--Wells Fargo sells $2.75 billion of three-year notes
--Weekly issuance now at $12 billion
--Bond rally wanes after Federal Reserve releases gloomy
economic outlook
(Updates with final pricing in the third paragraph and updated
secondary-market information in the final five paragraphs.)
By Patrick McGee
Corporate bond issuance is usually sleepy on days when the
Federal Reserve is set to announce its update to monetary policy,
but continued market stability convinced Wells Fargo & Co.
(WFC) there was an opportunity to sell $2.75 billion of bonds
Wednesday.
The deal marks the largest U.S. marketed bank bond issue since
March 14, when Nordea Bank AB (NRDEF, NDA.SK) sold a $2.75 billion
issue, according to data provider Dealogic. Wells Fargo hasn't
issued a deal of this size since March 2009.
Wells sold $2 billion of fixed-rate bonds at 1.567%, or 1.15
percentage points over the Treasury rate, plus $750 million of
floating-rate notes at 0.92 percentage points over the three-month
London interbank offered rate, or Libor. The Libor rate is 0.47
percentage points this week, according to Bankrate.com.
The bonds are expected to be rated A2 by Moody's Investors
Service, A-plus by Standard & Poor's and AA-minus by Fitch
Ratings.
Elsewhere, BRF-Brasil Foods SA (BRFS, BRFS3.BR) added $250
million to a $500 million, 10-year sale of 5.875% notes from last
month. The add-on was priced at $102.839 per $100 of face value,
yielding 5.50%, or 3.853 percentage points over Treasurys.
The two deals bring the week's high-grade volume tally to $12.1
billion, according to Dealogic, in line with expectations for $10
billion to $15 billion to be sold this week.
Greg Hall, managing director in debt capital markets at
Barclays, said issuers are using whatever windows of stability are
available to them.
"Another incentive for going to market now rather than waiting
is the fact that many issuers will enter earnings blackout over the
next few weeks and the summer slowdown will start to take effect in
late July," Mr. Hall said.
Bonds in the secondary market rallied ahead of the Federal
Reserve meeting but faltered somewhat after the bank reported a
less optimistic outlook for the U.S. economy. Economic growth, the
Fed said, would remain "moderate over coming quarters" and then
pick up "very gradually."
The Fed also extended its long-bond-buying program through the
end of the year. The program, dubbed Operation Twist, was scheduled
to conclude at the end of this month.
Markit's CDX Investment Grade Index, a proxy for corporate-bond
health, strengthened 0.5% in late trading, versus a 1% improvement
in early-day trading Wednesday.
Twelve of the 15 most-active bonds in the secondary market
outperformed Treasurys in late trading, versus 14 before the Fed
meeting, according to MarketAxess.
But recent bond issues continued to perform well. The three-year
notes from British Telecommunications, which were sold Tuesday at a
spread of 162.5 basis points, for instance, traded Wednesday at a
spread of 136 basis points.
Write to Patrick McGee at patrick.mcgee@dowjones.com