Market shows signs of indigestion; Merck, APT price; Bank, financial paper flat; Exxon weak

By Aleesia Forni and Cristal Cody

Virginia Beach, March 16 – The investment-grade bond market was showing some “signs of indigestion” on Monday following the more than $119 billion of new issuance the market has seen so far this month.

Merck KGaA came to market with a $4 billion five-part new issue in order to finance its acquisition of Sigma-Aldrich Corp.

The deal’s order book was around 1.5 times oversubscribed at $6.1 billion, and all tranches of the new issue sold flat compared to initial price thoughts.

Meanwhile, APT Pipelines Ltd. upsized its new bond offering to $1.4 billion from $1.3 billion; both tranches of the new deal sold in line with initial talk.

The session also hosted Hyundai Capital America, which sold $1 billion of notes in two parts.

Campbell Soup Co. priced $300 million of 10-year senior notes in its first dollar offering in more than two years.

The company was able to pull in pricing by around 12 basis points compared to initial price thoughts.

Despite the varied investor reaction to the day’s deals, market participants are expecting another active week for high-grade bonds, with around $25 billion to $30 billion of supply projected.

Sweden and Bank Nederlandse Gemeenten NV both announced plans to bring bond offerings to market later this week.

High-grade corporate bonds traded mostly flat to modestly tighter on the day, according to market sources.

The Markit CDX North American Investment Grade series 23 index firmed 1 bp to a spread of 65 bps.

JPMorgan Chase & Co.’s 3.125% notes due 2025 traded flat over the session.

Bank of America Corp.’s 4% notes due 2025 were unchanged in secondary trading.

Goldman Sachs Group Inc.’s 3.5% senior notes due 2025 were flat.

Exxon Mobil Corp.’s senior notes (Aaa/AAA/) traded flat on the day but remain weaker than issuance.

Merck sells $4 billion

Merck was in Monday’s market with a $4 billion issue of senior notes (Baa1/A/) sold in five tranches, according to market sources.

The notes were issued by the company’s subsidiary, EMD Finance LLC.

The offering included $250 million of two-year floating-rate notes priced at par to yield Libor plus 35 bps.

The notes sold on top of guidance, which was unchanged from initial price thoughts in the 35 bps area over Libor.

There was also $400 million of 1.7% three-year notes priced at 99.983 to yield 1.706%, or Treasuries plus 65 bps.

The notes sold on top of guidance. Initial talk was set in the 65 bps area over Treasuries.

A $750 million tranche of 2.4% five-year notes sold at 99.995 to yield 2.401%, or Treasuries plus 85 bps.

The notes sold in line with guidance, which was unchanged from initial guidance.

There was a $1 billion tranche of 2.95% seven-year notes sold with a spread of 110 bps over Treasuries. Pricing was at 99.824 to yield 2.978%.

The notes sold in line with guidance and initial price thoughts set in the 110 bps area over Treasuries.

Finally, $1.6 billion of 3.25% 10-year notes sold at 99.383 to yield 3.323% with a spread of Treasuries plus 125 bps.

Pricing was in line with guidance set in the 125 bps area over Treasuries. Guidance was unchanged from initial talk.

BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and RBS Securities Inc. were bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to help finance the company’s acquisition of Sigma-Aldrich Corp.

The pharmaceutical company is based in Darmstadt, Germany.

APT upsizes

APT Pipelines priced an upsized $1.4 billion offering of senior notes in 10- and 20-year tranches on Monday, according to a market source.

The deal was upsized from $1.3 billion.

The company sold $1.1 billion of 4.2% notes due 2025 in line with price guidance at Treasuries plus 212.5 bps.

The notes sold at 99.895 to yield 4.213%.

A $300 million tranche of 5% notes due 2035 was also priced in line with guidance at 237.5 bps over Treasuries.

Pricing was at 99.592 to yield 5.035%.

The notes (Baa2/BBB/) sold via Rule 144A and Regulation S.

Bookrunners were ANZ, JPMorgan, Morgan Stanley & Co. LLC and Scotia Capital.

Proceeds will be used to fund the acquisition of the QCLNG pipeline from BG Group, as well as for general corporate purposes.

The natural gas pipeline infrastructure operator is based in Sydney, Australia.

Hyundai two-parter

Hyundai Capital America priced a two-part $1 billion offering of senior notes (Baa1/A-/) on Monday, according to a market source.

The company priced $500 million of 2% notes due 2018 with a spread of Treasuries plus 103 bps, or 99.751, to yield 2.086%.

Guidance was set at 103 bps to 105 bps over Treasuries.

There was also $500 million of 2.6% five-year notes, which were sold at 115 bps over Treasuries.

Pricing was at 99.507 to yield 2.706%.

The notes were guided at 115 bps to 117 bps over Treasuries.

Barclays, HSBC Securities (USA) Inc. and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

The financing arm of Hyundai in the United States is based in Irvine, Calif.

Campbell prices tight

Campbell Soup sold $300 million of 3.3% 10-year senior notes (A3/BBB+/) on Monday with a spread of Treasuries plus 123 bps, according to a market source.

Pricing was at 99.865 to yield 3.316%.

The notes sold at the tight end of guidance set in the 125 bps area over Treasuries. Initial talk was set in the 135 bps area over Treasuries.

BofA Merrill Lynch, Citigroup Global Markets and Credit Suisse Securities (USA) LLC were the bookrunners.

Proceeds will be used for general corporate purposes.

The company was last in the U.S. bond market with a $1.25 billion three-part issue of notes priced on July 30, 2012.

Campbell Soup is a convenience foods company based in Camden, N.J.

Sweden sets talk

Sweden set price talk for a planned benchmark offering of five-year notes (Aaa/AAA/AAA) on Monday in the mid-swaps minus 2 bps, according to a market source.

The bookrunners are Barclays, Credit Suisse Securities and HSBC.

The notes will be sold via Rule 144A and Regulation S.

BNG on deck

Bank Nederlandse Gemeenten set price talk for a planned offering of five-year notes in the area of mid-swaps plus 10 bps, according to a market source.

The bookrunners are Barclays, JPMorgan, Nomura and TD Securities.

The local government funding agency is based in the Hague, the Netherlands.

JPMorgan steady

JPMorgan Chase’s 3.125% notes due 2025 were quoted unchanged in Monday’s session at 125 bps bid, according to a market source.

JPMorgan sold $2.5 billion of the notes (A3/A/A+) on Jan. 16 at Treasuries plus 145 bps.

The financial services company is based in New York City.

Bank of America unchanged

Bank of America’s 4% notes due 2025 traded flat at 196 bps bid, according to a market source.

The company sold $2.5 billion of the notes (Baa2/A-/A) on Jan. 16 at Treasuries plus 225 bps.

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

Goldman stable

Goldman Sachs’ 3.5% notes due 2025 were unchanged at 144 bps bid in the secondary market, a source said.

Goldman sold $1.7 billion of the notes (Baa1/A-/A) on Jan. 20 at a spread of Treasuries plus 170 bps.

The financial services company is based in New York City.

Exxon Mobil weak

Exxon Mobil’s 1.912% notes due 2020 traded flat at 34 bps bid on Monday, a market source said.

The issue priced at Treasuries plus 30 bps on March 3 in a $1.15 billion offering.

Exxon Mobil’s 2.709% notes due 2025 were unchanged during the session at 68 bps bid, according to the source.

The company sold $1.75 billion of the notes at Treasuries plus 58 bps in the March 3 transaction.

Exxon Mobil is an oil and gas company based in Irving, Texas.

Bank/broker CDSs flat to lower

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

Bank of America’s CDS costs were flat at 65 bps bid, 70 bps offered. Citigroup Inc.’s CDS costs were also flat at 72 bps bid, 77 bps offered. JPMorgan Chase’s CDS costs were unchanged at 62 bps bid, 67 bps offered. Wells Fargo & Co.’s CDS costs were also unchanged at 41 bps bid, 44 bps offered.

Merrill Lynch’s CDS costs were flat at 68 bps bid, 72 bps offered. Morgan Stanley’s CDS costs fell 1 bp to 72 bps bid, 77 bps offered. Goldman Sachs Group’s CDS were 2 bp lower at 81 bps bid, 84 bps offered.

Paul Deckelman contributed to this review.

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