EIB, Quebec, CDK bring new bond deals; bank, financial paper firms; AT&T, Wal-Mart ease

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 8 – The European Investment Bank and the Province of Quebec joined a sole new corporate deal from CDK Global Inc. during Wednesday’s high-grade primary session.

Weak economic data out of China coupled with the release of the Federal Reserve’s minutes from its September policy meeting kept most issuers on the sidelines on Wednesday.

However, following a slight upswing in the market’s tone at midday, CDK Global emerged with a new deal announcement, ultimately pricing a $750 million two-part offering of notes in five- and 10-year tranches.

Meanwhile, Quebec sold $1.6 billion of 10-year notes at the tight end of talk, and EIB came to market with $1 billion of notes due 2024.

Wednesday’s primary activity pushes the week’s total investment-grade new issuance to $10.2 billion.

“Thinking tomorrow should see some more action,” a market source said of potential issuance on Thursday.

Still, the primary has some ground to cover in order to meet what was predicted to be a $15 billion to $20 billion week.

Investment-grade bond spreads tightened over the session on Wednesday, sources said.

The Markit CDX North American Investment Grade series 23 index firmed 3 basis points to a spread of 67 bps.

Bank and financial paper improved, while telecom bonds traded wider on the day, market sources said.

Citigroup Inc.’s 2.5% notes due 2019 tightened about 4 bps in the secondary market, according to a market source.

AT&T Inc.’s 4.8% notes due 2044 headed out 4 bps wider, a source said.

Wal-Mart Stores Inc.’s 3.3% notes due 2024 that were reopened on Tuesday traded 1 bp softer from where the notes priced, according to a market source.

CDK new issue

CDK Global sold the day’s lone corporate new issue on Wednesday, pricing $750 million of senior notes (Baa3/BBB-/) in tranches due 2019 and 2024, according to a market source and an 8-K filed with the Securities and Exchange Commission.

The sale included $250 million of 3.3% notes due 2019 priced at par with a spread of Treasuries plus 173 bps.

A second tranche was $500 million of 4.5% 10-year notes sold at par, or Treasuries plus 216.3 bps.

The notes were sold via Rule 144A and Regulation S.

The bookrunners were J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, BofA Merrill Lynch and Citigroup Global Markets Inc.

Proceeds from the sale will be used, together with cash on hand, to repay all outstanding borrowings under the company’s short-term $750 million senior unsecured bridge loan facility.

CDK is an integrated information technology and digital marketing company based in Hoffman Estates, Ill.

Quebec prices tight

Also on Wednesday, Quebec priced $1.6 billion of 2.875% 10-year notes (Aa2/A+/AA-) at mid-swaps plus 47 bps, or Treasuries plus 62.75 bps, according to a market source and an FWP filed with the SEC.

Pricing was at 99.192 to yield 2.969%.

The notes were priced at the tight end of the mid-swaps plus 48 bps area talk.

BofA Merrill Lynch, HSBC, National Bank Financial and TD Securities were the bookrunners.

EIB brings $1 billion

The European Investment Bank sold a $1 billion offering of 2.5% 10-year notes (Aaa/AAA/AAA) on Wednesday at 99.177 to yield mid-swaps plus 9 bps, according to a market source.

The notes sold in line with talk.

Credit Agricole, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC ran the books.

The lender for the European Union is based in Kirchberg, Luxembourg.

Citigroup firms

Citigroup’s 2.5% notes due 2019 firmed about 4 bps over the session to 81 bps offered, a source said.

Citigroup sold $2 billion of the notes (Baa2/A-/A) on July 22 at a spread of Treasuries plus 85 bps.

The bank is based in New York.

AT&T eases

AT&T’s 4.8% notes due 2044 eased 4 bps to 164 bps offered on Wednesday, a source said.

The notes (A3/A-/A) widened 8 bps in Tuesday’s session, according to a market source.

AT&T sold $2 billion of the 30-year notes at a spread of Treasuries plus 140 bps on June 3.

The telecommunications company is based in Dallas.

Wal-Mart softens

Wal-Mart’s 3.3% notes due 2024 (Aa2/AA/AA) were quoted wider on the day at 69 bps offered, a source said.

The company priced a $500 million add-on to the existing issue on Tuesday at Treasuries plus 73 bps.

Wal-Mart originally priced $1 billion of the notes at 73 bps over Treasuries on April 15.

The discount retailer is based in Bentonville, Ark.

Bank/brokerage CDS costs

Investment-grade bank and brokerage CDS prices were lower on Wednesday, according to a market source.

Bank of America Corp.’s CDS costs fell 1 bp to 70 bps bid, 73 bps offered. Citigroup Inc.’s CDS costs were 2 bps lower at 69 bps bid, 72 bps offered. JPMorgan Chase & Co.’s CDS costs were also 2 bps lower at 55 bps bid, 58 bps offered. Wells Fargo & Co.’s CDS costs declined 2 bps to 43 bps bid, 48 bps offered.

Merrill Lynch’s CDS costs were 1 bp lower at 74 bps bid, 77 bps offered. Morgan Stanley’s CDS costs ended 1 bp lower at 84 bps bid, 87 bps offered. Goldman Sachs Group, Inc.’s CDS costs were flat at 82 bps bid, 85 bps offered.

Stephanie N. Rotondo contributed to this review

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