2nd UPDATE: Deluge Of High-Grade Issues Floods Bond Market
September 07 2010 - 4:45PM
Dow Jones News
A deluge of new investment-grade bonds flooded the market
Tuesday, with Dell Inc. (DELL), Home Depot Inc. (HD) and other
top-rated companies issuing more than $10 billion in
debt--exceeding the total of $5.35 billion in all of September last
year.
Companies were able to take advantage of low interest rates
because investors had few savory alternatives: Stock market
volatility spiked on renewed concern about the health of Europe's
biggest banks and yields on money markets and government debt are
plumbing record lows.
"Interest rates are low, we got past the payroll numbers on
Friday and everyone is chasing yields," said Patrick Sporl, a
senior portfolio manager at American Beacon Advisors in Fort Worth,
Texas.
Tuesday was especially busy because this week--the first after
the unofficial end of summer--includes two holidays: Labor Day on
Monday and Rosh Hashanah, the Jewish New Year, starting Wednesday
at sundown. "The calendar is such that we have a lot of deals,"
Sporl said. In a holiday-shortened week, he added, issuers are keen
to sell bonds sooner rather than later.
Dell was selling a $1.5 billion deal, as were the Canadian
Imperial Bank of Commerce (CM) and the insurer AON Corp. (AON).
Home Depot sold $1 billion of debt, its first bond sale since 2006.
Medco Health Solutions Inc. (MHS) and International CCE Inc., the
soft-drinks bottler were also selling $1 billion each.
Meanwhile, France Telecom's (FTE, FTE.FR) $750 million bond has
priced, according to a person familiar with the matter. The bond
sold at 82 basis points over Treasurys, to yield 2.238%.
Allergan Inc. (AGN) was in the market with a $650 million
10-year note; Hospira Inc. (HSP) with a $500 million 30-year bond;
and Burlington Northern Santa Fe (BNI), with a $500 million
note.
Societe General and Province of Ontario had benchmark notes,
Health Care Reit Inc. (HCN) had a $450 million seven-year note and
Parker Hannifin (PH) had a $300 million note.
"The end of August tends to be slow, so we get an extra pop at
the beginning of September, said Andrew Karp, managing director and
head of investment grade debt syndicate, the Americas, at Bank of
America Merrill Lynch. Along with low interest rates, this has
generated "a tidal wave of supply," he added.
"The number of deals we have had is definitely among the busiest
we have ever seen," Karp said.
Home Depot's $1 billion bond priced Tuesday, according to a
person familiar with the deal. The $500 million 10-year part sold
at 135 basis points over Treasurys to yield 2.626% and the $500
million 30-year tranche sold at 175 basis points over Treasurys to
yield 3.67%.
Burlington Northern Santa Fe LLC's $750 million two-part bond
also priced, according to a person familiar with the matter.
The $250 million 10-year part sold at 100 basis points over
Treasurys to yield 3.616% and the $500 million 30-year part sold at
140 basis points over Treasurys to yield 5.074%.
Canadian Imperial Bank of Commerce's three-year note has
launched, according to a person familiar with the matter, and is
due to price later Tuesday. It is rated Aa2/A+/AA- and launched at
75 basis points over Treasurys. Barclays Capital, Citigroup Inc.,
J.P. Morgan Chase & Co. and CIBC are leading the sale.
Dell's $1.5 billion three-part note has maturities of three,
five and 30 years. The $500 million three-year tranche launched at
70 basis points over Treasurys, the $700 million five-year tranche
launched at 90 basis points over Treasurys and the $300 million
30-year portion launched at 175 basis points over Treasurys. The
bond, joint led by Barclays Capital, Goldman Sachs and Morgan
Stanley, will price later Tuesday.
International CCE's $1 billion bond has launched, according to a
person familiar with the matter.
The 10-year $525 million tranche launched at 100 basis points
over Treasurys and the five-year $475 million portion launched at
80 basis points over Treasurys. The bond will price later
Tuesday.
-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227;
anusha.shrivastava@dowjones.com
Parker Hannifin (NYSE:PH)
Historical Stock Chart
From May 2024 to Jun 2024
Parker Hannifin (NYSE:PH)
Historical Stock Chart
From Jun 2023 to Jun 2024