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US high-grade inches close to record August
By Hillary Flynn
NEW YORK, Aug 10 (IFR) - The US high-grade bond market is close to setting a new record for August volumes on Wednesday with more benchmark trades set to price from Amgen (Xetra: 867900 - news) , Baxter and Royal Bank of Scotland (LSE: RBS.L - news) .
Five issuers are in the market, and they only need to raise just over US$4bn between them to smash the previous record for August set back in 2007 when US$71.565bn was priced.
Biotech firm Amgen (Hanover: AMG.HA - news) (Baa1/A) is selling a four-part trade which includes three new bonds, and a tap of an existing 30-year issue.
Initial price thoughts have been set at T+90bp area on the five-year, T+110bp area on the seven-year, T+125bp area on the 10-year and T+190bp on the tap of its outstanding 2045s, and those levels are expected to be pulled in as order books swelled to US$12bn by late morning.
Baxter(Baa2/A-/BBB+) also saw firm demand for its deal - a three-part trade - with books already at US$9bn.
IPTs on Baxter's deal have been set at T+100bp area on the five-year tranche, T+140bp area on the 10-year and T+175bp area on the 30-year.
Both issuers are hitting the market soon after posting earnings. That trend has been prevalent this month, with many issuers pulling forward bond sales amid worries that markets could turn more volatile as the US elections near.
"It's an excellent opportunity to fund while avoiding the big rush (of deals) in September," a syndicate banker said.
High-grade spreads have been very resilient even as primary issuance has soared. The average spread on US high-grade bonds has tightened by 3bp to T+147bp since the start of the month, according to Bank of America Merrill Lynch data, as demand for higher-yielding US assets has sky-rocketed.
The credit market also appeared to shrug off weak US productivity data this week.
"Normally US HG credit spreads would widen in such environment," said Hans Mikkelsen, a credit strategist at BAML.
"But these times are not normal times and instead bond spreads tightened meaningfully as lower global yields translate into more foreign buying of US corporate bonds."
Among the other highlights in the US high-grade market on Wednesday is an Additional Tier 1 issue from Royal Bank of Scotland - the first AT1 from a UK bank since Britain voted to leave the EU in June.
RBS had attracted US$15bn of investor orders for its US$2.65bn (£2bn) deal by late morning, and launched the trade at 8.625% - inside IPTs of 8.75%.
The two other issuers are utility Black Hills (Baa1/BBB/BBB+), which is selling a US$700m two-part issue with IPTs set at T+185bp area on a long 10-year and T+220bp area on a 30-year.
Bunge Ltd Finance (Baa2/BBB/BBB) is selling a US$500m 10-year with IPTS set at low T+200bp. (Reporting by Hillary Flynn; Editing by Natalie Harrison and Shankar Ramakrishnan)
