Corporate Bonds: Monsanto $2.5 Bln Sale Coming as Market Gains
Bloomberg News
December 4, 1998, 10:35 a.m. ET
New York, Dec. 4 (Bloomberg) -- Monsanto Co., is selling
$2.5 billion of bonds today, while US Airways Inc. and China are
gearing up for sales next week as investor demand was boosted by
an employment report showing a stronger than expected economy.
After a week of flagging investor demand which caused
spreads to widen between corporate and Treasury bonds, Monsanto
opted to increase yields 5 basis points for $2 billion of the
$2.5 billion it expects to sell later today.
Demand for new corporate bonds is expected to benefit by the
rise in November payrolls that reduced the unemployment rate to
4.4 percent. That report ignited a rally in U.S. stocks, sent
Treasury issues lower and allayed some investors' worries that
economic growth would slow enough to hurt corporate credit
ratings. The Dow Jones Industrial Average rose 79 points in
midmorning trading.
''Any time stocks do well it's always a good sign for
corporates,'' said Nicholas Walsh, who helps manage $1 billion of
fixed-income assets at J&W Seligman & Co. in New York.
Earlier in the week, investors were increasingly wary of
corporate bonds because there were so many new issues to choose
from at the same time as falling stock prices and rising
Treasuries were signaling that the economy was expected to
weaken. Those concerns were aggravated when Brazil failed to
adopt measures that would have cut its budget deficit and allowed
the company to move away from the high interest rates that are
hurting its economy.
''Brazil, bad equity markets and so many deals in such a
short period of time took the bloom off the rose,'' said Margaret
Patel, who manages the $10 million Third Avenue High Yield Fund.
About $43 billion of corporate bonds sold in November, the
most for any month since July. That pace continued early this
month and expected to remain brisk before the end-of-year
holidays with a sales of at least $2 billion by Seagram & Co. and
$500 million by China.
After spreads between many corporate bonds and Treasuries
widened up to 10 basis points earlier this week, Monsanto
proposed to increased yields 5 basis points on $2 billion of its
$2.5 billion sale.
The large agricultural biotechnology company, plans to sell
its notes and bonds in a private sale today at the following
yield spreads over Treasuries with comparable maturities:
--$500 million of three-year notes at about 90 basis points,
unchanged;
--$500 million of seven-year notes at about 120 basis
points, wider by 5 basis points;
--$500 million of 10-year notes at about 130 basis points,
wider by 5 basis points;
--$500 million of 20-year bonds at about 140 basis points,
wider by 5 basis points;
--$500 million of 30-year bonds at about 150 basis points,
wider by 5 basis points;
Investors say the company is required to offer wider yield
spreads than similarly rated industrial bonds. They say that's
needed because of the
sale's large size, the retrenchment in investor demand for
corporate bonds the past few days and the risks of Monsanto's
recent acquisitions of seed companies and bio-technology
businesses. Proceeds of the sale will help pay for $8 billion of
acquisitions over the past two years.
Monsanto's sale is the largest since Sprint Capital Corp.
sold $5 billion Nov. 10.
--Kathleen Spillane in the New York newsroom (212) 318-2034 with |
