Three jumbo-sized high-grade bond deals are hitting the U.S. debt markets Tuesday as companies seek to participate in the record-low yield environment.

It's often said that when IBM issues bonds, others follow, knowing that Big Blue has a knack for achieving record-low yields. So perhaps it's no coincidence that within a half-hour of International Business Machines Corp. (IBM) reporting plans to issue three- and seven-year bonds Tuesday morning, Berkshire Hathaway (BRKB) and beverage company Diageo (DEO) each disclosed their own three-part debt issues.

Each is "benchmark"-sized, which typically means at least $500 million per tranche. They could be considerably larger, pending market appetite. Coupled with four smaller deals, at least $6.05 billion should price today.

"It's a high-quality day in the market," said Susanna Gibbons, head of fixed-income credit research at RBC Global Asset Management.

The flurry of jumbo deals comes at a time of record-low yields for highly-rated bonds. The widely watched Barclays U.S. Investment-Grade Index finished last week at 3.25%, the lowest level in data going back almost four decades. On Monday it ticked up to 3.26%, the second-lowest rate on record.

Last week, data provider Dealogic counted $24.6 billion in high-rated-bond issuance, marking the fifth-busiest week of 2012. But Gibbons said she isn't concerned about the market becoming saturated.

Even after near-record volume in the first quarter, net issuance is growing minimally as the amount of principal returning to investors mostly offsets new issuance, she noted, while inflows from mutual funds continue to indicate strong demand.

"Most deals really have had no problem getting done, and in particular higher-quality paper is being snapped up," she said.

When IBM last issued three-year bonds in February, it achieved an all-time low coupon of 0.55%, according to Dealogic. Those bonds last traded Monday at a spread over Treasurys of 0.37 percentage point, yielding 0.737%, according to MarketAxess.

IBM's debt is rated Aa3 by Moody's Investors Service and A-plus from Standard & Poor's and Fitch Ratings.

Berkshire and Diageo, each issuing through financing subsidiaries, are both issuing five-, 10-, and 30-year bonds. The Berkshire bonds are rated Aa2 by Moody's and AA-plus by Fitch, while Diageo's bonds are rated A3 by Moody's and A-minus by S&P and Fitch.

Berkshire is offering 0.85, 1.25, and 1.45 percentage points over respective Treasury rates, according to launch terms. It is raising funds to retire up to $700 million of 4.75% coupon notes due this year and to replace $1 billion of 4% notes that matured last month.

IBM and Diageo are each borrowing for general corporate purposes. According to Standard & Poor's LCD, this is Diageo's first U.S. bond deal since 2010.

Among smaller issues in Tuesday's market, Penske Truck Leasing Co. (PTL.XX) is readying a $750 million deal of three- and five-year bonds, and Southern Co. unit Georgia Power said it would sell $500 million in a two-part deal.

Telecommunications equipment provider Motorola Solutions (MSI) is also selling $500 million of 10-year bonds in its first offering since 2007.

All six deals are expected to price Tuesday.

Earlier in the session, Malaysia's RHB Bank Berhad sold $300 million of 3.25% bonds due 2017, pricing them at 2.25 percentage points over Treasurys.

-By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com

Grafico Azioni Northern Lights (NYSE:PTL)
Storico
Da Mag 2024 a Giu 2024 Clicca qui per i Grafici di Northern Lights
Grafico Azioni Northern Lights (NYSE:PTL)
Storico
Da Giu 2023 a Giu 2024 Clicca qui per i Grafici di Northern Lights