Issuance to stay strong in coming week; Bank of New York Mellon, PepsiCo notes trade better

By Aleesia Forni and Andrea Heisinger

New York, July 25 - The week ended Friday with roughly $22 billion of new issuance thanks to a strong showing from the financial sector in high-grade bond issuance.

A source said there was a "$600 million private trade" on Friday from a unit of MassMutual Life Insurance Co., but pricing details were not available.

Bank of New York Mellon Corp. and Citigroup Inc. each gave terms on Friday for sales done Thursday.

BNY Mellon sold $1.1 billion of five-year notes in two tranches, and Citi reopened floating-rate notes due 2016 to add $250 million. It brought the total issuance to $1.25 billion.

The coming week should see more sales from companies that have reported second-quarter earnings in the past couple of weeks, syndicate sources said.

"Investors aren't shy anymore," one source said Friday. The source was talking about a period in May and June when investors avoided the credit market after fears arose that the Federal Reserve would scale back its stimulus measures at the end of 2013.

As for the coming week, a market source said it would be a week of between $15 billion and $20 billion of issuance, with companies coming in right away on Monday.

A syndicate source added that "we should be busy" in the coming week.

"Should be about the same [as the past week]. Maybe more smaller deals."

Most of the past week's sales were more than $1 billion in size.

Meanwhile, the Markit CDX North American Investment Grade index was unchanged at a spread of 76 basis points on Friday.

Despite a muted tone to the secondary market, Thursday's new issues from PepsiCo, Inc. and Bank of New York Mellon continued to see tightening during the session.

The trader saw BNY Mellon's new fixed-rate notes trading 1 bp better on the day, while PepsiCo's notes were quoted 3 bps tighter.

Investment-grade bank and brokerage credit default swap costs were unchanged to slightly higher on the day, according to a market source.

Bank of America Corp.'s CDS costs were flat at 106 bps bid, 111 bps offered. Citigroup's CDS costs increased 1 bp to 102 bps bid, 107 bps offered. JPMorgan Chase & Co.'s CDS costs were unchanged at 80 bps bid, 85 bps offered. Wells Fargo & Co.'s CDS costs were up 1 bp at 65 bps bid, 70 bps offered.

Merrill Lynch's CDS costs were unchanged at 96 bps bid, 106 bps offered. Morgan Stanley's CDS costs were flat at 138 bps bid, 143 bps offered. Goldman Sachs Group, Inc.'s CDS costs were also flat at 127 bps bid, 132 bps offered.

Pepsi notes tighten

Friday's secondary market saw PepsiCo's $850 million tranche of 2.25% notes due 2019 trade 3 bps better compared to levels seen late Thursday at 83 bps bid, 79 bps offered, a trader said.

The notes were priced at a spread of Treasuries plus 90 bps.

The two-part $1.7 billion sale also included $850 million of two-year floating-rate notes sold at par to yield Libor plus 20 bps.

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

BNY's terms

The Bank of New York Mellon brought a $1.1 billion sale of five-year senior medium-term notes, series G, (Aa3/A+/AA-) in two tranches, according to FWP filings with the Securities and Exchange Commission.

The $500 million of five-year floating-rate notes priced at par to yield Libor plus 56 bps.

A $600 million tranche of 2.1% five-year notes sold at a spread of Treasuries plus 75 bps.

A trader quoted the notes 1 bp better on the day at 72 bps bid, 67 bps offered.

The bookrunners were BNY Mellon Capital Markets LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

The New York-based financial services company was last in the U.S. bond market with a $1.5 billion offering in four tranches on March 4. That sale included a 1.35% five-year note priced at 60 basis points over Treasuries and a five-year floater sold at a coupon of Libor plus 44 bps.

Citi does tap

Citigroup added $250 million to its issue of floating-rate notes due July 25, 2016 (Baa2/A-/A), according to an FWP filing with the SEC.

The notes have a coupon of Libor plus 96 bps with a price of 100.269.

The total issuance will be $1.25 billion.

Citigroup Global Markets Inc. was the bookrunner.

The financial services company is based in New York.

Paul Deckelman contributed to this review

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