High-grade issuance thins after strong supply; Realty Income prices; Washington Gas firms

By Cristal Cody

Tupelo, Miss., Dec. 9 – High-grade volume stayed light over Wednesday’s session with just one reported registered issuer in the primary market.

Realty Income Corp. priced $725 million of senior notes (A3/A-/) in two tranches during the session.

The deal included a $325 million tranche of notes due March 15, 2026 and $400 million of notes due March 15, 2033.

Elsewhere, the Federal Home Loan Bank System announced it skipped issuing a Global note on Wednesday. The agency’s next Global note funding opportunity will be on Jan. 20.

Week-to-date investment-grade volume totals more than $20 billion.

About $15 billion to $20 billion of high-grade bonds were expected to price over the week, according to syndicate sources.

Supply was strong over the first two sessions with $11.45 billion of notes from issuers including CVS Health Corp., Morgan Stanley and Nasdaq, Inc. on Monday and continued with more than $7 billion of volume on Tuesday, led by offerings from Charles Schwab Corp.

Investment-grade deal volume is expected to decline significantly headed into the holidays, sources report.

About $25 billion to $35 billion or more of corporate bonds were forecast to price in December.

Month to date, about $40 billion of investment-grade bonds have already priced.

In the first week of December, more than $21 billion of corporate bonds were sold.

Secondary mixed

Market tone was soft over the day with the status of additional U.S. Covid-19 stimulus measures in flux and infection rates rising.

Credit spreads eased nearly 2 basis points.

The Markit CDX North American Investment Grade 35 index widened to a spread of 52.65 bps from 50.84 bps on Tuesday.

The iShares iBoxx Investment Grade Corporate Bond ETF closed down 0.42% at $136.46.

The PIMCO Investment Grade Corporate Bond index fell 0.18% to $116.11.

Looking at the secondary market, new issues are mixed this week, a source said.

The 0.985% global medium-term senior fixed-to-floating-rate notes due Dec. 10, 2026 that Morgan Stanley (A2/BBB+/A) priced on Monday softened to 63 bps bid.

Morgan Stanley sold $2.5 billion of the notes at par to yield a spread of Treasuries plus 60 bps.

Initial price talk was at the Treasuries plus 75 bps area.

The rate on the notes will reset Dec. 10, 2025 to a floating rate of SOFR plus 72 bps.

Washington Gas Light Co.’s 3.65% medium-term notes due Sept. 14, 2049 (A3/A-/A) that were reopened on Monday tightened about 3 bps.

The company priced a $100 million add-on to the issue at a spread of 110 bps over Treasuries.

The notes priced 5 bps tighter than the tight side of guidance in the 120 bps spread area, plus or minus 5 bps, and better than initial talk in the Treasuries plus 137.5 bps area.

Washington Gas Light originally sold $300 million of the notes on Sept. 10, 2019 at Treasuries plus 150 bps.

Investment-grade corporate secondary trading volume rose to $23.86 billion on Tuesday from $22.99 billion on Monday, according to Trace.

© 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.