Morning Commentary: High-grade primary quiets after blowout week; AES, NRG tighten

By Cristal Cody

Tupelo, Miss., Nov. 20 – The high-grade primary market stayed quiet early Friday following heavy supply that beat market expectations over the week.

More than $40 billion of corporate bonds were sold in the first four sessions, led by Volkswagen Group of America Finance LLC’s $4 billion of notes (A3/BBB+) that priced in four tranches on Tuesday.

In addition to the corporate volume, the week also hosted $13 billion of sovereign, supranational and agency issuance.

Secondary trading volume also has been strong over the week with $27.58 billion of high-grade corporate issues traded on Thursday, up from $26.58 billion on Wednesday, $24.75 billion on Tuesday and $20.2 billion on Monday, according to Trace.

Secondary active

In the secondary market, new high-grade issues are trading mostly tighter, a source said.

AES Corp.’s $1.8 billion Rule 144A and Regulation S two-tranche offering of green senior notes (Ba1/BBB-/BBB-) that priced on Thursday firmed about 6 basis points to 7 bps.

The company’s 2.45% notes due Jan. 15, 2031 tightened to 154 bps bid.

AES sold $1 billion of the long 10-year notes at a Treasuries plus 160 bps spread.

The notes were guided to print in the Treasuries plus 165 bps area, plus or minus 5 bps. Initial talk was at the 180 bps to 185 bps spread area.

NRG Energy Inc.’s $1.4 billion of senior secured first-lien notes (Baa3/BBB-) that priced in two tranches in a Rule 144A and Regulation S transaction on Tuesday have tightened more than 10 bps.

The company’s $900 million tranche of 2.45% sustainability notes due Dec. 2, 2027 firmed to 170 bps bid.

The notes priced at a Treasuries plus 185 bps spread.

Initial talk was in the 212.5 bps over Treasuries area.

Volkswagen’s notes remain about 2 bps to 7 bps better than issuance in secondary trading.

The company’s 1.25% notes due Nov. 24, 2025 were seen at 88 bps bid.

Volkswagen sold $1.25 billion of the five-year notes at a spread of Treasuries plus 90 bps.

Initial price talk was in the 110 bps spread area.

Market tone was soft in the high-grade space at the start of the day.

The iShares iBoxx Investment Grade Corporate Bond ETF declined 0.17% to $137.45.

The Pimco Investment Grade Corporate Bond index fell 0.32% at $116.41.

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