High-Grade Bonds Take It Easy During Federal Reserve Policy Week
(Continued from Prior Part)
Overview of last week’s deals
Only three out of five entities we classify were present in the primary market in the week ended June 19. US corporates dominated high-grade bond issuance last week, making up 61.3% of all issues. Meanwhile, US financials accounted for 12.9% of all issues. SAS issuers formed 25.8% of all high-grade corporate bonds issued last week, while Yankee bond issuers remained absent from the market. The week ended June 19 brought the year-to-date issuance of corporate high-grade bonds to $849.8 billion.
Issuances by high-grade corporates form part of the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD). Treasuries—the other high-grade bond category—are tracked by the iShares 1-3 Year Treasury Bond (SHY).
Details of Baxalta’s issue
Baxalta is a soon-to-be-listed spin-off unit of Baxter International (BAX). It issued bonds worth $5 billion—the largest issue last week. The Baa2/BBB rated bonds were issued in six tranches:
- $375 million in three-year FRNs (floating rate notes) at three-month LIBOR (IntercontinentalExchange London Interbank Offered Rate) + 78 basis points
- $375 million in 2% three-year notes at a spread of 100 basis points over similar-maturity Treasuries
- $1 billion in 2.875% five-year notes at a spread of 125 basis points over similar-maturity Treasuries
- $500 million in 3.6% seven-year notes at a spread of 155 basis points over similar maturity Treasuries
- $1.75 billion in 4% ten-year notes at a spread of 175 basis points over similar maturity Treasuries
- $1 billion in 5.25% 30-year bonds at a spread of 215 basis points over similar maturity Treasuries
Details of Energy Transfer Partners’ issue
Energy Transfer Partners (ETP) is in the business of transporting natural gas. It issued high-grade bonds worth $3 billion last week. The Baa3/BBB- rated four-part issue consisted of the following:
- $650 million in 2.5% three-year notes at a spread of 150 basis points over similar-maturity Treasuries
- $350 million in 4.15% on-tap five-year notes at a spread of 185 basis points over similar-maturity Treasuries
- $1 billion in 4.75% long ten-year notes at a spread of 250 basis points over similar-maturity Treasuries
- $1 billion in 6.125% long 30-year bonds at a spread of 300 basis points over similar-maturity Treasuries
Details of JPMorgan Chase’s issue
JPMorgan Chase (JPM) raised A3/A–rated high-grade bonds worth $2.25 billion. The single-tranche issue carried a coupon of 2.75%. The five-year notes were issued at a spread of 115 basis points over similar-maturity Treasuries.
Details of Occidental Petroleum’s issue
Occidental Petroleum Corporation (OXY) acquires and develops oil and gas properties. It issued high-grade bonds rated A2/A, worth $1.5 billion in two parts:
- $750 million in 3.5% ten-year notes at a spread of 117 basis points over similar-maturity Treasuries
- $750 million in 4.625% 30-year bonds at a spread of 152 basis points over similar-maturity Treasuries
Details of Cardinal Health’s issue
Healthcare services company Cardinal Health (CAH) issued high-grade bonds worth $1.5 billion. The Baa2/A- rated three-tranche issue consisted of the following:
- $550 million in 1.95% three-year notes at a spread of 90 basis points over similar-maturity Treasuries
- $500 million in 3.75% 10.25-year notes at a spread of 145 basis points over similar-maturity Treasuries
- $450 million in 4.9% 30.25-year bonds at a spread of 185 basis points over similar-maturity Treasuries
Continue to Next Part
Browse this series on Market Realist: