High-grade supply beats August forecast; new issue concessions widen; bonds price tight

By Cristal Cody

Tupelo, Miss., Aug. 12 – High-grade bond supply continued to race past market forecasts with the second week of August wrapping up more than $30 billion of volume.

About $25 billion of issuance was expected over the week.

Supply also has outpaced market forecasts of about $75 billion of issuance for August on the back of more than $58 billion of deals brought to the primary market in the prior week.

Issuance may thin over the back half of the month with about $90 billion of investment-grade notes already priced through the first two weeks and average new issue concessions moving out Thursday, according to market sources.

Volume was expected to be front-loaded this week ahead of the release of the Consumer Price Index data on Wednesday.

The Labor Department said the inflation gauge rose 8.5% over the last 12 months, below market forecasts of an 8.7% increase.

In the high-grade primary market, the average new issue concession widened to 42.5 basis points on Thursday from 6 bps in Wednesday’s session, according to a BofA Securities Inc. note.

New issue concessions were mostly wide throughout the week with Duke Energy Corp. seeing new issue concessions of 15 bps to 18 bps on its 10- and 30-year tranches sold Monday, Dominion Energy Inc. printing with 20 bps to 24 bps of new issue concessions on its 10- and 30-year notes Tuesday and Banco Santander SA pricing with new issue concessions of 45 bps on its three-year notes and 40 bps on its five-year tranche sold Thursday, according to the note.

Banco Santander prints

Deals, though, were seen printing mostly tighter than talk across the board over the week, a source said.

Banco Santander’s two-part offering of senior non-preferred notes (Baa1/A-) priced 25 bps tighter than talk.

The company sold $1.75 billion of 5.147% notes due 2025 at Treasuries plus 195 bps and $1.75 billion of 5.294% notes due 2027 at a 230 bps over Treasuries spread on Thursday.

Duke Energy’s $3.2 billion three-tranche offering of notes (Baa2/BBB) on Monday priced more than 20 bps better than talk. The $1.15 billion tranche of 4.5% notes due 2032 firmed to a print of Treasuries plus 177 bps from talk at the 200 bps spread area.

Dominion Energy’s deal also came in 20 bps from talk, including the $600 million of 4.85% notes due 2052 that priced at a 190 bps over Treasuries spread.

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