High-grade issuers print in short deal window; new energy notes trading mostly tighter

By Cristal Cody

Tupelo, Miss., Feb. 25 – Investment-grade issuers found a short two-day window to print over $18 billion of corporate bonds before Russia’s late midweek invasion of the Ukraine rattled the financial markets.

Issuers were expected to bring about $25 billion of new bonds over the holiday-shortened week.

The primary market had $6.15 billion of supply on Tuesday and nearly $12 billion of issuance on Wednesday before supply ceased Thursday and Friday.

While Russia’s invasion of the Ukraine shook the markets early Thursday, bonds were headed back toward unchanged and better on Friday as investors look toward the Federal Reserve’s March meeting.

Some deal volume is expected in the week ahead as issuers attempt to get in front of the Fed’s March 15-16 monetary policy meeting but will vary based on volatility, sources said.

There is a growing expectation of a major rate hike with inflation and employment in focus and expectations of higher gas prices in the spring and summer “that’s just a real killer economically,” a source said. “I think they have to go 50 basis points – they cannot ignore this inflation.”

Moody’s Investors Service said in its weekly outlook report on Thursday that the escalation of the Ukraine-Russia conflict “rattled equity markets and led to an increase in global oil prices, which likely had some risk premium already embedded.”

Moody’s noted that West Texas Intermediate and Brent crude oil prices both were trading near, or above, $100 per barrel.

“Higher oil prices will boost inflation and increase the cost at the pump,” Moody’s said.

“Wholesale gasoline futures, which lead U.S. retail gasoline prices by two weeks, point toward prices at the pump reaching $3.75 per gallon, compared with $3.58 in the week ended February 18,” according to the report. “If oil prices continue to climb, then $4-per-gallon gasoline will become a reality. Our rule of thumb is that for every $10 increase in oil prices, retail gasoline prices rise by 30 cents per gallon.”

CenterPoint stronger

New high-grade energy bonds priced during the week remained mostly stronger in the secondary market headed into the weekend, while oil declined over Friday’s session, sources said.

ConocoPhillips Co.’s new notes (A3/A-) were trading about 1 bp to 4 bps tighter.

The $1.1 billion tranche of 3.8% notes due March 15, 2052 tightened to 151 bps offered.

The notes priced Tuesday at a Treasuries plus 155 bps spread.

Eversource Energy’s two tranches of notes priced on Tuesday traded flat to about 1 bp tighter. The $650 million offering of 3.375% notes due March 1, 2032 (Baa1/BBB+) firmed to 144 bps bid, 140 bps offered.

The company sold the notes at a spread of Treasuries plus 140 bps.

CenterPoint Energy Houston Electric LLC’s two-part offering of notes (A2/A) sold Wednesday came in about 4 bps to 7 bps.

The $300 million tranche of 3% notes due March 1, 2032 tightened to 100 bps bid, 98 bps offered from where it priced at a Treasuries plus 137 bps spread.

Alliant Energy Finance LLC’s 3.6% 10-year notes (Baa2/BBB+) traded flat on the bid side at 165 bps bid, 163 bps offered.

The company sold $350 million of the notes on Wednesday at a Treasuries plus 165 bps spread.

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