Synchrony, McDonald’s print; Yara prepares deal; lighter volume forecast; new bonds mixed

By Cristal Cody

Tupelo, Miss., May 18 – Two corporate issuers tapped the high-grade bond market on Friday.

Synchrony Bank priced $750 million of 3.95% three-year notes at a spread of Treasuries plus 98 basis points.

The notes were seen trading tighter at 97 bps bid, 96 bps offered in aftermarket trading.

Also on Friday, McDonald’s Corp. priced $500 million of three-year senior floating-rate notes at par to yield Libor plus 43 bps.

In addition on Friday, the Federal Home Loan Bank System sold $3 billion of two-year global notes.

Looking ahead, Yara International ASA plans to hold fixed-income investor calls next week for a bond deal.

Several issuers also remain the pipeline.

Petrofac Ltd. is expected to price $300 million of five-year notes (Ba1/BBB-/BBB-) that were initially talked to price in the 6% area with a spread in the Treasuries plus 300 bps area.

Vodafone Group plc, Eni SpA and ASB Bank Ltd. also all held roadshows this week.

Syndicate sources forecast about $25 billion of new bond issuance in the week ahead. Supply is expected to be lighter going into the Memorial Day holiday weekend.

More than $32 billion of high-grade bonds priced this week, in line with syndicate forecasts of about $30 billion to $35 billion of supply.

New bank and financial paper priced over the week was mostly flat to softer in secondary trading.

Royal Bank of Scotland Group plc’s $1.75 billion of 4.892% fixed-to-floating-rate senior notes due May 18, 2029 brought to market on Tuesday eased 3 bps.

Elsewhere, Charles Schwab Corp.’s $1.95 billion of senior notes (A2/A/A) priced Thursday were mixed going out with the floaters about 1 bp softer and the fixed-rate tranches wrapped around issuance on the bid side.

Of the $8 billion of notes priced in six tranches on Monday to fund the merger of Keurig Green Mountain Inc. and Dr Pepper Snapple Group, Inc., the short-dated notes firmed, while the longer maturities softened about 2 bps to 7 bps.

The Markit CDX North American Investment Grade 30 index closed Friday about 1 bp wider at a spread of 62 bps.

Synchrony prices $750 million

Synchrony Bank priced $750 million of 3.95% three-year senior bank notes (/BBB/BBB-) on Friday at a spread of Treasuries plus 98 bps, according to a market source.

The notes were initially talked to price in the Treasuries plus 112.5 bps area.

The final order book was more than $1.8 billion.

BofA Merrill Lynch, Citigroup Global Markets Inc. and MUFG were the bookrunners.

Synchrony is a consumer financial services company based in Stamford, Conn.

Yara plans investor calls

Coming up on Monday and Tuesday, Yara International (Baa2/BBB/) plans to hold fixed-income investor calls for a dollar-denominated senior note offering, according to a market source.

Citigroup Global Markets, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Societe Generale CIB are the lead managers for the Rule 144A and Regulation S deal.

The Norwegian chemical company is based in Oslo.

Schwab flat on bid side

In the secondary market, Charles Schwab’s 3.85% notes due May 21, 2025 headed out on Friday at 80 bps bid, 77 bps offered, a market source said.

The company sold $750 million of the seven-year notes on Thursday at a Treasuries plus 80 bps spread.

Charles Schwab is a San Francisco-based company that provides wealth management, securities brokerage, banking, asset management, custody and financial advisory services.

Keurig tranches mixed

Maple Escrow Subsidiary, Inc.’s 4.057% notes due May 25, 2023 tightened to 116 bps bid, 114 bps offered in the secondary market, a source said.

The subsidiary of the parent company of Keurig Green Mountain priced the $2 billion tranche of five-year notes on Monday at a 120 bps over Treasuries spread.

The issuer’s 4.597% notes due May 25, 2028 softened to 162 bps bid, 158 bps offered in secondary trading.

Maple Escrow sold $2 billion of the 10-year notes at a 160 bps over Treasuries spread.

Keurig is a Waterbury, Vt.-based personal beverage system company.

Royal Bank of Scotland eases

Royal Bank of Scotland Group’s 4.892% fixed-to-floating-rate senior notes due May 18, 2029 (Baa3/BBB-/BBB+) traded Friday at 185 bps bid, 181 bps offered, a source said.

The company sold $1.75 billion of the notes on Tuesday at par to yield a spread of Treasuries plus 182 bps.

The notes will reset May 18, 2028 to a floating rate of Libor plus 175.4 bps.

Royal Bank of Scotland Group is a banking and financial services company based in Edinburgh.

Inflows improve

For the week ended May 16, Lipper US Fund Flows reported inflows of $3.07 billion for corporate investment-grade funds, up from reported inflows of $804 million in the previous week.

Inflows to U.S. mutual funds and ETFS improved for equity and fixed income for the week ended May 16, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released Friday.

“Within fixed income, flows improved for high grade, high yield and EM and weakened for government bonds and munis,” Seliger said, citing data EPFR Global and BofA Merrill Lynch Global Research. “After two weeks of subdued levels, inflows to high grade increased this week to $2.49 [billion] from $0.47 [billion] in the prior week.”

Inflows to short-term high grade increased to $1.41 billion from $1.13 billion, while flows to outside of short-term turned positive with a $1.08 billion inflow following a $66 million outflow, according to the note, which defines high-grade bonds as including corporate bonds, mortgages, agencies and Treasuries.

“Overall the trend so far in May has been for high grade flows to shift towards short-term funds and ETFs, likely in response to rising interest rates,” Seliger said. “Over the last three weeks cumulative inflow to short-term high grade was $3.53 [billion], above the $1.04 [billion] inflow outside of short term.”

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