Corporates See Follow-Through Buying, Sentiment At Multi-Month High
26 Janeiro 2012 - 9:19PM
Dow Jones News
Corporate bonds continued to rally Thursday with follow-through
buying after the Federal Reserve on Wednesday indicated it planned
to keep interest rates at ultra-low levels through 2014.
But the rally was more apparent in the morning and had somewhat
fizzled out in later trading.
Markit's CDX North America Investment-Grade Index, a measure of
health in the U.S. corporate-bond market, had improved at least 3%
in morning trading, but at 5 p.m. EST the gain was trimmed to 1.1%.
The measure, was with Wednesday, is at its best level since early
August.
Among individual bonds, the 15 most actively traded names all
improved Thursday, including a series of issues from global banks,
according to MarketAxess.
Dan Hannis, who runs corporate bond trading at William Blair
& Co. in Chicago, said bond buying was furious in the wake of
the Fed announcement Wednesday, and it continued Thursday morning,
but then investors got exhausted and some decided to take
profits.
"We have clients that want to step out and take some risk of the
table," he said. "It's not a turning point right now, but I could
see the market trading choppy in the next two weeks."
But the rally in financials still has plenty of room to run.
Hannis said there has been a sea change in investor sentiment
towards financials, yet some bonds are still offering spreads--the
extra yield corporate bonds offer over Treasurys--that he called
"very attractive" considering the absence of a funding crisis.
Four of the five most actively traded bonds in Thursday's market
were from the financial sector, MarketAxess shows.
Morgan Stanley (MS) 5.5% coupon bonds due 2021 improved 16 basis
points to a spread of 379, Goldman Sachs Group (GS) 5.75% bonds due
2022 improved one basis point to 336, and Citigroup (C) 4.5% bonds
due in 2022 improved nine basis points to 270.
Appetite for new deals in the primary market was robust, as
Peruvian silver and zinc mining company Volcan Compania Minera SAA
(VOLCABC1.VL) completed its first-ever bond sale in the U.S.,
according to a person familiar with the matter.
It sold $600 million of 5.375% coupon bonds priced at par, for a
spread to Treasurys of 344 basis points. Pricing guidance started
at 5.75% and was slashed at least three times, indicating broad
appetite for this new name.
Also, the National Rural Utilities Cooperative Finance Corp.
priced a two-tranche, $800 million bond deal featuring three-year
and 10-year notes. The three-year notes were priced at 80 basis
points over Treasurys for a yield of 1.108%, and the 10-year notes
were priced at 3.090%, a spread of 115 basis points.
The only other major deal was a $400 million issue of five-year
notes from Harley-Davidson Financial Services Inc. It enlarged its
debt offering by $100 million and sold them at a yield of 2.704%, a
spread of 195 basis points over Treasurys. Earlier pricing guidance
was a 210 basis point spread.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382;
patrick.mcgee@dowjones.com
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