Rising Spreads, Falling Issues: Investment-Grade Bonds Hit Lows
(Continued from Prior Part)
Deals overview for the week ending January 22
SAS (sovereign, agency, and supranational) issuers dominated the primary market for high-grade bonds in the week ending January 22, making up 39.0%, or nearly $11.3 billion, of all issues. US financials made up 37.7% of all issues while Yankees commanded 19.8% of the total issuance.
The week ending January 22 brought the year-to-date issuance of high-grade corporate bonds to more than $146.2 billion. Issuances by high-grade corporates make up parts of mutual funds like the Janus Flexible Bond Fund Class A (JDFAX) and the TIAA-CREF Bond Index Fund Retail Class (TBILX).
Details of Morgan Stanley’s issues
Morgan Stanley (MS) is a global financial services firm that, through its subsidiaries and affiliates, provides investment banking products and services to its clients. On January 22, Morgan Stanley issued A3/BBB+ rated high-grade bonds worth $5.5 billion via the following three parts:
- $500 million in three-year FRNs (floating-rate notes), issued at three-month LIBOR + 137.5 basis points
- $2.0 billion in 2.45% three-year notes, issued at a spread of 137.5 bps over similar-maturity Treasuries
- $3.0 billion in 3.88% ten-year notes, issued at a spread of 185 bps over similar-maturity Treasuries
Details of Wells Fargo’s issues
Wells Fargo & Company (WFC) is a provider of financial, advisory, investment, and funds management services. On January 22, Wells Fargo issued Aa2/AA rated high-grade bonds worth $3.5 billion in the following two parts:
- $2.0 billion in two-year FRNs (floating-rate notes), issued at three-month LIBOR + 74 basis points
- $1.5 billion in 1.65% two-year notes at a spread of 80 bps over similar-maturity Treasuries
Details of Royal Bank of Canada’s issues
Through its subsidiaries, the Royal Bank of Canada (RY) provides diversified financial services in Canada, the US, and 37 other countries. On January 22, the bank issued high-grade bonds worth $1.5 billion. The single-tranche, Baa1/A- rated ten-year issue was raised at a coupon of nearly 4.7%. The high-grade bonds were issued at a spread of 262.5 bps over similar-maturity Treasuries.
Details of TransCanada Pipelines’ issuances
TransCanada Pipelines is a US limited partnership firm with access to new gas supplies through support from its sponsor, TransCanada Corporation (TRP), a leading energy infrastructure company in North America. On January 22, TransCanada issued A3/A- rated high-grade bonds worth nearly $1.3 billion in the following two parts:
- $400 million in 3.13% three-year notes at a spread of 212.5 bps over similar-maturity Treasuries
- $850 million in 4.88% ten-year notes at a spread of 287.5 bps over similar-maturity Treasuries
In the next and final part of this series, we’ll look at investment-grade bond fund flows.
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