Caterpillar Financial, Covidien, BlackRock price as tone turns shaky; bonds mixed; banks firm

By Andrea Heisinger and Cristal Cody

New York, May 22 - Another group of high-grade issuers made their way to the bond market on Tuesday as conditions didn't necessarily improve but also didn't deteriorate.

Caterpillar Financial Services Corp. was in the market with a $1.5 billion deal in three parts, and BlackRock, Inc. priced $1.5 billion of bonds in tranches due 2015 and 2022.

Covidien International Finance SA priced $1.25 billion of notes due 2015 and 2022 that are guaranteed by two Covidien parent units.

Swedish Export Credit Corp. announced a sale of five-year notes and was the only non-corporate name in the primary. The notes were not seen pricing as of late in the day.

The market opened improved but took a tumble later in the day, a market source said, after the prime minister of Greece said there were preparations being made in the event that the country leaves the euro zone.

"Things got better then got shaky and [the Dow] went down when the Greek prime minister started talking," the market source said.

Regardless of the headlines, there are still companies looking at selling debt on Wednesday.

"It's the last viable day this week, so we'll have a couple of calls in the morning," a syndicate source said.

The Markit CDX Series 18 North American Investment Grade index, which firmed 5 basis points the previous day, ended unchanged on Tuesday at a spread of 118 bps.

"Today, it was flat," a trader said. "It was improved, maybe a little tighter, but it fell off at the end of the day."

Covidien's bonds traded a "little wider" in the secondary market, out 1 bp to 3 bps, a bond source said.

BlackRock's two tranches stayed wrapped around the new issue price in trading.

Caterpillar Financial's notes traded unchanged to 3 bps tighter.

Bank and financial paper ended 5 bps to 10 bps better. Morgan Stanley's 5.5% notes due 2021 firmed 5 bps on the day, and paper from Bank of Nova Scotia and Toronto-Dominion Bank ended 7 bps to 8 bps better.

Investment-grade bank and brokerage credit default swap costs declined.

Banks were tighter. Bank of America's CDS costs firmed 8 bps to 289 bps bid, 294 bps offered. Citi's CDS costs tightened 10 bps to 249 bps bid, 254 bps offered.

Brokers firmed. Merrill Lynch's CDS costs traded 5 bps tighter at 320 bps bid, 330 bps offered. Morgan Stanley's CDS costs traded 15 bps better at 425 bps bid, 435 bps offered. Goldman Sachs' CDS costs tightened 9 bps to 325 bps bid, 335 bps offered.

Treasuries ended weaker. The benchmark 10-year note yield rose 3 bps to 1.77%. The 30-year bond yield climbed 5 bps to 2.86%.

BlackRock's two tranches

BlackRock priced $1.5 billion of notes (A1/A+/) in two tranches, a source who worked on the trade said.

There was about $5.5 billion on the books for the deal, the source added.

"It was good quality, not much traction on it," the source said.

The $750 million of 1.375% three-year notes priced at a spread of Treasuries plus 100 bps. The tranche was sold tighter than initial talk in the 115 bps area and at the low end of revised guidance in the 105 bps area plus or minus 5 bps.

A $750 million tranche of 3.375% 10-year notes sold at 165 bps over Treasuries. The notes priced tighter than initial talk in the 175 bps area and at the tight end of revised guidance in the 170 bps area plus or minus 5 bps.

The bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds are being used to repay amounts drawn under a commercial paper program to fund a portion of a stock repurchase and for general corporate purposes.

In the secondary market, BlackRock's notes due 2015 traded flat at 100 bps bid, 95 bps offered, a trader said. The notes due 2022 also traded flat at 165 bps bid, 160 bps offered.

Another source said BlackRock's notes due 2015 "are trading about 5 bps better."

The investment management company is based in New York.

Covidien sells $1.25 billion

Covidien International Finance sold $1.25 billion of senior notes (Baa1/A/A) in two parts, an informed source said.

There was roughly $4.5 billion of demand for the offering, the source said.

The $600 million of 1.35% three-year notes were priced at a spread of Treasuries plus 95 bps. The notes sold tighter than talk in the 120 bps area.

A second part was $650 million of 3.2% 10-year notes sold at Treasuries plus 145 bps. The tranche also priced tighter than guidance in the 165 bps area.

BNP Paribas Securities Corp., Citigroup and Deutsche Bank Securities Inc. were the bookrunners.

Proceeds are being used to fund the redemption of $500 million of 5.45% notes due October 2012 and for general corporate purposes.

The deal is guaranteed by Covidien plc and Covidien Ltd.

Covidien was last in the market with a $1.5 billion offering in three tranches on June 21, 2010.

The 1.875% three-year notes from that trade priced at 72 bps over Treasuries, and the 4.2% 10-year notes sold at 97 bps over Treasuries.

Covidien's new notes traded wider in the secondary market, a source said. The notes due 2015 eased 1 bp to 96 bps bid, 91 bps offered, while the tranche of notes due 2022 widened to 148 bps bid, 145 bps offered.

The health-care products company is based in Luxembourg.

Caterpillar prices

Caterpillar Financial Services sold $1.5 billion of medium-term notes (A2/A/) in three tranches, an informed source said.

The $500 million of 1.1% three-year notes priced at a spread of Treasuries plus 70 bps.

A $500 million tranche of 1.625% five-year notes priced at a spread of 90 bps over Treasuries.

There was also a $500 million tranche of 2.85% 10-year paper sold at 110 bps over Treasuries.

Bank of America Merrill Lynch and Citigroup ran the books.

Caterpillar Financial's notes traded mostly better in the secondary market, a source said.

The notes due 2015 firmed to 67 bps bid, 63 bps offered. The notes due 2017 traded at 88 bps bid, 85 bps offered. The tranche of notes due 2022 traded flat at 110 bps bid, 107 bps offered.

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

Swedish Export preps deal

Swedish Export Credit is planning a sale of five-year notes, a market source said late in the day.

The source hadn't seen the notes price and expected they would on Wednesday.

Bank of America Merrill Lynch, HSBC Securities (USA) Inc., JPMorgan and Nomura Securities International Inc. are the bookrunners.

The lender to Sweden's export industry is based in Stockholm.

Morgan Stanley firms

Morgan Stanley's 5.5% notes due 2021 tightened 5 bps on the day going out Tuesday at 478 bps bid, 468 bps offered, a source said.

Morgan Stanley sold $1 billion of the notes (A2/A/A) on Oct. 27, 2011 at a spread of 335 bps over Treasuries.

The investment bank is based in New York.

Scotiabank firms

In other trading, Bank of Nova Scotia's 2.55% notes due 2017 (Aa1/AA-) firmed 7 bps from Friday's session to 100 bps bid on Tuesday, a source said.

Scotiabank sold $1.25 billion of the notes (Aa1/AA-/) on Jan. 5 at a spread of 172 bps plus Treasuries.

The bank is based in Halifax, N.S.

TD tightens

Toronto-Dominion Bank's 2.375% notes due 2016 (Aaa/AA-) tightened to 79 bps bid on Tuesday from 87 bps on Friday, a source said.

TD sold $600 million of the notes in a reopening on Nov. 3, 2011 at 117 bps plus Treasuries.

The bank and financial services company is based in Toronto.

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