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AT&T High-Grade Bond Issue is Second Highest of 2015 So Far

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The week’s deals

After the week ended March 13, US corporates made a splash in the primary market for high-grade bonds. In the week ending April 24, high-grade bonds issued by US corporates made up 34.1% of all issues. US financial companies accounted for 23.7% of all issues in the week.

On the other hand, Yankee bonds accounted for just 9.1% of the total, with more than 90% of their quantum raised by financial companies. The week ending April 24 brought the year-to-date issuance of corporate investment-grade debt to $559.1 billion.

Issuances by investment-grade corporates form part of the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD). Treasuries, the other investment-grade bond category, are tracked by funds like the iShares 1–3 Year Treasury Bond ETF (SHY).

Last week, telecom giant AT&T (T) issued bonds worth $17.5 billion—making it the second highest issuer of high-grade bonds in 2015 behind Actavis (ACT), which had raised $21 billion on March 3.

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Details of AT&T’s issue

AT&T (T) issued bonds worth $17.5 billion on April 23. The six-tranche issue consisted of:

  • $750 million in long 5-year FRNs (floating rate notes) at 3-month LIBOR + 93 basis points
  • $3.0 billion in 2.45% Baa1/BBB+ rated long 5-year notes at a spread of 110 bps over similar maturity Treasuries
  • $2.75 billion in 3.00% Baa1/BBB+ rated long 7-year notes at a spread of 130 bps over similar maturity Treasuries
  • $5.0 billion in 3.40% Baa1/BBB+ rated 10-year notes at a spread of 150 bps over similar maturity Treasuries
  • $2.5 billion in 4.50% Baa1/BBB+ rated 20-year bonds at a spread of 190 bps over similar maturity Treasuries
  • $3.5 billion in 4.75% Baa1/BBB+ rated 31-year bonds at a spread of 215 bps over similar maturity Treasuries

Details of Citigroup’s issue

Citigroup (C) issued high-grade bonds worth a cumulative $7 billion, hitting the primary market six times in 2015 so far, including two times this week. Rated Baa2/A-, this four-tranche issue consisted of:

  • $1.0 billion in 3-year FRNs (floating rate notes) at 3-month LIBOR
  • $2.5 billion in 1.70% 3-year notes at a spread of 92 bps over similar maturity Treasuries
  • $1.5 billion in 3.30% 10-year notes at a spread of 135 bps over similar maturity Treasuries
  • $2.0 billion in Ba3/BB rated perpetuals NC10 preferred at 5.95%

Details of Harris Corporation’s issue

Harris Corporation (HRS) is an international communications equipment provider. It raised high-grade bonds worth $2.4 billion and rated Baa3/BBB+ in five parts:

  • $500 million in 1.999% 3-year notes at a spread of 110 bps over similar maturity Treasuries
  • $400 million in 2.70% 5-year notes at a spread of 130 bps over similar maturity Treasuries
  • $600 million in 3.832% 10-year notes at a spread of 185 bps over similar maturity Treasuries
  • $400 million in 4.854% 20-year bonds at a spread of 220 bps over similar maturity Treasuries
  • $500 million in 5.054% 30-year bonds at a spread of 240 bps over similar maturity Treasuries
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