Fidus prices $125 million five-year notes; strong January supply in view; credit spreads ease

By Cristal Cody

Tupelo, Miss., Dec. 16 – One company tapped the high-grade bond market on Wednesday as volume continues to thin ahead of the holidays.

Fidus Investment Corp. priced $125 million of registered five-year notes (Egan-Jones: A-) during the session.

Investment-grade supply has been thin week to date with $2.15 billion of bonds sold in Rule 144A and Regulation S deals from Microchip Technology Inc. on Monday and Berry Global, Inc. on Tuesday.

Light issuance is expected over the rest of December with zero up to $10 billion of volume anticipated by market participants for this week and the remainder of 2020.

More than $41 billion of investment-grade bonds have priced month to date, surpassing forecasts of about $25 billion to $35 billion of expected issuance for December.

Deal volume is expected to rev up in January with about $125 billion to $135 billion of new issuance anticipated, syndicate sources said.

Fed maintains rate

Market tone was mostly positive as Wednesday’s session got underway ahead of the Federal Reserve's meeting statement but softened by the end of the day.

The Markit CDX North American Investment Grade 35 index eased slightly to a spread of 52.92 basis points on Wednesday from 52.64 bps in the prior session.

In the high-grade space, the PIMCO Investment Grade Corporate Bond index declined 0.10% to $116.50.

The iShares iBoxx Investment Grade Corporate Bond ETF softened 0.08% to $137.34 by the close.

The Federal Reserve said in in statements following the monetary policy meeting that it is committed to using its full range of tools to support the U.S. economy during the coronavirus’ continued impact.

The Federal Reserve Open Market Committee “decided to keep the target range for the federal funds rate” at zero to 0.25% and expects to maintain the target range until labor market conditions have reached maximum employment levels and inflation has risen to 2% and is on track to moderately exceed 2%.

The Federal Reserve said it plans to increase its holdings of Treasury securities by at least $80 billion a month and of agency mortgage-backed securities by at least $40 billion per month until “substantial further progress” has been made toward its maximum employment and price stability goals.

The Fed also on Wednesday extended its temporary U.S. dollar liquidity swap lines and the temporary repurchase agreement facility for foreign and international monetary authorities through Sept. 30, 2021. The facilities were temporarily established in March and extended in July through March 2021.

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