International Business Machines Corp. is planning to sell its second U.S. dollar-denominated debt offering this year, as yields in the corporate bond market reach record lows.
IBM may sell three-year notes at a relative yield of about 45 to 47 basis points more than similar-maturity Treasuries, and seven-year bonds in the 70 basis points area, said a person familiar with the offering who declined to be identified because terms aren’t set. A basis point is 0.01 percentage point.
In February, when IBM last issued dollar-denominated debt, it got a record-low coupon on three-year notes, selling $1.5 billion of 0.55 percent securities, at 42 basis points more than Treasuries, according to data compiled by Bloomberg.
The world’s biggest computer-services provider will use the proceeds for general corporate purposes, which could include debt repayments, preferred stock redemptions, possible acquisitions or expansion, according to a filing dated today.
The bonds, which are SEC registered, are expected to be rated Aa3 by Moody’s Investors Service and A+ by Standard & Poor’s, the person said. Barclays Plc, HSBC Holdings Plc, JPMorgan Chase & Co., and Royal Bank of Scotland Group Plc are managing the sale. The transaction will be of benchmark size, typically at least $500 million, the person said.
IBM is offering bonds as company borrowing costs have reached record lows. Investment-grade corporate bond yields fell to 3.340 percent May 4, the least in data going back to 1986, according to the Bank of America Merrill Lynch U.S. Corporate Master Index.
In February, the Armonk, New York-based company also sold $1 billion of 1.25 percent, five-year bonds, at a 62 basis points spread, Bloomberg data show.