It is shaping up to be a heavy day for issuance in the
high-grade corporate bond market.
Even with risk sentiment weakening Monday, a robust $7.6 billion
of bonds were priced. In early trading Tuesday, Markit's CDX North
America Investment Grade Index has improved 2.3%, setting the stage
for another deluge of deals.
Eight companies have already reported plans to borrow, including
a three-part deal from Sumitomo Mitsui Banking Corp., a two-part
deal from Penske Truck Leasing Co. and a two-part deal from
Corporacion Nacional del Cobre de Chile, the Chilean state-owned
mining company. Sizes haven't been set on most deals, but at least
$6.9 billion should sell Tuesday.
All are enticed by the same dynamics: low yields and heavy
demand.
On Monday, Monsanto Co. (MON) broke a record for lowest coupon,
as it sold 30-year bonds at 3.60%, indicating a very strong
reception among investors.
In the broader market, Barclays's index of corporate bonds
Monday hit a record-low yield of 3.16%, a full 0.20 percentage
points under the lowest yield heading into 2012.
The all-time low has been smashed numerous times in 2012,
including four times in July alone, thanks to falling Treasury
rates. Data go back to 1973.
Investors who have purchased low-yielding bonds have been
generously rewarded in 2012, with the total return on high-quality
corporate bonds at 5.81% so far, beating Treasurys by 2.82
percentage points, Barclays shows. The average spread to Treasurys
is 1.97 percentage points.
Three financial-sector companies selling bonds Tuesday, in
addition to Sumitomo Mitsui, include Industrial Bank of Korea, ING
U.S. Inc., and Westpac Banking Corp. (WBK).
Other companies include South Carolina Electric & Gas Co.,
Westlake Chemical Corp. (WLK), and Transcontinental Gas Pipe Line
Co.
Write to Patrick McGee at patrick.mcgee@dowjones.com
Copyright (c) 2012 Dow Jones & Company, Inc.