Johnson & Johnson, Eli Lilly, Principal Life, IFC price notes; high-grade inflows decline

By Cristal Cody

Tupelo, Miss., Aug. 20 – Johnson & Johnson led deal action in the high-grade primary market on Thursday with a $7.5 billion six-tranche offering of fixed-rate notes (Aaa/AAA/) priced to fund its estimated $6.5 billion acquisition of Momenta Pharmaceuticals, Inc.

The deal attracted strong demand with a cumulative final book size of over $17 billion, a source said.

Johnson & Johnson’s notes, which included five, seven-, 10-, 20-, 30- and 40-year tranches, all priced 15 basis points better than talk.

Eli Lilly & Co. sold $1.1 billion of senior notes (A2/A+/A) in two tranches on Thursday, including a $250 million tap of its 2.25% notes due May 15, 2050 and $850 million of new 40-year notes.

Also on Thursday, Principal Life Global Funding II priced $400 million of 10-year senior secured notes (A1/A+/) backed by funding agreements in a Rule 144A and Regulation S offering upsized from $300 million.

Meanwhile, pricing action continued on Thursday in the sovereign, supranational and agency market.

International Finance Corp. (Aaa/AAA/) priced $1 billion of 10-year global notes on top of talk.

In other activity, a multiple tranche offering of dollar-denominated senior notes (Baa3/BBB-/BBB-) is expected soon from Royalty Pharma plc following fixed income investor calls held on Wednesday for the Rule 144A and Regulation S deal.

The notes are guaranteed by Royalty Pharma Holdings Ltd.

Lighter supply eyed

Investment-grade corporate issuers have priced about $36 billion of bonds week to date, while SSA supply totals another $8.7 billion through Thursday.

About $30 billion to $40 billion of corporate issuance was expected this week.

Deal volume is anticipated to subside somewhat in September, though market sources estimate pricing activity will remain strong.

September is expected to see about $120 billion to $140 billion of issuance in mostly refinancings, below the $167 billion and $146 billion totals posted in the previous two years, according to a BofA Securities, Inc. research note.

“September is seasonally the busiest month in the IG new issue market, although of course not this year,” BofA analysts said. “The recent re-steepening of the curve, election risks and perceived risk of a second wave of infections are only accelerating refis, pulling issuance into August and asserting widening pressure on spreads.”

Elsewhere, high-grade corporate funds posted inflows of $5.13 billion for the past week ended Wednesday, according to Refinitive Lipper US Fund Flows.

Inflows were down from $6.48 billion in the previous week, $7.21 billion in the prior week and $7.9 billion in the week prior.

The Markit CDX North American Investment Grade 33 index was modestly weaker on the day at a spread of 67.91 bps.

Market tone stayed mostly positive over the session.

The PIMCO Investment Grade Corporate Bond index rose 0.21% to 115.93.

The iShares iBoxx Investment Grade Corporate Bond ETF closed up 0.35% at 136.2.

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