New deals absent in high-grade, desks report solid calendar; new Nomuras hold higher levels

By Andrea Heisinger and Cristal Cody

New York, Feb. 26 - New bonds sales dried up in the investment-grade market on Friday, as expected after a weak tone the previous day.

But issuers are expected to make a robust return in the coming week as syndicate desks report they have sales lined up, but no set dates for them to price.

"We have a lot that are ready to go," one market source said. "We're just going to feel it [market tone] out."

Weather in the Northeast and other factors may have kept deals out of the market on Friday, but it was likely a simple fact of focus that did it, one market source said in mid-afternoon.

"I think people are either out early or watching news," he said.

Investment-grade trading hit the brakes on Friday, according to sources.

Winter weather in the northeastern United States kept many investors and traders at home.

"I didn't get a lot done today because of all the snow," one trader said. "It's quiet out there - and has been for the last few days. There's the Olympics and a lot of distractions."

Overall Trace volume fell 16% to about $9.4 billion on Friday, according to a market source.

Meanwhile, Treasuries also hindered trading in corporates, a source said.

"We had a lot of Treasury auctions this week - that was part of it."

The Treasury auctioned a record $126 billion of debt over the week.

Treasuries continued to firm on Friday. The yield on the 10-year Treasury note was 1 bp tighter at 3.62% after firming 6 bps to end at 3.63% on Thursday.

In addition, the yield on the 30-year Treasury bond tightened 3 bps to 4.55% on Friday after closing 6 bps stronger at 4.58% the previous day.

Meanwhile on Friday, the CDX Series 13 North American high-grade index was seen 2 bps tighter at a mid bid-asked spread level of 92 bps, according to a source.

In secondary trading, Nomura Holdings, Inc.'s new debt stayed active, while the financial sector, including paper from Goldman Sachs Group Inc., was mostly unchanged after moving "sideways" over the week, according to sources.

Primary looks to deal influx

Syndicate sources said on Friday afternoon that they were working on deals for the coming week, but that most New York City-based desks were clearing out early or thinly staffed due to a snowstorm.

"It's not exciting out there today," one source said. "I don't think anyone was going to [issue] anyway."

Deals are expected to come into the market more heavily in the coming week or two, with more and more industrial and financial issuers coming out of earnings blackouts and needing to tap the debt market.

"We definitely have some for next week," one syndicate source from a larger desk said. "I don't know if they'll come on Monday, but we'll see stuff on Tuesday for sure."

Another source also reported that he was working on "a few smaller things" for the coming week.

The past week saw a steady inflow of new bonds despite a weaker tone.

The second syndicate source acknowledged that the coming week is probably not going to look much better than the past one, but that deals would still price.

Nomura active in secondary

Nomura Holdings' $3 billion of notes (Baa2/BBB+), which tightened more than 20 bps on Thursday in secondary trading after pricing earlier in the day, held their own on Friday, according to a source.

For example the 5% notes due 2015 priced Thursday at Treasuries plus 275 bps and were seen ending the week at 255 bps bid, 250 bps offered, a trader said. That was in line with Thursday's closing level of 255 bps, a source said.

"It looks like the five-years were offered at 250 - those were just outright offers," the trader said.

Also in trading, Nomura's 6.7% notes due 2020 were seen Friday at 285 bps bid, 280 bps offered. The notes, which had seen a pickup in gray market activity on Thursday, priced at Treasuries plus 310 bps and had tightened later that day to 283 bps.

The deal was the Tokyo, Japan-based financial services company's first dollar-denominated offering in the United States. Proceeds will be used for general corporate purposes.

Financial sector moves sideways

Elsewhere, the financial sector ended about where it started the week after having moved wider, according to sources.

"We've kind of been moving sideways for the last probably two or three days," one trader said. "It's generally unchanged to maybe a touch stronger."

For example, New York-based Goldman Sachs' 7.5% notes due 2019 on Wednesday were seen at 180 bps bid, 174 bps offered.

"They widened out a little bit to 187, 180 and now they're back to 185, 175," the trader said.

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