Chevron Selling $6 Billion of Bonds Ahead of Fed Meeting
Taking advantage of a calmer market ahead of a key Federal Reserve meeting, Chevron Corp. is selling $6 billion in corporate bonds on Monday, its largest deal since at least 1995.
Chevron's four-part deal is coming in three-, five-, seven- and 10-year maturities. Underwriters lowered yields on the sale throughout the day, suggesting good demand from investors. The three-year debt was offered to yield 0.40 percentage point more than comparable Treasurys. The 10-year debt was offered to yield 1.00 percentage point more than comparable Treasurys.
Chevron last came to market in November, when it sold $4 billion, according to Dealogic, whose data go back to 1995. Chevron's deal Monday is among the biggest 10 for the year. It is tied with Bank of America Corp., Goldman Sachs Group Inc. and Vodafone Group PLC, which all had $6 billion deals earlier in the year. The biggest deal of the year is Apple Inc.'s $17 billion sale, which is also the largest U.S. corporate bond on record.
Ingersoll-Rand Global Holding Co. Ltd. was also in the investment-grade market on Monday, offering $1.55 billion. O'Reilly Automotive Inc. sold $300 million and Metropolitan Life Global Funding I sold $500 million. Mining giant Rio Tinto sold $3 billion on Friday.
The companies are the latest to sell after an approximately two-week lull: Bond yields had spiked in response to comments from some Federal Reserve officials that the central bank could slow its bond-buying program relatively soon. The volatility had kept some high-grade companies on the sidelines. But the markets calmed in the last few days, spurring some issuers to take advantage of still-historically low rates.
The Federal Open Market Committee will meet Tuesday and Wednesday. Market participants will be watching the outcome of the gathering for any hint regarding the Fed's plans for its bond-buying program.
Companies that "were looking to issue opportunistically, maybe they felt like they missed the boat last week," said Michael Collins, senior investment officer at Prudential Fixed Income, which oversees $400 billion. "They're seeing this window open again and they want to take advantage of it now."
Chevron plans to use the proceeds of its bond sale to refinance a portion of its existing commercial paper borrowings. Ingersoll-Rand will use its proceeds to redeem existing notes, and could put some of the money toward its previously announced spinoff of its commercial and residential security business.
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