New deals absent from high-grade market; BNY sells preferreds; Perrigo firms; JPMorgan weakens

By Aleesia Forni and Andrea Heisinger

New York, May 10 - There was no activity in the high-grade primary market on Friday, ending a week that once again breached supply expectations.

Between $20 billion and $25 billion of bonds were expected to be sold, and the week's haul totaled more than $28 billion not including emerging markets offerings.

The previous week also had beat expectations, seeing more than $35 billion of issuance buoyed by the $17 billion trade by Apple Inc.

S&P Dow Jones Indices came out with a report on yields Friday, explaining why some companies are scrambling to sell bonds at the moment.

A market source said the coming week should see between $20 billion and $25 billion of supply.

"We should be pretty busy," the source said.

"I know of four or five deals, and that's a good barometer of how the whole market looks."

The trades are expected to be similar to those of the past week, which were mostly less than $1 billion.

"A lot of corporates are still coming out of [earnings] blackout," a syndicate source said.

He added that there "aren't a lot more Apples out there," referring to the size of that offering.

There was some activity in the preferred stock market to end the week.

A $500 million sale of $1,000-par noncumulative perpetual preferreds was done by Bank of New York Mellon Corp.

A trader said he had not heard any price talk on the fixed-to-floating securities.

Post-pricing, a source said the issue was at par bid.

Meanwhile, General Electric Capital Corp.'s $750 million issue of 4.7% $25-par senior notes due 2053 was at $25.05 bid at midday.

"They've been trading around $25.10 for most of the morning," a trader said.

The notes priced Thursday.

The Markit CDX Series 18 North American Investment Grade index was 1 basis point wider at a spread of 72 bps on Wednesday.

In trading activity, Thursday's deal from Perrigo Co. traded tighter during the session, while the recent issue from JPMorgan Chase & Co. traded 3 bps wider.

Investment-grade bank and brokerage credit default swap costs declined on Friday.

Bank of America's CDS costs were 1 bp tighter at 93 bps bid, 96 bps offered. Citi's CDS costs were 2 bps tighter at 87 bps bid, 90 bps offered. JPMorgan's CDS costs also declined 1 bp to 76 bps bid, 79 bps offered. Wells Fargo's CDS costs declined 1 bps to 61 bps bid, 66 bps offered.

Merrill Lynch's CDS costs were 3 bps tighter at 83 bps bid, 88 bps offered. Morgan Stanley's CDS costs declined 3 bps to 116 bps bid, 121 bps offered. Goldman Sachs' CDS costs were 1 bp tighter at 103 bps bid, 108 bps offered.

BNY's preferreds

Bank of New York Mellon priced a $500 million offering of 4.5% $1,000-par series D noncumulative perpetual preferred stock, a market source said.

Credit Suisse Securities (USA) Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co., UBS Securities LLC and BNY Mellon Capital Markets LLC were the bookrunners.

When declared, the fixed-rate dividend will be paid on the 20th of June and December. Beginning June 20, 2023, the dividend will float at Libor plus 246 bps.

The New York-based financial institution will use proceeds to redeem $300 million of 7.78% capital securities and for general corporate purposes.

S&P yield report

A report out Friday from S&P Dow Jones Indices talked about how Treasury bills are trading at or near zero yields.

This is a good environment for companies, and according to the report, corporate debt has reached lows in May as the index's yield-to-worst is at 2.5%.

The report further states that "treasurers and CFOs across the market are touting this as the perfect time to refinance and strike deals, as the cost of financing is so low. Companies are issuing various maturities of debt at a frenzied pace to an investor base that demands as much yield as it can get."

This has led to oversubscription of deals.

However, the report notes that there are risks, but they won't be known until the future when companies use the funds received through the bond sales to do things like pay down older debt and start new projects.

The report also says that "a more immediate effect, among others, has been the buyback of equity shares by a number of companies, as the S&P 500 is up 14.06% year-to-date."

Perrigo firms

Perrigo's recent notes traded tighter on the day, one market source said.

The notes were quoted at 119 bps offered on Friday.

A trader at another desk had quoted the notes at 123 bps bid, 120 bps offered late during Thursday's session.

Perrigo sold the upsized $600 million of 2.95% 10-year senior notes to yield Treasuries plus 125 bps.

The health-care company and maker of generic and over-the-counter pharmaceuticals is based in Allegan, Mich.

JPMorgan notes widen

JPMorgan's $2 billion sale of 1.625% five-year notes was quoted 3 bps wider on Friday at 97 bps bid, 93 bps offered.

The notes priced on Wednesday with a spread of Treasuries plus 92 bp.

The financial services company is based in New York.

Stephanie N. Rotondo contributed to this review

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