Corporate bond prices were unchanged Friday, and issuance ebbed after a banner week, despite the record Treasury auction.
An ease in monetary policy by the Federal Reserve Board last week sent Treasury prices markedly lower, beckoning issuers. Over $2 billion of new securities flooded the market in the face of the Treasury's record $38 billion quarterly refunding.
The producer price index for finished goods declined 0.2% in July after a 0.3% drop in June. The core rate of inflation came in up 0.2%, meeting market expectations. Prices barely moved as market participants headed home for the weekend.
Both yields on high-yield bonds and investment-grade bonds were unchanged on the session.
Meanwhile, new issuance was very light. The lone new issue of the day was a $75 million noncallable debenture for Corning Inc. The 30-year bonds were priced by Lazard Freres & Co. to yield 8.894%, 75 basis points above the comparable Treasury bond.
In ratings news, Standard & Poor's Corp. said it placed Iowa Power Inc.'s A-rated senior-secured debt on CreditWatch with positive implications.
At the same time, ratings were affirmed on Iowa Public Service Co.'s A-plus senior secured debt, A rated preferred stock, and A1-plus commercial paper, Standard & Poor's said.
About $750 million of consolidated debt is outstanding.
Iowa Power Inc. and Iowa Public Service Co. are expected shortly to file for approval to merge the two utilities into a single subsidiary of their holding company, Midwest Resources Inc., Standard & Poor's said. Approvals are required of the Securities and Exchange Commission, the federal Energy Regulatory Commission, the Iowa Utility Board, and the Minnesota Public Utilities Board.
It is expected that the combined utility's senior debt rating will be A-plus, the preferred stock rating will be A, and the commercial paper rating will be A1, Standard & Poor's said.
The merger of the two utilities is expected to result in significant cost savings over the next 10 years.