CORRECT: =Corporate-Bond Investors Snap Up $5 Billion In New Supply

26th Jul 2010 23:13

("=Corporate-Bond Investors Snap Up $5 Billion In New Supply," timed at 4:55 p.m. EDT, misstated the Westpac tranche size and dropped a decimal point in the guidance concerning Alcoa's bonds in paragraphs seven and eight, respectively.) By Katy Burne Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The corporate-bond market found a tailwind Monday once Eurozone bank stress tests were out the way and investors focused on bonds with meatier yields than those on offer from Treasurys. Investors snapped up nearly $5 billion of high-grade bonds: $3 billion from Australia's Westpac Banking Corp., $1 billion from aluminum producer Alcoa Inc., $500 million from utility Commonwealth Edison Co., and $250 million from hygiene products maker Kimberly-Clark Corp. It was the highest daily volume in high-grade bonds since last Wednesday, when $9.4 billion was issued, according to data provider Dealogic. The fresh supply was a welcome reprieve after months of irregular issuance because of unnerving news from Europe, market participants said. "Those clouds have cleared," said Patrick Sporl, senior portfolio manager at American Beacon Advisors in Fort Worth, Texas. "There's less distraction and yields are down, so if you're a company that needs money, it's a good time to sell bonds." The yield on the 10-year Treasury is 2.992% and on the 30-year it is 4.016%. Westpac's U.S. dollar-denominated sale was its fifth and largest so far this year. It launched with a risk premium over Treasurys of 1.17 percentage points on an initial chunk of $1 billion, three-year notes and 1.37 percentage points on a second chunk of billion, five-year notes. Orders totaled almost $2 billion on the first bucket and $3 billion on the second, with price guidance set at 1.2 and 1.4 percentage points, respectively. Alcoa's 10-year, 6.15% senior unsecured bonds priced at 3.18 percentage points over Treasurys, well inside guidance of , for a yield of 6.167% thanks to more than $5 billion of orders, a syndicate banker said. Proceeds will help the company refinance debt maturing over the next three years. Alcoa, which recently reported second-quarter net income of $136 million, last came to market in July 2008, raising $1.5 billion. ComEd, an Exelon Corp. subsidiary, sold its 4% first mortgage bonds at a discount to yield 4.003%, or 1 percentage point over Treasurys, and plans to use the money to refinance 4.74% bonds maturing Aug. 15 this year. And Kimberly-Clark Corp. priced its 10-year, 3.625% senior unsecured bonds at a discount to yield 3.661%, or 0.65 percentage points over Treasurys, inside guidance of 0.70. The company is using the money to help refinance a portion of the $450 million debt it has coming due on July 30. "This debt issuance demonstrates our commitment to a disciplined approach to the deployment of free cash flow while maintaining a conservative financial policy," said a spokeswoman. In secondary trading, existing Kimberly Clark bonds bearing interest at 6.125% and maturing in August 2017 were priced at 118.744 to yield 3.125%, slightly less than the newly offered bonds, according to MarketAxess. Meanwhile, in high-yield issuance, Advanced Micro Devices Inc. priced $500 million in new, 10-year unsecured bonds at par to yield 7.75%. Proceeds will be used to reduce and term out the computer chip maker's existing indebtedness. "The markets have been very turbulent in the last couple of months," said Thomas Seifert, finance chief of the computer-chip maker. "But the stress tests came out Friday and were a lot better than expected, so we thought this would open us up for a good transaction." Some $9.3 billion has been raised from high-yield bond sales so far in the third quarter, according to data provider Dealogic, compared to $8.3 billion for the same period last year. Financial institutions--Morgan Stanley, Bank of America and Barclays Bank, in particular--were also popular in secondary trading, despite the summer lull still affecting volumes. So were solid corporate credits like PepsiCo. Inc., which have been attracting investors who are looking to get diversified exposure outside of Treasurys. -By Katy Burne, Dow Jones Newswires; 212-416-3084; [email protected] (END) Dow Jones Newswires July 26, 2010 18:13 ET (22:13 GMT)