J&J, Aetna, HSBC, Rio Tinto among issuers in frenzied primary; Google's 10-year notes widen

By Andrea Heisinger and Cristal Cody

New York, May 17 - New issues stacked up throughout the morning as companies continued to jump into the high-grade bond market to take advantage of favorable interest rates.

Among the day's high-profile deals were Johnson & Johnson, Aetna Inc., Rio Tinto Finance (USA) Ltd. and McDonald's Corp.

Johnson & Johnson took the spotlight with its $3.75 billion sale in six parts. Two tranches of floating-rate notes were added at the launch.

Those notes were accompanied in the primary by Rio Tinto Finance. The company sold $2 billion of guaranteed notes in three parts including a reopening of 5.2% bonds due 2040.

Health insurance company Aetna priced $500 million of 10-year notes at the low end of guidance.

Fast food giant McDonald's sold $400 million of 10-year notes.

The financial sector saw HSBC Bank plc sell $3 billion in two parts after a tranche of two-year floaters was added to the original five-year notes. The deal was split evenly between the two maturities.

Another deal from an overseas financial name came from Rabobank Nederland. The company sold $1.5 billion of 30-year bank bonds.

Caterpillar Financial Services Corp. sold $750 million of three-year notes at the low end of guidance.

South Carolina Electric & Gas Co. reopened its issue of 5.45% first mortgage bonds due 2041 to add $100 million. The bonds sold 15 basis points wider than the original issue from January.

Quick, opportunistic sales were done by Bank of America Corp. and Citigroup Inc. Bank of America sold $500 million of five-year floating-rate notes while Citigroup priced $250 million of five-year floaters.

Total Capital Canada Ltd. priced $1 billion of two-year floaters.

There was a $350 million sale from Ryder System, Inc. The transportation and logistics company sold $350 million of six-year notes at the tight end of talk.

There was about $14.2 billion of high-grade bonds sold during the day, dwarfing Monday's total of $9.1 billion. It brings the total for these two days to $23.3 billion - right in the middle of the expected range for the entire week.

"I think those $25 billion [volume] guesses weren't far off," a market source said. "They're going to keep coming out of the woodwork."

A syndicate source cited "crazy coupons" as part of the reason for the opportunistic issuance. No new record lows have been set, but some companies like Texas Instruments Inc. came close with sub-1% rates.

Syndicate desk sources reported that there will likely be more deals on Wednesday and beyond, although nothing firm.

"We might have something for tomorrow," one source said.

Overall investment-grade Trace volume jumped from about $7.7 billion on Monday to more than $12 billion on Tuesday, a market source said.

The new bonds from McDonald's, Aetna, HSBC, Rio Tinto Finance and Caterpillar Financial all tightened a few basis points, sources said. Johnson & Johnson's notes were released late in secondary and only light activity was immediately seen.

Kellogg Co.'s notes traded tighter than Monday's issue price but widened out from initial secondary levels, a trader said Tuesday.

Google Inc.'s debut bonds sold on Monday were mixed in trading on Tuesday, with the 10-year notes quoted 6 bps wider on the bid side.

"Google paper kind of dominated most of my flows," the trader said. "The 10-year got priced a little too aggressively. The three-years and five-years held in pretty well."

The Markit CDX Series 14 North American Investment Grade index eased 1 bp to a spread of 90 bps, Markit Group Ltd. said.

Treasuries gained on Tuesday, sending yields down, on weaker economic data. The 10-year note yield fell 4 bps to 3.11%, and the 30-year bond yield dropped 5 bps to 4.22%.

J&J's six tranches

Johnson & Johnson followed in the footsteps of a $3 billion sale from Google Monday, bringing a $3.75 billion issue of notes (Aaa/AAA/AAA) in an increased six parts in the late afternoon, a market source said.

Two tranches of floating-rate notes were added at the launch on demand from investors, the source said.

The size of the sale was in line with predictions of between $3 billion and $4 billion, he said. There was "significant demand" from a variety of investors due to the company's AAA credit ratings and name recognition.

"There wasn't as much of a scramble [as for Google], but they've issued before," the source said.

Johnson & Johnson last sold bonds in a $1.1 billion deal in two tranches on Aug. 12, 2010.

The new sale launched in six tranches.

A $500 million tranche of two-year floaters sold at par to yield Libor flat. The second tranche of floaters was $600 million with a three-year maturity priced at par to yield Libor plus 9 bps.

A $1 billion tranche of 1.2% three-year notes priced at a spread of Treasuries plus 33 bps. The notes priced at the tight end of guidance in the 35 bps area.

The $900 million of 2.15% five-year notes sold at 43 bps over Treasuries. They were priced at the low end of talk in the 45 bps area.

A $450 million tranche of 3.55% 10-year notes priced at Treasuries plus 55 bps. They were sold in line with guidance in the 55 bps area.

Finally, there was $300 million of 4.85% 30-year bonds sold at 68 bps over Treasuries. They were sold a little wider than initial talk in the range of 60 bps to 65 bps.

Active bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities LLC and RBS Securities Inc.

Proceeds are being used to repay commercial paper and for general corporate purposes.

Secondary activity was seen only in the three-year and 40-year bonds from Johnson & Johnson, traders said.

The bonds due 2041 were quoted at 64 bps offered. "No markets yet on the other JNJ's," one trader said.

Another trader saw the notes due 2014 at 32 bps bid. "Allocations just came out," the trader said.

The consumer products company is based in New Brunswick, N.J.

Aetna sells 10-year

Aetna sold $500 million of 4.125% 10-year senior notes on Tuesday to yield 118 bps over Treasuries, said a source close to the deal.

They were priced at the tight end of guidance in the 120 bps area.

The notes (Baa1/A-/A-) were sold at 98.601 to yield 4.298%.

They have a make-whole call at 20 bps over Treasuries and feature a change-of-control put at 101.

Goldman Sachs & Co., JPMorgan and Morgan Stanley & Co., Inc. were active bookrunners. Passives were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Wells Fargo Securities LLC.

Proceeds are going to repay 5.75% senior notes when they're due at maturity on June 15 and also used for general corporate purposes.

In secondary trading, the notes tightened 3 bps on the offer side to 115 bps, a trader said. No bids were immediately seen.

The health insurance company is based in Hartford, Conn.

Rio Tinto sells in three parts

Rio Tinto Finance (USA) sold $2 billion of notes (A3/A-/A-) in three parts late in the day, a market source confirmed.

The full terms were not available at press time.

The $700 million of five-year notes were sold at a spread of 83 bps over Treasuries.

A second tranche of $1 billion of 10-year notes priced at 103 bps over Treasuries.

The final part was a reopening of 5.2% bonds due 2040 to add $300 million. Those bonds sold at a spread of Treasuries plus 112.5 bps. Total issuance for the notes is $800 million including $500 million sold on Oct. 28, 2010 at Treasuries plus 115 bps.

JPMorgan, Deutsche Bank Securities Inc. and RBS Securities were active bookrunners.

Proceeds are being used for general corporate purposes.

The deal is guaranteed by Rio Tinto plc and Rio Tinto Ltd.

Rio Tinto Finance last sold bonds in a $2 billion deal in three tranches on Oct. 28, 2010. The 1.875% five-year notes from that sale sold at 68 bps while the 3.5% 10-year notes priced at 93 bps.

Of the new bonds, Rio Tinto Finance's five-year and 40-year bonds were seen firmer in secondary trading.

The five-year notes traded at 105 bps bid, 100 bps offered, a trader said. The 40-year bonds were quoted at 111 bps bid, 106 bps offered.

The mining company is based in Melbourne and Dublin.

HSBC's $3 billion

HSBC Bank sold $3 billion of notes (Aa2/AA) in two parts as a floating-rate tranche was added, said a source away from the trade.

That $1.5 billion tranche of two-year floaters sold at par to yield Libor plus 43 bps.

Originally, the sale consisted of a five-year maturity. That $1.5 billion tranche of 3.1% five-year notes sold at Treasuries plus 133 bps.

They were priced under Rule 144A.

HSBC Securities ran the books.

The notes firmed in secondary trading to 132 bps bid, 130 bps offered, a source said.

The financial services company is based in London.

CAT prices short bond

Caterpillar Financial Services sold $750 million of 1.375% three-year notes (A2/A/A) to yield Treasuries plus 47 bps, according to an FWP filing with the Securities and Exchange Commission.

They were sold at the low end of guidance in the 50 bps area, the source said.

The bookrunners were Bank of America Merrill Lynch and Barclays Capital Inc.

The three-year notes tightened on the bid side in trading, according to a trader. The notes were quoted at 42 bps bid, 47 bps offered late afternoon.

Another trader saw the notes at 44 bps bid, 43 bps offered.

The financing arm of heavy equipment maker Caterpillar Inc. is based in Nashville.

BofA, Citi's floaters

Bank of America priced $500 million of five-year senior floating-rate notes (A2/A/A+) at par to yield Libor plus 145 bps, according to an FWP filing with the SEC.

Bank of America Merrill Lynch handled the books.

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

Citigroup's deal was similar to that from Bank of America. The New York-based financial services company priced $250 million of five-year senior floaters (A3/A/A+) at par to yield Libor plus 130 bps, according to an FWP filing with the SEC.

Citigroup Global Markets was the bookrunner.

McDonald's prices

McDonald's sold $400 million of 3.625% 10-year medium-term notes (A2/A/A) at 58 bps over Treasuries, according to a market source and an FWP filing with the SEC.

The bookrunners were Bank of America Merrill Lynch, Citigroup, JPMorgan, RBS Securities and SunTrust Robinson Humphrey Inc.

The notes tightened 2 bps on the bid side to 56 bps, 54 bps offered in the secondary, traders said.

The fast food chain is based in Oak Brook, Ill.

Ryder's six-year notes

Ryder System priced $350 million of 3.5% six-year notes (Baa1/BBB+/A-) at a spread of Treasuries plus 175 bps, according to an informed source and an FWP filing with the SEC.

They sold at the tight end of guidance in the 180 bps area.

Mitsubishi UFJ Securities International plc, RBS Securities, U.S. Bancorp Investments Inc. and Wells Fargo Securities were the bookrunners.

Proceeds are being used for general corporate purposes.

The transportation and logistics company is based in Miami.

Rabobank sells 30-year

Rabobank Nederland sold $1.5 billion of 5.25% 30-year bank bonds (Aaa/AAA) at a spread of 115 bps over Treasuries, an informed source said.

Bank of America Merrill Lynch, Barclays Capital and Goldman Sachs ran the books.

Rabobank last sold bonds in a $2.75 billion two-tranche deal on Jan. 4.

The financial services company is based in Utrecht, the Netherlands.

Total sells floaters

Total Capital Canada priced $1 billion of two-year floating-rate notes (Aa1/AA-) at par to yield Libor plus 9 bps, an informed source said.

The bookrunners were Citigroup and JPMorgan. Proceeds are going to general corporate purposes.

The sale is guaranteed by parent company Total SA.

The holding company for petroleum subsidiaries is based in Paris.

SC Electric reopens bonds

South Carolina Electric & Gas reopened its issue of 5.45% first mortgage bonds due 2041 to add $100 million, according to an FWP filing with the SEC.

The notes (A3/A/A) were sold at a spread of Treasuries plus 105 bps.

Total issuance is $350 million including $250 million sold on Jan. 20 at 90 bps over Treasuries.

The bookrunners were JPMorgan and Mizuho Securities USA Inc.

Proceeds are being used to repay short-term debt, to finance capital expenditures and for general corporate purposes.

The utility is based in Cayce, S.C.

Kellogg holds

Kellogg's 3.25% seven-year senior notes traded at 79 bps bid, 77 bps offered late Tuesday, tighter than the issue price of 80 bps over Treasuries the previous day, a trader said.

The company sold $400 million of the notes (A3/BBB+/A-) on Monday, and the deal was quoted at 77 bps bid, 75 bps offered in that day's secondary activity.

The maker of cereal and convenience foods is based in Battle Creek, Mich.

Google mixed

Google priced $3 billion of senior notes (Aa2/AA-) in three tranches on Monday.

In trading on Tuesday, the tranche of 1.25% three-year notes, which sold at a spread of Treasuries plus 33 bps, was flat at 33 bps bid, 30 bps offered, a trader said.

The $1 billion of 2.125% five-year notes firmed slightly to 42 bps bid, 40 bps offered from where they priced at 43 bps over Treasuries.

The third tranche of 3.625% 10-year notes priced at 58 bps over Treasuries and widened to 64 bps bid, 62 bps offered.

The technology company is based in Mountain View, Calif.

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