Saudi Aramco's $12 Billion Bond Deal Fizzles - Bloomberg:
The bonds issued by Saudi Aramco in this week’s unprecedented offering sank for a second day, marking a quick sell-off that calls into question the depth of the deal’s $100 billion of investor orders.
Risk premiums on the oil giant’s $12 billion of bonds climbed amid a mild decline in oil prices and rising yields on the company’s sovereign parent. For the most actively traded piece of the offering -- $3 billion of 3.5 percent bonds due in 2029 -- the extra yield investors demanded to own the debt widened to as high as 1.2 percentage points more than U.S. Treasuries in trading Thursday, according to the Trace bond-price reporting system. That’s up from a spread of 1.05 percentage points when the deal priced Tuesday.
The trading sheds light on a long-held reality in the corporate bond market: that orders on highly anticipated deals are often padded by investors who fear losing out on allocations. It can create a “vicious cycle” that inflates demand, said Lon Erickson, a portfolio manager at Thornburg Investment Management
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