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.