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US high-grade market wraps up second-largest week ever

By Shankar Ramakrishnan

NEW YORK (Frankfurt: HX6.F - news) , March 7 (IFR) - The second-busiest week ever for the US high-grade market ended mute on Friday with no deals, but it was a chance to take a break and digest after nearly USD50bn priced over four days.

Major names like AT&T (NYSE: T - news) , Coca-Cola, General Electric (Swiss: GE.SW - news) , HSBC, Ford Motor Credit and Viacom (NasdaqGS: VIAB - news) were among the highlights of a USD49.7bn week that saw massive order books - even as nearly all borrowers tightened pricing substantially from IPT levels.

More than USD175bn of orders piled into the 36 deals and 69 tranches on offer this week, as investors shrugged off risk and embraced maturities from 18 months to 20 and even 31 years.

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The benefits of tapping the US dollar market at the long end of the curve was demonstrated by Canadian wireless and media company Rogers Communications (NYSE: RCI - news) , which was able to lock in pricing on a USD750m 30-year bond that was about 25bp cheaper on a swapped basis than what it could have done in its home market.

Utilities were represented by names like Duke Energy (Dusseldorf: D2MN.DU - news) Progress, Consolidated Edison Company and Public Service of Colorado, which all found decent pricing leverage at the long end of the curve.

JB Hunt Transport Services (NasdaqGS: JBHT - news) offered a diversity play and attracted a whopping order book of USD4.7bn for its USD500m no-grow two-part offering of five-year and 10-year bonds.

A pickup in global equity market sentiment led to a gush of supply on Tuesday, when a whopping USD19.45bn was raised by 13 issuers - the biggest issuance day of 2014 so far.

Viacom attracted USD10bn in orders for its USD1.4bn SEC-registered three-part note comprising five-year, 10-year and 30-year notes - and this was after dramatically tightening spreads on all three tranches during the bookbuilding process.

Gilead Sciences (NasdaqGS: GILD - news) was able to tighten pricing on its five-year, 10-year and 30-year bonds by 5bp-10bp from IPT levels and ended with order books of over USD11bn for its USD4bn trade.

Pitney Bowes (NYSE: PBI - news) meanwhile was able to increase the size of its 10-year trade to USD500m from USD350m and tighten levels to plus 205bp from 210bp area guidance.

The Coca-Cola Co tapped the very short term with a USD1bn 18-month floating-rate note shown with IPTs of Libor plus 5bp area. That was tightened by another 4bp for a final pricing of Libor plus 1bp. Still it had an order book of over USD2bn.

Wednesday offered another USD19bn-plus day, with 12 borrowers selling USD19.3bn in new debt.

AT&T (Berlin: SOBA.BE - news) (A3/A-/A) announced a US dollar benchmark SEC-registered three-part offering consisting of a five-year fixed and/or FRN and a 10-year senior unsecured note - its first offering at that maturity since 2012.

The new deal included a benchmark five-year, rated A3/A-/A, was talked at T+77-80bp from whispers of 85-90bp; and the 10-year at 125-130bp versus initial price thoughts of 135-140bp. At final pricing, the five-year fixed was set at plus 77bp and the 10-year at plus 125bp. The five-year floater was priced at 3-month Libor plus 67bp. The final order books were a whopping USD6.5bn.

McKesson Corp found a huge welcome for its USD4.1bn five-part transaction to fund a bridge loan it took to finance the USD8.3bn acquisition of German peer Celesio (Other OTC: CAKFF - news) . The health care giant offered five tranches of bonds with tenors of 18 months, three years, five years, 10 years and 30 years.

The fixed tranches were all tightened by about 15bp-20bp through the bookbuilding process. At these levels, the 5-year and 10-year bonds were judged to carry negative 5bp in concessions, while the 30-year had about negative 9bp. The book ended up at USD16.45bn.

Triple B names mostly got a great response except Tucson Electric Power, which had to widen the spread levels on its USD150m no-grow 30-year by 10bp from IPT levels to pricing at plus 140bp.

Thursday saw a USD3bn two-tranche trade from General Electric that comprised USD750m 10-year and USD2.25bn 30-year bonds.

Making its first appearance in the bond market since October 2012, GE tightened IPT levels by 10-15bp to plus 75bp-80bp and plus 90bp area at guidance stage, and fixed at final pricing at 75bp and 87.5bp respectively.

The new bonds offered negative new concessions of 3bp on the 10-year and about 10bp on the 30-year.

Final order books were USD11.5bn - which suggested the issuer could have done more - but it was heard that the company from the start did not want to place more than USD3bn.

CF Industries raised USD1.5bn by issuing 20- and 30-year bonds. It announced IPTs at plus 170bp-175bp on the 20-year and plus 187.5bp area on the 30-year.

These levels tightened significantly to plus 155bp area and plus 175bp respectively. The 20-year bonds finally priced at plus 152bp and the 30s at plus 172bp on books of USD6.5bn.

FIG FLOW

The flow of FIG paper continued to attract a decent following.

HSBC attracted about USD20bn of demand for its offering of 10-year and 30-year Tier 2 subordinated notes in the Yankee bond market on Wednesday, enabling it to pull in pricing by as much as 30bp from initial price thoughts.

Commonwealth Bank of Australia (Other OTC: CBAUF - news) (CBAAU) jumped in with a tightly priced offering of USD3.5bn of threes and fives which nonetheless attracted total books of USD6.15bn.

Books broke down to USD1.8bn on the three-year fixed, USD1.35bn on the floater and USD3bn on the five-year, levels which enabled leads to pull in pricing from guidance of 50-52bp on the three and 75bp on the five to plus 50bp and plus 73bp respectively.

JP Morgan (Other OTC: JPYYL - news) also offered Tier 1 eligible USD1bn of 6.125% perpetual non-call preferreds, a deal which priced at the tight end of its 6.125%-6.25% guidance and showed a significant recovery in Tier 1 yields in the last few months.

Ford Motor Credit (Baa3/BBB-/BBB-) didn't have to pay anything in new issue concessions for its offering of five-year fixed and floating rate notes.

Lead managers went out with initial price thoughts of 100-105bp on the fixed, built a book of USD1.1bn on the floater and USD2.25bn on the fixed, and pulled in guidance to 95bp before pricing at T+93bp.

Daimler Finance issued USD800m of 1.125% three-year fixed-rate notes at T+50bp, USD700m of three-year floaters at 3mL+35bp and USD650m of 2.875% seven-year fixed-rate notes at T+83bp.

The deal was first whispered at T+65bp area for the three-year fixed and the low 90s for the seven-year. But bookrunners were able to build strong order books for the tranches of USD1.7bn for the three-year fixed, USD1.35bn for the floater and USD1.35bn for the seven-year.

Asian financials AIA Group (Xetra: 7A2.DE - news) and Bank of Tokyo Mitsubishi were also inundated with orders for their Yankee bonds, as investors looked to diversify their FIG exposure.

AAnd ir Lease Corp, a rare issuer that is rated triple B minus, was bombarded with USD2.5bn of demand for what was at first just USD350m of seven-year notes but ultimately became USD500m of 3.875% April 2021s priced at T+175bp.

SECONDARY MOVES

The climate for both the buyside and the sellside has never been better in the US high-grade market, and this exuberance is expected to continue next week - especially as almost all of the 36 trades this week are trading tighter in the secondary.

General Electric's 10-year and 30-year bonds were trading 2bp-3bp tighter than new issue levels, while the CF Industries issues were about 2bp-8bp tighter.

The outliers are Hospitality Properties Trust's 10-year bonds, which were are about a basis point wider, and AT&T's 10-year, seen about 2bp wider in secondary trade.

VOLUME STATISTICS

THIS WEEK'S VOLUME

69 Tranches for $49.700 BLN

WEEKLY TRANCHES FIXED VS FLOATING

Fixed 59 $42.800 BLN

Floating 10 X $6.900 BLN

69 Tranches $49.700 BLN

WEEKLY TRANCHES BY MATURITY IG CORPS

2 X 1.5-YRS $1.400 BLN

11 X 3-YRS $8.800 BLN

17 X 5-YRS $12.025 BLN

1 X 5-YRS $350M

4 X 7-YRS $1.900 BLN

13 X 10-YRS $10.000 BLN

1 X 20-YRS $750M

1 X 29-YRS $200M

17 X 30-YRS $13.025 BLN

1 X 31-YRS $250M

1 X Perp $1.00 BLN

69 Tranches $49.700 BLN

THIS MONTH'S VOLUME

69 Tranches for $49.700BLN

Fixed Vs Floating This Month

Fixed 59 X $42.800

Floating 10 X $6.900 (Reporting by Shankar Ramakrishnan; Editing by Marc Carnegie)