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Reynolds American Leads High-Grade Bond Issuance in June 12 Week

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Deals overview

US corporates dominated high-grade bond issuance in the week to June 12. They accounted for 56.5% of all the issues. Meanwhile, US financials accounted for 8.4% of all the issues. SAS issuers formed 14.5% of all the high-grade corporate bonds issued last week, while Yankee bond issuances made up 13.2% of the total issuance. The week ending June 12 brought the YTD (year-to-date) issuance of corporate high-grade bonds to $828.4 billion.

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

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About Reynolds American’s issue

Cigarette manufacturer Reynolds American (RAI) issued bonds worth $9 billion—the largest last week. The Baa3/BBB- rated bonds were issued in six tranches:

  • $1.25 billion in 2.30% three-year notes at a spread of 120 bps (basis points) over similar maturity Treasuries
  • $1.25 billion in 3.25% five-year notes at a spread of 150 bps over similar maturity Treasuries
  • $1 billion in 4% seven-year notes at a spread of 185 bps over similar maturity Treasuries
  • $2.5 billion in 4.45% ten-year notes at a spread of 205 bps over similar maturity Treasuries
  • $750 million in 5.70% 20-year bonds at a spread of 255 bps over similar maturity Treasuries
  • $2.25 billion in 5.85% 30-year bonds at a spread of 270 bps over similar maturity Treasuries

About Cisco Systems’ issue

Cisco Systems (CSCO) issued high-grade bonds worth $5 billion last week. The A1/AA- rated five-part issue consisted of:

  • $900 million in three-year FRNs (floating rate notes) at three-month LIBOR + 31 bps
  • $1.6 billion in 1.65% three-year notes at a spread of 55 bps over similar maturity Treasuries
  • $1.5 billion in 2.45% five-year notes at a spread of 70 bps over similar maturity Treasuries
  • $500 million in 3% seven-year notes at a spread of 88 bps over similar maturity Treasuries
  • $500 million in 3.50% ten-year notes at a spread of 105 bps over similar maturity Treasuries
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About B.A.T. International Finance’s issue

B.A.T. International Finance is a subsidiary of British American Tobacco (BTI). It raised A3/A- rated high-grade bonds worth $4.5 billion in five parts:

  • $500 million in three-year FRNs at three-month LIBOR + 51 bps
  • $750 million in 1.85% three-year notes at a spread of 75 bps over similar maturity Treasuries
  • $1.25 billion in 2.75% five-year notes at a spread of 100 bps over similar maturity Treasuries
  • $500 million in 3.50% seven-year notes at a spread of 130 bps over similar maturity Treasuries
  • $1.5 billion in 3.95% ten-year notes at a spread of 150 bps over similar maturity Treasuries

About Exelon’s issue

Utilities holding company Exelon (EXC) issued high-grade bonds worth $4.2 billion. The Baa2/BBB- rated five-tranche issue consisted of:

  • $550 million in 1.55% two-year notes at a spread of 90 bps over similar maturity Treasuries
  • $900 million in 2.85% five-year notes at a spread of 115 bps over similar maturity Treasuries
  • $1.25 billion in 3.95% ten-year notes at a spread of 160 bps over similar maturity Treasuries
  • $500 million in 4.95% 20-year bonds at a spread of 185 bps over similar maturity Treasuries
  • $1 billion in 5.10% 30-year bonds at a spread of 200 bps over similar maturity Treasuries
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