Morning Commentary: High-grade issuers Starbucks, Textron, Duke Energy Indiana on tap

By Cristal Cody

Tupelo, Miss., March 10 – A handful of high-grade issuers offered bonds early Tuesday as the financial markets begin to stabilize after the tailspin seen Monday due to the coronavirus and an oil price war that sent stocks down 7%, Treasury yields to new all-time lows and credit spreads more than 30 basis points wider.

Starbucks Corp. is offering three tranches of fixed-rate senior notes.

Textron Inc. is marketing fixed-rate notes.

Also, Duke Energy Indiana, LLC expects to price first mortgage bonds due April 1, 2050.

There was no issuance on Monday as the Markit CDX North American Investment Grade 33 index widened to 113.67 bps from where it closed Friday at a spread of 82.75 bps and from where it finished a week earlier at a spread of 65.06 bps.

Fears of a recession are growing, according to market analysts.

After the “massive credit spread widening” on Friday and Monday, “we are pricing in a >60% probability of U.S. recession over the next 12 months,” according to a BofA Securities, Inc. research note released Tuesday.

“While as recently as three weeks ago IG valuations were toward the tight end of the range, the subsequent repricing much wider implies that spreads are now much more attractive,” the analysts said. “The 88 bps of widening of IG spreads since Feb. 19th is the most for a similar period since the financial crisis in 2008.”

Stocks traded 1% to 2% better over the morning with crude oil prices up more than 8%.

Treasuries also started to give back some of the gains on Tuesday with the benchmark 10-year note yield up 13 bps to 0.633%.

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