Corporate bond activity cools as investors bide time

After a week of blowout corporate issuance and a dip for yields to the lowest so far in 2011, there seems to be little incremental appetite for corporate debt on Tuesday. Some of the pressure on stocks was removed, although it seems investors see Spartan need to switch further from equities to bonds until at least there are a few more basis points on the table. Google’s recently issued five-year tranche is the most widely-changed hands Tuesday, although the range remains pretty narrow as investors flip-and-flop the name.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/p.php?f=daily_analysis.

Investment Grade -

Banco Bilbao Vizcaya. (BBVASM) – Although stocks and commodities attempted a rebound on Tuesday, let it not be said that the seemingly omnipresent sovereign debt crisis let up any. Investors continued to shun yankee-bonds issued by banks outside the United States in a trend we’ve noted during the past week or so. On Tuesday Moody’s generated a list of 14 banks that could suffer in the event of further credit-market stresses. The British government said it won’t be as generous in the event of a future banking failure warning that resorting to the public purse will not be an option. Bonds in Spain’s BBV were marked lower with $24mm of its May 2014 Aa2-rated paper changing hands at 27cents per $1,000 lower than yesterday. Its yield rose to 2.30%. Also marked down today was paper issued by Britain’s Lloyds Bank, whose January 2014 bonds were marked down $1.35 to 102.50 lifting the yield to 1.62%.

Apache Corp. (APC) – Perhaps a rebound in the prospects for crude oil helped provide additional stability across certain oil and gas producers. Goldman Sachs reversed its bearish call on commodities saying that prices had fallen too far, too fast given the economic outlook and called for crude oil prices to return to $130.00 per barrel. Investors bought shares in Apache Corp. lifting them 0.6% to $121.71 and took a liking to its February 2021 corporate paper as well. Investors paid $1.30 per $1,000 more than as at Monday’s close driving the yield on its A3-rated issue lower to 3.74% at the best price of the day. Its bonds have subsequently pared much of the day’s gain.

High Yield -

Anadarko Petroleum Corp. (APC) – Standing four notches beneath Apache, according to Moody’s credit ratings at least, is Anadarko, whose six-and eight-year paper was equally well sought after in today’s market. The yield on its September 2017 maturity slipped to 3.82% while at the June 2019 maturity buyers pushed its yield lower to 4.30% with volume in each a respectable $15mm. Shares also advanced for a near 2% gain Tuesday to $75.71. Buyers also hunted down its 2036 maturity, lifting prices higher on another $15mm paper to 105.92.

Seitel Inc. (SELA) – There’s some great insight into the volume and value of untapped oil reserves in today’s WSJ article “Facing Up to End of Easy Oil”by Ben Casselman. Turns out that the vast majority of the world’s supply of crude oil takes the form of molasses, making it difficult to extract from beneath even the world’s hottest deserts. By coincidence we’ve noticed demand today for bonds issued by Seitel Inc., an oil and gas services company in the seismic data collection business. Its Caa3-rated paper traded on volume of almost $9mm on Tuesday with buyers forking over 50cents more to lock-in to yields of 7.83% through maturity in February 2014.

Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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