Click here to
set an alert that will
notify you when
new stories appear.The new issue
concession was
expected to be 10 to
12 basis points below
the initial price talk.18 basis points, fair value for this new bond issue was about 47 basis
points over SOFR. The deal was introduced at 45 basis points over
the new benchmark, implying a 2-basis-point advantage for the
borrower in doing the deal, which received $2.5 billion of orders.
After the deal is priced, a new issue concession can be
calculated. Comparing the amount of demand with how much is
sold and with how much the spread tightened across the mar-
keting process are additional ways to gauge how the bonds will
probably trade after they’re issued.How to Find It
Go directly to the new issue concession analysis by running {NI NIC
<GO>} (FIG. 1). To set an alert that will notify you when a new story
appears, click on the Actions button on the red toolbar and select
Set Alert Delivery. This analysis is integrated into Bloomberg First
Word’s coverage. Go to {FIRS <GO>}, click on the Actions button,
and then on Select Market Focus. Click on Capital Markets, select
Americas Debt Capital Markets, and click on the Update button.Here’s a Smart App for Finding Value
In Investment-Grade Bond Sales
By BRIAN SMITH
New Issues
Fig. 1 To see headlines of new issue price analysis stories, go to {NI NIC <GO>}.WHEN A BLUE-CHIP company such as Verizon Communications Inc.
or Toyota Motor Corp. sells new bonds, how can you tell whether
they’re worth buying? In the U.S. high-grade debt market, that’s
an increasingly challenging proposition.
Speed is key. When new deals are announced, it’s important
to find similar bonds to compare them to. Many borrowers will
already have bonds outstanding, and it’s often possible to construct
a yield curve by interpolating between those bonds. It’s also import-
ant to look at how comparable debt from similar issuers is trading.
Consider an example from before March, when the corona-
virus outbreak sent credit markets into a tailspin. In January, Credit
Suisse AG wanted to raise $2 billion for its New York branch; its
outstanding 2.1% coupon bonds due in November 2021 were
trading at 34 basis points over Treasuries. Adding a new issue
concession, the fair value on a fixed-rate new issue would be about
35 basis points over the U.S. government benchmark.
In this case, the bank looked to borrow in floating-rate format.
The equivalent was about 29 basis points above the three-month
London interbank overnight rate, our analysis showed. An additional
wrinkle was that this bond was to be priced relative to the Secured
Overnight Financing Rate. Given a SOFR/Libor basis of about
Smith is a strategist with the credit team at
Bloomberg News in New York.44