By Patrick McGee Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Improvement in the credit markets has three borrowers issuing bonds Tuesday, placing the holiday-shortened week on track to meet volume expectations of $10 billion to $15 billion. Eastman Chemical Co. (EMN) leads the new-issue market with a $2.4 billion, three-part deal, followed by an $850 million offering of 10-year bonds from French food company Danone SA (DANOY, BN.FR) and a $300 million deal of 10-year debt from Whirlpool Corp. (WHR). Each of the deals is rated in the triple-B range, whereas last week's issuance was dominated by single-A borrowers, noted Ryan Newth, director of corporate syndicate at SunTrust Robinson Humphrey. Investors have been comforted by the rising prices of newly issued bonds, enabling lower-rated issuers to access the market with more confidence, he said. The Eastman deal features five-, 10- and 30-year maturities. It was launched recently at spreads to Treasurys of 1.70 percentage points, 1.95 points and 2.0 points, respectively. The spread on each has improved from earlier pricing guidance, indicating strong demand. Dealogic counted $16.6 billion of high-grade issuance last week, thanks largely to the $9.8 billion offering from United Technologies Corp. (UTX). After garnering almost four times the needed orders, the UTX deal has continued to improve in the secondary market. That helps the confidence of issuers and investors alike in participating in more deals. Newly issued bonds are more traded than older bonds, so they are considered a way to gauge sentiment. According to Newth, the UTX deal "reinvigorated the market." UTX's 10-year bonds were issued at a spread of 1.05 percentage points over Treasurys. They since have tightened to 0.81 point, including a 0.03-point improvement Tuesday, MarketAxess shows. UTX's three-year bond spreads have been pulled in 0.10 point Tuesday, narrowing the spread to just 0.53 point compared to 0.80 at issuance. McDonald's Corp. (MCD) bonds are outperforming as well. Its three-year bonds issued last Wednesday recently traded at a spread to Treasurys of 0.33 percentage point, marking a 0.10-point tightening from Friday and 0.12 points better than issuance. The better conditions are reflected in Markit's CDX North America Investment-Grade Index, which strengthened one basis point in midafternoon trading to 117, its lowest level since May 14. A basis point is one-hundredth of a percentage point, and the figure represents the annual cost to insure bonds for five years. At this level, the annual cost to insure $10 million of bonds would be $117,000. On May 18, it was $124,000, the costliest level of 2012. -By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com
