Goldman sells post-earnings; RBC, Japan Tobacco bring deals; CIBC notes tighter in secondary

By Aleesia Forni and Andrea Heisinger

New York, July 16 - The high-grade bond market picked up the pace Tuesday following a single issue the previous day.

Goldman Sachs Group Inc. priced $2.5 billion of five-year notes following an earnings announcement. Terms of the sale were not available at press time.

The banking giant announced second-quarter earnings earlier on Tuesday that handily beat analyst expectations. Net income for the New York-based company rose to $1.86 billion, or $3.70 per share, from $927 million, or $1.78 per share, for the same quarter a year ago.

Another issuer from the financial space, Royal Bank of Canada, offered $1.75 billion of three-year covered bonds.

A private $500 million offering of five-year notes was sold by Japan Tobacco, Inc. The trade was done under Rule 144A and Regulation S.

Howard Hughes Medical Institute tapped the market for $1.2 billion of notes due 2023.

Germany's KfW priced $5 billion of global notes due 2015 by midday, followed by an offering from another sovereign issuer, the Province of Ontario, which sold $2.5 billion of three-year notes.

The tone of the high-grade secondary bond market was looking "a little better" early on Tuesday, one trader said, though the Markit CDX North American Investment Grade index closed the session 1 basis point wider at a spread of 78 bps.

The trader added that Monday's $750 million tranche of three-year notes from Canadian Imperial Bank of Commerce was trading 1 bp tighter on Tuesday.

Tuesday's new issue from Howard Hughes was quoted flat by a market source at another desk during Tuesday's session.

In the preferred stock space, Farm Credit Bank of Texas priced $300 million of $100-par fixed-to-floating-rate noncumulative perpetual shares.

From Monday business, Wells Fargo & Co.'s $1.5 billion of 5.85% series Q class A fixed-to-floating-rate noncumulative preferreds was "doing well," a trader said.

He pegged the issue around par at midday.

After the bell, another source said the issue was "bid around par for most of the day," seeing a $25.02 bid for paper.

The new deal freed to trade on Tuesday.

Issuers jump to market

High-grade bond issuers opted to jump into the market Tuesday ahead of Wednesday's comments before Congress by Federal Reserve chair Ben Bernanke. There were also comments on Tuesday from the president of the Federal Reserve Bank of Kansas City, Esther George, recommending an end to the Fed's bond-buying program in the first part of 2014.

"Tomorrow might be a little slow until after [Bernanke's comments]," a market source said late Tuesday. "Or people will get in and out in a hurry."

A syndicate source who worked on one of Tuesday's sales said that "we aren't working on anything for tomorrow. It's looking pretty quiet."

RBC's covered bonds

The Royal Bank of Canada sold $1.75 billion of three-year covered bonds, series CB10 (Aaa/AAA/AAA) at a spread of mid-swaps plus 35 bps, a source away from the trade said.

Bookrunners were Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and RBC Capital Markets LLC.

The Montreal-based financial services company was last in the U.S. bond market with a $1.5 billion sale in two tranches on April 30.

Japan Tobacco prices

Japan Tobacco priced $500 million of 2.1% five-year senior notes (Aa3/AA-/), a source close to the trade said.

Pricing was done under Rule 144A and Regulation S.

Bookrunners were BofA Merrill Lynch, Citigroup Global Markets Inc., Mizuho Securities USA Inc., Morgan Stanley and BNP Paribas Securities Corp.

The cigarette maker is based in Tokyo.

Howard Hughes' 10-year notes

Howard Hughes Medical Institute priced $1.2 billion of 3.5% notes due 2023 (Aaa/AAA/) to yield 100 bps over Treasuries, a source close to the sale said.

A market source quoted the notes at 100 bps bid, 96 bps offered.

Bookrunners were Barclays, Goldman Sachs & Co. and Morgan Stanley.

The non-profit medical research organization is based in Chevy Chase, Md.

KfW sells $5 billion

KfW brought a $5 billion sale of 0.5% global notes due 2015 (Aaa/AAA/AAA), pricing them at mid-swaps flat, a market source said.

The sale is guaranteed by the Federal Republic of Germany.

Bookrunners were BNP Paribas, Credit Suisse and Morgan Stanley.

The German government-owned development bank is based in Frankfurt.

Ontario brings short bond

The Province of Ontario tapped the market for $2.5 billion of 1% three-year notes (Aa2/AA-/) priced at mid-swaps plus 22 bps, or Treasuries plus 37.85 bps, an informed source said.

Bookrunners were Barclays, BofA Merrill Lynch, Deutsche Bank Securities Inc. and RBC.

Proceeds are being used for general provincial purposes.

Farm Credit's preferreds

Farm Credit Bank of Texas priced a $300 million Rule 144A offering of 6.75% $100-par fixed-to-floating-rate class B series 2 noncumulative perpetual preferreds (expected ratings: Baa1/BBB), a market source said.

Price talk was 6.75%.

BofA Merrill Lynch and Barclays are the bookrunners.

The dividend will begin floating on Sept. 15, 2023 at Libor plus a spread. The issue also becomes callable on that date.

The bank is based in Austin, Texas.

Stephanie N. Rotondo contributed to this review.

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