--February new issuance climbs to new monthly record of $98.1 billion --High-grade yields fell to another record-low Tuesday --Corporate bonds outperformed Treasurys Wednesday By Patrick McGee Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- An extra day on the calendar helped new-issuance break a monthly volume record for February, as PepsiCo (PEP) and five other companies brought more than $7 billion into Wednesday's market. With equities climbing to multi-year highs in the backdrop, investors have been scooping up corporate bonds all month long, sending yields to the lowest in four decades and allowing companies to borrow at some of the cheapest rates ever. Investors are seeking bonds they can trade with ease, and new issues are the most liquid of all, said Jody Lurie at Janney Capital Markets. The demand incentivized companies to bring $98.1 billion to market this month, according to a preliminary estimate from data provider Dealogic. That beats the prior February record of $94.4 billion in 2009, and marks the biggest month for volume since May 2011, when $102.4 billion was sold. Seven companies sold $3 billion or more in the U.S. this month, including the $7 billion mega-deal from Brazilian oil company Petroleo Brasileiro SA (PBR), or Petrobras; and the $5.25 billion issue from BHP Billiton, the world's biggest mining company. Still, investor demand has outweighed the influx of supply, helping the Barclays Capital investment-grade corporate-bond index set a second-straight record low Tuesday at 3.28%, falling 0.02 percentage point. This is the fourth record low this month, in records going back to 1973. "Investment-grade corporate bonds have had a strong start in 2012, so don't be surprised to see some pullback," noted Charles Schwab strategist Kathy Jones. On Wednesday, investors slurped up a $2.75 billion, three-part issue from Pepsi, a $2 billion offering from ING Bank NV, a $1 billion offering from Southwestern Energy Co. (SWN), and three other deals. Pepsi's issue--its largest since January 2010, when it priced $4.25 billion--including three-, 10-, and 30-year bonds sold at yields over Treasurys of 0.35 percentage point, 0.80 point, and 0.95 point, respectively. The 0.75% three-year tranche was the sixth issue of that maturity to sell at a coupon of 1% or less this year, according to Dealogic. TransCanada priced $500 million of 0.875% three-year notes at 0.60 points over Treasurys earlier this week. ING's $2 billion offer of 3.75% coupon, five-year notes priced to yield 3.864%, or 3 percentage points over the Treasury rate. Pricing improved after the deal received $4.25 billion of orders, according to a banker on the deal. Southwestern's $1 billion issue of 4.10% coupon, 10-year notes priced to yield 4.115%, or 2.125 percentage points over the Treasury rate. Other deals in Wednesday's market include a 10-year offering from Rayonier (RYN), and 30-year deals from Raymond James (RJF) and Southern Co. (SO) unit Georgia Power. Markit's CDX North America Investment-Grade Index, a measure of health for the corporate bond market, struggled to keep its 1% gain in the morning; it eventually capitulated, weakening 0.2%. But it stands at 93.9 basis points, among the best levels since July. Corporate bond yields were generally higher by day's end, but they outperformed safe-haven Treasurys, which experienced a body blow when Federal Reserve Chairman Ben Bernanke appeared to imply the Fed wouldn't engage in another round of asset-buying, or quantitative easing. "We take issue with this read and it strikes us as an excuse chasing price action, rather than a real reason," said Ian Lyngen at CRT Capital, adding that Bernanke stands ready to continue using the Fed's balance sheet. Bernanke "said nothing we hadn't encountered before, someone sold and an excuse was needed," he added. -By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com
