Investors are still keen to buy long-dated bonds from top-quality investment-grade rated corporates, as Roche showed on Monday. The Swiss pharmaceutical company became the third corporate in as many weeks to sell a 20-year bond, following French utility Reseau de Transport d'Electricite and Dutch natural gas network Gasunie, as part of a €1.5bn dual-tranche offering. Although Bunds, like other government bonds, have sold off since late March – the yield on the 20-year benchmark is 23bp higher since March 27 at 2.71% – the weakness has been much less marked than in the Treasury market, reflecting a growing shift in central bank expectations. While investors are now no longer expecting a rate cut in the US in the first half of the year, they are still pricing one in by the ECB in June. This is helping to underpin the bid for 20-year bonds. "There's good demand for low-beta long-dated bonds," said a banker, who described Roche (Aa2/AA) as "an incredibly high-quality" credit. Roche also took advantage of a euro market that is outperforming its US dollar counterpart. "Euro spreads have kept on moving tighter, whereas the US dollar market has underpeformed a bit," said a second banker. "The US hasn't fallen out of bed but maybe there's a bit more uncertainty on the rates side." He described Roche as a "smart trade," with pricing levels "compelling all the way out to 20 years" compared with US dollars. Leads began marketing the transaction, which comprised May 2030s as well as May 2044s, at 65bp area and 110bp–115bp over mid-swaps via BNP Paribas, Santander and UniCredit. With more demand for the 20-year note – more than €2.3bn compared with €1.4bn-plus – leads were able to shape the curve based on the spread at the tight end of IPTs for that note and also raise more through the longer bond. So, while the €650m six-year landed at plus 38bp, the €850m 20-year note came at 83bp. The premium for the shorter bond was less than 5bp, based on where leads spotted Roche's August 2029s, at at I-spread of plus 32bp, and its February 2035s, at 50bp. It was tougher to calculate fair value on the 20-year tranche, with the issuer's longest bond on its euro curve, its December 2036s, at 62bp. As far as other comparables are concerned, Eli Lily (A1/A+) has November 2049s at an I-spread of 84bp, Deutsche Bahn (Aa1/AA) has November 2043s at 101bp, the RTE (A by S&P) April 2044s are at 107bp, while Siemens (Aa3/AA) has February 2044s at 97bp. The deal came just less than two months since Roche raised US$3.875bn in the US dollar market. The company is expanding through acquisitions, including a US$7.1bn takeover of Telavant Holdings. It also has big operating expenditure needs and shareholder returns. Proceeds will go towards financing M&A, refinancing of short-term debt and regular debt maturities, payment of dividends and for potential early redemptions or mandatory prepayment events. This was Roche's first euro deal of the year, though it was last in the market in November with a €1.5bn deal that also comprised two tranches, in that instance of four and 13-year bonds. It also issued in US dollars and Swiss francs in November.Middle of the fairway There was one other issuer in the market in Monday, with drinks company Pernod Ricard (Baa1/BBB+) raising €1.5bn through €700m November 2030 and €800m May 2034 notes. The bonds landed at plus 70bp and plus 92bp respectively, following IPTs of 100bp–105bp and 120bp–125bp. Leads said both tranches began 30bp–35bp back of fair value. "It's a seasoned borrower, a very well-known name, and has a loyal following," said the first banker. Pernod Ricard offered some value versus similarly rated Danone, which priced a €700m six-year bond on Friday at plus 58bp. It also offers good value over Diageo (A3/A–/A–), which has June 2029s at plus 44bp, according to LSEG data. Still, combined books fell from
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