PepsiCo, Bank of New York, Travelers bring bonds; PepsiCo notes move tighter in secondary

By Aleesia Forni and Andrea Heisinger

New York, July 25 - Issuance was pared down in the investment-grade bond market on Thursday compared to the previous day, with sales from PepsiCo, Inc., Bank of New York Mellon Corp. and Travelers Cos., Inc.

Wednesday saw $10.4 billion of corporate sales in the market, with Thursday's total at $3.3 billion.

PepsiCo priced $1.7 billion of bonds in two tranches after reporting second-quarter earnings on Wednesday that beat analyst expectations. The trade included equal tranches of two-year floating-rate notes and five-year notes. The company decided not to sell long five-year floaters, a source said.

Pepsi reported $2.01 billion of net income, or $1.28 per share, in Q2, which was a jump from $1.49 billion, or 94 cents per share, for the same period a year ago. The earnings beat expectations, despite a drop in sales of soda.

BNY Mellon continued the stream of financials tapping the market with its $1.1 billion offering of five-year notes in two tranches. There was $500 million of five-year floaters and $600 million of fixed-rate notes with the same maturity. Terms of the sale were not available at press time.

BNY reported Q2earnings on July 17 that beat analyst estimates.

A comparatively smaller sale of $500 million in 30-year bonds came from Travelers. It was the company's first bond issue in the U.S. market since 2010.

The European Bank of Reconstruction and Development priced $1 billion of five-year global notes.

Meanwhile, Westpac Banking Corp. gave terms of its sale done Wednesday.

A source referred to the primary as "fatigued" after the large deals priced Wednesday but said that the number of high-quality companies coming to the market is no coincidence.

"We're seeing a lot of demand for all of these," the source said. "It's mostly investor driven."

So far the week has seen upwards of $21 billion in high-grade corporate bonds priced. Nearly half of that priced on Wednesday.

Meanwhile, the Markit CDX North American Investment Grade index was 3 basis points wider at a spread of 79 bps.

Though spreads were "a little wider" during the session on Thursday, one trader noted that the day's new deal from PepsiCo traded 4 bps better.

The source also quoted BNY Mellon's new deal at 73 bps bid, 70 bps offered near the session's close.

Investment-grade bank and brokerage credit default swap costs were mostly unchanged to slightly lower on the day, according to a market source.

Bank of America Corp.'s CDS costs were flat at 106 bps bid, 111 bps offered. Citigroup Inc.'s CDS costs decreased 1 bp to 101 bps bid, 106 bps offered. JPMorgan Chase & Co.'s CDS costs were unchanged at 81 bps bid, 86 bps offered. Wells Fargo & Co.'s CDS costs lowered 1 bp to 64 bps bid, 69 bps offered.

Merrill Lynch's CDS costs were unchanged at 96 bps bid, 106 bps offered. Morgan Stanley's CDS costs were flat at 138 bps bid, 143 bps offered. Goldman Sachs Group, Inc.'s CDS costs were also flat at 127 bps bid, 132 bps offered.

PepsiCo's two tranches

PepsiCo priced $1.7 billion of senior notes (A1/A-/A) in two parts, a market source said.

The sale included $850 million of two-year floating-rate notes sold at par to yield Libor plus 20 bps.

There was also an $850 million tranche of 2.25% notes due 2019 priced at a spread of Treasuries plus 90 bps.

A trader quoted the notes at 86 bps bid, 83 bps offered near the day's close.

BofA Merrill Lynch, Goldman Sachs & Co. and Morgan Stanley & Co. LLC were bookrunners.

Proceeds are being used to redeem outstanding 3.75% senior notes due 2014 and for general corporate purposes, including repayment of commercial paper.

The Purchase, N.Y.-based global food and beverage company was last in the U.S. bond market with a $2.5 billion sale in three tranches on Feb. 25.

Travelers does long bond

Travelers sold $500 million of 4.6% 30-year senior notes (A2/A/A) at a spread of 95 bps over Treasuries, an informed source said.

BofA Merrill Lynch and Morgan Stanley were bookrunners.

Proceeds are being used for general corporate purposes and to fund a portion of the purchase price of the Dominion of Canada General Insurance Co. acquisition.

Travelers last tapped the U.S. bond market with a $1.25 billion offering of bonds in two tranches. That sale included a 5.35% 30-year maturity priced at 135 bps over Treasuries.

The holding company for commercial, property and casualty insurance subsidiaries is based in New York City.

European Bank does global

The European Bank for Reconstruction and Development priced $1 billion of 1.625% five-year global notes (Aaa/AAA/AAA) at a spread of mid-swaps flat, or Treasuries plus 27.9 bps, an informed source said.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and TD Securities (USA) LLC were bookrunners.

The lender to banks, businesses and industries is based in London.

Westpac gives terms

Westpac Banking gave details of its $1.4 billion sale of five-year senior notes (Aa2/AA-/) priced in two tranches, according to an FWP filing with the Securities and Exchange Commission.

There was $650 million of five-year floating-rate notes sold at par to yield Libor plus 74 bps.

A second tranche was $750 million of 2.25% five-year notes priced at a spread of Treasuries plus 93 bps.

Bookrunners were J.P. Morgan Securities LLC and Morgan Stanley.

Proceeds are being used for general corporate purposes.

Westpac was last in the U.S. bond market with a $1.25 billion sale of five-year covered bonds on May 22.

The banking organization is based in Sydney, Australia.

Paul Deckelman contributed to this review

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