Microsoft Issued the Most High-Grade Bonds Last Week

US corporates dominated the primary market for high-grade bonds in the week ended August 5, 2016. They made up 63.7%, or $32.8 billion, of all issues. Yankee issuers made up 15.9%, while US financials issuers made up the remaining 10.9% of the total issuance.

The week ended August 5 brought the year-to-date issuance of high-grade corporate bonds to $1.1 trillion. That was 2% higher than the issuance in the same period in 2015.

Issuances by high-grade corporates form part of the Vanguard Total Bond Market ETF (BND), the iShares 1-3 Year Credit Bond (CSJ), and the SPDR Barclays Short Term Corporate Bond ETF (SCPB).

Microsoft (MSFT) issued the following Aaa/AAA rated high-grade bonds worth $19.8 billion in seven parts on August 1, 2016:

• $2.5 billion in 1.1% three-year notes issued at a spread of 35 bps (basis points) over similar-maturity Treasuries
• $2.8 billion in 1.6% five-year notes issued at a spread of 50 bps over similar-maturity Treasuries
• $1.5 billion in 2.0% seven-year notes issued at a spread of 70 bps over similar-maturity Treasuries
• $4.0 billion in 2.4% ten-year notes issued at a spread of 90 bps over similar-maturity Treasuries
• $2.3 billion in 3.5% 20-year bonds issued at a spread of 120 bps over similar-maturity Treasuries
• $4.5 billion in 3.7% 30-year bonds issued at a spread of 145 bps over similar-maturity Treasuries
• $2.3 billion in 4.0% 40-year bonds issued at a spread of 180 bps over similar-maturity Treasuries

The company intends to use the proceeds of the loan to fund its purchase of LinkedIn (LNKD).

UBS Group Funding (Jersey), a subsidiary of UBS Group AG (UBS), issued A-/A high-grade bonds worth $2.5 billion on August 3, 2016, in the following two parts:

• $500 million in long five-year FRNs (floating rate notes) issued at LIBOR + 153 basis points
• $2.0 billion in 2.7% long five-year notes issued at a spread of 160 bps over similar-maturity Treasuries

JPMorgan Chase (JPM) issued high-grade bonds worth $2.5 billion on August 3, 2016. The single-tranche A3/A- rated five-year non-callable for four years issue was raised at a coupon of 2.3%. The high-grade bonds were issued at a spread of 123 bps over similar-maturity Treasuries.

International Paper (IP) issued Baa2/BBB high-grade bonds worth $2.3 billion on August 2, 2016, through the following two parts:

• $1.1 billion in 3.0% 10.5-year bonds issued at a spread of 150 bps over similar-maturity Treasuries
• $1.2 billion in 4.4% 41-year bonds issued at a spread of 210 bps over similar-maturity Treasuries

In the next part, we’ll look at investment-grade bond fund flows.