KfW, Kroger price bonds as tone improves; spreads tighten; Bank of America paper flat

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 21 – KfW and Kroger Co. priced new issues on Tuesday during a stronger session for the investment-grade bond market.

The primary saw Kroger bring to market a $500 million offering of seven-year senior notes.

The notes sold at the tight end of price talk, which had firmed around 15 basis points compared to initial guidance.

Meanwhile, KfW sold $3 billion of three-year global notes in line with price talk during the session.

In other primary happenings, FMS Wertmanagement joined the forward calendar on Tuesday, announcing plans to price an offering of notes.

Tuesday’s action brings the week’s total investment-grade supply to $9.7 billion, closing in on what sources had predicted to be around a $15 billion to $20 billion week.

Investment-grade bonds and credit spreads tightened over the day, market sources said.

The Markit CDX North American Investment Grade series 23 index firmed 3 bps to a spread of 66 bps.

Bank and financial paper headed out mostly stable in secondary trading, according to a market source.

Goldman Sachs Group Inc.’s 3.85% notes due 2024 remained wider on the day but ended about 1 bp tighter from where the paper traded over the morning.

Bank of America Corp.’s 4% notes due 2024 were unchanged over the day, a source said.

KfW prices $3 billion

KfW priced $3 billion of 0.875% three-year global notes (Aaa/AAA/AAA) on Tuesday at mid-swaps minus 6 bps, according to a market source and an FWP filing with the Securities and Exchange Commission.

Pricing was at 99.653.

The bookrunners were BNP Paribas Securities Corp., Credit Suisse Securities and Nomura.

The German government-owned development bank is based in Frankfurt.

Kroger prices tight

Also on Tuesday, Kroger priced $500 million of 2.95% senior notes (Baa2/BBB/BBB) due 2021 at Treasuries plus 110 bps, according to a market source and an FWP filing with the SEC.

Pricing was at 99.968 to yield 2.955%.

The notes priced at the tight end of revised price talk.

BofA Merrill Lynch, MUFG, Wells Fargo Securities LLC, Citigroup Global Markets Inc., RBS Securities Inc. and U.S. Bancorp Investments, Inc. were the bookrunners.

Proceeds will be used to repurchase commercial paper and for general corporate purposes.

Kroger is a Cincinnati-based grocery retailer.

FMS plans offering

FMS Wertmanagement plans to price an offering of notes, according to a 424B5 filed with the SEC.

Barclays, BNP Paribas, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC are the bookrunners.

Proceeds from the sale will be used to refinance existing liabilities in order to replace short-term with long-term funding, and any remaining proceeds will be used for general corporate purposes.

The notes are guaranteed by the Federal Republic of Germany.

The financial services company is based in Munich.

Goldman paper improves

Goldman Sachs’ 3.85% notes due 2024 (Baa1/A-/A) headed out at 146 bps offered, about 1 bp better from where the paper traded early in the day at 147 bps offered, a source said.

The paper traded early Monday at 141 bps offered.

Goldman Sachs priced $2.25 billion of the notes on June 30 at a spread of Treasuries plus 135 bps.

The financial services company is based in New York City.

Bank of America unchanged

Bank of America’s 4% notes due 2024 (Baa2/A-/A) were unchanged from Monday at 135 bps offered, a source said.

Bank of America sold $2.75 billion of the notes on March 27, 2014 at a spread of Treasuries plus 137 bps.

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

Bank/brokerage CDS costs

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

Bank of America Corp.’s CDS costs fell 5 bps to 69 bps bid, 72 bps offered. Citigroup Inc.’s CDS costs were also 5 bps lower at 69 bps bid, 72 bps offered. JPMorgan Chase & Co.’s CDS costs were 4 bps lower at 55 bps bid, 58 bps offered. Wells Fargo & Co.’s CDS costs decreased 1 bp to 46 bps bid, 49 bps offered.

Merrill Lynch’s CDS costs were 5 bps lower at 72 bps bid, 75 bps offered. Morgan Stanley’s CDS costs ended 6 bps lower at 77 bps bid, 80 bps offered. Goldman Sachs Group, Inc.’s CDS costs decreased 6 bps to 81 bps bid, 84 bps offered.

Stephanie N. Rotondo contributed to this review

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