Morning Commentary: Investment-grade primary market readies for busier week ahead

By Cristal Cody

Tupelo, Miss., Nov. 6 – The investment-grade bond market opened to light activity on Friday following Waste Management, Inc.’s $2.5 billion four-part offering that saw strong demand in the prior session as the week’s sole issuer.

Uncertainty remains as votes continue to be counted in the U.S. presidential election, but market participants are eying a busy week ahead, despite the mid-week Veteran Days holiday coming up.

About $25 billion to $30 billion of high-grade issuance is expected in the primary market next week, syndicate sources said.

Waste Management’s notes (Baa1/A-/BBB+) are the sole high-grade corporate deal priced this week, and pent-up demand saw the offering attract nearly $20 billion in book orders.

Zero to about $10 billion of investment-grade corporate volume was expected this week due to the election, the Federal Reserve’s two-day monetary policy meeting, heavy earnings reports releases and the October jobs report.

On Friday, the Labor Department announced total nonfarm payroll employment rose by 638,000 in October, while the unemployment rate declined 1 percentage point to 6.9%.

The data came in stronger than market analysts expected, forecasting a gain of 530,000 jobs and a 7.6% unemployment rate.

Equities pulled back after rallying over the week with the Dow Jones industrial average and the S&P 500 both down 0.10% at the start of the day.

The iShares iBoxx Investment Grade Corporate Bond ETF also was down 0.36% to $136.13 early in the session.

The Pimco Investment Grade Corporate Bond index continued to improve over the morning by 0.19% to $115.90.

Meanwhile, secondary trading picked up on Thursday in the high-grade bond market with $23.03 billion of corporate issues traded, compared to $16.51 billion on Wednesday, $18.38 billion on Tuesday and $18.92 billion on Monday, according to Trace data.

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