Morgan Stanley sells $4.5 billion; sovereigns tap U.S. market; secondary focuses on new issues

By Aleesia Forni and Andrea Heisinger

New York, Feb. 20 - Morgan Stanley tapped the high-grade primary market on Wednesday as other corporate issuers mostly sat on the sidelines.

The financial services company sold $4.5 billion in three tranches with maturities of three years and 10 years.

A $300 million sale of two-year floating-rate notes was priced by Caterpillar Financial Services Corp.

The Kingdom of Sweden tapped the market for $3 billion of five-year notes. Meanwhile, another sovereign issuer, KfW, priced $5 billion of three-year notes.

U.S. housing data was released as well as minutes from January's Federal Reserve two-day Federal Open Market Committee meeting.

This didn't have much impact on the high-grade bond market. Corporate sales have already crested $11 billion, which is within the $10 billion to $15 billion expected for the week.

"I would think it's going to be quiet tomorrow," a syndicate source said. "We may be looking at more next week when people are back [from vacation]."

New issues "remain the focus for the most part" in the secondary market as spreads moved wider overall late in the session, a market source said.

The Markit CDX Series 18 North American Investment Grade index widened 2 basis points to a spread of 86 bps on the day.

The secondary market saw Tuesday's new issue from Cardinal Health, Inc. trade better on Wednesday, a market source said.

Meanwhile, Wyndham Worldwide Corp.'s notes were quoted unchanged to slightly wider from levels seen late Tuesday.

Morgan Stanley oversubscribed

Morgan Stanley was in the market with a $4.5 billion sale of global medium-term senior notes (Baa1/A-/A) in two maturities, a market source said.

The size of the trade was increased from $3 billion, the source said, after demand "was sizeable." As of early afternoon, there was "ballpark $10 billion" on the books, the source added.

There was $750 million of three-year floating-rate notes priced at par to yield Libor plus 125 basis points.

A $1.25 billion tranche of 1.75% three-year notes sold at a spread of Treasuries plus 140 bps.

Finally, a $2.5 billion tranche of 3.75% 10-year notes was priced at 178 bps over Treasuries.

Morgan Stanley & Co. LLC was the bookrunner.

The New York-based financial services company was last in the U.S. bond market with a $2 billion offering of 4.875% 10-year global medium-term notes priced at 310 bps over Treasuries on Oct. 18. Morgan Stanley last priced a three-year maturity with a 2.875% coupon at 220 bps over Treasuries as part of a $2 billion, two-tranche sale on July 21, 2011.

CAT sells short bond

Caterpillar Financial Services priced $300 million of two-year medium-term floating-rate notes (A2/A/) at par to yield Libor plus 7 bps, according to an FWP filing with the Securities and Exchange Commission.

The bookrunner was Barclays.

The funding arm of heavy equipment maker Caterpillar is based in Nashville.

Sweden's five-year

Sweden sold $3 billion of 1% five-year notes (Aaa/AAA/AAA) to yield mid-swaps flat, or Treasuries plus 16.1 bps, an informed source said.

Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Goldman Sachs International ran the books.

Sweden was last in the U.S. bond market with a $1 billion sale of three-year notes on Oct. 22.

KfW's $5 billion trade

Germany's KfW sold $5 billion of 0.5% three-year notes on Wednesday to yield mid-swaps plus 2 bps, an informed source said.

The notes (Aaa/AAA/AAA) priced at 99.679 to yield 0.603%.

The bookrunners were BofA Merrill Lynch, Deutsche Bank Securities Inc. and RBC Capital Markets LLC.

The notes from the Frankfurt-based development bank are guaranteed by the Federal Republic of Germany.

Cardinal Health moves tighter

The $1.3 billion of notes from Cardinal Health, which were sold in three maturities during Tuesday's session, continued to trade better on Wednesday, a market source said.

Cardinal Health's $400 million tranche of 1.7% five-year notes traded 2 bps tighter compared to Tuesday's close, with one trader quoting the notes at 81 bps bid, 78 bps offered.

The notes were sold at a spread of Treasuries plus 85 bps on Tuesday.

The company's $550 million of 3.2% 10-year notes were quoted 2 bps better from Tuesday's close at 113 bps bid, 112 bps offered.

Cardinal Health sold the notes at a spread of Treasuries plus 120 bps.

Finally, the $350 million of 4.6% 30-year bonds traded 3 bps tighter at midday at 131 bps bid, 129 bps offered following Tuesday's pricing at a spread of 140 bps over Treasuries.

The health-care services company is based in Dublin, Ohio.

Wyndham mostly unchanged

In other secondary market action, Wyndham Worldwide's $850 million of notes were trading flat to weaker on Wednesday.

The $450 million tranche of 2.5% five-year notes was quoted 1 bp wider at 162 bps bid, 159 bps offered.

The company sold the notes at a spread of Treasuries plus 165 bps.

The $400 million of 3.9% 10-year notes traded unchanged at 190 bps bid, 185 bps offered following Tuesday's pricing at a spread of 190 bps over Treasuries.

The hospitality and lodging company is based in Bethesda, Md.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.