NEW YORK: The US high-grade market racked up nearly US$29bn in issuance this week, though as the days progressed there were signs of investor fatigue after such another big surge of supply.
While trades earlier in the week mostly found decent pricing leverage and substantial interest, there was some investor pushback as the week wore on.
Home Depot led the way on Monday with US$2bn in five and 30-year bonds that priced about 10bp inside initial price thoughts on books almost three times covered.
The US$1bn 5-year priced at plus 40bp, which seemed to carry about 3bp in new issue concession after adding 8bp for the maturity differential on outstanding September 2018s quoted with a G-spread of 29bp.
The long 30-years paid up only 2bp in concession. Investors bombarded drug company Actavis with US$17bn of orders for a four-part US$3.7bn acquisition financing on Tuesday, demonstrating the kind of reception even aggressively acquisitive credits can receive in today's bond market.
Actavis was able to ratchet in launch spreads by as much as 25bp on its four-tranche deal of three, five, 10 and 30-year securities.
Highly acquisitive even in an M&A-riddled sector, Actavis has nevertheless won the hearts of bond investors by expanding without breaching its credit metric commitments to rating agencies.
All tranches have held solid. On Friday the threes, fives, 10s and 30s were trading respectively at 55bp bid, 50bp offered over Treasuries; 78/74bp; 126/122bp; and 148/144bp.
Credit Suisse broke the drought in Yankee bank issuance of Additional Tier 1 offerings with a US$2.5bn deal, in the process re-establishing the US market as the best place for Europe's national champions to raise capital in dollars.
The 6.25 percent perpetual non-call 10.5 preferred was the first European bank Tier 1 deal in Yankee 144A format since January.
Citigroup jumped in to issue a US$1.25bn 3.75 percent 10-year note at a level that was 10bp-15bp tighter than initial price thoughts.
The new 2024s attracted a peak book of US$4.3bn after Citi went out with whispers in the 125bp-130bp range. The book size dropped back to around US$3.8bn after it pulled in pricing to 115bp from guidance of 117bp.
ANZ received a large swath of orders just shy of US$4bn for a three-part offering of US$1.25bn of 1.25 percent three-year fixed rate notes maturing June 2017; US$250m of three-year floating-rate notes; and US$1.25bn of 2.25 percent five-year notes maturing June 2019.
Royal Bank of Canada, John Deere, First Republic Bank and Svenska Handelsbanken all tapped the US market with senior unsecured notes.
Vornado Realty meanwhile became the third corporate to issue a green bond in US dollars and it appeared to benefit significantly from its efforts, pricing a US$450m 2.5 percent five-year 20bp tighter than where it first whispered the deal.
The deal, initially sized at US$300m, attracted more than US$1.2bn of demand, enabling lead managers to ratchet in pricing to T+90bp from initial price thoughts of 110bp.
A number of Yankee deals from names like RioPrevidencia, Turk Telecom, OCBC, PTT Exploration & Production, GS Caltex, Votorantim Industrial and Odebrecht Oil & Gas added diversity to the market and helped boost volumes.
RioPrevidencia, the state of Rio de Janeiro's public pension funds, came with one of the bigger sized trades, a US$2bn 10-year amortizer at 99.998 to yield 6.25 percent.
IN THE MIX Response to other Tier 1 issues was mixed. Investors threw caution to the wind and scrambled for Capital One Financial's US$500m perpetual Tier 1 non-call five preferred, even though it was a structure that significantly underperforms when rates rise.
But Bank of America experienced some pushback when it tried to increase the size of its US$1.5bn 5.125% perpetual non-call five-year Tier 1 preferred to the US$2bn that investors had expected, and it ended up not pulling in the price from whispers.
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