CSX Corp. (NASDAQ:CSX)
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5 Years : From Apr 2012 to Apr 2017
If new high-grade corporate bonds were sold in stores, they would have been flying off the shelves Thursday.
Luxembourg-based steel producer ArcelorMittal (MT, MT.FR, MT.AE) received $18 billion in investor orders for its $3 billion debt issue of three-year, five-year, and 10-year notes.
Viacom (VIA, VIAB) received $5.5 billion orders for its $750 million offering of three-year notes and 30-year bonds, and Brazil's Banco Bradesco (BBD, BBDC4.BR) received more than $7 billion in orders for its $1 billion, 10-year subordinate note sale.
Reliance Industries (500325.BY), India's largest company by market value, re-offered $500 million of 10-year bonds Thursday after receiving nearly $8 billion of orders when it sold $1 billion earlier this month.
And CSX Corp. (CSX) took two times the needed orders from investors willing to go long for its $300 million offering of 30-year bonds.
With corporate bonds near record-low yields, all sorts of companies including a range of foreign borrowers are taking advantage of cheap financings in the U.S., and yield-hungry investors are happy to indulge them and escape bottom-rate Treasurys.
That dynamic helped the high-grade market absorb $14.8 billion of issuance on Tuesday and Wednesday, according to data provider Dealogic, against forecasts of $15-$17 billion for the entire holiday-shortened week. With five companies adding another $5.55 billion Thursday, the week's tally has now surpassed forecasts with $20.4 billion.
The wave of new issues didn't hurt market sentiment. Markit's CDX North America Investment-Grade Index, a measure of health for the market, improved 1.5% in late trading to 96.5 basis points, its best level since Feb. 9 and among the best since late July.
Dan Hannis, corporate bond trader at William Blair & Co. in Chicago, said some clients have a load of money and are increasing their allocations to investment-grade and high-yield bonds. The secondary market is a bit of a stalemate between buyers and sellers, he said, but the primary market continues to attract heavy appetite thanks to much better liquidity, or ability to trade bonds.
He said yields are being pushed lower as bonds enter the secondary market, and noted some strategists are recommending investors rotate into new-issues for their liquidity.
The ArcelorMittal transaction features $500 million of three-year notes, $1.4 billion of five-year notes and $1.1 billion of 10-year notes. Launch terms suggest the tranches will offer respective spreads, or extra yield over Treasurys, of 3.4 percentage points, 3.7 points and 4.35 points.
According to a person familiar with the ArcelorMittal transaction, it originated with a $1.5 billion reverse inquiry--meaning investors approached banks to arrange the deal for them to buy--which then "turned into a riot," gathering five times the needed orders. The person said "every type of institutional account you can think of is involved."
The Viacom deal included $500 million 1.25% coupon, three-year notes priced to yield 1.322%, or 0.9 percentage point over Treasurys, and $250 million of 4.5% coupon, 30-year bonds priced to yield 4.66%, or 1.50 points above Treasurys.
Banco Bradesco's $1 billion issue of 10-year subordinate notes was launched with a 5.75% coupon, versus original guidance of around 6%. Final pricing is still to come.
The Reliance add-on was six-times oversubscribed by about 400 accounts, according to a person familiar with the deal. The 10-year notes were priced to yield 5.267%, or 3.25 points over Treasurys, a 0.15 point improvement from earlier guidance.
CSX, a Jacksonville, Fla., transportation supplier, priced its 30-year bonds at 4.435%, or 1.33 points over Treasurys.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382; email@example.com