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Investment-Grade Corporates Return after a Lackluster Week

PART:
1 2 3 4 5
Part 4
Investment-Grade Corporates Return after a Lackluster Week PART 4 OF 5

Yankee Bonds Throng the High-Grade Primary Market

Deals overview

Yankee bonds continued to dominate primary market issuance in the week to April 10. These bonds made up 40.7% of all the issues. Among Yankee bonds, 73% were issued by financials. The rest were issued by corporates. In contrast, US corporates accounted for 18.9% of all the issues in the week. The week ending April 10 brought the YTD (year-to-date) issuance of corporate investment-grade debt to $469.16 billion.

Yankee Bonds Throng the High-Grade Primary Market

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Issuances by investment-grade corporates form part of the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD).

So far, this year’s single largest issuance was by Actavis Plc (ACT)—a manufacturer of generic, brand, and bio-similar pharmaceuticals. Actavis had issued bonds worth $21 billion in the week to March 6. This was also the second largest deal ever—behind Verizon’s (VZ) $49 billion issue in September 2013. Verizon’s debt issues form part of the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD). ExxonMobil’s (XOM) seven-part $8 billion issue was another jumbo deal in March.

Last week, GM Financial—the financial services arm of General Motors (GM)—issued bonds worth $2.4 billion. This made it the highest issuer in the period.

Details of GM Financial’s issue

GM Financial issued bonds worth $2.4 billion. The Ba1/BBB- rated three-tranche issue consisted of:

  • $300 million in three-year FRNs (floating rate notes) at three-month LIBOR + 136 bps (basis points)
  • $850 million in 2.4% three-year notes at a spread of 160 bps over similar maturity Treasuries
  • $1.25 billion in 3.45% seven-year notes at a spread of 182 bps over similar maturity Treasuries

Details of ING Groep’s issue

ING Groep (ING) provides financial services to corporates and individuals across the world. It issued investment-grade bonds worth $2.25 billion. The Ba2/BB rated two-tranche issue consisted of:

  • $1 billion in NC-5 perpetual bonds at 6%
  • $1.25 billion in NC-10 perpetual bonds at 6.5%

Details of other issues

Glencore Funding LLC works as a funding vehicle in the US for the Glencore Xstrata Group. It raised bonds worth $2.25 billion. The Baa2/BBB rated four-part issue consisted of:

  • $250 million in three-year FRNs at three-month LIBOR + 106 bps
  • $500 million in 2.125% three-year notes at a spread of 130 bps over similar maturity Treasuries
  • $1 billion in 2.875% five-year notes at a spread of 155 bps over similar maturity Treasuries
  • $500 million in 4% ten-year notes at a spread of 220 bps over similar maturity Treasuries

Bank of Montreal (BMO) issued bonds worth $1.25 billion. The Aa3/A+ rated two-tranche issue consisted of:

  • $250 million in three-year FRNs at three-month LIBOR + 36 bps
  • $1 billion in 1.4% three-year notes at a spread of 60 bps over similar maturity Treasuries
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