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Corporate-bond deals are coming out of the woodwork to take advantage of borrowing rates that are once again near all-time lows.
Boston-based global insurer Liberty Mutual is leading four U.S. companies Tuesday in the search for low-cost debt. It is joined by Altera (ALTR), a San Jose-based supplier of semiconductors; Consumers Energy, the principal subsidiary of Jackson, Mich.-based CMS Energy (CMS); and Aetna (AET), a Hartford, Conn.-based health insurer.
The deals follow a busy session Monday, when Goldman Sachs Group (GS) and Wells Fargo & Co. (WFC) sold $2 billion and $1.5 billion of debt, respectively, capping off an otherwise light month of new volume.
Together, issuance from the first two days this week already rivals the four-week average of less than $10 billion per week in April, according to Dealogic. April issuance dried up as companies focused on releasing first-quarter earnings, while investors shied away from risk.
Jody Lurie, corporate bond strategist at Janney Capital Markets, said the two bank deals Monday signaled "that the rumored sizable backlog may flood the markets this month, as many companies prepare to close large debt-funded transactions this quarter."
Their timing could hardly be better. Average corporate bond yields finished Monday at 3.28%, just 0.01 percentage point from the all-time low going back to 1973, according to the Barclays U.S. investment-grade index. Industrial bond yields are even lower, at 3.07%.
Colgate-Palmolive (CL) demonstrated just how low borrowing costs can be on Monday. It sold $500 million of 10-year debt with a coupon of 2.30%, matching a record-low set by Procter & Gamble (PG) earlier this year.
And unlike Monday, broader markets are roaring in the backdrop after a key U.S. manufacturing index beat expectations, recording a 10-month high.
"The manufacturing sector may not be growing as fast as it fell in the great recession, but it continues to claw its way toward the light," wrote economist Michael Montgomery at IHS Global Insight.
Markit's CDX North America investment-grade index, a proxy for corporate bond health, improved 1.6% as of 1:30 p.m. EDT. In the equity world, the Dow Jones Industrial Average notched a fresh four-year high.
The risk-on sentiment helped Aetna increase the size of its deal by 50% to $750 million. Early pricing guidance suggests it is offering investors 1.05 percentage points over Treasurys on five-year bonds and 1.60 points over Treasurys on 30-year bonds.
Liberty Mutual is selling $1 billion in 10- and 30-year bonds at spreads to Treasurys of 3.25 points and 3.50 points, respectively.
Altera is issuing $500 million of five-year notes, with early pricing guidance at 1.0 percentage point over Treasurys.
Consumers Energy, the smallest issue on Tuesday's calendar, already completed a $325 million sale of 10-year "first-mortgage" bonds, which offer extra protection by giving investors a first-claim on certain property. The 2.85% coupon bonds were priced to yield 2.851%, or 0.90 point over Treasurys.
Also in the market: British publishing house Pearson PLC (PSO) is borrowing $500 million through a financing subsidiary. The deal recently launched at 1.875 points over Treasurys.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382; firstname.lastname@example.org