Marsh & McLennan, PPL Electric see demand in weak primary; financials, Bank of America widen

By Andrea Heisinger and Cristal Cody

New York, July 12 - High-grade bond issuers like Marsh & McLennan Cos., Inc. and PPL Electric Utilities Corp. saw enough improvement in the market's tone on Tuesday to sell small deals.

Marsh & McLennan sold bonds for the first time since 2009. The company's upsized $500 million of 10-year notes priced at the lowest end of late-morning guidance.

Electric company PPL priced $250 million of 30-year first mortgage bonds in a sale that had a do-not-grow clause, a source said.

The Marsh & McLennan sale had been floating around the primary in recent days - taking the market's temperature and waiting for an opportune time to sell.

The sale's proceeds were tied to a $600 million liability through a tender offer, so that time crunch gave the company a push to tap the market Tuesday, a market source said.

"It was still a weaker tone, but there was a lot of momentum, and we ended up with a $2 billion trade," she said.

"There was quite a bit of confidence in the book we built."

The company had the benefit of a Treasury note rally in morning and was better positioned in the market than the PPL Electric deal, a source said.

If the tone remains constructive, then there should be a handful of trades pricing throughout the remainder of the week.

"We're a little bit held hostage. This is uncharted territory," the source said, referring to the impact on issuance from the euro zone debt crisis and the ongoing debt ceiling talks in the United States.

Overall trading volume climbed nearly 20% to about $12 billion on Tuesday.

In the secondary market, PPL Electric's notes firmed 9 basis points on the bid side, while the new deal from Marsh & McLennan traded around the issue price, according to traders.

Financials ended the day wider, including paper from Bank of America Corp. and Toronto-Dominion Bank, traders said.

In other trading, Teck Resources Ltd.'s long bonds (Baa2/BBB/BBB) that priced in June continue to trade about 20 bps tighter.

The Markit CDX Series 15 North American Investment Grade index, which eased 4 bps the previous day, ended Tuesday 2 bps weaker at a spread of 98 bps, according to Markit Group Ltd.

Treasuries ended the day higher after Moody's Investors Service downgraded Ireland to junk status. On Monday, Italy's bonds were sold off on concerns of debt fallout, but they firmed in trading on Tuesday on potential support from the European Central Bank.

"Italy's 10-year yields are in about a dozen basis points on the day after widening out quite a bit overnight," one bond source said. "Their CDS blew out - it was about 1,000 basis points over Germany's overnight, but the ECB saying they would continue to support peripherals and Italy's auction on Thursday caused their yields to bounce back."

The 10-year Treasury note yield dropped 4 bps to 2.88%. The 30-year bond yield fell to 4.17% from 4.21%.

Marsh & McLennan upsizes

Professional services and consulting firm Marsh & McLennan sold an upsized $500 million of 4.8% 10-year senior notes (Baa2/BBB-/BBB) to yield Treasuries plus 190 bps, a source close to the trade said.

The paper sold at the tight end of guidance in the 195 bps area with a margin of plus or minus 5 bps. Early whispers were in the 212.5 bps area, and that was gradually tightened down to 190 bps with only a handful of drops by investors on the books, a source said.

The deal size was increased from $350 million on strong demand, the source said.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co., Inc. were the bookrunners.

Proceeds are being used for the repayment, redemption or repurchase of debt, including notes in tender offers, and for general corporate purposes.

Marsh & McLennan last sold $400 million of 9.25% 10-year notes on March 18, 2009. Those notes were priced at par to yield Treasuries plus 629.9 bps.

The new notes were seen trading at 190 bps bid, 187 bps offered after pricing Tuesday afternoon, according to one source.

Another trader saw the notes firmer at 189 bps bid, 186 bps offered.

The issuer is based in New York.

PPL offers mortgage bonds

PPL Electric Utilities offered $250 million of 5.2% 30-year first mortgage bonds (A3/A-/A-) at a spread of 105 bps over Treasuries, according to an FWP filing with the Securities and Exchange Commission.

Active bookrunners were J.P. Morgan Securities LLC and UBS Securities LLC. Passives were Lloyds Securities and Mitsubishi UFJ Securities International plc.

Proceeds are being used for capital expenditures, working capital and general corporate purposes.

In the secondary market, the bonds due 2041 firmed 9 bps on the bid side, according to a trader. The notes tightened after pricing to 96 bps bid, 92 bps offered.

The electric subsidiary of PPL Corp. is based in Allentown, Pa.

Bank of America wider

Bank of America's 3.75% notes due 2016 stayed weak in the secondary market, a trader said Tuesday.

The notes widened to 217 bps bid, 211 bps offered. Bank of America sold the notes (A2/A/A-) at a spread of Treasuries plus 205 bps on Thursday.

The bank and financial services company is based in Charlotte, N.C.

TD Bank five-years

Toronto-Dominion Bank's new 2.5% senior medium-term notes due 2016 gave back initial gains in trading. The five-year notes (Aaa/AA-) widened in trading to 85 bps bid, 80 bps offered on Tuesday from the previous day's quote of 84 bps, 81 bps, a trader said.

The Toronto-based bank and financial services company sold the notes on Thursday at Treasuries plus 85 bps.

Teck holds

Teck Resources' long bonds have stayed about 20 bps tighter in secondary trading since initial trading after the bonds priced on June 29, a bond source said Tuesday.

The company sold $1 billion of the 6.25% bonds due 2041 at a spread of Treasuries plus 190 bps. The notes have held steady since initial trading in the 175 bps range, the source said.

The diversified resource company for mining and mineral development is based in Vancouver, B.C.

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