Week’s supply nearly doubles expectations; busy November ahead; Citigroup, Goldman Sachs mixed

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 30 – The investment-grade bond market was quiet to close out a busy week on Friday, though sources noted that the market was displaying continued signs of improvement.

Fannie Mae was the only issuer entering the primary, selling $3 billion of Benchmark Notes due 2018.

With the day’s lone new deal, the high-grade primary closed the week at $38 billion of supply on Friday, even with the primary’s pause for the Federal Reserve’s statement following its two-day policy meeting.

Jumbo bond offerings, including Wednesday’s $13 billion seven-part megadeal from Microsoft Corp. and ACE INA Holdings Inc.’s $8 billion deal priced on Tuesday, pushed the high-grade primary’s total to nearly double earlier predictions of $20 billion.

Investment-grade corporate bonds headed out mostly flat to modestly better in secondary trading over the day.

Citigroup Inc.’s 2.65% notes due 2020 edged 1 basis point wider, while its 4.4% subordinated notes due 2027 were flat.

Goldman Sachs Group Inc.’s paper was flat to tighter in the secondary market.

Charter Communications Inc.’s bonds traded 2 bps better over the session.

The Markit CDX North American Investment Grade 25 index ended unchanged at a spread of 79 bps on Friday.

Heavy issuance forecasted

November is expected to be another active one for high-grade bonds.

Sources continue to anticipate an onslaught of supply to hit the primary in the coming weeks ahead of the holidays.

Coming off the more than $118 billion priced in October, participants are gearing up for another $100 billion to price in November.

One source noted that current issuance conditions are “pretty much ideal,” adding he wouldn’t be surprised if the month hosted $125 billion to $130 billion of supply in light of recent spread tightening in the secondary.

For next week specifically, around $25 billion to $30 billion of issuance is expected, with mergers and acquisitions financing accounting for a large portion of that total as potential issuers begin to exit earnings blackout periods.

Fannie Mae Benchmark Notes

Fannie Mae priced $3 billion of 1.125% Benchmark Notes due Dec. 14, 2018 at Treasuries plus 13.5 bps on Friday, according to a company press release.

The notes priced at 99.851 to yield 1.174%.

Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and TD Securities are the joint lead managers.

The government-backed mortgage lender is based in Washington, D.C.

By region, U.S. investors accounted for 85% of orders and Europe and Asia each picked up 7%.

By investor type, 55% of orders came from fund managers, 21% from commercial banks, 10% from insurance companies and 7% from central banks.

Citigroup mixed

Citigroup’s 2.65% notes due 2020 traded 1 bp softer over the afternoon at 119 bps bid, a market source said.

The notes were quoted 4 bps tighter at the start of the day at 116 bps offered.

Citigroup sold $2.7 billion of the notes (Baa1/A-/A) on Oct. 19 at 133 bps over Treasuries.

The tranche of 4.4% notes due 2027 was unchanged on Friday at 233 bps bid.

Citigroup sold $1.5 billion of the notes (Baa3/ BBB+/A-) in a reopening on Oct. 23 at 233 bps over Treasuries. The company originally sold $2 billion of the notes on Sept. 23 at Treasuries plus 235 bps.

The financial services company is based in New York.

Goldman flat to tighter

Goldman’s 4.25% subordinated notes due 2025 firmed 2 bps in afternoon trading to 211 bps bid, according to a market source.

The notes traded early on Friday 2 bps softer at 207 bps offered.

Goldman priced $2 billion of the notes (Baa2/BBB+/A-) on Oct. 16 at a spread of Treasuries plus 230 bps.

The company’s 5.75% senior notes due 2045 were unchanged at 177 bps bid.

Goldman sold $1.75 billion of the bonds (A3/A-/A) in the Oct. 16 offering at Treasuries plus 192 bps.

The financial services company is based in New York City.

Charter bonds improve

Charter Communications’ 4.908% notes due 2025 traded 2 bps tighter on Friday at 256 bps bid, a market source said.

The company sold $4.5 billion of the notes (Ba1/BBB-) on July 9 at 260 bps plus Treasuries.

Charter Communications’ 6.484% notes due 2045 firmed 2 bps in secondary trading to head out at 329 bps bid.

The company sold $3.5 billion of the bonds (Ba1/BBB-) in the July 9 sale at Treasuries plus 335 bps.

The provider of cable, internet and phone services is based in Stamford, Conn.

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