BNY Mellon, UBS sell, Family Dollar prices first bonds; broad market wider as Treasuries rise

By Andrea Heisinger and Cristal Cody

New York, Jan. 25 - Bank of New York Mellon Corp., UBS AG, Stamford branch and Family Dollar Stores, Inc. sold bonds as corporate names retook the market from sovereigns and Yankee issuers on Tuesday.

Bank of NY Mellon priced $1.2 billion in three parts that mostly came at the tight end of guidance.

Another financial in the market was UBS with a $1.75 billion deal in two tranches.

Both the Bank of NY Mellon and UBS sales included tranches of three-year floating-rate notes - a continuing sign that investors are looking for this kind of coupon.

"We're seeing it more," a source said. "A lot of them are added at the last minute."

The day also saw the first bond deal from discount retailer Family Dollar, which was awarded an investment-grade rating in its first credit assessment. The company sold an upsized $300 million of 10-year paper after initially announcing the size at $250 million.

Source said that Wednesday isn't going to be a packed market.

"It's looking quiet," one syndicate source said. "I don't know that there's anything too exciting out there."

In the secondary market, Family Dollar's notes were slightly tighter, Bank of NY Mellon's tranches were trading around issue price and Anheuser-Busch InBev Worldwide Inc.'s new debt widened about 3 basis points, traders said.

"Financials are 2 to 5 [bps] wider," a trader said.

Spreads were a "bit wider in general," another trader said.

The Markit CDX Series 14 North American investment-grade index eased 1 basis point to a spread of 83 bps, a market source said.

Volume was considered good for the day, though.

Overall investment-grade Trace volume rose 15% to about $15.5 billion, a market source said.

The break in Treasuries "in turn pulled corporates a couple basis points wider," a trader said. "Overall, it's probably 2 to 3 [bps] wider for investment-grade telecom and technology."

Treasuries rallied on Tuesday after the auction of two-year notes and on reports that president Barack Obama plans a partial freeze on federal spending.

Additional details were expected in the president's State of the Union address Tuesday night.

The yield on the 10-year note fell to 3.33% from 3.4%. The 30-year bond yield dropped 7 basis points to 4.49%.

BNY's $1.2 billion of notes

Bank of New York Mellon sold $1.2 billion of medium-term notes (Aa2/AA-/AA-) in three parts, an informed source said.

The sale was oversubscribed, the source said, but declined to say by how much.

A $350 million tranche of three-year floating-rate notes priced at par to yield three-month Libor plus 28 bps. The notes priced at the tight end of guidance in the Libor plus 30 bps area, plus or minus 2 bps.

The second tranche was $350 million of 1.5% three-year notes priced at 99.854 to yield 1.55% with a spread of 55 bps over Treasuries. These notes also priced at the tight end of talk, for this tranche set at a spread in the 57 bps area, plus or minus 2 bps.

A final part was $500 million of 4.15% 10-year notes priced at 99.83 to yield 4.171% with a spread of Treasuries plus 85 bps. These notes priced in the middle of guidance in the 85 bps area, plus or minus 2 bps.

Bookrunners were Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

"These guys come every once in a while," a source who worked on the trade said. "It's a well-received name - pretty standard."

Not much secondary activity was immediately seen in the new tranches, traders said.

"The 10-years are now locked up around issue price," one trader said. "The five-years came at 55 and we haven't seen any markets on it."

Another trader saw the 10-year notes in the secondary at 86 bps bid, 84 bps offer.

The financial services company is based in New York City.

Family Dollar upsizes

Family Dollar Stores sold an upsized $300 million of 5% 10-year senior notes (Baa3/BBB-) to yield Treasuries plus 175 bps, said a source who worked on the trade.

Price talk was initially in the 187.5 bps area and the notes priced tighter than that.

The size was announced at $250 million but was increased on demand. There was about $2.5 billion on the books, the source said.

"It took a little bit to build," he said of the credit, which is unfamiliar to investors. "It was fairly yieldy so that helped."

Morgan Stanley & Co. Inc., Bank of America Merrill Lynch and Wells Fargo Securities LLC were bookrunners.

This was the company's first bond sale, and its first time being rated by Moody's and Standard & Poor's, a source said.

"Family Dollar has a long history of increasing shareholder value," said Howard Levine, chairman and chief executive officer, in a news release. "We believe that this offering supports our goals of optimizing our capital structure, increasing shareholder returns and preserving an investment-grade balance sheet."

Proceeds are being used to fund a $750 million share repurchase program and for general corporate purposes.

In the secondary market, Family Dollar's new notes due 2021 firmed to 173 bps bid, 171 bps offer, traders said.

Later in the afternoon, another trader saw the notes a further 1 bp tighter on the bid side at 172 bps bid, 171 bps offer.

The discount retailer is based in Charlotte, N.C.

UBS sells two tranches

UBS, Stamford branch priced $1.75 billion of notes (Aa3/A+/A+) in two tranches, a source away from the deal said late in the day.

The $750 million of three-year floating-rate notes priced at par to yield three-month Libor plus 100 bps.

A second part was $1 billion of 2.25% three-year notes priced at a spread of 127 bps over Treasuries.

UBS Securities LLC was bookrunner.

A secondary trader saw UBS' tranche of three-year fixed-rate notes with a bid of 98 bps. Another trader saw the notes in the gray market at 125 bps bid.

The financial services company is based in Basel and Zurich, Switzerland.

Anheuser-Busch weaker

Anheuser-Busch InBev's new notes widened in secondary trading on Tuesday, a trader aid.

"Roughly 3 basis points wider today," the trader said.

Anheuser-Busch InBev Worldwide sold $1.65 billion of senior notes (Baa2/BBB+/BBB) in three tranches on Monday, which also included three-year floaters.

Activity was seen in the tranches of five- and 10-year notes.

The 2.875% five-year notes priced at a spread of Treasuries plus 90 bps.

"Last I saw on the five-years was 90, 88," the trader said.

The tranche of 4.375% 10-year notes, which priced at 105 bps over Treasuries, traded at 105 bps bid, 103 bps offer on Tuesday.

"Anheuser-Busch is still a couple basis points from the break, despite being wider today," the trader said.

The brewery is based in Leuven, Belgium.

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