Replies to post #101882 on Biotech Values

[linhdtu]

The pragmatist capitalist has a good rejoinder to the Bond Bubble meme.
http://pragcap.com/the-myth-of-the-great-bond-bubble

[Biowatch]

"Dividends are great as long as a company can make money," he says. "But if the economy sinks, they'll stop paying."

Tiomkin says he's sticking with Washington IOUs

The classic trade-off. The Great Depression put most Americans off buying stocks for half a century, even if it was a wise investment. Then again, cash is King.

http://finance.yahoo.com/news/Bond-bubble-fear-returns-as-apf-2034071771.html?x=0&sec=topStories&pos=3&asset=&ccode=

[DewDiligence]

Bond-bubble update: MFST today issued $1B of 3-year bonds with a coupon of 0.875% and a yield-to-maturity of 0.093%!! That’s the lowest interest rate for a 3-year issue in the history of the US corporate-bond market.

http://finance.yahoo.com/news/Microsoft-Announces-Debt-prnews-2533612747.html?x=0&.v=1

[DewDiligence]

CELG joins the bond-flotation brigade, issuing a total of $1B of 5- and 10-year notes yielding 125 and 150 basis points above T-bonds, respectively:

http://www.reuters.com/article/idCNN0414272920101004

The bond market is clearly out of whack when a company as risky as CELG can sell 5-year unsecured debt yielding <2.5% and 10-year unsecured debt yielding <4%.

[DewDiligence]

Strange Tales in the Land of No Return

[A negative yield on TIPS is the latest symptom of the Bond Bubble.]

http://www.nytimes.com/2010/10/29/business/economy/29norris.html

›October 29, 2010
By FLOYD NORRIS

Now the government really is selling bonds that deserve the label “certificates of confiscation.”

This week the United States Treasury sold bonds for a price that may be greater than the total amount of cash an investor will get from holding the bond to maturity in 2015.

That appears to be a first for this or any other government. When all is done, the Treasury may have managed to borrow money at a negative interest rate. Put another way, buyers of the bonds might have done better if they stuffed the money in their mattresses.

We’ll get to the details of the bond later. But first we’ll note that buyers of the bonds could make out O.K. if inflation soars. The bonds are inflation-protected. So there is a chance, albeit perhaps a small one, that this will prove to be a really profitable investment.

The same cannot be said for conventional bonds from the Treasury or from high-quality corporate borrowers. There the rates are minuscule, and the upside nonexistent.

Only two months ago, people were shocked to hear that I.B.M. had issued three-year bonds with a coupon of only 1 percent. That rate seems a little high now. In September, Microsoft paid seven-eighths of a percent on similar bonds. Then this month Wal-Mart borrowed at three-quarters of a percent.

If you bought a $1,000 Wal-Mart bond at par when it was issued, you would get a check for $3.75 every six months. Then in three years you get your $1,000 back.

The term “certificate of confiscation” was coined in the late 1970s, when inflation was rising. “If you took the coupon payment, adjusted for inflation and taxes, you had a negative real return,” said Leon Cooperman, who may have been the first to use the term. Mr. Cooperman now runs Omega Advisors, a hedge fund manager, but then was a strategist for Goldman Sachs.

By the time the concept became popular, around 1980, Treasury bonds had nominal yields of more than 10 percent and were despised. (To his credit, by then Mr. Cooperman was suggesting such bonds could be good investments.)

When I called Mr. Cooperman this week and told him I wanted to talk about bonds, he immediately brought up the confiscation theme, saying it was truer now than ever.

Incredibly enough, at the auction this week, investors locked in a negative real return of 0.55 percent. This is a bond that comes with a promise the investor will not keep up with inflation.

Here’s how this bond will work for the four and a half years until it matures. Every six months, the holder of a $100 bond will get one-quarter of 1 percent of whatever the principal value is at that point. That value will rise, or perhaps fall, with the Consumer Price Index. When the bond matures, in April 2015, the bondholder will get the principal value back.

And how much will the principal value be? The government will use a combination of the C.P.I. figures, before seasonal adjustments, for January and February 2015. If that figure is below 228.65, the investor will get back less than the $105.50 he or she paid for the bond this week. The C.P.I. in September was 218.44, so cumulative inflation of 4.7 percent, or a little over 1 percent a year, is needed for the investor to break even. If the 2015 C.P.I. is higher, there will be a profit.

If we have deflation, as some fear, the buyer does get a bit of a break. He or she will get back $100 even if the C.P.I. has fallen a lot.

This week’s auction was a reopening of a Treasury security sold six months ago. Next April, there will be an auction for a newly issued series of bonds. If the market then is around where it is now, that auction will lead to a zero-coupon Treasury, one with no dividend payments at all, and the possibility of capital loss at the end of five years if there is no inflation.

This makes sense if you accept as reasonable the current depressed level of interest rates. Those rates have been driven down by the Federal Reserve as it seeks to stimulate the economy and prevent deflation. A search for safety by investors has also helped, as has China’s need to buy and invest dollars to keep the renminbi from appreciating too much.

So the United States borrows at amazingly low rates. Some other countries, among them Germany and Britain, get similar bargains. But Greece, which averted default earlier this year, is still viewed as scary, and its 10-year bonds have double-digit returns.

When inflation was rampant, there was talk of making the dollar worthless. In a certain sense, that is what has happened now. It is not worthless as a currency to buy things, but it has little value for an investor seeking a safe return on money that is being saved for retirement or a child’s education. The yield on a one-year Treasury bill is now under a quarter of 1 percent.

Investors who need to earn money but crave the perceived safety of fixed income are being forced to lock up their money for years. This week, Goldman Sachs borrowed $1.3 billion from retail investors by selling notes that will mature in 50 years. The notes pay 6.125 percent, and will trade on the New York Stock Exchange.

The deal seems remarkable for many reasons. It was little more than two years ago that we learned that a large Wall Street firm can go broke and leave small investors hung out to dry, but now investors desperate for yield are throwing money at Goldman, which set out to borrow $250 million but found lenders eager.

It is a cliché that the most important assets of an investment bank go home every night, but investors are willing to lend money for 50 years. Few if any people working for Goldman now will still be with the firm then; it is quite possible that the chief executive in 2060 has yet to be born.

Imagine, for a moment, that someone guessed in 1960 which Wall Street firm would be prospering in 2010. He or she might have gotten it right, but a lot of wrong guesses would have seemed equally reasonable.

Finally, Goldman has been widely criticized for its actions leading up to the financial crisis, and it paid $550 million to settle fraud charges filed by the Securities and Exchange Commission in connection with the issuance of collateralized debt obligations based on mortgage securities. But the government has made it possible for Goldman to borrow on extremely favorable terms.

“It is a gift to the banking system,” said Mr. Cooperman, the former Goldman partner, of the prolonged period of superlow interest rates. “The people who did not get us into trouble are being penalized by getting nothing on their savings.”

The Fed’s moves are justified by the need to support an economy that is suffering through a very slow recovery. But monetary policy is not the only policy available to a government. “The time has come for the government to turn to fiscal policy,” Mr. Cooperman said.

But fiscal stimulus has gotten a bad name and is being denounced in the current campaign, as Republicans bemoan budget deficits and demand (vague) spending cuts. It seems unlikely a new Congress will do anything to help the economy. That leaves it to the Fed, and is bad news for those who rely on their savings for income.‹

[DewDiligence]

When there’s a bond bubble, as there is now, smart companies
sell bonds and use the proceeds to repurchase their stock. This is
exactly what PG (and some pharma companies) have been doing.

http://online.wsj.com/article/SB10001424052748703350104575653250196152366.html

›P&G’s Buybacks Are Worth the Gamble

DECEMBER 6, 2010
By JOHN JANNARONE

Lately, Procter & Gamble's bondholders have been served on a silver platter, while shareholders had to settle for crumbs. It may be time to trade places.

P&G shares have risen just 0.3% so far this year, while the S&P 500 has gained 9.8%. Meanwhile, P&G's bonds have outperformed, with its 3.15% bonds due in 2015 up 4.9%, topping the roughly 4% rise in its Markit iBoxx benchmark.

Such a mismatch has created an opportunity. P&G is now able to borrow at far lower rates than its stock's dividend yield. In mid-November, P&G sold $1 billion in bonds due 2015 at a 1.97% yield. Because interest is tax-deductible, the company's effective cost of debt is roughly 1.4%, assuming a tax rate of about 30%. P&G's dividend yield is around 3%.

That makes a strong case for P&G to borrow to keep buying back shares. J.P. Morgan analyst John Faucher says P&G bought over $2 billion of shares in each of the first two calendar quarters and more than $3 billion in the third quarter. The company had bought shares at twice that pace a few years ago, but buybacks had ground to a near halt in 2009.

P&G is no anomaly. Mature companies in other sectors could also take advantage of [and have been taking advantage of] the bond-market rally.

AT&T, for instance, has a dividend yield of about 6%, but its five-year bonds yield roughly 2.4%, according to Markit.

The catch is that shareholders could benefit at the expense of bondholders. Even a company with high capacity for additional debt would see its bonds suffer if it takes on extra leverage.

Take Microsoft, which had $33 billion in net cash at Sept. 30. That takes into account $4.75 billion of bonds the software company sold in late September with the purpose of funding dividends or buybacks. Yet Barclays Capital says that insurance on Microsoft's debt became more expensive after the bond sale, and remains more costly even as a benchmark for such insurance has declined.

While the financial system is flush with cheap cash, even more of the benefits should flow to equity investors.‹

[DewDiligence]

Municipal Bonds Are a Screaming Buy

[Munis never fully benefited from The Great American Bond Bubble (#msg-53466103), partly because the tax advantage of munis applies only to US investors. Now, a wave of fear about the financial condition of state and local governments has caused some munis to become so cheap that they are screaming buys. The most attractive muni funds, IMO, are those with an intermediate average maturity and no leverage.]

http://online.barrons.com/article/SB50001424052970204555504576075980500585362.html

›JANUARY 15, 2011
By RANDALL W. FORSYTH

From the way the beleaguered municipal-bond market is acting, you'd think American cities and states and localities were heading into a fiscal abyss as bad or worse than that of wobbly European sovereign debtors.

Thanks to dire predictions of an unprecedented wave of defaults in the muni market, investors in municipal-bond mutual funds now are stampeding to the exits—sending muni-bond prices plunging. But the drop more reflects the relative illiquidity of the tax-exempt bond market than it does states' and municipalities' finance troubles.

Last week saw wholesale selling of munis by some of the biggest-name fund managers to meet redemptions. Open-end muni funds have suffered nine straight weeks of outflows, totaling some $16.645 billion, a considerable sum absolutely, but not in the context of the overall muni market, which totals some $2.8 trillion. In the week ended Wednesday, outflows were $1.51 billion. Also, Vanguard shelved plans for three exchange-traded muni funds.

The iShares S&P National AMT-Free Municipal Bond exchange-traded fund (ticker: MUB) fell 3.3% on the week, to a 52-week low, and is down 11.7% from its peak, touched last August [a huge drop for a muni-bond fund]. But the surge in yields resulting from the plunge in muni-bond prices is attracting even savvy buyers for whom munis' tax-free interest is irrelevant.

Jonathan Beinner, Goldman Sachs Asset Management's chief investment officer and co-head of global fixed income, says pension funds are crossing over to the muni market to take advantage of what he calls a technical situation caused by heavy liquidations. Indeed, the Goldman Sachs Strategic Income Fund (GSZAX), which Beinner co-manages, has been moving into munis to take advantage of yields as high or higher than comparable taxable bonds.

Indeed, taxable-equivalent yields on muni bonds have moved back to levels not seen since the panic of 2008, points out Michael Darda, chief economist and strategist of MKM Partners. On a taxable-equivalent basis (what a taxable security would have to yield before taxes to equal the tax-free yield), Darda wrote to clients Friday that "long-term muni [general-obligation] bonds are yielding 8.3%. This compares with high-yield bond rates of 7.15%, Baa corporate bond yields of 6.08%, and a forward earnings yield on the S&P 500 of 7.4%. Thus, the risk/reward in munis looks increasingly compelling in our view."

On an absolute basis, the yield on the benchmark 30-year, triple-A muni bond topped 5% Friday, which equaled 111.5% of the yield on the taxable 30-year U.S. Treasury, notes John Hallacy, head of municipal research at Bank of America Merrill Lynch.

Another muni-bond pro observed that California GO bonds due in 2039, rated A-minus by Standard & Poor's, were trading at a tax-free yield of 6.10%. In comparison, fully taxable Mexican government bonds, rated triple-B rating by S&P, and Colombia's obligations, with a below-investment-grade Ba1 from Moody's, yield about 5.75%. Meanwhile, leveraged closed-end muni funds offer tax-free yields up to 8%.

Forecasts of a wave of municipal defaults totaling hundreds of billions contrast with actual experience. S&P reported Friday that actual municipal defaults totaled $2.65 billion in 2010, equal to approximately 0.095% of the $2.8 trillion muni market, down from $2.8 billion in '09. Smart managers are buying munis, not the hysteria.‹

[DewDiligence]

SNY issues $7B of dollar-denominated bonds to pay for GENZ acquisition:

http://www.reuters.com/article/2011/03/22/sanofi-aventis-debt-notes-idUSN2219588820110322

There are six tranches ranging from 1-year to 10-year maturities. The 5-year bonds pay 2.4%, and the 10-year bonds pay 4%. Why would anyone want to buy these issues?

[DewDiligence]

MON issues $300M of 5-year notes @2.8% interest:

http://finance.yahoo.com/news/Monsanto-Company-Announces-prnews-734033540.html?x=0&.v=1

If cheap money is available, might as well take it!

[DewDiligence]

The bond bubble continues—John Deere Capital (the captive finance subsidiary of DE) sold $500M of 5-year bonds with a yield to maturity of 1.86% (!):

http://www.bloomberg.com/news/2011-08-23/john-deere-capital-corp-sells-500-million-5-year-nc-notes.html

[DewDiligence]

The Bond Bubble continues—3M issues $1B of 5-year notes at 1.55%:

http://www.reuters.com/article/2011/09/26/3m-debt-notes-idUSS1E78P1FR20110926

[DewDiligence]

More evidence of The Great American Bond Bubble—ZMH, a medical-device company that is not exactly a blue-chip, sells 3-year bonds at 1.4% and 10-year bonds at 3.375%:

http://finance.yahoo.com/news/Zimmer-Holdings-Inc-Agrees-to-prnews-700325157.html?x=0&.v=1

[DewDiligence]

The Bond Bubble continues—Caltech sells 100-year (!) bond at 4.7%:

http://online.wsj.com/article/SB10001424052970203833104577070613830155408.html

[DewDiligence]

The Bond Bubble continues—PG sells $1B of 10-year bonds @2.3%:

http://www.bloomberg.com/news/2012-02-01/p-g-obtains-record-low-2-3-coupon-on-10-year-notes-sold-today.html

This is the lowest interest rate ever paid by a corporation for a 10-year bond, according to Bloomberg.

[DewDiligence]

The Bond Bubble is making people do strange (and comically dumb) things:

http://online.barrons.com/article/SB50001424052748703786004577221332212161566.html

One of the biggest-ever bond "deals" hit a snag Friday when some $6 trillion of U.S. Treasury securities were seized by Italian authorities. A trunk full of what appeared to be paper Treasury bonds in denominations of $1 billion was intercepted en route to Zurich from Hong Kong in what the U.S. embassy in Rome said was part of an alleged scheme to defraud Swiss banks.

The implausibly large denomination of the securities was an obvious tip-off the bonds were bogus. They were dated 1934 and still had paper coupons attached, which would be clipped and deposited every six months back in the days before electronic book-entry securities. And the $6 trillion total would equal about 40% of the current amount of U.S. Treasury securities in the public's hands, and multiples of the total of American debt in the 1930s.

[DewDiligence]

[OT]—BHP has a better credit rating than the government of Australia, evidently:

http://blogs.wsj.com/dealjournalaustralia/2012/02/22/bhps-5-25-billion-bond-bonanza

…[BHP] was able to borrow money 10 years out at 2.875% (and 30 years out at 4.125%). By way of comparison, the Australian government’s 10-year bond is yielding 4.25%.

[DewDiligence]

More on the Bond Bubble—PEP issues 30-year unsecured notes at 4%:

http://www.bloomberg.com/news/2012-02-29/pepsico-sells-750-million-4-30-year-sr-unsecured-notes.html

[DewDiligence]

Bonds Are a Sucker Bet, Says Burton Malkiel

[The actual title of this opinion piece in the WSJ is, “What Does the Prudent Investor Do Now?”]

http://online.wsj.com/article/SB10001424052702304692804577285712326880238.html

›March 22, 2012
By BURTON G. MALKIEL

The economic news has certainly improved in recent weeks. Nonfarm payrolls have increased by almost 250,000 workers per month over the past quarter—the best three-month run (except for when temporary census workers were hired) since 2006.

New unemployment claims remain moderate. Consumer spending and business fixed investment have advanced. Stock prices are up. And the Federal Reserve announced last week that the majority of the largest United States banks continue to have adequate capital even in an extremely adverse hypothetical economic scenario.

In short, the chances of a self-sustaining recovery have improved—a "virtuous cycle" where increased employment leads to better consumer sentiment, stronger sales, and continued increases in employment.

But let's not uncork the champagne quite yet. The strong employment gains may well have been aided by our unusually warm winter. Rising gasoline prices will put increased pressure on consumers. And a number of strong economic headwinds still exist.

The economies of the euro zone are getting worse, not better. The housing sector has yet to make a convincing turn for the better, and the economic data, as a whole, suggest the economy is growing at a rate nearer to 2% rather than its previous trend rate of 3%-4%. The realistic conclusion for investors should be "Yes, things are better, but we still have a long way to go."

Given the present economic outlook, what is the best strategy for investors? Let's look at three asset classes in reverse order. I will rank them from worst to best.

Bonds are the worst asset class for investors. Usually thought of as the safest of investments, they are anything but safe today. At a yield of 2.25%, the 10-year U.S. Treasury note is a sure loser.

Even if the overall inflation rate is only 2.25% over the next decade, an investor who holds a 10-year Treasury until maturity will realize a zero real (after-inflation) return. If the investor sells prior to maturity, it will likely be for less than the face value of the note if the inflation rate rises.

Even if the inflation rate remains moderate, interest rates are likely to rise to more normal levels as the economy continues to recover. Investors with long memories should recall that over the entire period from the 1940s until 1980, bonds were a horrible place to be. Given the likely trends, U.S. Treasurys and high quality bonds are likely to be extremely poor investments and are very risky.

Equities, on the other hand, are still attractively priced, despite their substantial rise from the October 2011 lows. A good way to estimate the likely long-run rate of return from common stocks is to add today's dividend yield (around 2%) to the long-run growth of nominal corporate earnings (around 5%).

This calculation would suggest that long-run equity returns will be about 7%—five percentage points more than the safest bonds. This five-percentage point equity risk premium is close to the historical average.

A variety of valuation metrics (such as current multiples of earnings and book values) suggest that equities are still reasonably priced today. Only the so-called Shiller price/earnings ratio (based on the past 10 years of earnings) would suggest that stocks are too high. [I previously opined on this board that the Shiller calculation of market valuation is asinine, so I won’t repeat that argument here.] But the average earnings over the past 10 years are likely to be well below the current normalized earning power of U.S. corporations.

Emerging market equities are particularly attractive. [I prefer to benefit from growth in emerging markets by buying shares of blue-chip multinationals who are deriving much of their growth from such markets.] The price-earnings multiples for emerging markets have traditionally been about 20% higher than for U.S. stocks. Today they are 20% lower. Over the long run, emerging markets have better demography (younger populations) and better fiscal balances than the developed markets. And they are likely to continue to grow at a far more rapid rate than the developed world [no kidding].

Etc.‹

[DewDiligence]

More on the bond bubble—IBM sells 3- and 7-year notes at 0.8% and 1.9%, respectively:

http://www.reuters.com/article/2012/05/08/ibm-bonds-idUSL1E8G8ENQ20120508

International Business Machines Corp on Tuesday set a record for the lowest ever coupon on a seven-year note, breaking through the 2.00% barrier in that maturity for the first time.

IBM, rated Aa3/A+/A+, sold $1.5 billion of debt in a two-part deal, consisting of $900 million of three-year notes and $600 million of seven-year notes.

The seven-year priced at 99.85 with a coupon of 1.875%, to yield 1.898% or 65 basis points above comparable Treasuries.

The three-year priced at 99.834 with a coupon of 0.75% to yield 0.806% or 45 basis points above Treasuries.

[DewDiligence]

Bond bubble continues—MON sets record low interest rate (3.6%) on 30-year paper:

http://www.reuters.com/article/2012/07/09/newstory-idUSL2E8I9AZ320120709

The global agribusiness company sold $500 million of debt in a two-part deal of 10-year and 30-year notes. The 30-year tranche priced at a record low coupon of 3.60 percent, beating out McDonald's 3.70 percent notes due February 16, 2042, according to Thomson Reuters/IFR low coupon table. McDonald's had held the record since early February, when a barrage of low coupon deals hit the market.

[DewDiligence]

Bond bubble continues—1.875% (record low) for 10-year corporate from IBM:

http://www.reuters.com/article/2012/07/25/newstory-idUSL2E8IPHYE20120725

[DewDiligence]

Bond bubble continues—more record-low coupons on corporate paper:

http://www.reuters.com/article/2012/07/30/unilever-bonds-idUSL2E8IUCYB20120730

[DewDiligence]

Bond bubble continues—PEP sells $2.5B of debt in three tranches: 0.71% for 3-year maturity, 1.36% for 5-year maturity, and 3.69% for 30-year maturity:

http://www.reuters.com/article/2012/08/08/pepsico-notes-idUSL2E8J8F8320120808

[DewDiligence]

WPI raises $3.75B of 5-to-30-year debt:

http://finance.yahoo.com/news/watson-announces-offering-senior-unsecured-125000876.html

[DewDiligence]

XOM and JNJ short-term bonds now have lower interest rates than US Treasury paper with the same maturity:

http://online.wsj.com/article/SB10001424127887324073504578103403052975588.html

[DewDiligence]

Bond bubble continues—Teva sells 7-year notes @2.25%, 10-year notes @2.95%:

http://finance.yahoo.com/news/teva-announces-pricing-2-0-224500399.html

This is not IBM! A single product accounting for almost half of Teva’s profits—Copaxone—is going off-patent in less than 3 years.

[DewDiligence]

MRK exploits Bond Bubble by selling $6.5B of fixed- and floating rate notes:

http://finance.yahoo.com/news/merck-prices-6-5-billion-222900812.html

• $1,000 million of 0.70% notes due May 2016
• $500 million of floating rate notes due May 2016
• $1,000 million of 1.30% notes due May 2018
• $1,000 million of floating rate notes due May 2018
• $1,750 million of 2.80% notes due May 2023
• $1,250 million of 4.15% notes due May 2043

The purpose of the debt issuance is to repurchase $7.5B of common stock during the next 12 months as part of a new $15B repurchase authorization announced on 5/1/13.

[DewDiligence]

Bond Bubble continues—PFE sells $3.5B of debt at following rates:

http://finance.yahoo.com/news/pfizer-prices-4-0-billion-215800684.html

• $750M of 4-year notes at 0.90%
• $1B of 5-year notes at 1.50%
• $1B of 10-year notes at 3.00%
• $750M of 30-year notes at 4.30%

PFE also sold $500M of 5-year floating rate notes, making it a $4B offering in all.

[DewDiligence]

MYL prices $2B of senior debt:

http://finance.yahoo.com/news/mylan-announces-pricing-2-0-211700376.html

• $500M of 3-year notes paying 1.35%

• $500M of 6-year notes paying 2.55%

• $500M of 10-year notes paying 4.20%

• $500M of 30-year(!) notes paying 5.40%

I.e., the Bond Bubble has eased, but only a little.

[DewDiligence]

CAT sells 50-year bonds yielding 4.8%:

http://online.wsj.com/news/articles/SB10001424052702304831304579544304288532382

Caterpillar sold $500 million of 50-year bonds and offered them to yield 1.375 percentage points more than comparable U.S. Treasurys. The company also sold 10-year and 30-year debt, to yield 0.80 and 0.95 percentage point over Treasurys. The 10-, 30- and 50-year bonds yielded 3.402%, 4.342% and 4.767%, respectively. The total size of the sale was $2 billion.

The Caterpillar deal received about $8 billion in orders [i.e. it was 4x oversubscribed], said one investor following the sale.

[DewDiligence]

PFE sells $4.5B of 3-30-year debt:

http://finance.yahoo.com/news/pfizer-prices-4-5-billion-224900506.html

• $1B of 3-year notes paying 1.1%
• $0.5B of 3-year floating-rate notes
• $1.5B of 5-year notes paying 2.1%
• $1B of 10-year notes paying 3.4%
• $0.5B of 30-year notes paying 4.4%

[DewDiligence]

MRK sells €2.5B ($3.1B) of 7-20-year bonds:

http://finance.yahoo.com/news/merck-prices-eur-2-5-162800552.html

• €1.0B of 7-year notes paying 1.125%
• €1.0B of 12-year notes paying 1.875%
• €0.5B of 20-year notes paying 2.50%

[DewDiligence]

MON sells $365M of 30-year(!) bonds with interest rate of 4.3%:

#msg-109994097

[DewDiligence]

ACT’s $21B bond issue—the second-largest ever—prices at rock-bottom rates:

http://www.bloomberg.com/news/articles/2015-03-02/in-negative-yield-world-actavis-shows-a-little-goes-a-long-way

Actavis is offering $4 billion of 10-year notes that are being sold at 1.75 percentage points more than Treasuries with similar maturities, according to a person with knowledge of the deal who wasn’t authorized to speak publicly. The securities had initially been marketed at a spread of 2 percentage points.

The company’s banks, led by JPMorgan Chase & Co., Mizuho Financial Group Inc. and Wells Fargo & Co., received orders for $90 billion of the debt [!].

The longest-dated piece of Actavis’s nine-part deal consists of bonds maturing in 30 years that are being sold at a yield of about 2.1 percentage points more than similar-maturity Treasuries, down from an initial premium of about 2.4 percentage points.

The proceeds of the debt offering will be used to fund the cash portion of the $66B AGN deal.

[DewDiligence]

ABT sells $2.5B of 5-10-year bonds:

#msg-111583757

At rates like these, might as well take the money.

[DewDiligence]

ZMH sells $7.65B of 2-30-year bonds to pay for Biomet merger:

http://finance.yahoo.com/news/zimmer-holdings-inc-agrees-sell-120000395.html

There are seven tranches…

• $500M of 2-year bonds paying 1.45%
• $1.15B of 3-year bonds paying 2.00%
• $1.15B of 5-year bonds paying 2.70%
• $750M of 7-year bonds paying 3.15%
• $2.0B of 10-year bonds paying 3.55%
• $500M of 20-year bonds paying 4.25%
• $1.25B of 30-year bonds paying 4.45%

[DewDiligence]

BMY sells €1.15B of unsecured notes at minuscule interest rates:

http://finance.yahoo.com/news/bristol-myers-squibb-prices-1-223000858.html

• €575M of 10-year notes at 1.0%
• €575M of 20-year notes at 1.75%

[DewDiligence]

ZTS sells $1.25B of bonds in two tranches:

• $500M of 5-year bonds @3.45%
• $750M of 10-year bonds @4.50%

While still pretty low for a company like ZTS, these rates seem more reasonable than some of the paper that was floated during the past few years.

http://finance.yahoo.com/news/zoetis-announces-pricing-1-25-004300540.html

[DewDiligence]

AZN sells $6B of bonds in five tranches:

http://globenewswire.com/news-release/2015/11/11/786005/0/en/ASTRAZENECA-PRICES-A-6-BILLION-BOND-ISSUE.html

• $0.4B of 3-year floating-rate notes
• $1.0B of 3-year notes @$1.75%
• $1.6B of 5-year notes @2.375%
• $2.0B of 10-year notes @3.375%
• $1.0B of 30-year notes @4.375%

[DewDiligence]

With the Fed’s interest-rate boost today, the Reply chain emanating from #msg-53466103, consisting of 41 posts, has reached its logical end.

[DewDiligence]

[OT]—UL sells 4-year bonds with YtM of 0.08%(!):

#msg-122175025