Heavy supply forecast; CVS, Toyota, Brooklyn Union Gas eye deals; Nationwide, Starbucks ease

By Cristal Cody

Tupelo, Miss., March 2 – The primary market stayed quiet on Friday ahead of an expected heavy week of high-grade supply.

CVS Health Corp. held investor calls that will continue on Monday, according to a market source.

CVS (Baa1/BBB+/) is expected to price about $40 billion to $45 billion of bonds to help finance its $69 billion cash and stock acquisition of Aetna Inc.

BofA Merrill Lynch, Barclays, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are the call arrangers.

Also on Friday, Brooklyn Union Gas Co. (A2/A-/BBB+) began a round of fixed-income investor calls for a benchmark dollar-denominated Rule 144A and Regulation S offering of notes, according to a market source.

Citigroup Global Markets Inc., Mizuho Securities USA Inc., RBC Capital Markets, LLC and SG Americas Securities, LLC are the arrangers.

Beginning Monday, Toyota Industries Corp. (A1/AA-/) will hold a roadshow in the U.S., Europe and Asia markets for a benchmark dollar-denominated bond offering, a source said.

BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC, Nomura Securities International, Inc. and SMBC Securities America, Inc. are the arrangers for the Rule 144A and Regulation S transaction.

About $50 billion to $60 billion of supply, including CVS’ expected offering, is forecast by syndicate sources for the upcoming week.

New issues priced this week were mixed but mostly wider in secondary trading, a source said.

Nationwide Building Society’s $1.75 billion of senior non-preferred medium-term fixed-to-floating-rate notes priced in two tranches on Thursday eased about 1 basis point.

Starbucks Corp.’s $1.6 billion of senior notes (A3/A-/A-) priced in two tranches at the start of the week traded about 1 bp to more than 10 bps wider.

The Markit CDX North American Investment Grade 29 index improved more than 1 bp to head out on Friday at a spread of 56 bps.

Nationwide Building eases

Nationwide Building Society’s 3.766% notes due March 8, 2024 traded on Friday at 121 bps bid, 118 bps offered, a market source said.

The company sold $1 billion of the notes on Thursday at a spread of 120 bps over Treasuries.

The rate will reset to a floating rate plus Libor on the March 8, 2023 optional redemption date.

Nationwide Building Society is a mutual financial company and building society based in Swindon, England.

Starbucks softens

Starbucks’ 3.1% notes due March 1, 2023 were quoted at 51 bps bid, 50 bps offered in secondary trading on Friday, a source said.

The company sold $1 billion of the five-year notes on Monday at a spread of 50 bps over Treasuries.

Starbucks’ $600 million tranche of 3.5% notes due March 1, 2028 widened to 79.5 bps bid, 76 bps offered.

The notes priced with a spread of Treasuries plus 67 bps in Monday’s offering.

Starbucks is a Seattle-based specialty coffee retailer.

Inflows data

For the week ended Feb. 28, inflows to bonds decelerated to $1.04 billion from $4.01 billion a week earlier, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

“While flows improved for high yield, they were weaker for high grade, government bonds and munis,” Seliger said, citing data from EPFR Global and BofA Merrill Lynch Global Research.

Weekly inflows to high grade declined to $1.63 billion from $2.71 billion for the week, according to the note.

“Flows turned negative for short-term high grade for the first time since December with a $0.36 [billion] outflow,” Seliger said. “This compares to a $0.60 [billion] inflow to short-term high grade in the prior week.”

Outside of short-term high-grade inflows slowed to $1.99 billion from $2.11 billion.

High-grade inflows declined for both funds to $1.05 billion from $1.81 billion and ETFs to $59 million from $90 million, according to the BofA Merrill Lynch note.

Investment-grade corporate funds gained $1.372 billion in the week ended Feb. 28, according to sources familiar with the fund-flow statistics generated by AMG Data Services Inc.

The latest week’s gain raises the year-to-date net inflow figure for the investment-grade corporates to $21.03 billion, according to a Prospect News analysis of the data.

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