Deutsche Telekom, Heinz, U.S. Bank, TransCanada among deals; bonds trade modestly tighter

By Andrea Heisinger and Cristal Cody

New York, Feb. 28 - New issuance exploded in the high-grade bond market on Tuesday as household names like H.J. Heinz Co., U.S. Bancorp and Burlington Northern Santa Fe, LLC priced deals along with others.

These names were joined by Interpublic Group of Companies, Inc., TransCanada Pipelines Ltd., and Deutsche Telekom International Finance BV.

The day's largest offering came from Deutsche Telekom, which sold $2 billion in tranches of five- and 30-year bonds.

Burlington Northern Santa Fe priced $1.25 billion of paper in two tranches.

U.S. Bancorp sold $1 billion of 10-year senior holding company notes at the low end of guidance.

Food product maker Heinz priced $600 million of notes with maturities in 2017 and 2022.

New York City-based advertising and marketing firm Interpublic Group of Companies sold a split-rated $250 million of 10-year paper while TransCanada Pipelines priced $500 million of three-year notes.

Issuers were pulled to the market by low borrowing rates and a "decent tone," one syndicate source said.

By the market close, the Dow Jones industrial average had closed up substantially, although sources said that had nothing to do with the day's haul of bond deals.

"It's just a continuation," said one source in reference to how busy the month of February has been.

"March should be just as busy," the source added.

A syndicate source called the day "fine" and said there was "nothing really exciting to report."

"None of the deals really stood out," the source said. "Last week there was some excitement, but today everything just got done."

The primary could be just as active on Wednesday as a handful of names are looking at the market, sources said.

The Province of Manitoba is expected to price a benchmark bond deal, a source said.

"It's expected to launch in the near future. If tone is good, it likely will launch tomorrow, but it's yet to be determined," the source said.

The Markit CDX Series 17 North American high-grade index firmed 1 basis point to a spread of 94 bps.

H.J. Heinz's two tranches traded 3 bps to 4 bps better in the secondary market.

Burlington Northern's two tranches traded about 3 bps better.

TransCanada Pipelines' notes firmed 5 bps in trading.

U.S. Bancorp's notes came in 5 bps, while Deutsche Telekom's two tranches traded flat to 3 bps tighter.

Investment-grade bank and brokerage credit default swaps costs declined, a source said.

Citigroup's CDS costs dropped 15 bps to 215 bps bid, 225 bps offered. J.P. Morgan's CDS costs fell 5 bps to 105 bps bid, 110 bps offered.

On the brokerage side, Merrill Lynch's CDS costs traded down 5 bps to 290 bps bid, 310 bps offered. Goldman Sachs' CDS costs fell 10 bps to 250 bps bid, 260 bps offered. Morgan Stanley's CDS costs traded 5 bps lower at 315 bps bid, 330 bps offered.

Treasuries ended lower on the day with yields up 2 bps to 4 bps on the longer end of the curve. The 10-year Treasury note yield rose 2 bps to 1.94%. The yield on the 30-year bond added 3 bps to end the day at 3.07%.

U.S. Bank prices tightly

U.S. Bancorp sold $1 billion of 3% 10-year senior holding company notes (Aa3/A/AA-) to yield Treasuries plus 110 bps, a source away from the trade said.

The deal was priced at the tight end of guidance in the 115 bps area, the source said.

Barclays Capital Inc., J.P. Morgan Securities LLC and U.S. Bancorp Investments Inc. were bookrunners.

Proceeds are being used for general corporate purposes.

The notes tightened in trading to 105 bps bid, 102 bps offered, according to a trader.

The financial services company is based in Minneapolis.

Heinz sells $600 million

H.J. Heinz sold $600 million of notes (Baa2/BBB+/BBB) in two tranches, a market source away from the trade said.

The $300 million of 1.5% five-year paper sold at a spread of Treasuries plus 70 bps. The tranche sold at the low end of talk in the 75 bps area.

A second tranche was $300 million of 2.85% 10-year notes priced at 95 bps over Treasuries. These notes also sold at the tight end of guidance in the 100 bps area.

Bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities LLC and UBS Securities LLC.

Proceeds are being used for general corporate purposes including commercial paper repayment.

Heinz last priced bonds in a $700 million sale of five- and 10-year paper on Sept. 7, 2011. The 2% five-year notes from that trade were priced at 110 bps and the 3.125% 10-year notes sold at 125 bps.

The notes due 2017 traded at 68 bps bid, 65 bps offered, a trader said.

Another trader saw the five-year notes tighter at 66 bps bid, 62 bps offered late afternoon.

The tranche of notes due 2022 firmed to 92 bps bid, 90 bps offered in the secondary.

The food product company is based in Pittsburgh, Penn.

Deutsche Telekom deal

Deutsche Telekom International Finance sold $2 billion of notes (Baa1/BBB+/BBB+) in two tranches, a market source said.

The $1 billion of 2.25% five-year paper sold at Treasuries plus 153 bps.

A $1 billion tranche of 4.875% 30-year bonds priced at 190 bps over Treasuries.

The bonds were priced under Rule 144A and Regulation S.

Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Societe Generale were bookrunners.

The deal is guaranteed by Deutsche Telekom AG.

Deutsche Telekom last tapped the U.S. debt market with a $1.25 billion sale of 3.125% five-year notes at 95 bps over Treasuries on April 4, 2011.

The notes due 2017 were quoted tighter at 150 bps bid, 147 bps offered in the secondary market, according to a trader. The 30-year tranche traded flat at 190 bps bid, 187 bps offered.

The telecommunications company is based in Bonn, Germany.

BNSF twice oversubscribed

Burlington Northern Santa Fe priced $1.25 billion of debentures (A3/BBB+/) in two tranches, an informed source said.

A source said there was "just under $3 billion" on the books for the trade.

The $625 million of 3.05% 10-year paper priced at a spread of 115 bps over Treasuries. The tranche sold at the tight end of guidance in the 120 bps area.

A $625 million tranche of 4.4% 30-year bonds sold at Treasuries plus 137.5 bps. The bonds sold in line with guidance in the 137.5 bps area.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC were bookrunners.

Proceeds will be used for general corporate purposes including working capital, capital expenditures, debt repayment and distributions.

BNSF was last in the market with a $750 million deal in 10-and-30-year tranches on Aug. 17, 2011. The 3.45% 10-year notes from that offering priced at 130 bps over Treasuries and the 4.95% 30-year bonds sold at 140 bps over Treasuries.

In the secondary market, the notes due 2022 traded after pricing at 114 bps bid, 111 bps offered, a trader said.

The 10-year notes were seen going out by another trader tighter at 112 bps bid, 111 bps offered.

The 30-year bonds traded early afternoon at 141 bps bid, 133 bps offered and firmed later in the day to 139 bps bid, 137 bps offered.

The holding company for a transportation and railroad company is based in Fort Worth, Texas.

TransCanada's short bond

TransCanada Pipelines priced $500 million of 0.875% three-year senior notes (A3/A-/) at a spread of Treasuries plus 60 bps, a market source away from the deal said.

Deutsche Bank Securities Inc. and HSBC Securities (USA) Inc. were bookrunners.

Proceeds are being used for general corporate purposes and to reduce short-term debt of the corporation and its affiliates.

TransCanada last priced notes in the U.S. market in a $1 billion sale of 10-year notes on Sept. 20, 2010.

The notes firmed in secondary trading to 55 bps bid, 53 bps offered, a trader said.

The natural gas pipeline is based in Calgary, Alberta.

Interpublic's $250 million

Interpublic Group of Companies sold $250 million of 4%10-year senior notes (Baa3/BB+/BBB) to yield Treasuries plus 225 bps, an informed source said.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were bookrunners.

Proceeds are being used for the redemption of $400 million of 4.25% convertible notes due 2023 on March 26 or for share repurchases and general corporate purposes.

The notes firmed in trading to 210 bps bid, 207 bps offered, a trader said.

The advertising and marketing company is based in New York City.

Bank of England gives terms

The Bank of England sold $2 billion of 0.5% three-year bonds to yield mid-swaps plus 9 bps, a market source said.

The paper (Aaa/AAA) was sold under Rule 144A and Regulation S.

Bank of America Merrill Lynch, Goldman Sachs & Co., HSBC Securities (USA) Inc. and Morgan Stanley & Co. LLC were bookrunners.

Proceeds are being used to finance the bank's foreign exchange reserves.

The central bank of the United Kingdom is based in London.

JPMorgan's floaters

JPMorgan Chase & Co. gave terms for its $1 billion deal of five-year senior medium-term floating-rate notes (Aa3/A/AA-) priced on Monday at par to yield Libor plus 160 bps, according to a 424B2 filing with the Securities and Exchange Commission.

J.P. Morgan Securities LLC was bookrunner.

The financial services company is based in New York City.

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