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5 Years : From Apr 2012 to Apr 2017
Corporate bonds weakened Wednesday as risk aversion took hold of investors, but McDonald's (MCD) was lovin' it.
The burger chain upsized its two-part bond combo to $900 million, from $750 million when it reported its borrowing plans just before the equity market opened.
McDonald's attained a corporate market record-low 3.70% coupon for 30-year bonds when it last issued debt in February.
This time around, it matched the record low for seven-year debt.
McDonald's sold $500 million of three-year notes with a 0.75% coupon at 0.843%, or 0.45 percentage point over Treasurys, and $400 million of seven-year notes with a 1.875% coupon at 2.022%, or 0.88 point over Treasurys.
The seven-year coupon matches the record low set earlier this month by International Business Machines Corp. (IBM), according to Dealogic, whose data go back to 1995. The lowest coupon ever for three-year debt was 0.55%. That too was set by IBM, in February.
The deal was led by Bank of America Merrill Lynch, Goldman Sachs Group, J.P. Morgan Chase & Co., Morgan Stanley and Wells Fargo & Co.
Meantime, high-grade corporate bonds weren't immune to the broader selloff. Eight of the top 10 most traded bonds deteriorated Wednesday, with bank bonds leading the way downward, electronic trading platform MarketAxess shows.
Morgan Stanley 4.75% coupon bonds due 2014 declined to $98.162 from $98.286. Their yields soared 0.73 percentage point to 5.814%.
Markit's CDX North America Investment Grade Index, a proxy for risk, shot up 3.2% in early trading but the weakening softened later in the day. By 3:30 p.m. EDT the index stood at 119 basis points, reflecting a 0.7% weakening on the day.
A basis point is one-hundredth of a percentage point, and the figure represents the annual cost to insure bonds for five years.
At this level, the annual cost to insure $10 million of bonds would be $119,000. On Tuesday, the cost had fallen to $117,000 on two days of improving sentiment. On Friday, it was $124,000, the costliest of 2012.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382; firstname.lastname@example.org