Morning Commentary: Lear, Philip Morris, Norfolk Southern, Celanese notes on tap

By Cristal Cody

Tupelo, Miss., April 29 – High-grade supply is expected to ramp up on Monday following light bond issuance over the back half of April.

On Monday, companies including Lear Corp., Philip Morris International Inc., Norfolk Southern Corp. and Celanese US Holdings LLC announced plans to tap the primary market.

Lear plans to sell fixed-rate 10- and 30-year senior notes.

Philip Morris also is offering two tranches of fixed-rate notes.

Norfolk Southern intends to price three tranches of senior notes, including one new 30-year tranche and reopenings of its 3.8% note due 2028 and 5.1% notes due 2118 that were originally issued Aug. 2, 2018.

Meanwhile, Fannie Mae said on Monday that it will forgo issuing Benchmark Notes on its April 29 announcement date.

About $15 billion to $20 billion of deal volume is expected by market sources this week.

For May, syndicate sources said they expect about $125 billion of new supply.

The total could be higher, depending on if any mergers-and-acquisitions related funding comes during the month, sources said.

A deal from Bristol-Myers Squibb Co. (A2/A+/A-) to help fund its acquisition of Celgene Corp. is being eyed to hit the market in May, one source said.

The offering is being targeted in the $10 billion to $15 billion area and may include dollar- and euro-denominated notes.

The biopharmaceutical companies announced in January the cash and stock transaction valued at about $74 billion will be funded through cash on hand and debt financing.

The merger is expected to close in the third quarter.

Last week, investment-grade companies priced more than $6 billion of bonds.

“Admittedly, technicals in the U.S. IG corporate bond market – while still strong – are somewhat weaker that we had expected at this point due to less than expected foreign demand, which is partially mitigated by strong inflows to IG bond funds/ETFs,” BofA Merrill Lynch analysts said in a note released on Monday. “We look for foreign buying to normalize and gradually accelerate in May offset to some extent by less bond fund/ETF inflows.”

Lipper US Fund Flows on Thursday reported the second largest inflow on record, according to a market source. Corporate investment-grade fund inflows climbed to $5.86 billion for the week ended April 24, compared to $2.31 billion in the week ended April 17 and $3.47 billion in the previous week.

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