By Patrick McGee
Industrial-gas company Praxair Inc. (PX) and Utah-based Discover
Bank found a favorable backdrop to sell bonds Wednesday, pushing
weekly issuance toward the higher end of earlier forecasts.
Praxair priced $900 million of debt in a two-part deal
originally set for $750 million, while Discover, a unit of Discover
Financial Services (DFS), sold $750 million of five-year notes.
Each deal was priced at a lower yield than originally indicated,
suggesting strong demand for new issues.
The confident tone was also found in Markit's CDX North America
Investment-Grade Index, a proxy for bond buyer sentiment. It
improved 1.3% in afternoon trading to 86 basis points. A basis
point is one one-hundredth of a percentage point and the figure
means the average yearly cost of protecting $10 million of bonds
against default is $86,000. That is the cheapest since Feb. 1.
Bonds in the secondary market improved versus benchmark
Treasurys. All 10 of the most actively traded bonds saw their
yields tighten versus Treasurys, according to MarketAxess. The
most-traded were Comcast Corp. (CMSCA), which jumped in value on
reports that the cable provider is buying the remaining stake of
NBC Universal for $16.7 billion.
Praxair, which is rated in the single-A range, took advantage of
improved sentiment and priced three-year bonds to yield 0.771%, or
0.35 percentage point above the yield on comparable Treasurys. It
also sold 10-year bonds to yield 2.74%, of 0.72 point above
Treasurys.
The cash will be used for general purposes including
acquisitions and share repurchases. Praxair last week said it was
purchasing beverage-carbonation company NuCO2 for $1.1 billion as
it looks to expand its presence in the restaurant industry.
Discover Bank, which carries triple-B ratings, sold five-year
notes with a yield of 2.007%.
The two deals push weekly issuance to nearly $15 billion, versus
early-week estimates of between $10 billion and $15 billion. A
major contributor to the week was the $6 billion offering Monday
from Vodafone Group PLC (VOD), the largest industrial bond deal in
five months.
Strategists at RBS Securities said the market's ability to
digest such a large deal was impressive, but they noted that
concessions--the extra yield that issuers sometimes pay in the
new-issue market to entice buyers--are growing larger. Investors
are also showing a preference to shorter-term debt, a sign of
caution.
Higher quality corporate bonds have struggled to maintain their
value this year after interest rates started the year with a quick
climb, hurting prices. A Barclays index shows high-grade bonds have
declined 0.87% so far this year.
Write to Patrick McGee at patrick.mcgee@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires