Fixed income buyers returned after a five-session selloff for government bonds. Dealers sold bonds last week not because they felt the Fed was a step closer to changing tack, but because fears over the sovereign debt crises were smoothed by a successful Greek vote. With equity prices running out of excuses, investors turned toward the allure of corporate debt where yields had similarly backed up once again offering a good deal for those looking for income-earning opportunities. Overall trading is light as dealers head for the Hamptons following the Independence Day weekend.
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Investment Grade -
Amgen Inc. (AMGN) – Amgen’s $3 billion issuance last week was the largest throughout June giving dealers something to chatter about. The company launched three tranches including a 5.65% coupon-carrying June 2042 maturity that on Tuesday was in strong demand among fixed income bargain hunters. Priced at 140 basis points over the U.S. long bond last week, the premium has narrowed to around 125 basis points after Amgen’s secondary paper traded higher pushing the yield down to 5.60%.
Energy Transfer Partners LP (ETP) – Investors appeared to sell paper issued by Energy Transfer Partners after the company raised its bid for Southern Union from $33 to $40 per share. The revised bid outpaces by one dollar an unwelcome bid for Southern from Williams Companies in June but also comes at a price for ETP. The second bid, already granted the seal of approval from the boards at both companies, comes with an assumption of $3.7 billion in outstanding debt. ETP’s recently-issued 4.65% June 2021 lost ground with investors sending its yield in the opposite direction to government paper widening its premium to 186 basis points.
Bank of America (BAC) – Investors continue to look favorably on bonds issued by the nation’s largest bank after last week’s SEC settlement. One of today’s most actively traded bonds is BoA’s May 2021 maturity, which advanced according to our data by $2.24 per $1,000 invested sending the yield lower to 5.05%.
Non-Investment Grade –
Macy’s Inc. (M) – Volumes are definitely concentrated in the higher-grade universe on Tuesday while paper issued by Macy’s heads up the most actively traded in the non-investment world. Most in demand was its 7.875% July 2015 maturity where $14.5mm changed hands with the yield easing marginally to 3.11%. Its shorter-dated July 2014 issue was also wanted although earlier price gains dissipated leaving the yield unchanged at 2.29%.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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