uploads/2015/04/Total-IG-Bond-Issuance-for-WE-April-10-20151.jpg

Yankee Bonds Throng the High-Grade Primary Market

By

Updated

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.

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

Article continues below advertisement

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
Article continues below advertisement

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
Advertisement

More From Market Realist