US high-grade market enjoys issuance surge

(Updates throughout)

By Hillary Flynn

NEW YORK, May 5 (IFR) - The high-grade primary market saw a whopping US$15.4bn in new supply on Thursday, making it the seventh busiest day of the year and putting weekly volumes well past earlier estimates.

With (Other OTC: WWTH - news) first quarter earnings out of the way, market players say this is just the start of a very active May which could see volumes reach US$130bn.

"(Thursday's volume) is just the tip of the iceberg," Scott Kimball, senior portfolio manager at Taplin, Canida and Habacht, told IFR.

A US$7.25bn four-part issue from Royal Dutch Shell (Xetra: A0ET6Q - news) 's financial subsidiary led the charge with the largest of nine deals that came to market on Thursday.

But financials like Barclays PLC (LSE: BARC.L - news) , BB&T and BNP Paribas (LSE: 0HB5.L - news) also made a splash with trades of over a billion dollars each.

This put weekly volumes at close to US$30bn - past earlier estimates of US$25bn - and well on course to hitting the upper end of monthly estimates of US$110bn-US$130bn.

Shell (LSE: RDSB.L - news) 's US$15.75bn book underscored renewed appetite for certain oil names as investors tried to catch up with the recent rally in the energy sector as crude prices stabilize.

"People are trying to jump back into the higher quality oil paper," said Kimball.

Shell Finance (Aa2/A+) was able to squeeze spreads by 15bp to 18bp across the curve on tenors ranging from three to 30-years. Demand reached US$3.2bn on the three-year, US$3.3bn on the five-year, US$4.15bn on the 10-year and US$5.1bn on 30-year.

The three-year bonds were priced at Treasuries plus 60bp while the five-year came at 80bp, the 10-year at 118bp and 30-year at 152bp.

"Shell's bonds, like every other bond tied to oil, had spreads blew out last year so trading anywhere close to where they priced is a positive," an investor said.

Media giant Time Warner (Xetra: AOL1.DE - news) also issued US$800m of 10-year senior notes, which priced at US Treasuries plus 135bp, the tight end of price guidance of 140bp area (+/-5bp).

Strong demand also helped Estee Lauder and Equifax (NYSE: EFX - news) upsize their deals from an originally planned US$500m to US$600m, and US$755m respectively.

Estee Lauder tightened pricing on its two-part deal 25bp-30bp from start to finish before landing a five and 30-year bond at US Treasuries plus 50bp and 115bp, respectively. (Reporting by Hillary Flynn; editing by Shankar Ramakrishnan and Paul Kilby)