By Nancy Leinfuss
NEW YORK, May 19 (Reuters) - U.S. corporate bond investors had no trouble digesting Monday's $2.3 billion of supply despite an already heavy week of issuance this week while secondary market issues remained under pressure, traders said.
"The new issues we saw today got very well put away," said one trader. "Weakness in stocks and the ongoing supply we've seen has put pressure on spreads," he said.
Spreads -- the extra yield that corporate bonds pay over Treasuries -- weakened by 0.02 to 0.04 percentage point on Monday, following a week which saw $20 billion in supply, traders said. The Dow was off 193 points in late trade.
The average investment-grade corporate bond was yielding 1.32 percentage point more than Treasuries on Friday, about 0.06 percentage point wider than at the end of last week, according to Merrill Lynch & Co.
U.S. firms sold $2.3 billion of offerings on Monday, led by Johnson & Johnson , which issued $1 billion of 10-year and 30-year issues. The "Aaa/AAA" rated infrequent borrower's offering was met with very good demand.
"This is the ultimate museum piece. There are very few "AAA" credits left," said Mitchell Stapley, portfolio manager at Fifth Third Investment Advisors Inc., in Grand Rapids, Mich. "A fund manager does not have to worry about holding Johnson & Johnson in their portfolio," he said.
Its 10-year notes were priced to yield 3.819 percent, or a spread of 0.38 percentage point over Treasuries while its 30-year bonds yielded 4.953 percent or 0.5 percentage point over Treasuries.
Gillette Co. also tapped the market, selling $300 million of five-year notes at a yield of 2.676 percent or a spread of 0.3 percentage point over Treasuries. The issue is rated "Aa3" by Moody's and "AA-minus" by S&P.
Cynthia Cole, portfolio manager at National City Investment Management Co. opted not to participate in either sale due to the low yields and tight spreads. "These (J&J and Gillette) are both great companies but from a yield standpoint we had no place to go with them," said Cole.
In the high yield sector, firms are expected to sell $4 billion of new supply this week, dealers said.
To see recent or upcoming bond sales, click on [nNEUBD4].