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Mizuho Securities USA Inc. are the arrangers.

Bank and financial issuance resumed this week with new paper trading mostly tighter in the secondary market.

Bank of Montreal’s $1.75 billion of 3.3% senior medium-term notes due Feb. 5, 2024 that priced on Thursday firmed about 4 basis points on the offered side in the secondary market.

U.S. Bank NA’s $1.7 billion of senior notes (A1/AA-/AA-) that priced in two tranches on Monday tightened 1 bp to 5 bps in the secondary market.

Secondary trading volume hit a 52-week high on Thursday with $34.2 billion of investment-grade issues traded, Trace data shows. On Wednesday, $29.2 billion of high-grade bonds were traded, compared to $29.95 billion on Tuesday and $21.02 billion on Monday.

The Markit CDX North American Investment Grade 31 index was mostly unchanged on the day at a spread of 67 bps. The index tightened about 3 bps on Wednesday and another 3 bps on Thursday following the Federal Reserve’s move to leave rates unchanged after its two-day monetary policy meeting.

“The decisive dovish turn by the Fed makes our, already bullish, view on credit too conservative and we need to upgrade it,” BNP Paribas, London Branch credit strategists Viktor Hjort and Paola Lamedica said in a note released on Friday.

“Corporate bonds are cheap and we’re upgrading our targets,” the analysts said. “Our base case now sees IG cash spreads 25 [bps] tighter [versus a previous forecast of an 11 bps improvement], BBs outperforming BBBs, and cash outperforming CDS. Cash bonds should outperform CDS narrowing the very wide basis that currently exists, partly reflecting concerns about supply and wide new issue premiums, which we see as unfounded.”

Elsewhere, inflows to fixed income climbed to $5.26 billion for the week ended Jan. 30 from $1.93 billion in the prior week, “with stronger flows across all major sectors except global EM bonds,” Yuri Seliger, a strategist with BofA Merrill Lynch, said in a research note released on Friday.

Net buying of high-grade bonds climbed to $1.91 billion for the week ended Jan. 30 from $1.32 billion in the prior week, Seliger said.

Short-term high-grade bond purchases also improved to $540 million for the week from $140 million in the previous week, and buying of excluding short-term high-grade bonds rose to $1.37 billion from $1.18 billion in the prior week.

Inflows to high-grade funds, which includes corporate, Treasuries, agencies and mortgages, rose to $1.35 billion in the week ended Wednesday from $450 million in the previous week, Seliger said.

Bank of Montreal reopens

Bank of Montreal priced a $103 million reopening of its two-year medium-term floating-rate notes at 100.071 with a coupon of Libor plus 40 bps, according to an FWP filing on Friday with the Securities and Exchange Commission.

Wells Fargo Securities LLC was the bookrunner.

The bank originally sold $417 million of the notes on Jan. 24 at par. The total outstanding is now $520 million.

Bank of Montreal is a Montreal-based banking and financial services provider.

Verizon in deal pipeline

Verizon Communications (Baa1/BBB+/A-) plans to price a dollar-denominated offering of green bonds, according to a market source.

The company will hold fixed income investor calls on Monday.

BofA Merrill Lynch and Goldman Sachs & Co. LLC are the arrangers.

Verizon is a New York City-based telecommunications company.

BMO paper tightens

Bank of Montreal’s $1.75 billion of 3.3% senior medium-term notes due Feb. 5, 2024 (Aa2/A-/AA-) that priced on Thursday tightened to the 91 bps bid, 88 bps offered in the secondary market, a source said on Friday.

The notes priced at a spread of 92 bps over Treasuries.

The bank is based in Montreal.

U.S. Bank notes firm

U.S. Bank’s tranche of floating-rate notes due Feb. 4, 2021 traded at 30 bps bid, 27 bps offered on Friday, a market source said.

The company sold $900 million of the floaters on Monday at Libor plus 31 bps.

U.S. Bank’s 3% notes due Feb. 4, 2021 tightened to 40 bps bid, 37 bps offered in the secondary market.

The $800 million tranche of fixed-rate notes priced at a spread of Treasuries plus 45 bps.

The commercial bank is based in Cincinnati.

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