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11-05-2012 00:28:00

UPDATE: Companies Pour Into High-Grade Corporate Bond Market

--High-grade companies sell $8 billion of bonds

--Two $3 billion deals gets priced

--Weekly tally crosses the $20 billion mark

By Patrick McGee

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- It didn't take much to turn the issuance tap back on. With risk-sentiment improving overnight and borrowing costs still at record lows, companies seeking to issue bonds were making up for lost time after a mostly quiet Wednesday.

Six high-grade companies sold $8.2 billion of new bonds Thursday, led by two $3 billion issues from biopharmaceutical company Amgen Inc. (AMGN), and Asia's largest refiner by capacity, China Petrochemical Corp. (SNP), better known as Sinopec Group.

Media group Discovery Communications Inc. (DISCA) borrowed $1 billion, spirits producer Beam Inc. (BEAM) priced $600 million, Bank of New York Mellon Corp. (BK) had a $500 million deal and NextEra Energy Inc. (NEE) unit Florida Power & Light issued $600 million.

According to Dealogic, $12.2 billion was sold in the first three days of this week, placing the week's tally just beyond the $20 billion mark. Last week, $25.55 billion was sold in what was the fourth-busiest week of the year.

Borrowers were all enticed by the same thing: very low financing costs. The Barclays U.S. Investment Grade Corporate Bond Index has moved between 3.25% and 3.27% since Friday, the lowest range in almost four decades of records.

But issuance was quiet Wednesday as market participants were cognizant that recent bond issues were trading poorly, said Ryan Newth, director of corporate syndicate at SunTrust Robinson Humphrey. Prices have since rebounded, instilling more confidence to the market.

Berkshire Hathaway (BRKA, BRKB) 3% bonds due 2022 traded at 1.22 percentage points over Treasurys around midday, an improved spread from the 1.25-point spread they were priced at Tuesday, according to inter-dealer trades recorded by Benchmark Solutions. On Wednesday, the spread was as wide as 1.28 points.

"Everything was underwater yesterday," said Newth. "But this morning it was a firmer tone, with equities up."

He said this morning's deals were initially offered with higher-than-normal concessions--the extra yield offered on new bonds--but orders then piled up, allowing offered yields to fall.

Amgen sold its $3 billion deal in five-, 10- and 30-year maturities, paying respective yields of 2.125%, 3.625% and 5.375%, according to a banker on the deal. That represents 1.40, 1.85 and 2.35 percentage points over comparable Treasury rates.

Sinopec sold bonds with the same maturities, pricing them to yield 2.812%, 3.936% and 4.896%, respectively. The spreads to Treasurys were 2.05, 2.10 and 1.85 points over Treasurys.

The narrow spread on the longer-dated bonds reflects the dearth of high-quality issuance with a 30-year maturity, according to a banker familiar with the deal. Sinopec boasts a Aa3 rating from Moody's Investors Service and an A-plus rating from Standard & Poor's.

"There is significant demand for long bonds right now," the banker said. "There's not a lot of double-A-rated paper out there, globally."

Discovery, which issued the third jumbo-bond of the day, sold $1 billion of 10- and 30-year bonds at spreads of 1.55 and 1.95 points, yielding 3.399% and 5%.

-By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com

(END) Dow Jones Newswires

May 10, 2012 18:28 ET (22:28 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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