June 17 (IFR) - Chevron Corp on Monday kicked off the week
for the US primary high-grade market with a six-part deal
expected to be sized at about USD5bn.
The deal is expected to give a boost to a primary market
that has been deprived of major issuance activity in recent
weeks due to volatile Treasury rates.
On Friday, Rio Tinto stepped in to break the dry spell,
raising USD3bn from a four-parter that was the largest deal of
the week. That deal, which attracted a book of USD7.25bn, showed
that issuers can still raise sizeable volume from the market
despite the concerns about Treasury yields as long as they are
conservative in pricing.
The pace of high-grade issuance was expected to pick up
today with Treasuries relatively flat on the back of a strong
rally in equity futures. Issuance in any case was expected to be
front-loaded to the first two days of the week ahead of the
conclusion of the Fed meeting on Wednesday.
Stock futures rallied following a report that the Bank of
Japan is considering increasing its REIT asset purchases. That
helped improve tone, which was tentative as of Friday afternoon
as bankers had no real clarity on the likely pace of issuance
this week. Reflecting the uncertainty, syndicate estimates for
the week stretch from USD5bn-25bn.
The Empire State Manufacturing Survey data released earlier
showed a much stronger-than-expected rise to +7.84 in June from
-1.43 in May. The median expectation was for a flat reading.
Chevron, rated Aa1/AA, is issuing three-year fixed
and/or floating rate notes; five-year fixed and/or floating rate
notes, seven-year and 10-year notes via Barclays, JP Morgan,
Morgan Stanley and Wells Fargo.
The initial price thoughts on the three-year fixed-rate
notes are Treasuries plus 70 basis points area; five-year
fixed-rate notes at Treasuries plus 90bp area; seven-year
fixed-rate notes at Treasuries plus 120bp area; and the 10-year
fixed-rate notes at Treasuries plus 130bp area.
Besides Chevron, other issuers in the market on Monday
include MetLife and O'Reilly Automotive.
Sentiment, however, remains fragile and investors will
carefully watch this week's main events.
On Wednesday, the focus will be on what Bernanke says at his
post-meeting press briefing when he is expected to unveil the
Fed's latest economic projections and provide greater clarity on
the likely timing for tapering asset purchases.
Also on the calendar are Tuesday's CPI, housing starts and
building permits, and Thursday's Philly Fed, existing homes
sales and weekly jobless claims.