General Mills brings solid high-grade new issue; credit spreads ease; secondary slows

By Aleesia Forni and Cristal Cody

Virginia beach, Oct. 14 – A single deal from General Mills Inc. priced during a weak session for high-grade bonds with another round of market volatility keeping other issuers on the sidelines.

“It was a pretty quiet day today,” a market source said on Tuesday following the long Columbus Day holiday weekend.

General Mills sold its new $1 billion of senior notes in two parts during the session.

Both tranches of the offering sold at the tight end of price talk, which had firmed around 5 basis points compared to initial guidance.

A source added that the deal’s order book was nearly three times oversubscribed.

In other market action, Kommunalbanken AS announced plans to bring to market an offering of five-year notes.

Activity for the shortened week is expected to remain subdued, with around $15 billion of new issuance expected to price.

Investment-grade credit spreads widened over the day and secondary trading activity remained light, market sources said.

The Markit CDX North American Investment Grade series 23 index eased 1 bp to a spread of 73 bps.

“Spreads seem to have followed stocks, ultimately wider,” a trader said.

No secondary market activity was seen as the session closed in General Mills’ two tranches of notes, a trader said.

In other trading, Apple Inc.’s 4.45% notes due 2044 ended off of morning gains but still better than where the notes traded on Friday, according to a market source.

Verizon Communications Inc.’s 5.15% notes due 2023 traded better over the day, a source said.

U.S. and Canadian secondary bond activity remains light as buyers hunker down, market sources said.

“There’s not a lot of secondary trading taking place,” one source said. “They’re waiting on clearer signals on what might happen. Trading has been very slow over the last several sessions. It tends to slow as global volatility increases.”

General Mills two-parter

In Tuesday’s sole high-grade new issue, General Mills priced $1 billion of senior notes (A3/BBB+/BBB+) in tranches due 2017 and 2019, according to an informed source.

The sale included $500 million of 1.4% three-year notes priced at 99.982 to yield 1.406%, or Treasuries plus 60 bps.

There was also $500 million of 2.2% five-year notes priced at 99.802 to yield 2.242%, or with a spread of Treasuries plus 80 bps.

Both tranches sold at the tight end of price talk.

Barclays, BofA Merrill Lynch and Credit Suisse Securities (USA) LLC were the joint bookrunners.

Proceeds will be used to fund the planned acquisition of Annie’s, Inc. and for general corporate purposes.

The maker of consumer food products is based in Minneapolis.

Kommunalbanken on deck

Kommunalbanken set price talk for a $1 billion offering of five-year notes (Aaa/AAA/) in the mid-swaps plus 5 bps area, a market source said.

The sale is being done under Rule 144A and Regulation S.

The bookrunners are Barclays, BNP Paribas Securities Corp., Citigroup Global Markets Inc. and Mizuho Securities.

The government-funded lender to municipalities is based in Oslo.

Apple off earlier gains

Apple’s 4.45% notes due 2044 ended at 106 on Tuesday in thin trading, down from 106.47 earlier in the session, a market source said.

The notes (Aa1/AA+/) traded at 106.47 over the morning, compared to 105.29 on Friday.

Apple sold $1 billion of the notes at 99.459 to yield 4.483% on April 29.

The computer and mobile communications device company is based in Cupertino, Calif.

Verizon ends stronger

Verizon’s 5.15% notes due 2023 ended the day better at 113.30, up from 112.91 over the morning, according to a market source.

The notes (Baa1/BBB+/A-) traded last on Friday at 112.29.

Verizon sold $11 billion of the notes at 99.676 to yield 5.192% on Sept. 11, 2013.

The telecommunications company is based in New York City.

Bank/brokerage CDS costs rise

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

Bank of America Corp.’s CDS costs rose 1 bp to 75 bps bid, 78 bps offered. Citigroup Inc.’s CDS costs were flat at 74 bps bid, 77 bps offered. JPMorgan Chase & Co.’s CDS costs were 2 bps higher at 61 bps bid, 64 bps offered. Wells Fargo & Co.’s CDS costs rose 1 bp to 47 bps bid, 50 bps offered.

Merrill Lynch’s CDS costs were 1 bp higher at 78 bps bid, 81 bps offered. Morgan Stanley’s CDS costs ended 2 bps higher at 85 bps bid, 90 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 1 bp higher at 87 bps bid, 90 bps offered.

Paul Deckelman contributed to this review

© 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.