High-grade issuers quiet ahead of holiday; Walmart, Charter flat; Bayer, CVS Health soften

By Cristal Cody

Tupelo, Miss., July 3 – The high-grade bond market closed early on Tuesday with no deal activity reported.

The markets shut at 2 p.m. ET and will reopen on Thursday following the U.S. Independence Day holiday.

Reported issuers stayed out of the primary market also on Monday. Syndicate sources expect little to no activity over the week with supply forecasts of zero to up to $5 billion.

Volume is expected to stay light until after companies exit earnings blackout periods in mid-July, while bond offerings related to funding for mergers and acquisitions should stay light until September, sources report.

“North American M&A announcement volume declined to $169 [billion] in June from $269 [billion] in May,” BofA Merrill Lynch analyst Yunyi Zhang said in a note released on Tuesday. “At the same time, the pipeline of announced deals with potential high grade funding implications declined to $427 [billion] at the end of June from $484 [billion] at the end of May.”

Just three deals with the potential for investment-grade bond funding are slated to close by August, while nearly a dozen deals that may be funded through bond deals are set to complete in September, according to the note. A heavy pipeline of deals is set to close in December, including Cigna Corp.’s $68.4 billion takeover of Express Scripts Holding Co. and ConAgra Brand Inc.’s $10.8 billion acquisition of Pinnacle Foods Inc., the note said.

Bonds priced this year to fund takeover deals were mixed in secondary trading over the day.

Walmart Inc.’s notes priced as part of a $16 billion transaction in June to in part pay a portion of the price for the acquisition of a majority ownership of Flipkart Private Ltd. were unchanged.

Bayer AG’s notes priced in June to help fund its $63 billion acquisition of Monsanto Co. softened about 4 basis points to 5 bps.

CVS Health Corp.’s notes (Baa1/BBB+) sold in March to fund its $47.9 billion acquisition of Aetna Inc. eased about 5 bps on Tuesday.

In other new issue trading, Charter Communications, Inc.’s senior secured notes brought to the primary market last week were flat.

The Markit CDX North American Investment Grade 30 index was quoted about 1 bp tighter at a spread of 67 bps.

Walmart steady

Walmart’s 3.4% notes due June 26, 2023 were unchanged on the day at 55 bps bid, a market source said.

The company sold $2.75 billion of the notes on June 20 at a 60 bps spread over Treasuries.

Walmart’s $2.75 billion tranche of 3.7% notes due June 26, 2028 also were flat at 75 bps bid over the session.

The notes priced in the June 20 offering at a Treasuries plus 80 bps spread.

The discount retailer is based in Bentonville, Ark.

Bayer eases

Bayer’s 4.375% notes due Dec. 15, 2028 softened about 4 bps to 154 bps bid on Tuesday, according to a market source.

Bayer affiliate Bayer US Finance II LLC (Baa1/BBB/A-) sold $3.5 billion of the notes on June 18 as part of a $15 billion eight-part issue at a spread of 155 bps over Treasuries.

The health care and agriculture products company is based in Leverkusen, Germany.

CVS softens

CVS Health’s 4.3% notes due March 25, 2028 traded about 5 bps softer on Tuesday at 168 bps bid, a market source said.

The company sold $9 billion of the notes on March 6 at a spread of Treasuries plus 160 bps.

The $8 billion of 5.05% notes due March 25, 2048 eased 5 bps to 200 bps bid during the day.

CVS Health sold the notes in the March 6 offering at a spread of Treasuries plus 195 bps.

The retail pharmacy chain and pharmacy benefits manager is based in Woonsocket, R.I.

Charter unchanged

Charter Communications’ 4.5% notes due Feb. 1, 2024 headed out unchanged on Tuesday at 174 bps bid, a market source said.

Charter subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. sold $1.1 billion of the notes (Ba1/BBB-/BBB-) on Thursday at a Treasuries plus 180 bps spread.

The broadband communications company is based in Stamford, Conn.

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