Johnson Controls upsizes, Morgan Stanley reopens in slow primary; ArcelorMittal, Microsoft up

By Andrea Heisinger and Cristal Cody

New York, Feb. 1 - Morgan Stanley and Johnson Controls, Inc. priced bonds as the primary high-grade market remained sluggish on headlines and lack of supply.

Morgan Stanley reopened an issue of three-year floating-rate notes to add $850 million. The add-on was for a deal priced at the end of January.

There was also an upsized $1.6 billion of notes from diversified industrial company Johnson Controls. The size was $1.3 billion at first and increased after a $300 million tranche of 30-year bonds was added.

It was another unexciting day that left many syndicate desks wishing more companies would sell bonds.

"I think people are either hesitant or don't need to price [debt]," one source said. "It's getting boring."

The market has been mostly slow since the beginning of January, which featured a week of non-stop issuance. Since companies went into earnings blackout, the volume of new paper has been feast or famine.

"It's been like that for a while," another syndicate source said. "Any bad news [headlines] scare people off."

With the stock market soaring by day's end and the successful pricing of a few deals to start the week, the second source said he thought there would be more new deals on Wednesday, but "nothing for sure."

Secondary trading was strong with a "positive tone" on Tuesday, a trader said.

The Markit CDX Series 14 North American investment-grade index narrowed 1 basis point to a spread of 83 bps on Tuesday, according to Markit Group Ltd.

The new debt that Noble Holding International Ltd. sold on Monday firmed in secondary trading, a source said.

Oil and gas bonds were stronger, while ArcelorMittal's bonds narrowed 10 bps, sources said.

In the telecommunications and software sectors, bonds were 2 bps to 3 bps tighter, a trader said.

Microsoft Corp.'s debt tightened from Monday's weakening. The recently priced issues were trading 20 bps to 30 bps tighter from issue price.

Financial bonds traded 5 bps to 10 bps better on the day, a trader said.

Overall investment-grade Trace volume rose to more than $17 billion from $14 billion the previous day, a market source said.

Treasuries sank on Tuesday - pushing yields up, though within range bounds - on stronger manufacturing data.

The 10-year Treasury note yield rose to 3.43% from 3.37%. The 30-year bond yield rose 4 bps to 4.61%.

Johnson Controls' upsized deal

Johnson Controls sold an upsized $1.6 billion of senior notes (Baa1/BBB+/BBB+) in four tranches late in the day, an informed source said.

A tranche of 30-year notes was added to the deal on demand, the source said, taking the size up from an initial $1.3 billion.

The $350 million of three-year floating-rate notes priced at par to yield Libor plus 41 bps.

A $450 million tranche of 1.75% three-year notes priced at a spread of Treasuries plus 75 bps.

The $500 million of 4.25% 10-year notes priced at 90 bps over Treasuries.

The added tranche of $300 million of 5.7% 30-year bonds priced at a spread of 110 bps over Treasuries.

Bookrunners were Bank of America Merrill Lynch and J.P. Morgan Securities LLC.

Proceeds are being used to repay short-term debt, including commercial paper issued in January, to repay $654 million of 5.25% notes due 2011 that matured on Jan. 15 and for general corporate purposes.

The diversified industrial company has segments in automotive, building and power and is based in Milwaukee.

Morgan Stanley retaps floaters

Morgan Stanley reopened an issue of its three-year floating-rate notes to add $850 million, a source away from the deal said.

The notes (A2/A/A) have a coupon of Libor plus 160 bps with a price of 100.2925 to yield Libor plus 150 bps.

Total issuance is $2.35 billion including $1.5 billion sold on Jan. 20 at par.

Morgan Stanley & Co. Inc. was the bookrunner.

The financial services company is based in New York.

Noble firms

Noble Holding sold $1.1 billion of senior notes (Baa1/A-/A-) in three tranches on Monday, and all three parts were stronger in the secondary market, a source said.

The 3.05% five-year notes priced at a spread of Treasuries plus 110 bps and came in to 107 bps bid, 104 bps offer, the source said.

The second tranche of 4.625% 10-year notes firmed slightly to 124 bps bid, 121 bps offer from where the notes priced at 125 bps over Treasuries.

The last tranche of 6.05% 30-year bonds that sold at Treasuries plus 150 bps firmed to 148 bps bid, 145 bps offer.

The offshore drilling contractor is based in Grand Cayman.

Microsoft firms

Microsoft's bonds rebounded in trading on Tuesday, a source said.

The 4.5% bonds due 2040 were "wrapped around 56" bps, the source said. The bonds priced at 87.5 bps over Treasuries on Sept. 22.

The 3% notes due 2020 traded at 38 bps bid, 34 bps offer. The notes have narrowed more than 20 bps since they priced at 60 bps.

"Both were 1 to 2 wider yesterday," the source said.

The software company is based in Redmond, Wash.

ArcelorMittal 10 bps tighter

The oil and gas and industrial sectors firmed, with ArcelorMittal "being the outperformer," a trader said.

"Oil and gas was generally 3 to 5 better, with [ArcelorMittal] about 10 basis points better," the trader said.

Luxembourg-based ArcelorMittal is the world's leading steel company.

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