Investment grade issuers dominate bond market

18 May, 2004

Investment-grade issuers dominated the primary eurobond market on Monday as they began to secure financing ahead of expected interest rate hikes and further market volatility.
The FTSE Euro Corporate Bond Index was almost flat. It showed investment-grade corporate bonds in euros yielding an average 57.8 basis points more than similarly dated government bonds at 1502 GMT, 0.4 basis point more on the day.
Stuart Trow, a bond strategist at National Australia Bank, said investors may have been waiting for the market to calm after recent spread widening before bringing new deals.
"We saw bonds rally late on Friday and we might have seen a reaction to that. Companies may have thought that the investment-grade sector did not come to as much harm recently as it could have," Trow said.
In the market on Monday was Italian municipal utility ASM Brescia, which planned to price a 500-million-euro 10-year bond at swaps plus 45-50 basis points, a lead manager for the deal said.
Barclays Bank, Merrill Lynch and Banca Caboto are joint lead managers. ASM Brescia is rated A+ with a stable outlook by Standard & Poor's.
Elsewhere, French oilfield services company Technip will price its benchmark euro-denominated seven-year bond by the middle of this week, a banking source said. The bond is expected to be priced to give a spread of around 60 basis points over mid-swaps.
The company is rated BBB+ by credit rating agency Standard & Poor's. BNP Paribas, CSFB and Societe Generale are leading the deal.
The higher rated end of the credit curve will also see a seven-year euro-denominated benchmark bond from Dow Chemical, to be priced in the area of mid-swaps plus 65 basis points, a banker involved in the sale said.
The largest US chemical maker has mandated Barclays Capital and Dresdner Kleinwort Wasserstein to lead manage the sale. Pricing is expected early this week.
Dow Chemical is rated A3 by Moody's Investors Service and A- by Standard & Poor's.

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