Bond market focuses on Fed; Lloyds, IADB, Scentre price; Verizon firms; Wal-Mart softens

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 29 – The investment-grade bond market was subdued on Wednesday, with all eyes focused on the Federal Open Market Committee’s statement following its two-day meeting.

As expected, the Federal Reserve announced that it would end its monthly bond purchasing program during the session.

Meanwhile, the primary hosted Lloyds Banking Group plc, Inter-American Development Bank and Scentre Group.

Lloyds Banking Group was forced to widen price talk for its new issue by around 10 basis points compared to initial thoughts, market sources noted. The new $1 billion issue ultimately priced on top of talk.

However, Scentre Group saw a solid reception from investors for its $750 million offering.

The deal was upsized from initial thoughts of $500 million and sold around 15 bps tighter than initial guidance.

The primary also saw Inter-American Development Bank price a $500 million tap of its existing three-year bonds in line with price talk.

More than $13 billion of new investment-grade issuance has hit the market this week, so far falling short of what was predicted to be around a $20 billion to $25 billion week.

Investment-grade bonds were mixed in the secondary market over the session, sources said.

The Markit CDX North American Investment Grade series 23 index eased 1 bp to a spread of 66 bps.

Verizon Communications Inc.’s 4.15% notes due 2024 tightened 6 bps over the day, a source said.

Wal-Mart Stores Inc.’s 3.3% notes due 2024 that were reopened in early October eased 2 bps in trading, according to a market source.

Lloyds new issue prices

Lloyds Banking Group sold $1 billion of 4.5% subordinated debt securities (A1/A/A) due 2024 on Wednesday at Treasuries plus 225 bps, according to a market source.

The notes sold on top of revised guidance, which widened from initial thoughts.

Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Lloyds Securities LLC, Morgan Stanley & Co. LLC and Nomura Securities were the bookrunners.

Proceeds will be used for general corporate purposes.

The subordinated notes will be issued in denominations of $200,000 and in multiples of $1,000 after that.

The retail bank is based in London.

Scentre upsizes

Scentre Group priced an upsized $750 million offering of 2.375% senior notes (A1/A/) with a spread of Treasuries plus 95 bps, a market source said.

Pricing was at 99.439 to yield 2.495%.

BofA Merrill Lynch, Citigroup, JPMorgan and RBS Securities Inc. were the bookrunners.

Scentre is a Sydney-based retail property developer and owner.

IADB add-on prices

Inter-American Development Bank sold a $500 million tap of its existing 1.25% bonds (Aaa/AAA/) due Jan. 16, 2018 on Wednesday at mid-swaps minus 7 bps, according to a market source.

The notes sold in line with guidance.

Pricing was at 100.549 to yield 1.075%.

The original $500 million issue sold at mid-swaps minus 9 bps on Oct. 1.

Citigroup and JPMorgan were the joint bookrunners.

The issuer provides financing for Latin American and Caribbean countries and is based in Washington, D.C.

Verizon 10-year notes firm

Verizon’s 4.15% notes due 2024 (Baa1/BBB+/A-) firmed 6 bps in secondary trading to 132 bps offered, a market source said.

Verizon sold $1.25 billion of the notes on March 10, 2014 at Treasuries plus 140 bps.

The telecommunications company is based in New York City.

Wal-Mart eases

Wal-Mart’s 3.3% notes due 2024 (Aa2/AA/AA) eased 2 bps to 67 bps offered, a source said.

The company brought a $500 million add-on to the existing issue on Oct. 7 at a spread of Treasuries plus 73 bps.

Wal-Mart originally sold $1 billion of the notes at Treasuries plus 73 bps on April 15, 2014.

The discount retailer is based in Bentonville, Ark.

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS prices were higher on Wednesday, according to a market source.

Bank of America Corp.’s CDS costs increased 2 bps to 70 bps bid, 72 bps offered. Citigroup Inc.’s CDS costs were 3 bps higher at 69 bps bid, 71 bps offered. JPMorgan Chase & Co.’s CDS costs were 1 bp higher at 59 bps bid, 62 bps offered. Wells Fargo & Co.’s CDS costs were flat at 46 bps bid, 49 bps offered.

Merrill Lynch’s CDS costs were 2 bps higher at 73 bps bid, 76 bps offered. Morgan Stanley’s CDS costs ended 3 bps higher 79 bps bid, 81 bps offered. Goldman Sachs Group, Inc.’s CDS costs were also 3 bps higher at 83 bps bid, 85 bps offered.

Paul Deckelman contributed to this review

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