Mondelez, Jefferies, Veritex tap high-grade primary; light October supply eyed; spreads firm

By Cristal Cody

Tupelo, Miss., Sept. 30 – A handful of reported issuers priced bonds on Wednesday in the high-grade primary market after steady supply in the first two sessions of the week.

Mondelez International, Inc. sold $1.25 billion of notes (Baa1/BBB/) in two tranches.

The company came by with $625 million of new notes due Oct. 15, 2032 and a $625 million add-on to its 2.625% notes due Sept. 4, 2050.

Jefferies Group LLC and and Jefferies Group Capital Finance Inc. sold $500 million of senior notes due Oct. 15, 2032 (Baa3/BBB/BBB) on Wednesday.

Also, Veritex Holdings, Inc. priced $125 million of 10-year fixed-to-floating-rate subordinated notes (Kroll: BBB-) over the day.

In the sovereign, supranational and agency market, Federation des caisses Desjardins du Quebec priced $750 million of three-year covered bonds (Aaa//AAA) in a Rule 144A and Regulation S offering.

Corporate and SSA issuance totals more than $17 billion week to date.

High-grade issuers priced more than $8 billion of bonds on Tuesday and over $7 billion of notes on Monday.

Deal volume so far has been led by Pernod Ricard International Finance LLC’s $2 billion three-part sale of guaranteed senior notes (Baa1/BBB+/BBB+) that priced on Monday.

About $20 billion to $25 billion of issuance is expected by market participants this week.

Thin fourth-quarter action

Investment-grade volume in October is expected to slow to about $75 billion to $100 billion, though the total could be much less, sources report.

“After careful deliberations we are sticking with our outlook for $100 [billion] of gross IG issuance in 4Q,” including $50 billion of volume in October, $40 billion in November and $10 billion in December, BofA Securities, Inc. analysts said in a research note released on Wednesday.

Companies will be entering third quarter earnings reporting-related blackout periods after the quarter ends Wednesday.

“After that there is a window of about two weeks before the elections, but we think many issuers frontloaded that activity,” the BofA Securities analysts said. “Of course we can't prove that the refi trade is over, but we think so.”

Investment-grade bond volume has hit record amounts this year.

Supply totaled $187.48 billion in September, compared to $125.22 billion of issuance in the same month last year, according to Prospect News data.

Year to date, high-grade supply totals $1.66 trillion versus $930.88 billion of volume in the same period a year ago.

Market tone was mixed over the day with stock indices ending higher.

The Federal Reserve Board announced late afternoon that it approved of Morgan Stanley’s $13 billion all-stock acquisition of E*Trade Financial Corp.

Morgan Stanley said in a statement that it expects to close the deal on Friday.

The Federal Reserve also announced on Wednesday that it approved Toronto-Dominion Bank’s notice to acquire more than 5% of the voting shares of The Charles Schwab Corp.

The Markit CDX North American Investment Grade 35 index closed nearly 1 basis point tighter on the day at a spread of 59.3 bps.

The iShares iBoxx Investment Grade Corporate Bond ETF softened 0.01% to 134.71.

The PIMCO Investment Grade Corporate Bond index closed down 0.3% at 114.66.

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