High-grade supply resumes after Fed rate cut; McDonald’s, Entergy price; credit spreads widen

By Cristal Cody

Tupelo, Miss., March 3 – Investment-grade issuers sold more than $6 billion of bonds on Tuesday in the busiest session in more than a week following the Federal Reserve’s rate cut of 50 basis points at the start of the session.

McDonald’s Corp. priced $2 billion of senior medium-term notes in three tranches.

Sherwin-Williams Co. sold $1 billion of senior notes in two parts.

American Electric Power Co., Inc. came with $800 million of senior notes in two tranches.

Texas Instruments Inc. brought $750 million of five-year notes.

Canadian Pacific Railway Co. sold $500 million of 10-year notes.

Also, Entergy Louisiana LLC priced $350 million of 31-year collateral trust mortgage bonds.

The deals are the first corporate issues to price this week following no issuance on Monday and only one offering in the market last week on volatility from the coronavirus.

Up to about $15 billion of bond supply is forecast for the week.

Early in the session, the Federal Reserve announced in a Federal Open Market Committee release that it lowered the target range for the federal funds rate to 1% to 1.25%.

“The fundamentals of the U.S. economy remain strong,” the Fed said. “However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate.”

In other activity, Fannie Mae announced that it would skip issuing any Benchmark Notes on Tuesday. Fannie Mae’s next scheduled date to offer Benchmark Notes is on March 24.

High-grade credit spreads closed softer on Tuesday after improving modestly Monday following last week’s move out by more than 21 bps.

The Markit CDX North American Investment Grade 33 index eased more than 4 bps to a spread of 69.71 bps.

Stocks ended Monday’s session strong with the Dow Jones Industrial Average up 5.09%, but were soft at the open on Tuesday and remained soft at the close. The Dow finished down 2.94%.

Treasuries rallied further over the day with the 10-year benchmark note off 7.8 bps at 1.01%.

McDonald’s prices $2 billion

McDonald’s sold $2 billion of senior medium-term notes (Baa1/BBB+/) in three tranches on Tuesday, according to an FWP filing with the Securities and Exchange Commission.

The company sold $500 million of 1.45% notes notes due Sept. 1, 2025 at 99.816 to yield 1.485% and a spread of 75 bps over Treasuries.

A $750 million tranche of 2.125% 10-year notes priced at 99.946 to yield 2.131%. The issue came at a Treasuries plus 115 bps spread.

McDonald’s placed a $750 million add-on to its 3.625% notes due Sept. 1, 2049 at 108.227 to yield 3.188% and a spread of 160 bps over Treasuries.

The issue originally priced in a $1 billion tranche on Aug. 7, 2019 at 99.075 to yield 3.732% and a Treasuries plus 150 bps spread. The total outstanding is now $1.75 billion.

Barclays, BofA Securities, Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, Citigroup Global Markets Inc., RBC Capital Markets, LLC and SG Americas Securities, LLC were the bookrunners.

The fast food chain is based in Chicago.

Sherwin-Williams raises $1 billion

Sherwin-Williams priced $1 billion of senior notes (Baa3/BBB/BBB) in two tranches on Tuesday, according to an FWP filing.

The company sold $500 million of 2.3% 10-year notes at 99.979 to yield 2.302% and a spread of Treasuries plus 130 bps.

A $500 million tranche of 3.3% 30-year notes priced at 99.823 to yield 3.309%, or a 170 bps over Treasuries spread.

BofA Securities, Citigroup, J.P. Morgan and Wells Fargo were the bookrunners.

Sherwin-Williams is a Cleveland-based developer, manufacturer and distributor of paints and related products.

American Electric sells notes

American Electric Power priced $800 million of senior notes (Baa1/BBB+/) in two tranches on Tuesday, according to an FWP filing.

The company priced $400 million of 2.3% 10-year notes at 99.956 to yield 2.305%. The notes were sold at a spread of 130 bps over Treasuries.

A $400 million tranche of 3.25% 10-year notes priced at 99.829 to yield 3.259%, or a Treasuries plus 165 bps spread.

BofA Securities, BNY Mellon Capital Markets, LLC, J.P. Morgan, Mizuho Securities USA Inc., Scotia Capital (USA) Inc., SMBC Nikko Securities America, Inc., TD Securities (USA) LLC and U.S. Bancorp Investments, Inc. were the bookrunners.

American Electric Power is a Columbus, Ohio-based electricity provider.

Texas Instruments in primary

Texas Instruments priced $750 million of 1.375% notes due March 12, 2025 (A1/A+/) at 99.851 to yield 1.406%, or a spread of 60 bps over Treasuries, on Tuesday, according to an FWP filing.

BofA Securities, MUFG, Barclays, Citigroup, J.P. Morgan, Mizuho and Morgan Stanley & Co. LLC were the bookrunners.

Texas Instruments is a Dallas-based semiconductor designer and manufacturer.

Canadian Pacific Railway prices

Canadian Pacific Railway sold $500 million of 2.05% 10-year notes (Baa1/BBB+/) on Tuesday at a spread of 105 bps over Treasuries, according to an FWP filed with the Securities and Exchange Commission.

The notes priced at 99.802 to yield 2.072%.

Barclays, Citigroup, HSBC Securities (USA) Inc., Morgan Stanley, BofA Securities and Wells Fargo were the bookrunners.

The notes are guaranteed by parent company Canadian Pacific Railway Ltd.

The railroad operator is based in Calgary, Alta.

Entergy Louisiana prints

Entergy Louisiana priced $350 million of 2.9% collateral trust mortgage bonds due March 15, 2051 on Tuesday at a spread of 130 bps over Treasuries, according to an FWP filing.

The bonds (A2/A/) priced at 99.755 to yield 2.912%.

BNY Mellon, MUFG, Regions Securities LLC, Scotia and Wells Fargo were the bookrunners.

Entergy Louisiana is a Jefferson, La.-based energy provider.

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