Morning commentary: General Dynamics, Mid-America, Clorox plan deals; heavy volume forecast

By Cristal Cody

Tupelo, Miss., May 7 – General Dynamics Corp. (A2/A+/A) announced a seven-part bond deal early Monday.

The company was expected to hold fixed income investor calls on Monday.

General Dynamics, a Falls Church, Va.-based global aerospace and defense company, completed its acquisition of government IT business CSRA Inc. in April. The transaction was valued at $9.7 billion, which includes the assumption of $2.8 billion in CSRA debt.

Also, Mid-America Apartments, LP (Baa1/BBB+/BBB+) gave details early Monday for an expected offering of senior notes following fixed-income investor calls the Memphis-based real estate investment trust held Friday.

In other primary market action, Clorox Co. joined the deal pipeline with a senior note offering and Kellogg Co. is marketing senior notes due 2021 and 2028.

In addition, Consolidated Edison Co. of New York, Inc. intends to price two tranches of debentures and Enable Midstream Partners, LP plans to sell 10-year senior notes.

Amcor Ltd. also is expected to tap the primary market soon after the company completed a two-day round of fixed income investor calls for a 10-year senior note deal on Friday.

Strong volume is expected to continue over the week, according to market sources.

About $30 billion to $35 billion of new bond issuance is forecast by syndicate sources for the week.

Supply may climb to as much as $50 billion for the week, a source said.

The potential for investment-grade bond deals related to mergers and acquisitions is strong in May, market sources report.

About $85 billion of high-grade bond deals related to mergers activity could come to the primary market over the next two months, according to BofA Merrill Lynch.

“We are now entering the period of seasonally elevated supply,” BofA Merrill Lynch analysts said in a note released on Monday. “Issuance in the first two weeks of May has averaged $32-33 [billion] per week since 2011.”

In other market activity, the three-month Libor yield was up 1 basis point to 2.37% at the start of the day, a source said.

The secondary market ended Friday with $13.86 billion of investment-grade issues traded, according to Trace.

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