--Four companies price $2 billion of new bonds Tuesday
--Illinois Tool Works leads with $1.1 billion, 30-year deal
--This month's issuance at more than $54 billion, compared with
$43 billion average for August in past five years, Dealogic
shows
(Adds final pricing information for ITW in second paragraph,
updated Markit data in sixth paragraph and Fidelity pricing in
ninth paragraph.)
By Patrick McGee
Smaller deals are finding a receptive audience in the
corporate-bond market, despite lightly staffed trading desks.
Four companies priced $2 billion of new bonds Tuesday, led by a
$1.1 billion, 30-year deal from Illinois Tool Works Inc. (ITW). It
sold the bonds at a coupon of 3.90%, joining a small club of
borrowers to issue long-dated bonds at sub-4%, and saving nearly a
full percentage point from its 30-year offering a year ago,
according to data provider Dealogic.
The offerings push this month's issuance to more than $54
billion, compared with a $43 billion average for August in the past
five years, Dealogic shows.
Though borrowing costs have ratcheted up this month as benchmark
Treasury rates have risen, rates are well under the previous record
lows heading into this year, according to the Barclays U.S.
corporate investment-grade index, which goes back to 1973. The
average yield is currently 3.08%, versus a record-low 2.92% on July
31. The low heading into 2012 was 3.36%.
The average yield is also just 1.71 percentage points more than
Barclays's Treasurys index, the narrowest spread to the safe-haven
asset class in just more than 12 months.
The deals were sold as Markit's CDX North America
Investment-Grade Index, a proxy for buyer sentiment, improved 0.9%
in midafternoon trading. That brought the index to 97.5 basis
points, indicating the cost to protect against defaults was at its
lowest since May 3. In late-afternoon trading, the index weakened
to 98.5 basis points. A basis point is one-hundredth of a
percentage point.
But Illinois Tool Works was able to take advantage of the
favorable conditions, borrowing cash that won't come due for three
decades. The company paid just 1.05 percentage points more than
Treasurys on the 30-year bonds, in its largest deal since selling
$1.5 billion in March 2009.
The bonds carry provisional ratings of A1 from Moody's Investors
Service and A-plus from Standard & Poor's Ratings Services.
Among smaller deals, Fidelity National Financial Inc. (FNF) sold
$400 million of 10-year bonds at 5.564%, or 3.75 percentage points
more than Treasurys.
PPL Electric Utilities Corp. and India's Axis Bank Ltd.
(532215.BY) also completed $250 million deals.
Write to Patrick McGee at patrick.mcgee@dowjones.com
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