--Corporate bond issuance slows, but two jumbo deals get
priced
--Trading improves despite uncertainty ahead of EU summit
--Borrowing costs still near record-lows
(Updated throughout with pricing details, Markit data in 2nd-3rd
paragraphs, banker comment in 4th paragraph, and trading update in
final paragraph).
By Patrick McGee
Corporate bond deals continued to trickle in Wednesday as
companies push to get deals completed before the two-day European
Union summit begins Thursday.
Conditions were favorable, with the stock market rising and few
headlines making their way out of Europe. A broad gauge of
corporate-bond health, Markit's CDX North America Investment Grade
Index, improved 1.1% in late-afternoon trading.
The Markit index is based on credit default swaps that protect
against corporate bonds defaulting. The improvement suggests the
cost of protection is falling, despite uncertainty surrounding the
EU summit.
"You'd think people might buy protection ahead of the summit,
driving the spread wider, but that's not the case," said Michael
Mutti, senior credit strategist at Stifel, Nicolaus & Co. "The
market might just be getting tired of getting panicky before every
EU meeting."
For home-security-products provider ADT Corp., the stable tone
was encouraging enough to issue a three-part, $2.5 billion deal,
while serial issuer General Electric Capital Corp., a unit of
General Electric Co. (GE), sold $1.5 billion of three-year
notes.
ADT, which is being spun off by parent company Tyco
International Ltd. (TYC), sold bonds maturing in five-, 10-, and
30-year maturities. Launch terms indicated the bonds would offer
1.55, 1.90, and 2.25 percentage points more than Treasurys,
respectively, reflecting the lower end of earlier price
guidance.
They have provisional ratings of Baa2 by Moody's Investors
Service, BBB by Standard & Poor's, and BBB-plus by Fitch
Ratings.
Fitch noted the company boasts nationwide brand recognition with
more than six million customers, adding that its subscriber-based
business generates sustainable cash flow and solid liquidity.
GE Capital's three-year deal included fixed-rate and
floating-rate notes. The 1.625% coupon fixed notes were priced at
1.25 percentage points more than Treasurys.
Among smaller deals, Liberty Interactive Corp.'s (LINTA, LINTB)
multimedia retailer QVC Inc. sold $500 million of 10-year senior
secured notes. They yielded 5.125%, or 3.499 points more than
Treasurys. Markel Corp. (MKL), a property-and-casualty
insurance-holding company, priced $350 million of 10-year notes
yielding 4.919%, or 3.3 point over Treasurys.
The day was much quieter than Tuesday, when $8.25 billion was
sold.
Market participants were expecting upwards of $15 billion in new
issuance this week, in part because trading could be thin next week
owing to the U.S. Independence Day holiday falling on a
Wednesday.
According to Barclays, corporate bonds are yielding an average
3.29%, just 0.04 percentage point from the all-time record.
Actively-traded bonds improved in secondary trading, but overall
the market lacked a real direction. Seven of the 10 most-active
bonds outperformed Treasurys, according to MarketAxess.
Comcast Corp. (CMCSA) 10-year and 30-year bonds, which priced
Tuesday, have improved 0.06 and 0.04 of a percentage point,
respectively.
Spreads on 3M Co. (MMM) 10-year bonds that priced at a
record-low 2% coupon last week tightened 0.04 of a percentage point
Wednesday. The spread is now 0.52 point, versus 0.55 at
issuance.
-Write to Patrick McGee at patrick.mcgee@dowjones.com.