Goldman, General Mills, Discovery, TransCanada sell bonds; Treasury yields ease after auction

By Andrea Heisinger and Cristal Cody

New York, May 26 - Goldman Sachs Group Inc., General Mills, Inc., Discovery Communications LLC and TransCanada Pipelines Ltd. sold bonds as the high-grade market snapped back into action on Wednesday.

The fairly robust issuance followed a day with no new deals and a start to the week that brought three sales.

Goldman Sachs was the most-watched deal of the day with its $1.25 billion of 10-year senior notes.

General Mills priced its $500 million deal of notes due in 2040 at about the same time.

Late-afternoon sales came from TransCanada and Discovery Communications.

TransCanada price its $1.25 billion sale in tranches due 2015 and 2040.

The $3 billion Discovery Communications deal, which is guaranteed by its parent company, was split into three tranches. It included $850 million of five-year notes, $1.3 billion of 10-year notes and $850 million of 30-year bonds.

The tone wasn't much better than any other recent day, but issuers decided to price anyway.

When asked if the market was feeling any better today, a source said that "I'm not sure right now," and then added, "You saw how things ended yesterday, right? It's pretty subjective."

A trader who watches the credit-default swaps market said that the cost of protecting holders of bonds issued by major banks, such as Bank of America Corp., Citigroup Inc. and JP Morgan Chase, against a possible event of default fell by between 2 basis points and 13 bps on the Wednesday session, reflecting renewed investor confidence in the sector.

He also saw the CDS protection cost of bonds of major investment banking houses like Morgan Stanley and Goldman Sachs 5 bps to 15 bps lower.

Goldman's new and existing high-grade debt was weaker in secondary trading, according to other sources.

Also in trading, the new offering from TransCanada Pipelines was wider, while General Mills sale of 5.4% bonds due 2040 tightened, traders said.

The new offerings may have given high-grade trading a boost. Overall investment-grade Trace volume jumped 30% to about $12 billion, according to a source.

The CDX Series 14 North American investment-grade index firmed 2 bps to a mid bid-asked spread level of 124 bps, a source said.

In Treasuries, yields eased after the government's second auction of $40 billion of five-year notes.

Yields on benchmark 10-year Treasury notes were 4 bps weaker at 3.19% a day after sinking to their lowest level on Tuesday since April 2009.

Yields on the 30-year bond eased 3 bps to 4.09%.

The Treasury Department auctioned the $40 billion of five-year notes at a yield of 2.13%. The government sold $42 billion of two-year notes on Tuesday at a yield of 0.769%.

"Today's five-year was about average. Not bad, not great," one trader said.

The final auction of the week is set for Thursday with the sale of $31 billion of seven-year notes.

Goldman Sachs sells $1.25 billion

Goldman Sachs Group priced $1.25 billion of 6% 10-year senior notes (A1/A/A+) at 280 bps over Treasuries, a source away from the deal said.

Goldman Sachs & Co. Inc ran the books.

The New York City-based investment bank last sold 10-year bonds on March 19. That sale was $750 million of 5.375% notes due 2020 that priced at a spread of Treasuries plus 175 bps.

A portion of the notes tightened in secondary trading to 278 bps bid, 275 bps offered, but the notes moved out late afternoon, one trader said.

"Last I saw was 283, 280. Seems to be lots of interest," the trader said.

That deal was done before the bank was investigated by the Securities and Exchange Commission for fraud in its mortgage unit. Wednesday's sale commanded a significantly higher new issue concession because of that, a market source said.

"They are being kind of brave," a market source said. "There's a lot of volatility out there - some of it on them."

Those 5.375% notes due in 2020 have also been trading heavily since the civil lawsuit against the bank by the government was announced.

Those traded Wednesday at 261 bps versus 259 bps on Tuesday, sources said. The notes are well off of the quote of 188 bps bid, 187 bps offered from early March, according to sources.

Discovery Communications prices $3 billion

Discovery Communications priced $3 billion of guaranteed senior unsecured notes (Baa2/BBB-/BBB) in three tranches, an informed source said.

The $850 million of 3.7% five-year notes sold at a 170 bps over Treasuries spread.

The $1.3 billion of 5.05% 10-year notes priced at Treasuries plus 190 bps.

A third tranche of $850 million in 6.35% 30-year bonds priced at a spread of Treasuries plus 225 bps.

The notes are guaranteed by Discovery Communications, Inc.

All of the bonds priced in line with guidance. That was the 170 bps area for the five-year tranches, the 190 bps area for the 10-year tranche and the 225 bps area for the 30-year bonds.

Books for the sale were about $6 billion, leaving it roughly two times oversubscribed, the source said.

Citigroup Global Markets and J.P. Morgan Securities Inc. were the active bookrunners.

Proceeds are being used to redeem up to $2 billion outstanding under Discovery Communications Holding LLC term loans due in 2014 and up to $935 million of private placement notes.

The media and entertainment company is based in Silver Spring, Maryland.

High-grade primary plugs along

After a day with no new deals, issues returned in a big way with all but one of the day's sales more than $1 billion.

It wasn't that the market suddenly improved overnight, but that there was a glimmer of positive news at the open.

"The Treasuries rallied this morning," a market source said. "With all the bad news going on, it's not a market where you want to sit on the sidelines. It felt good this morning."

The Goldman Sachs deal was perhaps the most surprising to those away from it.

Other sales, like the largest one of the day in the form of $3 billion from Discovery Communications was always intended to price this week, but had to wait for an opening.

"That was this week's trade," a source close to it said. "We just decided to go for it."

A couple of slight changes to the market is that deals are no longer blowouts on the books, as evidenced by the somewhat modest two times oversubscribed for the Discovery deal as well as that they are pricing in line with talk, not at the tight end.

"It's all very conservative now," a source said.

General Mills offers 30-year bond

Cereal and food maker General Mills priced $500 million of 5.4% 30-year senior unsecured notes (Baa1/BBB+) by mid-afternoon to yield Treasuries plus 130 bps, an informed source said.

They were priced in line with guidance in the 130 bps area, the source said.

The bonds were first seen trading at 135 bps bid, 131 bps offered, a trader said.

They were quoted by another trader closing at 125 bps over Treasuries.

Barclays Capital Inc., Credit Suisse Securities and J.P. Morgan Securities Inc. were bookrunners.

Proceeds will be used to repay a portion of outstanding commercial paper.

The company is based in Minneapolis.

TransCanada prices two tranches

TransCanada Pipelines sold $1.25 billion of notes (A3/A-) in two tranches late in the afternoon, a source close to the sale said.

A $500 million tranche of 3.4% five-year notes priced at a spread of Treasuries plus 137.5 bps.

The second tranche of $750 million of 6.1% 30-year bonds sold at a 200 bps over Treasuries spread.

The 3.4% notes moved out to 142 bps bid, 134 bps offered while the 30-year bonds moved out in late afternoon secondary trading to 207 bps bid, the traders said.

Bookrunners were Deutsche Bank Securities and HSBC Securities.

The natural gas pipeline is based in Calgary, Canada.

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