Bond Buyers Swoop on Shorter-Dated Maturities

Government security prices made good headway with maturities from 10-30 years shedding seven basis points in yield even as stock prices rebounded from opening lows to trade higher on the day. Paper issued by financial institutions seemed to find decent demand with capital gains evident across all of the most widely traded names. The yield on the 10-year treasury benchmark slid to 2.17% ahead of lunchtime. Ahead of the release of August-minutes from the Federal Reserve later on Tuesday, fixed-income investors were scouring the market for buying opportunities at shorter-dated maturities.

Investment Grade

Wells Fargo (WFS) – Bonds maturing June 2016 issued by Wells Fargo with a face value of $28mm changed hands among investors on Tuesday. The five-year paper carries a yield to maturity of 2.55% and at its February issue carried a coupon of 3.676%. Shares in the company are unchanged at $25.41 and stand around 10% above the recently set 52-week low as financial issues find some favor among investors.

Barclays Bank (BACR) – Bonds issued by the British lender jumped on Tuesday to become the second most active issue among investment grade corporate bonds. Some $27mm of its bonds changed hands with investors apparently snapping up the Aa3-rated issue. As buying intensified the price advanced by almost $2.50 per $1,000 investment and forced the yield down to 4.40% on its September 2016 maturity.

BNP Paribas (BNP) – Shares in the French lender advanced in the European session after it said that it had agreed with both auditors and authorities on provisions it had made on provisions on its Greek sovereign debt holdings. An earlier headline story that ran across the Financial Times indicated disgruntlement at Europe’s IASB accounting standards body. Its dollar denominated bonds were also well bid after the Wall Street Journal reported the bank’s attempt to diffuse the story. The yield on BNP’s March 2015 maturity slumped by 56 basis points to 3.60% narrowing the premium over comparable U.S. treasuries to around 267 basis points.

Non-Investment Grade

ATP Oil & Gas Corp. (ATPG) – Bonds maturing in four years issued by oil-producer ATP were the most actively traded non-investment grade issue on Tuesday. Its shares leapt last week after announcing that production had begun at its deep-water well in the Gulf of Mexico using its 4,000-foot deep Telemark Hub in its ATP Titan platform. Shares have now more than doubled since the broader market ran in to trouble over the past couple of weeks and currently trade at $13.79. Bonds issued by the company and rated Caa2 by Moody’s, traded on volume of above $10mm on Tuesday, although the 16.5% mid-yield remains much higher than the 11.875% coupon when the bonds made a debut in January. The 7,000 barrel per day output at the oil explorer has at least some investors believing that the risk of owning the bonds will pay off in the medium term. ATP’s bonds carry a maturity date of May 2015.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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