Commonwealth Bank, EIB, Entergy price bonds; trading volume down, Boston Scientific widens

By Andrea Heisinger

New York, March 15 - Commonwealth Bank of Australia, European Investment Bank and Entergy Louisiana, LLC sold bonds on Monday ahead of a one-day Federal Reserve meeting.

The Commonwealth Bank issue was the last to price for the day, getting done after 5 p.m. ET. It totaled $3.5 billion, and was made up of $750 million of three-year floating-rate notes, $1.75 billion of five-year notes and $1 billion of 30-year bonds.

Frequent sovereign issuer EIB priced $3 billion of five-year global notes.

Entergy Louisiana priced and upsized $150 million of 30-year first mortgage bonds. The size was increased from $100 million.

The market tone was a little shakier after a solid previous week where many deals got done. A source said this was partly due to fears that the United States may get a credit ratings downgrade from Moody's Investors Service, and also the upcoming Fed meeting.

"It just didn't feel quite as good out there today," a source said. The week is not expected to net as many deals as the previous one, which saw nearly $30 billion priced.

There was not much excitement to start the week in the high-grade secondary market.

One source called corporate volume "the lightest it's been this month" and said it was lower than on Friday.

This was likely due to the Fed meeting on Tuesday, she said.

"Some people don't like to do anything before that [the Fed]," the source said. "Even though nothing is expected to change, some just like to wait on the sidelines to make sure."

Bonds from Boston Scientific were among the most-traded in both the investment-grade and high-yield markets, as the medical-devices maker voluntarily stopped production on a heart defibrillator. The company is split-rated.

Commonwealth Bank offers three tranches

Commonwealth Bank of Australia priced $3.5 billion of global notes (Aa1/AA/AA) late in the day in three tranches, a source close to the deal said.

The $750 million of three-year floating-rate notes sold at par to yield three-month Libor plus 55 bps.

A $1.75 billion tranche of 3.5% five-year notes priced at 120 bps over Treasuries.

The $1 billion of 5% 10-year notes have a spread of 135 bps over Treasuries.

Citigroup Global Markets, Goldman Sachs & Co. and HSBC Securities ran the books for the Rule 144A offering.

The financial services company is based in Sydney, Australia.

Tuesday issuance up in air

The Fed meeting could at least temporarily halt the flow of issuance for a day, or at least reduce it to a trickle of quick sales.

"I don't think anyone's going to price anything before [an announcement]," a source said.

There are no rate changes expected, but cautious issuers will likely either rush to get deals priced before an announcement in early afternoon, or simply wait until Wednesday to see how the market tone shakes out.

"We don't have a ton on the calendar anyway," a syndicate source said. "I wouldn't be surprised if we saw a couple [of deals] or nothing."

Nearly two weeks of decent market tone left the primary jammed with new bonds. The constant stream of issues has brought down the backlog of pending supply, although there is still money out there to buy new bonds, a source said.

Entergy prices mortgage debt

Entergry Corp. electric and natural gas subsidiary Entergy Louisiana priced an upsized $150 million of 6% 30-year first mortgage bonds (A3/A-) at par of $25, an informed source said.

The original size was $100 million. They priced tighter than original guidance in the range of 6.125% to 6.25% yield, a source said.

"It was a pretty generic, straightforward first mortgage bond deal," they said.

Morgan Stanley & Co. and Wells Fargo Securities were bookrunners for the New Orleans-based company.

EIB sells $3 billion in five-years

European Investment Bank sold $3 billion of 2.75% five-year global notes (Aaa/AAA/AAA) early in the day at Treasuries plus 35.25 bps.

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

The funding bank for the European Union is based in Kirchberg, Luxembourg.

New bonds not seen trading

The few new and recent bonds in the high-grade primary either did not hit, or disappeared in the secondary market, traders said.

A $250 million deal of 5.75% bonds due 2020 from reinsurance company RenRe North America Holdings, Inc. that priced Friday was not seen trading late in the afternoon, a source said.

A similarly small $150 million sale of 6% notes due 2040 from Entergy Louisiana also didn't make it to the secondary.

The three tranches of notes from CBA weren't freed for the secondary due to the lateness of pricing.

Boston Scientific wider on headlines

Outstanding bonds from medical device-maker Boston Scientific (Ba1/BBB-/BB+) were generically wider by late in the day after news came out that the company was halting production on a cardiac defibrillator due to troubles with the Food and Drug Administration involving paperwork.

The split-rated company's 6% bond due 2020 was listed as one of the most-active bonds in the high-grade secondary early in the afternoon. They were also garnering interest in the high-yield secondary.

They "are owned by a lot of high yield accounts, but it's still in a lot of investment-grade accounts," a source said, even though Moody's and Fitch had dropped its ratings into the higher part of the junk spectrum back in 2007.

The bond due 2020 was trading as wide as a 300 bps bid, but had tightened back down to 295 bps bid by later in the day, and then to 285 bps bid, 280 bps offered, sources said.

This bond was trading at 238 bps on March 11, a trader said.

A 4.5% bond due 2015 from the company was quoted as 50 bps wider in the morning.

"They're not looking too good today," a source on the industrial side of the secondary said.

A market source saw over $35 million of the Boston Scientific 6% notes due 2020 having traded by mid-afternoon, along with over $10 million of its 4.5% notes due 2015.

A new 4.45% bond due in 2020 from Medtronic Inc. that priced on March 11 was actively trading, possibly due to the Boston Scientific news, a source said.

"It kind of bled over," he said.

Financials among most actives

Notes from financial names like General Electric Capital Corp., Royal Bank of Scotland plc, Credit Suisse and Bank of America Corp. were among the day's most highly-traded bonds. This followed a recent trend of interest in financial bonds by investors.

GE Capital led the charge with its 5.5% notes due 2020 being one of the most-traded of the day.

Five-year bonds from Credit Suisse, RBS and Bank of America were also active. The RBS and one Bank of America bond were priced the previous week and tightened in the secondary.

Bombardier sees high-grade players

A junk trader noted that Bombardier Inc. upsized its two-part offering of senior notes to $1.5 billion from the originally announced $1 billion, but added that despite its Ba/BB+ ratings, "most of the interest in that is coming from the investment-grade side, from what I can ascertain."

He said that "orders going into the book are easily 50-50 investment grade/high yield, or in some cases, 75% investment grade or core-plus accounts and 25% high yield. So that's an interesting book."

The Montreal-based maker of aircraft and railroad transportation equipment priced $650 million of 7.5% notes due 2018 and $850 million of 7.75% notes due 2020.

-Paul Deckelman contributed to this report

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