Union Pacific, Hyatt price bonds, shrug off economic news; JPMorgan, financials widen

By Andrea Heisinger and Cristal Cody

New York, Aug. 4 - The primary side of the investment-grade bond market remained active on Thursday as Union Pacific Corp. and Hyatt Hotels Corp. each priced paper on high demand.

Union Pacific's sale of 30-year bonds was done by early afternoon. It was upsized to $500 million from $350 million due to demand.

There was also a $500 million sale from Hyatt, which priced its bonds in two parts due 2016 and 2021.

Discouraging economic data in the United States and global fears sent equities continually lower throughout the day. The news didn't seem to upset the high-grade market that was still riding high on the past two days' successful deals, although there aren't any sales on deck for Friday after the discouraging close.

"We were busy enough," said one source who worked on the Union Pacific sale. "I don't think things are going to be great for a while, so companies are jumping in."

High-grade paper remains attractive to investors, according to the syndicate source.

"They're looking for yield," he said. "That's why [Union Pacific] was so in demand."

Investment-grade bonds widened in the secondary market on Thursday, according to traders.

"Everything's all over the place," one trader said.

The Markit CDX Series 15 North American high-grade index eased 6 bps to a spread of 104 bps, according to Markit Group Ltd.

Union Pacific's deal widened 1 basis point on the bid side, but financials moved out as much as 25 bps in trading.

JPMorgan Chase & Co.'s notes due 2021 sold the previous day moved out as much "22 wider" in the secondary market, a trader said.

"Financials are probably 20 to 25 wider," the trader said. "Everything's a disaster today."

Coca-Cola Co.'s bonds were among the exception, staying 2 bps to 4 bps tighter in trading.

Overall trading volume edged down to about $10.5 billion.

Treasuries rallied with major gains on the long end on the flight into safer debt on Thursday. The 10-year benchmark Treasury note yield fell to 2.4% from 2.61%. The 30-year bond yield dropped to 3.67% from 3.9%.

Union Pacific's quick deal

Union Pacific priced an upsized $500 million of 4.75% 30-year bonds (Baa2/BBB+) to yield 110 bps over Treasuries, said a source who worked on the trade.

The deal was increased in size from $350 million. The notes were priced below initial guidance in the 115 to 120 bps range and in line with revised talk of 110 bps, a source said.

There was about $1.625 billion of demand on the books, making it more than three times oversubscribed, he said.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes, including the purchase of common stock through a share repurchase program.

Union Pacific last priced bonds in a $500 million sale of 10-years on July 28, 2010.

In the secondary market, Union Pacific's notes widened to 111 bps bid, 108 bps offered, a trader said.

The railroad transportation company is based in Omaha.

Hyatt sells in two parts

Hyatt Hotels priced $500 million of senior notes (Baa2/BBB) in two tranches late in the day, two syndicate sources said. Terms were not available at press time.

The sale consisted of a $250 million tranche of five-year notes and $250 million of 10-year notes.

Active bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes, including working capital, capital expenditures, debt service requirements and repayment of other debt and other business initiatives, including acquisitions.

Hyatt was last in the market on Aug. 10, 2009 when it priced $500 million of notes in six- and-10-year maturities. The 6.875% 10-year notes from that sale were priced at 312.5 bps.

The hospitality company is based in Chicago.

JPMorgan widens

JPMorgan Chase's 4.35% 10-year notes (Aa3/A+/AA-) widened in trading to 192 bps bid, 187 bps offered on Thursday, a trader said.

The bank sold $1.25 billion of the notes to yield Treasuries plus 175 bps on Wednesday.

Earlier, J.P. Morgan lowered its growth forecast for the fourth quarter and first half of 2012.

The financial services company is based in New York City.

Coke bonds firm

Coca-Cola's bonds were among the exception in the market on Thursday, staying stronger in trading going out on the day, a trader said.

The company priced $2 billion of notes (Aa3/A+/A+) in two tranches on Wednesday.

The $1 billion tranche of 1.8% five-year notes was priced at a spread of Treasuries plus 57 bps. In trading, the notes stayed tighter at 55 bps bid, 51 bps offered.

Coca-Cola's $1 billion tranche of 3.3% 10-year notes sold at 72 bps over Treasuries also were tighter at 68 bps bid, 65 bps offered early Thursday, the trader said.

The soft drink company is based in Atlanta.

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