Credit Market Tuesday

Includes: AZN, CSC, NWSA, UNS
by: Rubicon Associates

While the credit markets were not as hot as they were Monday, there were some interesting deals launched - a few investors might consider looking into.

Tuesday's deals included:

Issuer Rating Tenor Size Spread
Computer Sciences (NYSE:CSC) Baa2/BBB 3yr $350MM +220
Computer Sciences Baa2/BBB 10yr $350MM +280
Tucson Electric Pwr (NYSE:UNS) Baa3/BBB- 10.5yr $150MM +220
AstraZeneca PLC (NYSE:AZN) A1/AA- 7yr $1,000MM +85
AstraZeneca PLC A1/AA- 30yr $1,000MM +120
News America Inc. (NASDAQ:NWSA) Baa1/BBB+ 10yr $1,000MM +140
Click to enlarge

Tucson Electric term sheet. CSC term sheet, AstraZeneca prospectus.

In order to calculate the yield, the following are the relevant treasury points:

  • 3yr: 0.33%
  • 5yr: 0.67%
  • 7yr: 1.13%
  • 10yr: 1.71%
  • 30yr: 2.86%

The credit markets continued their slow and steady march tighter as risk continues to be en vogue. The way I view spreads - as risk premiums relative to the risk free rate - the market continues to have value.

Click to enlarge

Source: Citi

The cash market and the credit default swap market (utilizing the CDX index) had slightly different opinions:

Source: Citi

Notice how on a month to date basis, both cash and CDS markets have been tightening, showing both investor appetite for spread product and the willingness to add risk.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is for informational purposes only, it is not a recommendation to buy or sell any security and is strictly the opinion of Rubicon Associates LLC. Every investor is strongly encouraged to do their own research prior to investing.