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Bank of America, PepsiCo charge into firmer high-grade market
[New York] The US primary bond market sprung to life on Friday with four issuers, including one high-yield and three investment-grade borrowers, taking advantage of calmer conditions mostly to refinance debt.
PepsiCo, Bank of America Corp and TD Ameritrade Holding Corporation emerged in the high-grade market, which has seen just three deals price this week through to Thursday for US$3.5bn amid volatility sparked by global growth fears.
Single A rated PepsiCo Inc has started gauging investor interest for a US$500m no-grow SEC registered 30-year bond at Treasuries plus 140bp via BAML, Goldman Sachs and JP Morgan.
Bank of America Corp, meanwhile, set initial price thoughts at Treasuries plus 225bp area on a SEC-registered 12-year subordinated note, and TD Ameritrade Holding, rated A3/A, set IPTs of 125bp-130bp over Treasuries on a 10.5-year senior note via bookrunners BAML, Barclays and Wells Fargo.
All three deals are expected to price Friday. "You wouldn't typically expect to see deals on a Friday, but a lot of issuers have been delayed this week because of the volatility," said one debt capital markets banker. "It made sense to wait for a better tone." In credit, the IG CDX 23 index narrowed 2.75bp to 70.9bp, while the HY CDX 23 index jumped three quarters of a point, but the broad risk-on tone was running across markets Friday. "The market is quite strong after being down for six or seven days," said one high-yield trader.
Ten-year Treasury yields were up around 4bp at 2.2 per cent, having touched a low of 1.86 per cent Wednesday - the first time it had dipped below 2 per cent since June 2013. "European peripherals are better, Treasury rates are selling off. It feels like the time to talk to investors about adding rather than shedding risk," said the banker.
The turnaround in sentiment followed a batch of solid earnings reports and hopes the Federal Reserve might slow the wind-down of its stimulus in light of recent weakness in global demand.
ECB board member Benoit Coeure also said overnight that the central bank would start buying assets within days.
In the high-yield primary market, which has been frozen all week, Double B rated Nova Chemicals Corp is looking to price a 10.5-year US$500m non-call life senior unsecured bond to refinance its existing 8.625 per cent US$350m 2019 issue.
Bankers will gauge how today's deals go, but some are hopeful that the high-grade market could see around US$10-15bn of supply next week. "Even before the volatility, we expected the pace of issuance to be around half of September's volumes just because of blackouts," said the banker.
Volumes for October were US$30.463bn through to Thursday, compared to US$128.7bn for the whole of September, according to IFR data. IFR