Feb 5 (IFR) - IBM Corp on Tuesday made the most of a surge in demand for floating-rate notes in the corporate bond market by issuing a $1 billion two-year deal at a negative spread to Libor.
The deal, which was part of a $2 billion offering of two-year floaters and five-year fixed-rate notes, was priced at three-month Libor minus 2 basis points, making it one of the very few corporates to have issued a floater inside of Libor since the credit crisis.
The aggressive pricing was possible because of a scramble for floating-rate debt securities in the corporate bond market in recent weeks as Treasury yields rise.
So far this year more than $14 billion of floating-rate notes have been priced, already equal to almost a third of the $42 billion of floaters issued in all of 2012.
“We have seen a resurgence of demand for floating-rate product in 2013,” said Anne Daley, managing director and senior syndicate banker at Barclays in New York.
“While supply has not been massive yet, the fact that we have already seen more than $14 billion year-to-date versus $42 billion for all of last year clearly shows there is very strong demand growing for the product.”
Corporates have also been more willing to issue floating-rate notes, to balance out a debt mix which has been dominated by fixed-rate bond issuance in recent years as issuers sought to lock in record low fixed-rate coupons.
Usually money managers and securities lenders tend to buy floaters inside of 18 months, but the strength of demand has enabled names like IBM and General Mills to issue out to two and three years respectively.
JP Morgan was able to raise $2.4 billion of five year floaters in January.
IBM is only the third industrial issuer since the crisis to print at a negative spread to Libor, along with Procter & Gamble and Coca-Cola Company, which did deals last year.