Morning Commentary: Lockheed Martin, CMS, AES offer notes; Honeywell firms; flows dip

By Cristal Cody

Tupelo, Miss., May 15 – Deal volume is expected to continue on Friday with issuers including Lockheed Martin Corp. and CMS Energy Corp. offering new high-grade notes, according to market sources.

Lockheed Martin is marketing two tranches of registered fixed-rate notes (A3/A-/A-) during the session.

CMS Energy is offering split-rated 30-year registered fixed-to-fixed reset rate junior subordinated notes (Baa2/BBB-/BB+) on Friday.

Also, AES Corp. intends to bring a $1.5 billion Rule 144A and Regulation S two-part offering of senior secured first-lien notes due 2025 and 2030 (BBB-).

High-grade issuers have priced more than $60 billion of bonds week to date.

About $75 billion of investment-grade supply was forecast for the week.

In the secondary market, new issues priced this week were mixed, a source said.

Honeywell International Inc.’s $3 billion of senior notes (A2/A/A) that priced in three tranches on Thursday tightened more than 10 basis points in secondary trading.

The company’s 1.95% notes due June 1, 2030 were last seen at 123 bps bid.

Honeywell sold $1 billion of the 10-year notes at 99.891 to yield 1.962% and a 135 bps spread over Treasuries.

Initial price talk was in the 165 bps spread area.

Overall secondary market volume totaled $28.18 billion in high-grade corporate issues on Thursday, according to Trace data.

Meanwhile, high-grade bond fund and ETF inflows declined to $7.8 billion for the past week ended Wednesday from $8.74 billion in the previous week, according to a BofA Securities, Inc. research note released on Friday.

High-grade ETF inflows rose to $3.04 billion from $2.84 billion last week, while fund inflows declined to $4.76 billion from $5.9 billion a week earlier.

Inflows to short-term high-grade edged up to $3.58 billion from $3.51 billion a week earlier, according to the report that includes corporate bonds, agencies, Treasuries and mortgages.

Excluding short-term flows fell to $4.22 billion this past week from $5.22 billion in the prior week.

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