Semco, MassMutual sell bonds, financial names up on earnings; MassMutual gains in trading

By Andrea Heisinger and Cristal Cody

New York, April 14 - Semco Energy Inc. and MassMutual Global Funding II were the entrants into the investment-grade new issue market on Wednesday, with both sales getting done late.

The natural gas provider Semco sold $300 million of 10-year notes late in the afternoon under Rule 144A.

Also pricing privately was the $600 million MassMutual Global Funding sale. It was made up of a $200 million tranche of one-year floating-rate notes and a $400 million tranche of four-year notes. That deal also got done late in the day.

There wasn't much change in the high-grade market's tone for the day, a source said, other than a fluctuation in outstanding bank bonds.

While Semco Energy brought its first offering on Wednesday, no activity was seen in secondary trading on the new 10-year notes, according to a source.

Meanwhile in secondary trading, MassMutual Global Funding's $400 million offering of 2.875% notes due 2014 traded tighter, a source said.

Also in the secondary, the financial sector and short paper from Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and other banks continues to tighten, according to sources.

"There's just a firm, strong tone in the financials that's driving the market," a source said Wednesday.

The CDX Series 14 North American high-grade index firmed 1 bp to a mid bid-asked spread level of 83 bps, according to a source.

Overall Trace volume rose 1% to about $14.2 billion, according to a market source.

"Volume's not bad," a source said. "It's stronger than the last showing."

Elsewhere, U.S. Treasuries were weaker on Wednesday.

The yield on the 10-year Treasury note eased 4 bps to 3.86% and the yield on the 30-year Treasury bond weakened to 4.73% from 4.68%, according to a source.

Semco sells 10-years

Natural gas utility Semco Energy priced $300 million of 5.15% 10-year senior notes (A3/BBB+) to yield Treasuries plus 130 bps, a source close to the sale said.

They came tight to talk in the 137.5 bps area.

"They came inside initial guidance," he said. "There was a strong response from the investor base and it was several times oversubscribed."

The deal was sold under Rule 144A and Regulation S.

Credit Suisse Securities, RBC Capital Markets and UBS Investment Bank were tapped as bookrunners.

The issuer is based in Port Huron, Mich.

MassMutual prices two tranches

MassMutual Global Funding offered $600 million of senior notes (Aa2/AA+/AA+) in two tranches late in the session, a market source away from the sale said.

A $200 million tranche of one-year floating-rate notes priced at par to yield three-month Libor flat.

The second tranche was $400 million in 2.875% four-year notes priced at a spread of Treasuries plus 75 bps.

Both were priced under Rule 144A and the issue is GIC-backed.

It's probable the issue was rushed into the market to take advantage of improved sentiment in the financial sector after JPMorgan Chase & Co. announced stellar first-quarter earnings in the morning. The banking giant posted income of $3.3 billion for Q1, compared with $2.1 billion for the same period a year ago.

One market source called the MassMutual sale "kind of a strange issue" due to its choice of a one-year floater and four-year fixed-rate tranches.

"I don't know much about that one," he said.

Morgan Stanley & Co. and UBS Investment Bank ran the books.

The issuing unit of Massachusetts Mutual Life Insurance Co. is based in Springfield, Mass.

Remainder of week seen quiet

New deals aren't likely to be flooding the market in the next couple of days, sources said late on Wednesday.

"I think we're pretty much set," a syndicate source said of any further supply. "I don't know of anything coming."

Many financials can't ride the uptick their sector got after JPMorgan announced upbeat earnings due to earnings blackouts.

That didn't mean the sector didn't benefit.

"I know bank [bonds] looked better today," a market source said of trading. "They tightened in. It didn't change anything in terms of issuance."

MassMutual firms

MassMutual Global Funding's $400 million offering of 2.875% notes due 2014 firmed in secondary trading, a source said.

The notes priced at 75 bps to the four-year Treasury note - "which is unusual on Treasuries. They're trading now at 73 bps bid, 70 bps offered," the source said.

No activity for Semco

Meanwhile, no activity was seen in secondary trading for Semco Energy's new 10-year notes in their first high-grade offering, according to a source.

The $300 million 5.15% notes due 2020 priced at Treasuries plus 130 bps on Wednesday.

"Didn't see any trades on it," a trader said. "For all practical purposes, this looks like their first deal."

Financials tighter

Elsewhere, the financial sector continues to drive the market, a trader told Prospect News.

"Looks like all the activity's in finance. They're all tightening. I haven't had any selling financials - my buyers are all buying."

For example, Bank of America's 6.5% notes due 2016 tightened Wednesday to 105 bps from 112 bps over Treasuries the day before, according to a source.

Also, the Charlotte, N.C.-based bank's 7.625% notes due 2019 firmed 8 bps to 159 bps on Wednesday.

In addition, New York-based Citigroup's 8.5% notes due 2019 traded tighter at 196 bps on Wednesday from 210 bps on Tuesday.

Also in the sector, New York-based JPMorgan Chase's 6.3% notes due 2019 firmed 4 bps to 104 bps on Wednesday, according to the source.

Part of the stronger trend in financial paper is due to earnings season, the trader said.

"JPMorgan came out with good earnings this morning. As these banks come out with good earnings, [the strong showing] will continue. Financial short paper is in good demand."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.