IG WRAP-Issuers rush out ahead of M&A supply, rate rise

By Natalie Harrison

NEW YORK, March 9 (IFR) - Yankee bond issues from Barclays (LSE: BARC.L - news) , Credit Agricole, Abbey National, Toyota Motor Corp and Toronto-Dominion Bank led the charge in a busy primary market on Monday.

Borrowers were keen to price deals ahead of potential event risk and more expected M&A supply.

Among the 14 issuers aiming to price deals today include utility firms Potomac Electric Power, San Diego Gas & Electric and insurers Aflac Inc (NYSE: AFL - news) and ACE INA Holdings.

The main focus in the market right now is on rates, and specifically when the first move from the Federal Reserve will come after a strong payrolls report Friday that sent Treasury yields higher.

"Rates have gone up, and that has scared people a bit," said one syndicate banker.

"There are also some relatively large M&A deals that are expected to come to market soon, so that's probably triggered some of these deals," the banker said.

On Monday, the 10-year Treasury yield was down to 2.21%, but it is still around its highest levels of the year. With the Fed set to release its policy statement on March 18, there is likely to be greater focus on economic data this week.

Retail sales figures on Thursday and PPI data on Friday could be market moving events, some bankers said.

This week could also be poised for more M&A bond supply.

Bank of America Merrill Lynch, Citigroup (NYSE: C - news) , Credit Suisse (NYSE: CS - news) and JP Morgan are due to wrap up calls with fixed income investors early this week ahead of an expected jumbo bond issue for US medical device maker Zimmer.

European Union antitrust regulators will decide by May 26 whether to approve Zimmer's US$13.4bn bid for rival Biomet.

US food manufacturer JM Smucker and German chemical and pharmaceutical company Merck KGaA (Other OTC: MKGAF - news) are also holding investor calls this week which may result in new issues.

Merck agreed last September to acquire Sigma-Aldrich Corp for US$17bn in cash, the biggest takeover in its history, while JM Smucker Co agreed to buy Big Heart Pet Brands for US$3.2bn last month.

GM STAYS COMMITTED TO INVESTMENT-GRADE

Away from primary, General Motors (NYSE: GM - news) said on Monday it remains committed to keeping its investment-grade rating as it announced plans for a US$5bn share buyback programme.

"A foundational element of our approach will be to return all available free cash flow to shareholders while we maintain an investment grade balance sheet underpinned by a target cash balance of US$20bn," said GM's CEO Mary Barra on a call with analysts.

Moody's said the share repurchase plan did not impact its Baa3 rating and stable outlook, although it saw the news as credit negative.

"This program weakens GM's positioning at the current rating level and will likely delay any potential consideration for an upgrade," the ratings agency said.

(Reporting by Natalie Harrison; Editing by Jack Doran and Shankar Ramakrishnan)