BP Capital Markets received strong demand for two long-dated bonds in US dollars and Euros Tuesday as investors took a shine to the added yield despite the increasing duration risk in the oil and gas producer's credit curve. The company, rated A1/A-, launched its third 30-year US-dollar bond of 2020. The last year it sold 30-year bonds was in 2015, IFR data shows. The dollar tranche came quick on the heels of a €750m 20-year euro bond offered earlier this morning, which became the first in that tenor from any of the oil major’s issuing entities, making it the longest bond in its euro credit curve. "Investors seem to love it," one banker away from the trades said. "It's a low rate environment, so investors are happy to extend to grab some extra yield, and the issuer is happy to lock in low rates for an extended period - so it works well for everyone." The US$1.5bn dollar tranche from BP Capital Markets America garnered a US$4.5bn book mid-way through price progression, the banker said, before launching at 125bp over Treasuries in from initial price thoughts in the area of 145bp over. Those levels were just wide to its outstanding curve where the company's 2.772% 2050s from August and 3% 2050s from February were trading at a G spared of 119bp and 124bp, respectively, according to MarketAxess data. Even with little new issue concession, the spreads proved too attractive to pass up when compared to average Single A credit spreads that trade at around 84bp over Treasuries, according to ICE BofA data. The issuer also benefited from a positive day in the market as secondary credit spreads tightened across the board in sympathy with rallying equities. However, Treasuries climbed on the day as the 30-year rate hit 1.668% up from 1.58% the day prior. "As you can tell from today’s move in the long-end of US Treasuries, these all-in levels may not be around forever," one broker dealer said. "Despite risk-on sentiment of late, there’s still uncertainty in every outlook and it makes sense for issuers to push maturities as far out as investors will tolerate, especially as the incremental cost is still manageable in most names." Euro tranche In euros, BP Capital Markets issued from a newly established Dutch-domiciled borrowing entity as it seeks to utilize the significant pricing benefits of issuing bonds eligible for the ECB’s asset purchase programmes. Orders for the €750m bond peaked at over €2.6bn. Leads BNP Paribas, Commerzbank, Credit Agricole, ICBC, Mizuho and Societe Generale began marketing the trade at 115bp area IPTs but cut this back to land at 90bp over swaps. "It was a very strong outcome for the issuer and this is exactly the type of thing that the market wants in a low yield, low rate environment," said one banker involved. The use of the new issuer was purely in order to make use of the stronger pricing available to ECB-eligible borrowers, explained bankers involved. In spread terms, the savings generated by issuing ECB-eligible bonds versus non-ECB-eligible bonds was estimated to be somewhere in the 10s of basis points by several bankers involved in and away from the new trade. “You pay a material premium when you issue bonds that are not eligible and clearly this is something that it is preferable to avoid,” said a second lead. “It is a highly opportunistic deal, using the new issuing entity, using the long maturity and there were conversations about whether this is something we would be looking at for next year, but it made sense to go now.” Fair value was hard to estimate, said bankers, however, the lead pointed to Shell's €1bn 0.875% November 2039s as perhaps the most relevant comparable. Those notes were bid around 84bp on Tradeweb on Tuesday. Shell, however, is a slightly stronger credit, rated Aa2/AA-. Before Tuesday’s deal the issuer’s longest outstanding euro bond was a €900m 1.104% November 2034, bid at around 81bp during the
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