US Bond Market Absorbs Most Issuance Since Nov 14

A receptive buyer base convinced at least eight large higher-grade corporate issuers to tap the U.S. markets and allowed several to inflate the size of their deals Monday.

Almost $12 billion of investment-grade issuance hit the market, led by Ecolab Inc.'s (ECL) four-part offering totaling $3.75 billion and $2 billion of covered bonds from the Canadian Imperial Bank of Commerce (CM, CM.T).

To get an idea for how much issuance that is, consider that the 2011 average for weekly issuance among investment-grade issues is $16.1 billion, according Dealogic. The data provider noted weekly volume averaged $17 billion over the past four weeks, a high figure considering there was almost zero issuance during the Thanksgiving week.

Dealogic excludes covered bonds in its tally of investment-grade issuance and calculates Monday's daily total at $9.65 billion--still the most volume since Nov. 14.

The Ecolab deal featured $500 million three-year notes priced to yield 2.396%, $1.25 billion of five-year bonds priced to yield 3.043%, $1.25 billion of 10-year bonds priced to yield 4.358%, and $750 million of 30-year bonds priced to yield 5.571%.

The CIBC bonds, which are "covered" by fully insured residential mortgage loans to offer investors additional protection should the issuer become insolvent, are due in three years and were priced to yield 1.50%. They garnered triple-A ratings from four rating agencies.

The market also digested $1.5 billion deals from Wells Fargo & Co. (WFC) and Abu Dhabi National Energy Co., also known as TAQA (TAQA.AD). The five-year Wells Fargo bonds were priced to yield 175 basis points over comparable Treasurys; the TAQA bonds, featuring five- and 10-year maturities, were priced with spreads of 330 and 390 basis points, respectively.

"Anybody who has been ready to go has been given the all-clear signal so they are jumping in," said a syndicate source in New York. "I don't know if it's a huge pipeline and I don't know how long it will last--it might be a one-week or a two-week kind of thing--but the deals that got through last week really gave guys confidence to come to the market."

Additionally, $1 billion deals were issued by Duke Energy Carolinas and Noble Energy Inc. (NBL), while Senior Housing Properties Trust (SNH) marketed $300 million.

Shenzhen-based Tencent Holdings Ltd. (TCEHY, 0700.HK), one of China's largest Internet companies, also sold $600 million of 4.625% coupon, five-year U.S. dollar bonds priced to yield 4.684%, for a spread to Treasurys of 375 basis points, according to a person familiar with the deal.

Among high-yield issuers, Ford Motor Co.'s (F) financing arm sold $1 billion of 5.875%, 10-year bonds priced to yield 5.625%, for a spread to Treasurys of 359 basis points. The senior unsecured bonds were a reopening of, or addition to, a $1 billion borrowing of 5.875% bonds originally issued on July 27 and maturing on Aug. 2, 2021.

Whether issuance can keep the pace up this week remains to be seen, but sentiment in the secondary market weakened from its lofty levels early in the morning.

A benchmark index of the U.S. corporate-bond market, Markit's CDX North America Investment-Grade Index, had advanced 4% in the morning but finished the day with a 1.5% improvement.

"It was a day of mixed emotions," said a bond trader in Chicago. "There wasn't a lot of movement for the market as a whole because it got soft in the afternoon. I'd call the day a net wash."

-By Patrick McGee, Dow Jones Newswires; 212-416-2382; [e-mail]