Gilead leading 11-deal day in US high-grade

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By Hillary Flynn

NEW YORK, Sept 15 (IFR) - Biopharm company Gilead Sciences (NasdaqGS: GILD - news) led another busy session in the US primary bond market on Thursday with issuers trying to get ahead of key central bank meetings next week.

Gilead's five-part trade is likely to be the biggest deal of the day and will help propel the week's volume to the US$35bn-$40bn that syndicate desks were forecasting for the week - despite a spike in volatility that has hit rates and stocks.

One broker said Gilead's deal was expected to be around US$5bn, while another benchmark deal from building materials company LafargeHolcim (LSE: 0QKY.L - news) is also set to price on Thursday.

Both issuers are looking to sell 30-year bonds as part of their trades, despite a back-up in Treasury yields of late sparked by worries that central banks globally will begin to scale back support and that the Bank of Japan will try to steepen the yield curve by reducing long-end purchases.

Rate announcements from the Bank of Japan and US Federal Reserve are due next Wednesday.

"Even (Taiwan OTC: 6436.TWO - news) with the back-up in yields, long-end rates are still historically at very low levels so issuers are likely to continue to go up the curve," one syndicate banker told IFR.

Continued demand from pension funds and life insurance companies should also help long-term issuance, while the hunt for yield will push investors to buy more paper with maturities of 10-years or longer, the banker said.

Market conditions were supportive on Tuesday as a batch of lacklustre economic data further dampened expectations of a US rate hike next week. The CDX IG 26 index was 2bp tighter at 75.5bp, while stocks were also higher - and deals appeared to be going well.

Initial price thoughts on Gilead's 10-year were T+137.5bp, suggesting a new issue concession of about 20bp based on where its outstanding 3.65% 2026 bond was trading at G+112bp - but that was pulled in to T+125-130bp at guidance stage.

Most of the other nine trades pricing Thursday are US$500m or under - but that will still likely take issuance over US$90bn, or about 70% of what most bankers were forecasting for the whole of September.

Issuers are also bringing deals before an expected jumbo issue from drugmaker Shire (Xetra: S7E.DE - news) next week to finance its acquisition of Baxalta (Berlin: 9BX.BE - news) . An investor roadshow for the trade ends Thursday. (Reporting by Hillary Flynn; Editing by Natalie Harrison and Shankar Ramakrishnan)