Quiet week for primary closes with no new deals; Monsanto dominates secondary

By Cristal Cody and Aleesia Forni

Virginia Beach, June 27 – The investment-grade primary was empty of new issuance on Friday, capping off a slower week for the market.

“Typical summer Friday,” a market source said of the muted session.

This week’s new issue market saw roughly $14.1 billion of new high-grade paper price, falling short of sources’ expectations of around $15 billion to $20 billion of new issuance.

This week’s total pushes the total issuance so far for the month of June to more than $90 billion.

In other news this week, Lipper reported inflows of $1.502 billion into corporate investment-grade funds for the week ended June 25, down slightly from last week’s inflows of $1.965 billion.

This brings the year-to-date total inflows to roughly $42 billion.

Monsanto Co.’s bonds dominated secondary trading on Friday, a trader said.

Monsanto priced a $4.5 billion seven-part offering of senior notes (A3/BBB+/A-) on Thursday afternoon.

The company’s 30-year bond was the “highest volume bond on Trace today,” a trader said on Friday.

Monsanto’s 10-year note was the third-highest volume bond during the session, while the 20-year bond was the fourth highest of the day, and the 50-year bond was the fifth highest on Friday, according to the trader.

“If you were trading Monsanto, you were busy,” the trader said.

In other trading, Yamana Gold Inc.’s 4.95% senior notes due 2024 were offered slightly wider but remain better than issuance, according to a trader.

Investment-grade bond spreads ended mostly softer on the day, sources said.

The Markit CDX North American Investment Grade series 22 index eased 1 basis point to a spread of 58 bps.

Trace investment-grade bond volume was about $7.3 billion, a source said.

Monsanto notes firm

Monsanto’s 1.15% notes due 2017 traded at 26 bps offered on Friday afternoon, a trader said. The company sold $500 million of the three-year notes at a spread of Treasuries plus 30 bps.

Monsanto’s tranche of 2.125% notes due 2019 tightened to 46 bps offered in secondary trading. The notes priced in a $500 million offering at Treasuries plus 50 bps.

The company’s 2.75% notes due 2021 traded slightly better than issuance at 61 bps offered, the trader said. Monsanto sold $500 million of the seven-year notes at Treasuries plus 65 bps.

The tranche of 3.375% notes due 2024 firmed to 79 bps bid in the secondary market. Monsanto priced $750 million of the 10-year notes at 85 bps over Treasuries.

The company’s 4.2% notes due 2034 tightened to 81 bps bid, 78 bps offered, the trader said. Monsanto sold $500 million of the 20-year notes at Treasuries plus 90 bps.

The tranche of 4.4% bonds due 2044 traded late afternoon at 107 bps bid, 106 bps offered, according to the trader. Monsanto sold $1 billion of the bonds at 110 bps plus Treasuries.

Monsanto’s 4.75% bonds due 2064 firmed to 133 bps offered over the session. Monsanto priced $750 million of the 50-year bonds at Treasuries plus 140 bps in the seven-part offering.

The agricultural company is based in St. Louis.

Yamana Gold steady

Yamana Gold’s 4.95% notes due 2024 (Baa3/BB+/BBB-) headed out in the secondary market on Friday at 226 bps offered, a trader said.

The notes traded at 225 bps bid, 220 bps offered in aftermarket trading after the issue priced on Wednesday, according to a trader.

Yamana Gold sold $500 million of the 10-year notes at Treasuries plus 240 bps.

The precious metals mining company is based in Toronto.

Bank/brokerage CDS costs flat to higher

Investment-grade bank and brokerage CDS prices were unchanged to higher, according to a market source.

Bank of America Corp.’s CDS costs ended flat at 65 bps bid, 68 bps offered. Citigroup Inc.’s CDS costs eased 2 bps to 64 bps bid, 67 bps offered. JPMorgan Chase & Co.’s CDS costs rose 2 bps to 54 bps bid, 57 bps offered. Wells Fargo & Co.’s CDS costs widened 2 bps to 41 bps bid, 44 bps offered.

Merrill Lynch’s CDS costs closed unchanged at 68 bps bid, 72 bps offered. Morgan Stanley’s CDS costs ended flat at 65 bps bid, 68 bps offered. Goldman Sachs Group, Inc.’s CDS costs were flat at 69 bps bid, 72 bps offered.

Paul Deckelman contributed to this review.

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