Investment Grade Bonds Recent Issued

Over the past couple weeks, several new investment grade corporate bonds were issued. While now might not be the best time to put new money to work in investment grade corporate bonds (LQD) given the large rally of the past few months, it is never too early to build a watch list of bonds to buy on the next major pullback. For investors interested in learning about some of the latest newly issued corporates now trading on the secondary market, below I present details on eight of these newly issued notes. They have maturities ranging from 7 to 31 years, yields between 2.65% and 4.649%, and spreads to Treasuries of 70.4 to 223.8 basis points.

I recognize that some investors will immediately shy away from the yields offered by these bonds given the lengths of the maturities. Also, given today’s interest rate environment, other investors might immediately turn away from the investment grade bonds of companies that pay dividends to common shareholders. For these types of investors, perhaps there is something of interest in the high-yield bond market. For a list of a few newly issued high-yield bonds, see “4 High-Yield Corporates Hot Off The Press.”

Wells Fargo’s (WFC) senior unsecured note (CUSIP: 94974BFC9) maturing 3/8/2022 has a coupon of 3.50% and is asking 100.20 cents on the dollar (3.476% yield-to-maturity before commissions). It is non-callable and pays interest semi-annually. Moody’s currently rates the note A2; S&P rates it A+. It was originally offered at a price of 99.782, and the offer size was $2.5 billion. The offer date was March 1, 2012. Currently, the 2/15/2022 U.S. Treasury note (CUSIP: 912828SF8) is yielding 1.946%, which means Wells Fargo’s note is asking 153 basis points more than a corresponding Treasury.

Corning’s (GLW) senior unsecured note (CUSIP: 219350AW5) maturing 3/15/2042 has a coupon of 4.75% and is asking 101.621 cents on the dollar (4.649% yield-to-maturity before commissions). It has a make whole call and pays interest semi-annually. Moody’s currently rates the note A3; S&P rates it BBB+. It was originally offered at a price of 99.853, and the offer size was $500 million. The offer date was February 15, 2012. Currently, the 2/15/2042 U.S. Treasury bond (CUSIP: 912810QU5) is yielding 3.082%, which means Corning’s note is asking 156.7 basis points more than a corresponding Treasury.

John Deere Capital’s (DE) senior unsecured note (CUSIP: 24422ERM3) maturing 3/15/2022 has a coupon of 2.75% and is asking 100.876 cents on the dollar (2.65% yield-to-maturity before commissions). It is non-callable and pays interest semi-annually. Moody’s currently rates the note A2; S&P rates it A. It was originally offered at a price of 99.825, and the offer size was $500 million. The offer date was February 22, 2012. Currently, the 2/15/2022 U.S. Treasury note (CUSIP: 912828SF8) is yielding 1.946%, which means John Deere Capital’s note is asking 70.4 basis points more than a corresponding Treasury.

Marriott International’s (MAR) senior unsecured Series K note (CUSIP: 571903AJ2) maturing 3/1/2019 has a coupon of 3.00% and is asking 100.034 cents on the dollar (2.994% yield-to-call before commissions). It is continuously callable at par beginning 12/1/2018 and pays interest semi-annually. Moody’s currently rates the note Baa2; S&P rates it BBB. It was originally offered at a price of 98.92, and the offer size was $400 million. The offer date was February 22, 2012. Currently, the 2/28/2019 U.S. Treasury note (CUSIP: 912828SH4) is yielding 1.344%, which means Marriott International’s note is asking 165 basis points more than a corresponding Treasury.

U.S. Bancorp’s (USB) senior unsecured note (CUSIP: 91159HHC7) maturing 3/15/2022 has a coupon of 3.00% and is asking 100.943 cents on the dollar (2.89% yield-to-call before commissions). It is continuously callable at par beginning 2/15/2022 and pays interest semi-annually. Moody’s currently rates the note Aa3; S&P rates it A. It was originally offered at a price of 99.853, and the offer size was $500 million. The offer date was February 15, 2012. Currently, the 2/15/2022 U.S. Treasury note (CUSIP: 912828SF8) is yielding 1.946%, which means U.S. Bancorp’s note is asking 94.4 basis points more than a corresponding Treasury.

Wyndham Worldwide’s (WYN) senior unsecured note (CUSIP: 98310WAJ7) maturing 3/1/2022 has a coupon of 4.25% and is asking 100.524 cents on the dollar (4.184% yield-to-call before commissions). It has a make whole call, is continuously callable at par beginning 12/1/2021, and pays interest semi-annually. Moody’s currently rates the note Baa3; S&P rates it BBB-. It was originally offered at a price of 99.807, and the offer size was $500 million. The offer date was February 27, 2012. Currently, the 2/15/2022 U.S. Treasury note (CUSIP: 912828SF8) is yielding 1.946%, which means Wyndham Worldwide’s note is asking 223.8 basis points more than a corresponding Treasury.

CSX Corp.’s (CSX) senior unsecured note (CUSIP: 126408GX5) maturing 3/1/2043 has a coupon of 4.40% and is asking 99.941 cents on the dollar (4.403% yield-to-maturity before commissions). It has a make whole call until 9/1/2042, is callable at par on 9/1/2042, and pays interest semi-annually. Moody’s currently rates the note Baa3; S&P rates it BBB. It was originally offered at a price of 99.413, and the offer size was $300 million. The offer date was February 23, 2012. Currently, the 2/15/2042 U.S. Treasury bond (CUSIP: 912810QU5) is yielding 3.082%, which means CSX’s note is asking 132.1 basis points more than a corresponding Treasury.

H.J. Heinz’s (HNZ) senior unsecured note (CUSIP: 423074AP8) maturing 3/1/2022 has a coupon of 2.85% and is asking 100.561 cents on the dollar (2.784% yield-to-maturity before commissions). It has a make whole call until 12/1/2021, is callable at par on 12/1/2021, and pays interest semi-annually. Moody’s currently rates the note Baa2; S&P rates it BBB+. It was originally offered at a price of 99.836, and the offer size was $300 million. The offer date was February 28, 2012. Currently, the 2/15/2022 U.S. Treasury note (CUSIP: 912828SF8) is yielding 1.946%, which means H.J. Heinz’s note is asking 83.8 basis points more than a corresponding Treasury.

If you are interested in purchasing any of these securities but are nervous about counterparty risk wreaking havoc on your portfolio, learn how to hedge individual bonds in, “Protect Your Income Portfolio With Cross-Asset Hedging.”

Please be aware that prices in the over-the-counter U.S. bond market may vary depending on the broker you use. I discuss this in my article, “Are You Paying Too Much For Your Bonds?” The current prices may also differ greatly from those listed at the time this article was written. For additional information on any of these notes, please contact your broker or read the indenture.

Also, please do your own due diligence on the financial profiles of the companies mentioned in this article. Only you can determine if taking the counterparty risk of purchasing individual bonds is suitable for you.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am long WFC bonds, although not the CUSIP mentioned in this article.