July 27 (IFR) - A crazy week of upheaval in the Thomson Reuters/IFR low-coupon tables was set to end suitably, with yet another low-coupon record-breaker - on a summer Friday no less - from Colgate-Palmolive.
In the end however, Colgate had to settle for number two position, with a big pop in US Treasury yields keeping the record out of reach.
Colgate has regularly gained the top spot on the low-coupon tables and seemed almost certain to retake the number-one position in 10-years, after being ousted from the spot by 3M Co last month.
To do so, it would have to top IBM’s landmark 1.875% coupon on notes due August 2022 that priced on Wednesday - the first 10-year US high grade deal to print inside of 2.00%.
That seemed possible when the deal was announced, but by the time Colgate priced, the 10-year Treasury yield had spiked by 11 basis points (bp) on talk of stimulus measures from the ECB.
Colgate did manage to come in below 2.00% with a 1.95% coupon, but IBM’s record remains intact for now.
Colgate, rated Aa3/AA-/AA-, sold $500 million of SEC registered long 10-year medium term notes via HSBC, JPMorgan and Morgan Stanley joint books.
Proceeds of the deal will be used to retire commercial paper that was issued for general corporate purposes.
Initial price talk on the deal came at Treasuries plus 65bp area. Official guidance emerged at Treasuries plus 60bp area. Ultimately the deal was launched and priced at 98.537 to yield 2.106%, or Treasuries plus 58bp.
If Colgate had printed a straight 10-year instead of a long 10-year, that might have made the record easier to reach, but it wasn’t really an option. The issuer had just tapped the market with a straight 10-year in April - with the 2.30s due May 2022, which held the record low coupon in 10-years, tied with Procter & Gamble, until 3M came along with its 2.00s due June, 2022 on June 21.
Colgate’s 22s were quoted around Treasuries plus 52bp bid on Friday. Adding in 5bp for the maturity extension puts fair value of Treasuries plus 58bp.
That means that Friday’s trade priced with a flat new issue concession. On Wednesday, IBM demonstrated -- with its 65bp area guidance that it was unable to tighten -- that investors seem unwilling to dive into negative NIC territory with these low coupon/low spread deals. At least that seems to be the case for those that have active outstandings.
Book size was heard as $1.25 billion.
So IBM remains at the top of the 10-year table.
Bristol-Myers Squibb remains at the top of the five-year table with its 0.875% coupon, the first five-year inside of 1.00%, that was part of a 2-part offering of five-year and 30-year notes that priced on Thursday.
The 30-year tranche also grabbed top honors with a 3.25% coupon. In the three-year bucket, IBM has held the record since February 1 with its 0.55s due February 2015.
A total of $15.25 billion from twelve deals priced this week, right about mid-range of where syndicate desks expected it to come in. That topped the $13.85 billion in 12 deals done last week.
About half of the market expected activity to be in the area of $10 billion, perhaps to the plus side depending on opportunistic issuers. But the other half felt it would be busier - more like $15 billion area, with some saying $15-20 billion.
Yankee FIG issuers led the way this week with $6 billion from four issues, accounting for 39% of total volume. Overall FIG issuance (domestic and Yankee) accounted for 52.5% of the total.
Domestic industrial issuers also had a decent week, as four new issues hit the market for $4.5 billion, helping to boost the corporate sector total for the week (domestic plus Yankee) to $7.25 billion, accounting for 47.5% of total volume.
As has been the case for most of 2012 and definitely for the month of July, single-A issuers were the most active participants in the new issue market.
A full $6.5 billion, or 42.6%, of total issuance was from single-A rated companies. Double-A rated issuers accounted for $5.75 billion (37.8%), while the remaining $3 billion done this week, 19.6%, came from triple-B names.
Fifty-four percent of July issuance, or $31.325 billion, has originated from single-A rated issues.
The total for July is now $57.825 billion - just $918 million short of the $58.743 billion record for July (2010). There is still Monday and Tuesday of next week to push the month into record territory.
Year-to-date corporate volume now stands at $527.061 billion from 498 issues. 2012 new issue volume remains well ahead of the pace from one year ago, when 428 deals were priced for $487.186 billion during the same period.
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