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Bank Bonds Lead Corporate Market Higher

By Patrick McGee Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- A range of companies is tapping the U.S. credits markets on signs that investor demand for risky assets is holding up, particularly after the Federal Reserve said 15 of the biggest 19 U.S. banks would survive a depression-style hit to the economy. At least four sizable issues are in the market, including a three-year offering from J.P. Morgan Chase & Co. (JPM), plus two-part offerings from Nordea Bank (NRDEF, NRBAY, NDA.SK), Philip Morris (PM), and Medtronic (MDT). J.P. Morgan helped push up the entire U.S. equity market Tuesday when it reported a 20% increase in its quarterly dividend and authorized $15 billion in stock buybacks, just before the Fed released results of its Comprehensive Capital Analysis and Review, also known as the "stress tests" for the 19 largest banks. Dividend increases and stock buybacks are shareholder-friendly activities that are, at best, neutral to bondholders. But the sign of strength banks showed in the stress tests spurred investors to buy bank bonds, said Jesse Fogarty, portfolio manager at Cutwater Asset Management. "Bank spreads closed very firm as the overall message from the domestic banking sector was positive despite running the scenario analysis to a pretty harsh downside," he said. "We expect more bank issuance on the recent snap tighter in spreads, getting in any funding before first quarter earnings season begins." The financial sector is dominating secondary trading. Ten-year paper from Goldman Sachs Group (GS), Morgan Stanley (MS), and Bank of America Corp. (BAC) are outperforming Treasurys by 0.18, 0.27, and 0.23 percentage points, according to MarketAxess. Barclays Capital strategists said in a note Wednesday that the Fed's tests were "indeed highly stressful and should help ease any concerns regarding the capital position of U.S. banks." Nordea Bank's $2.75 billion offering includes $1 billion of three-year notes launched at 1.75 percentage points over Treasurys, and $1.75 billion of five-year notes at 2.05 points over Treasurys. Philip Morris is selling $1.25 billion in five- and 30-year maturities, at respective spreads to Treasurys of 0.68 points and 1.23 points, according to launch terms. Medtronic's $1.075 billion offering includes 10-year and 30-year bonds at 0.90 points and 1.1 points over Treasurys, respectively. "Investor appetite is quite strong," said a syndicate manager in New York. "The technicals supporting the market remain in place even after the large supply of volume last week." The $41.9 billion of high-grade debt sold last week was the second-highest in weekly records going back to 1995, and the most since early 2009, according to data provider Dealogic. This week's tally has been more subdued, with roughly $7.5 billion priced Monday and Tuesday. The market tone continues to improve from the best levels in eight months, according to Markit's CDX North America Investment-Grade Index, a measure of corporate bond sentiment. It advanced 1.1% Wednesday to 90 basis points, on track to finish at its best level since July 1. Key drivers of the rally are strong U.S. economic data and the Greek deal being put to bed, according to Scott MacDonald, head of research for MC Asset Management Holdings. "The rally continues, albeit with a little more volatility injected into the mix," he added. "It reflects creeping optimism over U.S. economic growth, which is filtering into markets." Yields on corporate bonds rose 0.04 percentage points to 3.39% on Tuesday's, but spreads compressed 0.017 points to 1.826 points over Treasurys. The 3.39% yield is the highest since February 21, but still just 0.12 points from the record low. -By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com

Stock News for Medtronic (MDT)
DateTimeHeadline
12/07/201420:25:13Deals Fuel Bond Boom
12/01/201419:54:39Medtronic's $17 Billion Bond Sale Is Year's Largest -- Update
12/01/201415:23:29Medtronic Selling Bonds for Covidien Acquisition -- Update
12/01/201410:49:16Medtronic Selling Bonds for Covidien Acquisition
11/28/201407:44:24EU Approves Medtronic's $43 Billion Merger With Covidien
11/26/201418:35:25Medtronic Acquisition of Covidien Receives U.S. FTC Clearance
11/18/201413:41:57Medtronic Sales Rise, Backs Covidien Deal -- 2nd Update
11/18/201413:34:48Correction to Medtronic Earnings Story
11/18/201410:41:22Medtronic Sales Drop in Core Pacemaker Business -- Update
11/18/201408:41:24Medtronic Revenue Grows 5%, Backs Commitment to Covidien Deal
11/17/201412:59:18Medtronic Profit, Sales Seen Rising in 2Q -- Earnings Preview
11/17/201406:28:22MARKET SNAPSHOT: Retailers Close Out Earnings Season
11/05/201409:45:59U.S. Hot Stocks: Hot Stocks to Watch
10/15/201417:05:13MARKET SNAPSHOT: U.S. Stocks Cut Losses In Harrowing, Volatile...
10/15/201414:50:29MARKET SNAPSHOT: U.S. Stocks Plummet As Selling Intensifies
09/15/201405:43:10Danaher Buys Nobel Biocare for About $2.1 Billion
09/15/201403:24:48Danaher Buys Nobel Biocare in $2.1 Billion Cash Deal
08/26/201407:20:42Medtronic Buys Brain-Stimulation Firm
08/26/201406:59:04Medtronic Buys Brain-Stimulation Firm for $200 Million
08/21/201416:13:51Inversions Push Falls to Treasury's Mark J. Mazur

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