Target, Black Hills, Agilent, Nova Scotia price bonds; Treasury yields on the rise

By Andrea Heisinger and Cristal Cody

New York, July 13 - Target Corp., Black Hills Corp., Agilent Technologies, Inc. and the Province of Nova Scotia priced bonds on Tuesday to signal another solid day in the high-grade bond market.

Target was one of the first to price its deal, with $1 billion of 10-year notes that came in line with guidance.

Black Hills priced soon after with its upsized $200 million of 10-year notes. The sale was increased by $50 million from the originally announced size of $150 million.

California-based Agilent Technologies sold $750 million of notes in three and 10-year tranches. The size did not change from what was announced in a prospectus with the Securities and Exchange Commission at the top of the day.

On the sovereign side, there was a $750 million deal from Nova Scotia. The province priced five-year global bonds after the sale went overnight.

Those who priced the day's deals remained upbeat about the state of the high-grade market. Issuance is expected to remain strong in the next couple of days and then drop off as more companies enter second-quarter earnings blackout.

Earnings announcements began on Monday with some solid numbers. That may have nudged some of the day's deals into the market.

"First, you had Oracle [on Monday] and some good earnings," a source said. "You also have some possible good news with BP."

He was referring to Oracle Corp.'s $3.25 billion sale in two tranches to start the week. BP plc could potentially get a break from its oil spill in the Gulf of Mexico if a new containment cap placed on the leaking well works.

The spate of new corporate offerings, including those from Target and Agilent Technologies, firmed in secondary trading, sources said.

Overall investment-grade Trace volume jumped to nearly $13 billion on Tuesday from about $9 billion on Monday, a source said.

The CDX Series 14 North American investment-grade index was tighter on Tuesday, according to a source. The widely watched barometer firmed 4 bps to a spread of 108 bps.

A sixth consecutive stock market rally sent U.S. Treasuries down and pushed yields up to among the highest levels this month.

The 10-year Treasury note yield rose 5 bps to 3.12%.

The 30-year Treasury bond yield was up 5 bps to 4.11%.

The Dow Jones Industrial Average finished up 146.75 points, or 1.44%, at 10,363.02 on Tuesday on stronger second-quarter earnings results from aluminum maker Alcoa Inc.

Target sells $1 billion

Target priced $1 billion of 3.875% 10-year notes (A2/A+/A) to yield Treasuries plus 80 bps, a source close to the deal said.

The notes priced in line with talk in the 80 bps area, a source said.

Late in the day, the notes were quoted by one trader as tightening in secondary trading to 79.5 bps bid, 77.5 bps offered.

Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities ran the books.

Proceeds are being used for general corporate purposes.

Target's last bond issue totaled $4 billion in three tranches on Jan. 14, 2008. It included a 10-year note that priced at 235 bps over Treasuries.

The discount retailer is based in Minneapolis.

DB sees issuance drop off

At a reporters' breakfast at Deutsche Bank Private Wealth Management on Tuesday, there was a brief insight into corporate bond sales for the remainder of the year.

Managing director Gary Pollack said that they see corporate debt issuance lower in the second half of 2010 than where it has been.

"I see more in 2011 - especially from financials who issued FDIC[-backed] debt, since those will be coming due."

People will be looking for extra yield in fixed income rather than equities, said CFA and managing director Owen Fitzpatrick.

"We've had companies improve their balance sheets dramatically, and now there's the question of what they're going to do with all that extra cash," managing director Benjamin Pace said.

Agilent prices two tranches

Agilent Technologies sold $750 million of senior unsecured notes (Baa3/BBB-/BBB) in two tranches before the market close, an informed source said.

The $250 million of 2.5% three-year notes priced at a spread of Treasuries plus 150 bps.

A $500 million tranche of 5% 10-year notes sold at Treasuries plus 195 bps.

The 2.5% notes were not immediately seen in the secondary market by one trader.

The tranche of 5% notes had firmed to 189 bps bid, 186 bps offered near the market close, a trader said.

Bank of America Merrill Lynch, Barclays Capital and Credit Suisse Securities were the bookrunners.

Proceeds are being used to satisfy financing obligations of subsidiary Agilent Technologies World Trade Inc. when it comes due on Jan. 27, 2011.

The maker of electronic and bio-analytical measuring instruments is based in Santa Clara, Calif.

Desks looking at more issues

There aren't any more large deals matching the size of Oracle's Monday pricing on tap for the week, but it's expected there will be "something" on Wednesday, a source said at the end of the day.

"We have some momentum, so I wouldn't be surprised," he said.

Spreads have moved lower again and that, on top of an upbeat tone in the investment-grade market, is luring issuers that need capital into the market. There have been less opportunistic issuers and more of those who have debt maturing or need money for capital improvements or acquisitions, the source said.

"People have enough cash right now, so they're probably not going unless they need to."

Black Hills upsizes 10-year

Energy holding company Black Hills sold an upsized $200 million of 5.875% 10-year senior unsecured notes (Baa3/BBB-) in early afternoon to yield 5.875%, a source away from the deal said.

The size was increased from $150 million.

The notes priced at a spread of Treasuries plus 277.2 bps and firmed in the secondary market, a source said.

The notes were seen trading tighter at 260 bps, a source said.

"We are pleased to complete another long-term financing at favorable terms," Tony Cleberg, executive vice president and chief financial officer of the company, said in a press release.

The issue positions the company well as it continues to make significant capital investments to construct two Colorado gas-fired generation projects that will provide reliable energy for utility customers and create additional earnings growth for Black Hills shareholders, Cleberg added.

Bookrunners for the deal were Credit Suisse Securities, RBS Securities and Scotia Capital.

Proceeds are being used to repay outstanding debt under a revolving credit facility.

The issuer is based in Rapid City, S.D.

Nova Scotia sells global bonds

The Province of Nova Scotia priced a benchmark $750 million of 2.375% five-year global bonds at Treasuries plus 60.25 bps, or mid-swaps plus 34 bps, according to an FWP filing with the Securities and Exchange Commission.

The bonds (Aa2/A+) had been announced the previous day but went overnight.

Bookrunners were Bank of America Merrill Lynch, Scotia Capital USA Inc. and TD Securities USA LLC.

Proceeds are being used for general purposes of the province.

The issuer is based in Halifax.

Bank, brokerage CDS costs fall

A trader who watches the credit-default swaps market said that the cost of protecting holders of bonds issued by major banks, such as Bank of America, Citigroup and JP Morgan Chase, against a possible event of default fell 5 bps to 12 bps.

The trader also saw the CDS protection cost of bonds of major investment banking houses, such as Morgan Stanley and Goldman Sachs, dip 8 bps to 13 bps.

Paul Deckelman contributed to this report.

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