Noble, NY Life, Canada tap market on low rates, yields; Noble trades 10 bps-15 bps better

By Andrea Heisinger and Cristal Cody

New York, Feb. 7 - High-quality issuers continued to tap the investment-grade bond market on Tuesday with Noble Holding International Ltd. leading the charge with its $1.2 billion deal.

Noble Holding, a unit of Switzerland-based offshore drilling company Noble Corp., sold its offering in tranches of five-, 10- and 30-year notes. All of the tranches priced at the tight end of guidance.

The company was joined in the market by New York Life Global Funding, which priced $600 million of five-year paper. The size of the sale was increased from $500 million.

Canada also tapped the market with its first U.S. dollar-denominated sale of bonds since September 2009. The government priced $3 billion of five-year notes tighter than talk.

The market got a boost from successful deals on Monday from Aristotle Holding, Inc. and Kimberly-Clark Corp. The Aristotle deal especially got momentum going as the $3.5 billion sale had demand of about $13 billion, a source said.

Low borrowing rates have enticed companies to issue bonds to fund, among other things, mergers and acquisitions, and investors have been grabbing for the debt so much that during the slow month of January, there wasn't enough to keep up with demand.

Wednesday could prove to be just as busy, or busier, than the first two days of the week.

"Hopefully today was good news," a syndicate source said. "We're seeing a busy calendar for tomorrow."

All three of Noble's tranches traded 10 bps to 15 bps better in the secondary market, according to traders.

NY Life Global's notes traded about 1 bp better on the bid side.

Canada's new bonds firmed 3 bps going out, a trader said.

Investment-grade bonds overall were mostly unchanged on Tuesday. The Markit CDX Series 17 North American investment-grade index was flat at a spread of 95 bps.

Overall trading volume stayed unchanged at about $13.5 billion on Tuesday.

Treasuries traded lower after a lackluster three-year note auction and the potential for a Greek debt bailout. The 10-year Treasury note yield rose 7 bps to 1.97%. The 30-year bond yield climbed to 3.15% from 3.09%.

Noble's three tranches

Noble Holding International sold $1.2 billion of senior notes (Baa1/BBB+) in three tranches, a source close to the trade said.

There was "north of $12 billion" of demand on the books for the deal, the source said. That demand was "pretty evenly skewed" among the three maturities, with slightly more interest in the 10-year notes, the source added.

The $300 million of 2.5% five-year paper sold at a spread of Treasuries plus 175 bps. The tranche was sold at the tight end of price talk in the 175 bps area, plus or minus 5 bps.

A $400 million tranche of 3.95%10-year notes priced at 200 bps over Treasuries. These notes were also sold at the low end of price guidance in the 205 bps area, plus or minus 5 bps.

There was also a $500 million tranche of 5.25% 30-year bonds sold at Treasuries plus 215 bps. The paper was priced at the tight end of talk in the 220 bps area, plus or minus 5 bps.

Barclays Capital Inc., HSBC Securities (USA) Inc., SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were bookrunners.

Proceeds will be transferred to Noble-Cayman as advances, distributions, repayment of outstanding intercompany debt or a combination of these. Noble-Cayman may use the proceeds to repay debt outstanding under a revolving credit facility and for general corporate purposes, including a capital expenditure program.

The deal is guaranteed by Noble Corp.

In the secondary market, all three tranches firmed, traders said.

The notes due 2017 came in to 155 bps bid, 150 bps offered, a trader said.

The tranche of notes due 2022 tightened 10 bps to 190 bps bid, 185 bps offered.

The long bonds also traded stronger at 203 bps bid, 198 bps offered.

The issuer is a subsidiary of offshore drilling company Noble Corp., based in Zug, Switzerland.

NY Life upsizes

New York Life Global Funding priced an upsized $600 million of 1.65% five-year notes (Aaa/AA+/AAA) to yield Treasuries plus 88 bps, a market source away from the trade said.

The deal size was increased from $500 million, the source said, and the paper priced at the tight end of guidance in the 90 bps area.

The sale was done under Rule 144A and Regulation S.

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and U.S. Bancorp Investments Inc. were bookrunners.

In afternoon secondary trading, the notes firmed slightly to 87 bps bid, 83 bps offered, traders said.

The funding arm of insurance company New York Life is based in New York City.

Canada's $3 billion deal

Canada sold $3 billion of 0.875% five-year global notes (Aaa/AAA/) to yield Treasuries plus 8 bps, a market source said.

The deal size was pegged at between $2 billion and $3 billion prior to the sale. A source said they were priced tighter than talk in the "low double digits" over Treasuries.

Bookrunners were Bank of America Merrill Lynch, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and RBC Capital Markets LLC.

Proceeds will be added to Canada's official foreign exchange reserves.

Canada last priced U.S. dollar-denominated bonds in a $3 billion deal of 2.375% five-year notes priced at Treasuries plus 23.5 bps on Sept. 2, 2009.

In the secondary market, the notes firmed to 5 bps bid, 1 bps offered, a trader said.

The issuer is based in Ottawa, Ontario.

Financial CDS costs ease

A trader said that the cost of CDS contracts protecting holders of bank and brokerage-company paper against a possible event of default were down slightly on Tuesday, indicating positive investor sentiment about the financial sector.

He said that the cost of a contract for Citigroup's bonds was 5 basis points lower, at 193/203 bps, while JPMorgan was unchanged at 100/110 bps.

Among the investment bank or brokerage companies, a CDS contract for Morgan Stanley was 5 bps lower, at 245/255 bps, while Merrill Lynch was 2 bps easier, at 253/268 bps.

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