Bond dealers were thrown through a loop Tuesday with early morning indications showing investors were set to return refreshed from a long holiday weekend with buying boots on. A rise in appetite for riskier equities dulled demand in early going for government bonds. However, after an early rise in yields and a lack of follow-through buying, Treasuries rallied sending yields down on the day and maintaining interest in the corporate space where demand remains strong for Anadarko paper in the non-investment grade universe and for Walt Disney in the investment arena.
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Investment Grade -
The Walt Disney Co. (DIS) – Investors appeared to be heavy-buyers of Disney’s recently-issued 3.75% coupon 10-year paper with over $25mm changing hands Tuesday. Disney paper was the single-most active issue in thin post-holiday trading as investors pushed its price ahead by eight-cents per $1,000 face value to 100.68 sending the yield lower to 3.66%. Shares in Disney continue to rebound from an excursion lower to frequently-tested support at $40.50 giving them around 10% upside back to the top of a well-established trading range over the past three months.
ArcelorMittal (MTNA) – There was also strong demand for paper issued by Luxembourg-based metal-producer, ArcelorMittal. Some $24mm of its 3.75% March 2016 maturity changed hands Tuesday as investors sought its 3.35% yield-to-maturity. Bonds issued by the company are rated Baa3 by Moody’s. The company received the go-ahead from EC regulators for its planned purchase of German coke producer Kokerei Prosper following its findings that the proposal would not lead to a monopoly. ArcelorMittal also recently announced a $2.2 billion mining investment in Canada.
High Yield -
Anadarko Petroleum Corp. (APC) – The top-two traded corporate bonds on Tuesday belonged to oil explorer, Anadarko where we continue to see demand show up for its Ba1-rated issues. Most actively traded was its September 2017 issue where prices slipped by a nickel. The March 2014 issue, however, advanced by 71 cents per $1,000 face value to trade at 115.18 lowering its yield to 1.99%. Between the two issues investors bought $37mm worth of bonds.
Life Technologies Corp. (LIFE) – Life Technologies March 2020 maturity appears offered Tuesday with investors marking the paper down by around 34 cents per $1,000. The company develops biotechnology tools used by researchers although it appears that its performance is being put under the microscope today. Around $10mm of the particular maturity have traded so far according to our scanners with its yield rising to 4.69%. During the past 12 months this issue has outflanked the return on comparable treasuries by around 1.2%.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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