IBM issues bonds; funds see $2.8 billion inflows; spreads tighten on improved tone

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 31 – International Business Machines Corp. priced a new offering of senior notes on Friday, capping off a strong week for investment-grade bonds.

The computer company brought to market a $1.1 billion offering of seven-year floating-rate notes during the session.

The trade pushed the week’s supply to more than $22 billion, falling in line with what sources had predicted to be $20 billion to $25 billion of new issuance.

Meanwhile, cash continued to pour into investment-grade bond funds, with Lipper reporting staggering net inflows of $2.78 billion for the week ended Oct. 29.

This figure is up significantly from last week’s $390 million of inflows, bringing the year-to-date total inflows to more than $70 billion.

Looking ahead, players are gearing up for a busy November for the investment-grade primary bond market.

Around $25 billion to $30 billion of supply is expected for the first week of the new month.

“Mostly corporates next week,” a market source said of the upcoming calendar.

In the Canadian primary market, Hydro-Quebec priced C$500 million of 4% series JQ debentures due Feb. 15, 2055 (Aa2/A+/DBRS: A) at 108.041 to yield 3.619% on Friday, according to the company and a market source.

National Bank Financial Inc. was the bookrunner.

“There’s been no [corporate] issues this week,” a Canadian syndicate source said. “The tone has really improved and turned the corner and I suspect next week should be very busy.”

Investment-grade credit spreads tightened more than 1 basis point early Friday and ended 2 bps better following the Bank of Japan’s surprise announcement that it will expand its annual asset purchase program, according to market sources.

The Markit CDX North American Investment Grade series 23 index firmed 2 bps to a spread of 64 bps.

In the secondary market, Morgan Stanley’s 3.7% senior notes due 2024 that priced in the previous week traded unchanged earlier in the day, according to a market source.

Wells Fargo & Co.’s 4.65% subordinated bonds due 2044 were flat to 1 bp tighter, a source said.

IBM floaters

IBM priced $1.1 billion of floating-rate senior notes (Aa3/AA-/A+) due 2021 on Friday at par to yield Libor plus 58 bps, according to an FWP filed with the Securities and Exchange Commission.

J.P. Morgan Securities LLC was the bookrunner.

Proceeds will be used for general corporate purposes.

The information technology and computer company is based in Armonk, N.Y.

Morgan Stanley steady

Morgan Stanley’s 3.7% notes due 2024 were quoted unchanged earlier in the session at 141 bps offered, a source said.

Morgan Stanley sold $3 billion of the notes (Baa2/A-/A) on Oct. 20 at a spread of Treasuries plus 155 bps.

The financial services company is based in New York City.

Wells Fargo stable

Wells Fargo’s 4.65% subordinated bonds due 2044 traded flat to 1 bp tighter at 161 bps offered early on Friday, a source said.

Wells Fargo sold $2 billion of the bonds (A3/A/A+) with a spread of Treasuries plus 165 bps on Tuesday.

The bank is based in San Francisco.

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