Bank of America, TD Ameritrade, PepsiCo bring new deals; PepsiCo firms in aftermarket

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 17 – The high-grade bond market sprang to life on Friday with three new deals pricing during the session.

The primary hosted Bank of America Corp., TD Ameritrade Holding Corp. and PepsiCo Inc. to end the slower shortened week.

“The tone was stronger today, so they wanted to take advantage of that,” a market source said of the uncharacteristically active session.

Bank of America came to market with a $2 billion offering of subordinated notes on Friday, pricing the new issue tighter than guidance.

The session also saw PepsiCo price $500 million of 30-year bonds 10 bps tighter compared to guidance.

However, the new $500 million offering from TD Ameritrade did not go over quite as well on Friday and ultimately priced around 15 bps wide of price talk.

Friday’s issuance activity pushed the week’s total supply to $7 billion, falling short of what sources had predicted to be around a $15 billion week.

Meanwhile, cash continued to flow into investment-grade bond funds the week, with Lipper reporting net inflows of $2.58 billion for the week ended Oct. 15.

This figure is down from last week’s staggering $6.89 billion of inflows, bringing the year-to-date total inflows to more than $67 billion.

Investment-grade bonds and credit spreads tightened over the end-of-week session, market sources said.

“Spreads are definitely better today, although it was very quiet on my desk,” a trader said.

The Markit CDX North American Investment Grade series 23 index firmed 4 bps to a spread of 70 bps.

PepsiCo’s offering of 4.25% notes due 2044 tightened 4 bps to 5 bps in aftermarket trading, according to traders.

Bank of America’s 4.25% subordinated notes due 2026 traded 2 bps better, a trader said.

TD Ameritrade’s new issue was not seen in the secondary market, according to traders.

BofA subordinated notes

Bank of America sold $2 billion of 4.25% subordinated medium-term notes, series L, due 2026 on Friday at Treasuries plus 210 bps, according to an informed source and an FWP filed with the Securities and Exchange Commission.

The notes (Baa3/BBB+/BBB+) priced tighter than guidance, which was set in the Treasuries plus 225 bps area.

Pricing was at 99.517 to yield 4.302%.

BofA Merrill Lynch was the bookrunner.

Proceeds will be used for general corporate purposes.

Bank of America’s 4.25% subordinated notes due 2026 firmed to 208 bps bid, 205 bps offered in aftermarket trading, a trader said.

Bank of America is a financial services company based in Charlotte, N.C.

Pepsi new issue

Also on Friday, PepsiCo priced $500 million of 4.25% 30-year senior notes (A1/A-/) at Treasuries plus 130 bps, according to a FWP filed with the SEC.

The notes sold tighter than guidance, which was set in the Treasuries plus 140 bps area.

Pricing was at 99.865 to yield 4.258%.

BofA Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities LLC were the bookrunners.

Proceed will be used for general corporate purposes, including the repayment of commercial paper.

PepsiCo’s 4.25% notes due 2044 traded better in the secondary market, traders said.

The notes headed out tighter at 125 bps bid, 124 bps offered, one trader said. As the session closed, the notes were quoted at 126 bps bid, 124 bps offered by a trader at another desk.

PepsiCo is a Purchase, N.Y.-based global food and beverage company.

TD Ameritrade prices wide

TD Ameritrade Holding priced $500 million of 3.625% 10.5-year senior notes on Friday at Treasuries plus 145 bps, according to a market source and an FWP filed with the SEC.

Pricing was wide of price guidance, which was set in the Treasuries plus 125 bps to 130 bps area.

The notes (A3/A/) priced at 99.95 to yield 3.631%.

Barclays, BofA Merrill Lynch, Wells Fargo Securities LLC, JPMorgan, TD Securities and U.S. Bancorp Investments Inc. were the bookrunners.

Proceeds will be used to repay the company’s $500 million of 4.15% senior notes due Dec. 1, 2014 and for general corporate purposes, including the payment of dividends or stock repurchases.

The notes are guaranteed by the company’s subsidiaries.

The securities brokerage and financial services provider is based in Omaha.

Bank/brokerage CDS costs rise

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

Bank of America Corp.’s CDS costs fell 3 bps to 74 bps bid, 77 bps offered. Citigroup Inc.’s CDS costs were 3 bps lower at 74 bps bid, 77 bps offered. JPMorgan Chase & Co.’s CDS costs were 2 bps lower at 59 bps bid, 62 bps offered. Wells Fargo & Co.’s CDS costs decreased 2 bps to 46 bps bid, 51 bps offered.

Merrill Lynch’s CDS costs were 3 bps lower at 77 bps bid, 80 bps offered. Morgan Stanley’s CDS costs ended 5 bps lower at 84 bps bid, 87 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 4 bps lower at 87 bps bid, 90 bps offered.

Stephanie N. Rotondo contributed to this review

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