PG&E Corporation : PG&E Sells $400 Million As Corporate Bond Market Stabilizes
04/11/2012| 04:13pm US/Eastern
--Markit's CDX North America Investment-Grade Index improved 2.5% in late trading after several days of weakening
--Strengthening in the CDX, along with stabilization in the equity market, could increase the chance that borrowers find a window to tap the debt markets Thursday
By Patrick McGee
The Pacific Gas and Electric Co. took advantage of an otherwise silent session in the U.S. high-grade corporate bond market, and the lack of competition allowed it to price 30-year bonds on the tighter end of earlier guidance as it increased the size of its offering by $100 million.
Other companies were less enthused to test the markets following a rough day Tuesday when four issuers struggled to sell debt while broader markets deteriorated substantially, dampening investor appetite for risk assets.
"Things got backed up a little bit--it was one of the weakest days of the year," said one syndicate source about Tuesday.
The $400 million Pacific Gas deal, rated A3 by Moody's Investors Service, BBB by Standard & Poor's, and A-minus by Fitch Ratings, was priced to yield 4.481%, or 1.3 percentage points over the 30-year Treasury rate. Earlier price guidance was 1.35 points over Treasurys.
Markit's CDX North America Investment-Grade Index, a proxy for risk sentiment in the corporate market, improved 2.5% in late trading after several days of weakening. The index now stands at 102 basis points--still among the highest, or worst, levels of 2012.
Strengthening in the CDX, along with stabilization in the equity market, could increase the chance that borrowers find a window to tap the debt markets Thursday, as the drop in Treasury rates makes potential borrowing costs extremely attractive.
"I would imagine a couple of other deals will come in if the tone remains stable, but who knows what tomorrow will bring," another syndicate source said.
The Barclays U.S. investment-grade index finished Tuesday at 3.34%, down from a 2012 peak last month at 3.51%, thanks to falling Treasury rates. Corporate bond spreads, however, have steadily climbed to 1.87 points over Treasurys, the highest since Feb. 27.
According to Dealogic, just $2.045 billion of high-grade issuance have been sold this week, versus a four-week average of $19.5 billion. Without a surge of new issuance, this will easily be the softest weak for issuance this year. So far, it is the lightest non-holiday week for issuance since mid-September 2011.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382; firstname.lastname@example.org