Commonwealth Bank, Toyota Motor Credit offer bonds in stable primary; spreads tighten

By Andrea Heisinger and Paul Deckelman

New York, Oct. 8 - The Commonwealth Bank of Australia and Toyota Motor Credit Corp. made up the majority of issuance on a solid if unexciting Thursday in the high-grade bond market.

Latin American cell phone company America Movil also sold 10-year bonds on the emerging markets side.

Commonwealth Bank of Australia took advantage of a lack of competition from companies in earnings blackouts, and priced $4 billion of notes in three tranches. They were at three-, five- and 10-year maturities and all priced in line with talk.

Toyota Motor Credit sold one of its most substantial bond offerings since the recession began. The U.S. funding arm of the car maker sold $75 million of two-year floating-rate notes. The deal largely flew under the radar.

Despite Friday being a full day, there is little if any issuance expected as many syndicate desks have mostly cleared out ahead of the three-day weekend. A majority of companies and financial names are in earnings blackout, as well.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 13 North American high-grade index was unchanged again at a mid bid-asked spread level of 103 bps.

Advancing issues and decliners continued their see-saw battle, which has raged for most of the week, with the advancers once more falling behind the decliners Thursday, although by only a relatively narrow margin of a few dozen issues out of over 3,500 issues tracked.

Overall market activity, reflected in dollar-volume totals, fell 2% from Wednesday's busy pace.

Spreads in general were seen tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year government note widened by 7 bps on Thursday to 3.25%.

Traders noted a fall-off of activity, both in terms of new-deal pricing and secondary market action, attributing it to the run-up to Monday's Columbus Day holiday, which will see the U.S. fixed-income markets closed, although equity markets will be open.

Another factor was the absence of some senior market participants who were at the well-attended Raymond James annual pre-holiday social gathering in Florida, leaving "just the seconds in command to run their desks," a trader said.

They expect an even quieter session on Friday, with several traders cautioning that "anything that happens will happen early or it won't happen at all," with many market players expected to head for the exits early to get a jump on the holiday weekend.

Commonwealth Bank sells three tranches

Sydney-based financial services provider Commonwealth Bank of Australia priced $4 billion of senior notes in three tranches later in the day.

The deal included a $500 million tranche of 2.75% three-year notes priced at Treasuries plus 140 bps, $2 billion of 3.75% five-year notes priced at Treasuries plus 160 bps, and a $1.5 billion tranche of 5% 10-year notes priced at Treasuries plus 182 bps.

The deal was done via Rule 144A. The tranches all "priced where they were launched and talked," a source away from the sale said.

Goldman Sachs & Co., J.P. Morgan Securities, Morgan Stanley and Commonwealth Bank of Australia ran the books.

"This is the kind of deal we'll be seeing in the next couple of weeks," the source said. The bank was "taking advantage of a lack of competition."

Primary remains solid

The high-grade primary was "relatively stable," a market source said late in the afternoon. He added that it was "really, really quiet," and that it was difficult to tell if the tone had changed much from the previous day that had more offerings.

"We have a lot of guys [companies] in blackout," he said.

Many names ended the third quarter on Sept. 30 and are preparing to announce results for the three months in the coming week or two.

The fact that Friday is technically a full day hasn't stopped many desks from making it an "unofficial four-day weekend," a syndicate source said.

"It [the end of the traditional early market close ahead of some three-day weekends] was meant to provide liquidity, but it seems to do the opposite," he said. "No one is going to do anything. Everyone's working with a skeleton staff, even the Treasury desks, running with maybe one guy."

Those companies not releasing earnings in the coming week are holding off on issuing until after the holiday, he said.

"I think we'll see a lot of foreign companies, if we see much at all," he said.

Toyota Motor Credit sells floaters

Toyota Motor Credit priced $75 million in two-year floating-rate senior notes at par to yield three-month Libor plus 10 bps, via agent UBS Securities.

The U.S. funding arm of Toyota is based in Torrance, Calif.

A source away from the sale said it was "interesting they did a deal." "That one kind of flew under the radar. We weren't even aware of it."

It's the first substantial sale of notes the issuer has sold since the recession began.

Protective Life tranches trade wider

One of the traders noticed that activity in Protective Life Corp.'s new 10-year and 30-year paper seemed to have cooled down markedly from its pace on Wednesday, when that issue had been the heaviest volume name in investment grade.

On Thursday, a trader saw the company's $300 million of 8.45% bonds due 2039 having widened out to a spread over comparable Treasuries of 450 bps bid, 440 bps offered, versus the 437.5 bps at which they had priced Tuesday.

The Birmingham, Ala.-based insurer's $400 million of 7.375% notes due 2019 were meantime being quoted at 420 bps bid, 410 bps offered, versus the 412.5 bps spread at Tuesday's pricing.

The first trader saw a $2 million block of the bonds trade at 416 bps over late in the day, but said that the activity level had paled in comparison to the previous day's.

Traders reported little or no activity in Protective Life's new $100 million issue of 8% notes due 2024, which priced Wednesday at par to yield 8%

Boston Properties goes nowhere

Also among the financial names, a trader saw Boston Properties LP's new 5.875% notes due 2019 little changed from Tuesday's spread at pricing of 262.5 bps over.

The trader quoted the Boston-based real estate investment trust's $700 million issue - upsized from the $500 million originally envisioned - at 265 bps bid, 260 bps offered.

New York Life holds small gain

And New York Life Insurance Co.'s 6.75% bonds due 2039 were being quoted at 268 bps bid, 263 bops offered.

The New York-based insurance giant's $1 billion issue had priced on Monday at 275 bps over.

Bank, broker CDS costs steady

A trader who follows the credit default swaps market said that the cost of insuring holders of big-bank paper, as well as that issued by major brokerage companies, was "plus or minus one [basis] point Thursday, pretty much across the board.

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