Bloomberg News

Celgene Leads U.S. Bond Offerings as Yields Fall to 11-Month Low

May 06, 2014

Companies returned to the U.S. bond market today following almost a week of below-average issuance as borrowing costs reached an 11-month low amid a pullback in U.S. economic growth.

Mead Johnson Nutrition Co. (MJN:US), the maker of Enfamil baby formula, and Summit, New Jersey-based Celgene Corp. (CELG:US) led borrowers offering about $9.8 billion of bonds, the most since $15.2 billion on April 29, according to data compiled by Bloomberg. Offerings exceeded the daily average of $6.8 billion over the past 12 months.

Last week’s slowdown threatened to break the record-setting pace of investment-grade sales, as investors reacted to a government report that showed the economy grew at a 0.1 percent rate in the first quarter, down from 2.6 percent in the prior period. Concern that growth is faltering along with turmoil in Ukraine has increased demand for safer assets such as Treasuries and pushed down borrowing costs, according to Kevin Flanagan at Morgan Stanley Smith Barney.

“There’s more of a growing sense that rates aren’t going to spiral to the upside,” Flanagan, the bank’s Purchase, New York-based chief fixed-income strategist, said in a telephone interview. “If you need or have been looking to raise money, this appears to be an opportune time.”

Investment-grade bond offerings in the U.S. have reached $459.8 billion this year, exceeding the $450.9 billion sold in the comparable period of 2013, Bloomberg data show.

‘Opportune Time’

Yields on U.S. corporate bonds from the most creditworthy to the riskiest borrowers fell to 3.72 percent on May 2, the lowest since June 2013, before rising to 3.73 percent yesterday, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Index. The extra yield investors demand to own the bonds rather than government debentures reached 170 basis points, 3 basis points more than an almost seven-year low reached last month.

Mead Johnson sold its first bonds in about four years with $500 million of 4.6 percent, 30-year debentures priced to yield 127 basis points more than similar-maturity Treasuries, Bloomberg data show. The debt will be used to redeem the Glenview, Illinois-based company’s outstanding 3.5 percent notes due in November, according to a person with knowledge of the transaction, who asked not to be identified citing lack of authorization to speak publicly.

Celgene, the maker of the cancer drug Revlimid, is offering $2.5 billion of bonds in five-, 10- and 30-year pieces, according to a person with knowledge of the transaction. The $1 billion of 10-year notes may pay a 108 basis-point spread.

JPMorgan Chase & Co. issued $2 billion of 3.625 percent, 10-year securities, Forestar Group Inc. is planning to issue $250 million of eight-year notes and Xerox Corp. intends to raise $700 million in two parts, according to people with knowledge of the transactions.

To contact the reporter on this story: Sarika Gangar in New York at sgangar@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net John Parry, Richard Bravo


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Companies Mentioned

  • MJN
    (Mead Johnson Nutrition Co)
    • $97.63 USD
    • -0.67
    • -0.69%
  • CELG
    (Celgene Corp)
    • $92.26 USD
    • -0.31
    • -0.34%
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