Express Scripts sells ahead of Fed as primary shrugs off meeting; trading up in AT&T 10-years

By Andrea Heisinger and Cristal Cody

New York, April 27 - There was one sale in the market on Wednesday from Express Scripts, Inc. as others waited until after an announcement from the Federal Reserve Federal Open Market Committee meeting.

The pharmacy benefit management company sold $1.5 billion of five-year notes after announcing the sale in a press release on Monday. The notes sold tighter than whispered and revised guidance.

The Fed meeting didn't have any shocking surprises, and the key short-term interest rate was held at zero.

Issuers were also wary of what would be said by Ben Bernanke in a press conference following the Fed meeting.

The day's only sale priced before the Fed meeting concluded, a source said.

The comments that came out of the meeting had "no effect" on the primary side of the high-grade market, he added. There was increased activity in certain parts of the secondary.

Nearly the entire week's calendar of offerings has already priced. Thursday could see a couple of new bonds price, but "nothing blockbuster," as a syndicate source said, adding that they may have one deal on tap.

"Corporate marketing trading was very slow today. Very low volume for a Wednesday," one source said in the late afternoon. "Would estimate it's about 70% of [typical] volume."

Overall investment-grade Trace volume ended the day at about $12 billion, according to a market source.

The deal from Express Scripts was not seen trading initially in the secondary market, a source said.

But AT&T Inc.'s new 4.45% 10-year notes were the most traded high-grade bonds on Wednesday, though the bonds traded only marginally tighter, a source said.

Verizon Communications Inc.'s notes also saw heavy trading activity on the day. "Spreads are mostly unchanged to maybe a basis point better," the source said.

The series 14 Markit CDX North American Investment Grade index firmed 1 basis point to a spread of 92 bps, according to Markit Group Ltd.

Treasuries sold off early and hung on to initial losses after the Federal Reserve lowered its economic growth view and indicated the $600 billion quantitative easing program would run as scheduled through June.

The 10-year note yield rose 5 bps to 3.35%. The 30-year bond yield rose 6 bps to 4.45%.

"We noted a hesitancy on traders to be long on the market right now," a source said. "Specifically right around the first of the [Treasury] auction and then the policy statement and then Bernanke's speech."

Express Scripts' $1.5 billion

Express Scripts sold $1.5 billion of 3.125% five-year senior notes (Baa3/BBB/BBB) to yield 118 bps over Treasuries, a source who worked on the sale said.

Price talk was in the range of 121 to 125 bps and later priced tighter than that.

There was about $3.5 billion on the books for the deal, the source said, and it priced right before the Fed announcement.

The bookrunners were Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and RBS Securities Inc.

Proceeds are being used to repurchase common stock and for general corporate purposes.

The deal is guaranteed by domestic subsidiaries.

The pharmacy benefit management company is based in St. Louis.

AT&T most traded

AT&T's new 4.45% 10-year notes were the most traded bond on Wednesday, a source said.

"There's a pretty good volume trading hands today, but looks like spreads are in 110 to 114 range, a little bit tighter than issue level," the source said.

AT&T sold $1.25 billion of the notes at 115 bps over Treasuries on Tuesday.

The telecommunications company is based in Dallas.

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