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Morning Commentary: Investment-grade bond spreads mostly flat; bank, financial paper eases
By Cristal Cody
Tupelo, Miss., June 16 – Market attention remained focused early Monday on primary supply and the upcoming Federal Reserve’s two-day policy meeting that ends on Wednesday, sources said.
Primary action is expected later in the session from issuers including Total Capital International SA, Macquarie Group Ltd. and ERP Operating LP.
Investment-grade bonds were mostly unchanged to slightly weaker over the morning, according to market sources.
The Markit CDX North American Investment Grade series 22 index closed flat on Friday at a spread of 60 basis points.
“Despite the sustained high level of new issue activity in recent months, corporate bond yields are near a 12-month low and within 40 bps of an all-time low,” RBC Capital Markets, LLC analysts said in a note on Monday.
U.S. five-year high-grade bond yields “have moved 22 bps higher since May 28,” according to the note.
Bank paper was modestly weaker in early trading on Monday, a source said.
Wells Fargo & Co.’s 4.1% subordinated notes due 2026 were quoted 3 bps wider.
Bank of America Corp.’s 4% notes due 2024 eased about 4 bps, according to a market source.
Wells Fargo’s 4.1% notes due 2026 eased 3 bps to 143 bps offered, a source said.
The bank (A2/A+/AA-) sold the notes on May 27 at a spread of Treasuries plus 160 bps.
Wells Fargo is based in San Francisco.
Bank of America weaker
Bank of America’s 4% notes due 2024 (Baa2/A-/A) traded about 4 bps wider at 115 bps offered, according to a market source.
Bank of America sold $2.75 billion of the notes on March 27 at 137 bps over Treasuries.
The financial services company is based in Charlotte, N.C.
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