Deluge of Corporate Bond Deals Continues Tuesday

   By Patrick McGee 
 

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 [e-mail]