CIBC deal opens modest week, Wells Fargo brings preferreds; economic data slows market pace

By Aleesia Forni and Andrea Heisinger

New York, July 15 - New issue activity in the high-grade bond market was limited Monday with a corporate sale from Canadian Imperial Bank of Commerce.

The Toronto-based financial services company priced $1.5 billion of three-year notes split evenly between two tranches. The sale included a fixed-rate note and a floating-rate tranche.

Issuance for the week is expected to be "similar to last week, maybe less," a syndicate source said.

The past week had predictions of $10 billion to $15 billion of supply, and came in at the high end of that range thanks to several multi-billion-dollar offerings.

Another source predicted sales of between $5 billion and $10 billion for the week, adding that they were "erring on the upside."

A report out Friday from the S&P U.S. Issued Investment Grade Corporate Bond Index showed that so far in July, returns have improved from difficult months in May and June.

A stagnant preferred stock market came back to life Monday as Wells Fargo & Co. announced and priced a $1.5 billion a sale of fixed-to-floating-rate noncumulative perpetual preferred stock.

Initial price talk was 6% for 10 years, then a floating rate, which was "what everyone is looking for," a trader said.

"It's still priced pretty cheaply," he said. "I think they could still squeeze it a little more."

The preferreds were priced with a dividend of 5.85%. After 10 years, the rate will be Libor plus 309 basis points.

The trader also commented that the emergence of the new issue could be a sign that there is more to come.

In secondary action, one trader had predicted a more active session on Monday, though he added near the end of the day's trading that "weaker than expected" retail sales data may have played a part in the tone shift.

Despite a positive tone at the day's start, the Markit CDX North American Investment Grade index 1 basis point wider compared to its mid-morning level at a spread of 77 bps at the session's close.

Meanwhile, the new issue from Canadian Imperial Bank of Commerce was trading 4 bps better near the end of the session, a source at another desk said.

CIBC sells $1.5 billion

CIBC priced $1.5 billion of three-year senior notes (Aa3/A+/AA-) in two tranches, a source close to the trade said.

A $750 million tranche of 1.35% three-year notes sold at a spread of Treasuries plus 72 bps. Initial guidance was in the high Treasuries plus 70 bps area.

The notes traded 4 bps better at 78 bps bid late during the session.

There was also $750 million of three-year floating-rate notes priced at par to yield Libor plus 52 bps. Talk was initially in the Libor plus low 60 bps area.

Bookrunners were Barclays, CIBC World Markets Corp., Citigroup Global Markets Inc. and Wells Fargo Securities LLC.

Proceeds are being added to bank funds for general corporate purposes.

Toronto-based diversified financial institution CIBC was last in the U.S. bond market with a $750 million offering of five-year notes on Jan. 17.

S&P looks at returns

The S&P index of investment-grade bond returns showed a gain of 0.11% for the month through July 12, according to a report describing the ratings agency's corporate bond index. Year-to-date, the measure shows a negative 3.03% return.

Stephanie N. Rotondo contributed to this review

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