Morgan Stanley sells sub notes; AutoZone prices; Bank of America trades tighter

By Aleesia Forni

Virginia Beach, April 20 – The investment-grade bond market opened the week on solid footing on Monday, with new deals pricing from Morgan Stanley, AutoZone Inc., National Rural Utilities Cooperative Finance Corp. and New York Life Global Funding.

Morgan Stanley attracted around $7 billion of orders for its new $2 billion global subordinated note.

The new 12-year offering sold around 12.5 basis points tight of the mid-point of initial guidance.

Also on Monday, AutoZone sold $650 million of senior notes in six- and 10-year tranches, both at the tight end of talk.

National Rural Utilities and New York Life Global Funding were each in the market with upsized new issues.

National Rural priced $500 million of two-year notes, and NY Life offered $450 million of three-year bonds.

The preferred market saw Citigroup Inc. announce a benchmark offering of $1,000-par series P fixed-to-floating-rate noncumulative preferreds.

The week’s opening session hosted around $3.6 billion of new issue activity.

Sources are calling for around $15 billion to $20 billion of supply to price during the week.

In the secondary market, spreads traded mostly tighter during Monday’s session.

The Markit CDX North American Investment Grade series 23 index firmed 2 bps to a spread of 62 bps.

Bank of America Corp.’s $5 billion of notes, which sold in three tranches on Thursday, traded mostly tighter in the secondary.

Morgan Stanley sub notes

Morgan Stanley sold $2 billion of 3.95% global medium-term subordinated notes (Baa3/BBB+/BBB+) on Monday at 210 bps over Treasuries, according to a market source and an FWP filed with the Securities and Exchange Commission.

Pricing was at 99.64 to yield 3.988%.

The notes were guided in the 215 bps area over Treasuries. Initial talk was set at 220 bps to 225 bps over Treasuries.

Morgan Stanley & Co. LLC was the bookrunner.

The financial services company is based in New York City.

AutoZone two-parter

AutoZone priced a $650 million issue of senior notes (Baa1/BBB/BBB) on Monday in six- and 10-year tranches, according a market source and an FWP filing with the SEC.

The sale included $250 million of 2.5% notes due 2021 at 99.962 to yield 2.507%, or Treasuries plus 118 bps.

The notes were guided in the 120 bps area over Treasuries, tightened from initial talk in the Treasuries plus 135 bps area.

There was also $400 million of 3.25% notes due 2025 priced at 99.731 to yield 3.282%, or Treasuries plus 138 bps.

Pricing was at the tight end of guidance set in the 140 bps area over Treasuries. Initial talk was set in the area of Treasuries plus 155 bps.

J.P. Morgan Securities LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC are the joint bookrunners.

Proceeds will be used for working capital, capital expenditures, new store openings, repurchases of common stock, acquisitions or general corporate purposes, which may include repaying, redeeming or repurchasing existing debt.

AutoZone is a Memphis-based automotive parts retailer.

National Rural upsizes

National Rural Utilities Cooperative Finance sold an upsized $500 million of 0.95% two-year notes (A2/A/) on Monday at Treasuries plus 45 bps, according to an informed source and a filing with the Securities and Exchange Commission.

Pricing was at 99.937 to yield 0.982%.

The notes sold on top of guidance and tight of initial talk set in the Treasuries plus 55 bps area.

The bookrunners were RBC Capital Markets LLC and U.S. Bancorp.

The market lender for electric cooperatives is based in Herndon, Va.

NY Life three-year bonds

New York Life Global Funding priced an upsized $450 million issue of 1.3% three-year bonds (Aaa/AA+/AAA) on Monday with a spread of 47 bps over Treasuries, a market source said.

Pricing was at 99.93 to yield 1.324%.

The notes sold at the tight end of talk set in the 50 bps area over Treasuries.

Bookrunners were Barclays, Credit Suisse Securities and Goldman Sachs & Co.

The notes sold via Rule 144A and Regulation S.

The unit of mutual insurance company New York Life Insurance Co. is based in New York.

Citi preferreds

Citigroup priced $2 billion of 5.95% $1,000-par series P fixed-to-floating rate noncumulative preferred stock, according to a market source on Monday.

Citigroup Global Markets Inc. is the sole bookrunner.

The dividend will be fixed until May 15, 2025 and will be payable semiannually during that time. After that date, the issue will begin floating at Libor plus a spread and will be payable quarterly.

The shares become redeemable May 15, 2025 or within 90 days of a regulatory capital treatment event. The redemption price is par plus accrued dividends.

The new securities will not be listed on any exchange.

The New York-based banking institution will use proceeds for general corporate purposes.

BofA notes firm

In the secondary market, Bank of America’s $5 billion of notes, which sold on Thursday in three tranches, traded mostly tighter, a market source said.

The bank’s $2 billion of 2.25% five-year senior notes (Baa2/A-/A), which priced at Treasuries plus 100 bps, was 2 bps tighter at 98 bps bid, 96 bps offered.

Its $2.5 billion 3.95% 10-year subordinated note (Baa3/BBB+/BBB+) traded 1 bp better at 209 bps bid, 207 bps offered.

The notes sold with a spread of Treasuries plus 210 bps.

The $500 million 4.75% 30-year subordinated note (Baa3/BBB+/BBB+), which sold at 220 bps over Treasuries, traded at 209 bps bid, 207 bps offered.

The financial services company is based in Charlotte, N.C.

Bank/broker CDS costs flat to lower

Investment-grade bank and brokerage CDS prices were flat to lower on Monday, according to a market source.

Bank of America’s CDS costs were unchanged at 62 bps bid, 65 bps offered. Citigroup’s CDS costs were also flat at 71 bps bid, 74 bps offered. JPMorgan Chase & Co.’s CDS costs fell 1 bp to 59 bps bid, 62 bps offered. Wells Fargo & Co.’s CDS costs remained flat at 40 bps bid, 43 bps offered.

Merrill Lynch’s CDS costs were flat at 64 bps bid, 69 bps offered. Morgan Stanley’s CDS costs were also 1 bp lower at 71 bps bid, 74 bps offered. Goldman Sachs Group, Inc.’s CDS costs were flat at 77 bps bid, 80 bps offered.

Stephanie N. Rotondo contributed to this review.

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