--Four companies price $2 billion of new bonds Tuesday

--Illinois Tool Works leads with $1.1 billion, 30-year deal

--This month's issuance at more than $54 billion, compared with $43 billion average for August in past five years, Dealogic shows

(Adds final pricing information for ITW in second paragraph, updated Markit data in sixth paragraph and Fidelity pricing in ninth paragraph.)

 
   By Patrick McGee 
 

Smaller deals are finding a receptive audience in the corporate-bond market, despite lightly staffed trading desks.

Four companies priced $2 billion of new bonds Tuesday, led by a $1.1 billion, 30-year deal from Illinois Tool Works Inc. (ITW). It sold the bonds at a coupon of 3.90%, joining a small club of borrowers to issue long-dated bonds at sub-4%, and saving nearly a full percentage point from its 30-year offering a year ago, according to data provider Dealogic.

The offerings push this month's issuance to more than $54 billion, compared with a $43 billion average for August in the past five years, Dealogic shows.

Though borrowing costs have ratcheted up this month as benchmark Treasury rates have risen, rates are well under the previous record lows heading into this year, according to the Barclays U.S. corporate investment-grade index, which goes back to 1973. The average yield is currently 3.08%, versus a record-low 2.92% on July 31. The low heading into 2012 was 3.36%.

The average yield is also just 1.71 percentage points more than Barclays's Treasurys index, the narrowest spread to the safe-haven asset class in just more than 12 months.

The deals were sold as Markit's CDX North America Investment-Grade Index, a proxy for buyer sentiment, improved 0.9% in midafternoon trading. That brought the index to 97.5 basis points, indicating the cost to protect against defaults was at its lowest since May 3. In late-afternoon trading, the index weakened to 98.5 basis points. A basis point is one-hundredth of a percentage point.

But Illinois Tool Works was able to take advantage of the favorable conditions, borrowing cash that won't come due for three decades. The company paid just 1.05 percentage points more than Treasurys on the 30-year bonds, in its largest deal since selling $1.5 billion in March 2009.

The bonds carry provisional ratings of A1 from Moody's Investors Service and A-plus from Standard & Poor's Ratings Services.

Among smaller deals, Fidelity National Financial Inc. (FNF) sold $400 million of 10-year bonds at 5.564%, or 3.75 percentage points more than Treasurys.

PPL Electric Utilities Corp. and India's Axis Bank Ltd. (532215.BY) also completed $250 million deals.

Write to Patrick McGee at patrick.mcgee@dowjones.com

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