Market tone improves; Citigroup, RBC price tight; Apple mixed; bank, financial paper flat

By Aleesia Forni and Cristal Cody

Virginia Beach, Jan. 29 – Citigroup Inc. and Royal Bank of Canada were in the investment-grade primary with new deals on Thursday.

With a slightly improved tone to the market following Wednesday’s Federal Open Market Committee statement, the high-grade primary saw around $8.8 billion of new issuance during the session.

Citigroup sold a $2 billion three-year note, which garnered around $4.7 billion of orders and sold at the tight end of talk.

Royal Bank of Canada’s new $2 billion covered bond also sold tight of guidance.

In other primary happenings on Thursday, AT&T Inc. priced a $2.62 billion 30-year global note.

Praxair, Inc. and Select Income REIT were each in the market with multi-tranche offerings during the session.

Both companies added a tranche of notes to their offerings following their respective deal announcements.

Thursday’s new issue activity pushes the week’s total supply to roughly $18.1 billion, still short of what was predicted to be around a $20 billion to $25 billion week.

Primary action in the Canadian high-grade market continues to stay quiet in 2015, although three deals priced on Wednesday, according to market sources.

“If we don’t get a deal tomorrow, it will be the slowest January since 2006,” a syndicate source said.

Issuance for the year is projected at C$80 billion, down C$10 billion from 2014.

The drop in Canadian issuance is attributed to low coupons and traditional issuers pricing deals elsewhere, the source said.

“Banks are traditionally the big issuers, and they have found better opportunities offshore,” the source said. “And investors don’t seem that desperate to add credit with these coupons.”

In the secondary market, bonds were mostly unchanged to modestly better, sources said.

The Markit CDX North American Investment Grade index edged less than 1 basis point tighter to a spread of 68 bps.

Apple Inc.’s notes traded flat to weaker over the day, with the company’s 3.45% notes due 2024 notes out 10 bps.

Bank and financial paper was mostly unchanged.

Goldman Sachs Group Inc.’s 3.85% notes due 2024 were flat on the day.

Morgan Stanley’s 3.875% notes due 2024 were quoted unchanged in afternoon trading.

JPMorgan Chase & Co.’s 3.625% senior notes due 2024 traded flat but about 5 bps tighter than where the paper ended on Monday.

Citi brings $2 billion

Citigroup sold $2 billion of three-year senior notes (Baa2/A-/A) on Thursday at Treasuries plus 97 bps, an informed source said.

Pricing was at 99.924 to yield 1.826%.

The notes sold at the tight end of price talk.

Citigroup Global Markets Inc. was the bookrunner.

The bank is based in New York.

AT&T global notes

Also on Thursday, AT&T priced $2,619,000,000 of 4.6% global notes (A3/A-/A) due Feb. 1, 2045 on Thursday at par, according to an FWP filed with the Securities and Exchange Commission.

The notes will be listed on the GreTai Securities Market.

Proceeds will be used for general corporate purposes, including acquisition-related payments.

The telecommunications company is based in Bedminster, N.J.

RBC covered bond

Royal Bank of Canada sold a $2 billion 1.875% five-year covered bond at mid-swaps plus 44 bps on Thursday, a market source said.

Guidance was set in the mid-40 bps area over mid-swaps.

The notes (Aaa/AAA/AAA) sold at 99.986 to yield 1.878%.

The bookrunners were Goldman Sachs & Co., RBC Capital Markets LLC and UBS Securities LLC.

The financial services company is based in Toronto.

Select Income new issue

The session also saw Select Income REIT sell $1.45 billion of senior notes (Baa2/BBB-/) in tranches due 2018, 2020, 2022 and 2025 on Thursday, according to a market source.

The company priced $350 million of 2.85% three-year notes at 99.616 to yield 2.985%, or Treasuries plus 215 bps.

A second tranche was $400 million of 3.6% five-year notes sold at 99.21 to yield 3.775%, or Treasuries plus 250 bps.

There was also $300 million of 4.15% seven-year notes priced with a spread of Treasuries plus 280 bps.

Pricing was at 98.746 to yield 4.36%.

Finally, $400 million of 4.5% 10-year notes priced at 97.99 to yield 4.755%, or 300 bps over Treasuries.

The seven-year tranche was added following the deal’s announcement.

The bookrunners were BofA Merrill Lynch, Citigroup Global Markets, Jefferies, Morgan Stanley & Co. LLC, RBC Capital Markets and UBS Securities.

Proceeds will be used to help fund the acquisition of Cole Corporate Income Trust.

Select Income REIT is a real estate investment trust that owns properties that are primarily net leased to single tenants. The company is based in Newton, Mass.

Praxair offering

Praxair sold $750 million of notes (A2/A/) in new and reopened tranches on Thursday, according to a market source.

The offering included a $150 million tranche of two-year floating-rate notes priced at par to yield Federal Funds plus 33 bps.

A $400 million 2.65% 10-year note sold at Treasuries plus 95 bps.

Pricing was at 99.617 to yield 2.694%.

There was also a reopening of the company’s 3.55% bonds due Nov. 7, 2042.

The $200 million tap priced at 99.838 to yield 3.559%, or Treasuries plus 125 bps.

Outstanding issuance of the notes due 2042 is $475 million, including $175 million priced at 68 bps over Treasuries on Nov. 2, 2012 and $650 million priced at 88 bps over Treasuries on April 29, 2013.

Bookrunners were Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities LLC.

Proceeds are for general corporate purposes, including debt repayment.

The industrial gas company is based in Danbury, Conn.

Apple eases

Apple’s 3.45% notes due 2024 eased 10 bps to 76 bps offered over the session, a source said.

Apple sold $2.5 billion of the notes (Aa1/AA+/) at Treasuries plus 77 bps on April 29, 2014.

The computer and mobile communications devices company is based in Cupertino, Calif.

Goldman paper unchanged

Goldman Sachs’ 3.85% notes due 2024 (Baa1/A-/A) traded flat at 148 bps bid, according to a market source.

Goldman Sachs sold $2.25 billion of the notes on June 30, 2014 at a spread of Treasuries plus 135 bps.

The financial services company is based in New York City.

Morgan Stanley notes flat

Morgan Stanley’s 3.875% notes due 2024 (Baa2/A-/A-) were unchanged at 147 bps bid, according to a market source.

Morgan Stanley sold $3 billion of the notes on April 23, 2014 at Treasuries plus 130 bps.

The financial services company is based in New York City.

JPMorgan better over week

JPMorgan’s 3.625% senior notes due 2024 (A3/A/A+) headed out flat over the session at 132 bps offered, a market source said.

The notes were seen on Monday at 137 bps offered.

JPMorgan sold $2 billion of the notes on May 6, 2014 at a spread of Treasuries plus 110 bps.

The financial services company is based in New York City.

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS prices fell on Thursday, according to a market source.

Bank of America Corp.’s CDS costs were 2 bp lower at 70 bps bid, 73 bps offered. Citigroup’s CDS costs were also 2 bp lower at 82 bps bid, 85 bps offered. JPMorgan Chase’s CDS costs fell 1 bp to 71 bps bid, 74 bps offered. Wells Fargo & Co.’s CDS costs declined 1 bp to 51 bps bid, 54 bps offered.

Merrill Lynch’s CDS costs fell 1 bp to 73 bps bid, 76 bps offered. Morgan Stanley’s CDS costs ended 2 bps lower at 82 bps bid, 85 bps offered. Goldman Sachs Group’s CDS costs decreased 1 bp to 91 bps bid, 94 bps offered.

Paul Deckelman contributed to this review.

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