Bank of America, McDonald's continue flow of new paper; Bank of America, GE Capital firm

By Andrea Heisinger and Cristal Cody

New York, Feb. 2 - McDonald's Corp. and Bank of America Corp. each priced two-tranche deals on Thursday as the primary retained its upbeat tone.

Bank of America priced $2.25 billion of reopened 5.7% 10-year notes and new 30-year bonds.

Similarly, fast food giant McDonald's reopened an issue of 10-year notes with a 2.625% coupon and priced new 30-year bonds. Its deal totaled $750 million.

After about $16 billion of new bonds priced in the high-grade market on Wednesday, it wasn't hard to take advantage of that momentum, sources said.

"We had some record [coupons] yesterday, so I think maybe McDonald's was coupon hunting," a syndicate source said.

International Business Machines Corp. set new record lows for three-year notes and five-year notes, besting Colgate-Palmolive Co. On Wednesday, IBM priced three-year notes with a 0.55% coupon and five-year notes with a 1.25% coupon, versus Colgate's 0.6% three-year notes and 1.3% five-year notes that priced on Nov. 3.

Another record fell on Wednesday as Procter & Gamble Co. sold a 2.3% 10-year note. It took the record low for that maturity away from Colgate, which previously held the title at 2.45%.

The World Bank gave terms of its $5 billion sale of five-year global bonds that priced on Wednesday.

"It was another good day out there," a source who worked on the McDonald's trade said. "People really want good paper. No problems selling [McDonald's]."

Nearly all of the week's corporate deals have been well oversubscribed, showing that investors remain interested in high-grade bonds and waited throughout the quiet month of January to buy them.

"I don't think we'll have much tomorrow, but with rates how they are, who knows," a market source said.

Overall trading volume stayed unchanged at about $17 billion on Thursday.

McDonald's notes due 2022 edged 1 basis point wider in secondary trading, while no initial secondary activity was seen in the long bonds.

Bank of America's paper firmed in the secondary market, with the notes due 2022 tightening more than 10 bps.

General Electric Capital Corp.'s 2.9% notes due 2017 traded nearly 20 bps tighter on Thursday.

Bank and financial paper was seen going out overall about 15 bps better, a trader said.

Investment-grade bank and brokerage credit default swaps costs stayed in a narrow range on Thursday.

Bank CDS costs were unchanged to 2 bps wider. Wells Fargo's CDS costs were 2 bps wider at 108 bps bid, 113 bps offered. Bank of America's were unchanged at 255 bps bid, 265 bps offered.

Brokers were mixed.

Morgan Stanley's CDS costs were 2 bps tighter at 273 bps bid, 283 bps offered. Merrill Lynch's CDS costs traded flat at 285 bps bid, 300 bps offered. Goldman Sachs' CDS costs traded 1 bp wider at 230 bps bid, 240 bps offered.

Treasuries were mostly flat. The 10-year Treasury note yield fell 1 bp to 1.82%. The 30-year bond yield rose 1 bp to 3.00%.

McDonald's sets record

McDonald's sold $750 million of senior notes (A2/A/A) in two parts, a source who worked on the deal said.

There was about $1.75 billion on the books for the reopened 10-year notes and about $2.5 billion for the 30-year bonds, the source said, making the deal more than five times oversubscribed.

The fast food chain reopened its issue of 2.625% notes due 2022 to add $250 million. Those notes priced at a spread of Treasuries plus 52 bps.

The tranche sold tighter than talk in the mid-60 bps area, the source said.

Total issuance is $750 million including $500 million priced on Sept. 27 at 78 bps over Treasuries.

There was also a $500 million tranche of new 3.7% 30-year bonds sold at Treasuries plus 80 bps.

This tranche sold tighter than guidance in the 90 bps area.

The 30-year bonds bested the record-low coupon for a 30-year note that was previously held by Alabama Power Co. when it priced its 4.1% 30-year notes on Jan. 10 at 112.5 bps.

The bookrunners for the McDonald's sale were Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and RBS Securities Inc.

Proceeds are being used for general corporate purposes.

The company was last in the bond market with the original $500 million issue of 2.625% notes due 2022 on Sept. 27.

The notes due 2022 edged wider on the bid side to 53 bps bid, 49 bps offered in the secondary market, a trader said.

The tranche of long bonds was not immediately seen in trading.

McDonald's is based in Oak Brook, Ill.

Bank of America's $2.25 billion

Bank of America sold $2.25 billion of senior notes (Baa1/A-/A) in two parts, a market source said.

The bank reopened its issue of 5.7% notes due 2022 to add $750 million. Those notes priced at a spread of Treasuries plus 325 bps.

Total issuance is $2.25 billion including $1.5 billion priced on Jan. 19 at 378 bps over Treasuries.

There was also a $1.5 billion tranche of new 5.875% 30-year bonds sold at Treasuries plus 297 bps.

The bookrunner was Bank of America Merrill Lynch.

Proceeds will be used for general corporate purposes.

Bank of America's notes due 2022 tightened in trading to 314 bps bid, 310 bps offered, a trader said.

The 30-year bonds came in 2 bps to 295 bps bid, 290 bps offered.

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

World Bank's first 2012 deal

World Bank sold $5 billion of 0.875% five-year global bonds (Aaa/AAA) at a spread of Treasuries plus 17 bps, according to a press release.

The bookrunners were Barclays Capital Inc., Citigroup, Deutsche Bank Securities Inc. and UBS Securities LLC.

This was the World Bank's first dollar-denominated deal in 2012.

According to the press release, 52% of the book total was bought by investors from Asia and 26% came from Europe. Central banks and official institutions bought 68% of the bonds, and bank treasury and corporate investors bought 18%.

The international financial institution aids developing countries and is based in Washington, D.C.

GE Capital better

In the secondary market, General Electric Capital's 2.9% notes due 2017 firmed to 144 bps bid, 139 bps offered, a trader said on Thursday.

GE Capital reopened the issue (Aa2/AA+/) on Wednesday in a $425 million offering at a spread of Treasuries plus 162 bps.

The funding arm of General Electric Co. is based in Fairfield, Conn.

Paul Deckelman contributed to this review

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