Data slows bond sales; coming week seen busy; new high-grade paper boosts trading volume

By Andrea Heisinger

New York, Nov. 5 - New bonds disappeared from the investment-grade primary market on Friday after a heavy influx of paper a day earlier.

October unemployment numbers were out as well as pending home sales data, leaving the high-grade primary market empty.

There were enough bonds priced previously in the week to meet the range predicted in the past week. About $18.55 billion in new paper was sold as of early Friday, and that was firmly in the $15 billion to $20 billion range that was anticipated.

The previous day had been the busiest of the week with a $4.5 billion deal from Coca-Cola Co. and a $2.5 billion deal from Dow Chemical Co.

"They were definitely coupon hunting," a source said. They added that everyone who waited until after the conclusion of a two-day Federal Reserve meeting Wednesday to issue was happy they did.

"I mean, with yields mostly down, it was good timing. A lot [priced] opportunistically."

Coca-Cola sold bonds to tender for outstanding paper and Dow Chemical issued for several purposes including repaying or refinancing debt.

The coming week is "a strange one," a source said, due to the Veterans Day holiday on Nov. 11. That will likely mean more deals on Monday and Tuesday.

"Everyone's hopping on the [low rate] bandwagon," she said.

New paper boosts secondary

Trading in high-grade paper was busy to end the week, especially after payroll numbers came out in the morning, a source said.

"The new issues were very active today," the source said.

After those jobs numbers came out, showing that jobs had been added and unemployment was unchanged from September, "everything started to move higher, generically 5 basis points better," the trader said.

"At the end of the day, bonds in the cable and media sector closed a few bps better, homebuilders continued to rally closing up about a ½ pt, and financials were 5 bps better but definitely weaker on light volumes into the end of the day."

Both the Coke and Dow Chemical bonds were seen tighter after pricing late the previous day, sources said.

There was a lot of trading activity in the morning, a trader in non-financial bonds said, adding that it wasn't only new paper but "a whole mix of stuff."

"If people could buy it, they were," the source added.

Treasury bonds gap out

After a mutual tightening of shorter-dated Treasury bond yields on Thursday, they were seen widening nearly across the board late Friday, a source said.

The five-year yield was out 6 bps to 1.09%, and the 10-year note was at 2.53%, or about 4 bps wider than the previous day. Both had tightened on Thursday.

The 30-year bond yield remained wide and was seen out by 6 bps to 4.12%. This long bond had widened considerably after the Fed announcement Wednesday to buy longer-dated Treasury paper to stimulate the economy.

Dow bonds zoom in

The two new notes from Dow closed nicely tighter at the market close and continued gains from the previous day, a source said.

The 2.5% notes due 2016 were quoted at 138 bps bid, 134 bps offered, a source said, or about a 12 to 16 bps gain from the 150 bps over Treasuries price. Later, another source quoted them even better at 135 bps bid, 134 bps offered.

The 4.25% notes due 2020 priced at Treasuries plus 180 bps and were quoted at 166 bps bid, 162 bps offered before the close. After the close they were trading at 165 bps bid, 163 bps offered, another source said.

Each of the bonds was "roughly 15 bps better," they said.

Coke notes in slightly

Three fixed-rate tranches of the $4.5 billion Coca-Cola deal were tighter in next-day trading, sources said.

The shortest tranche - 0.75% notes due 2013 - was priced at 32 bps over Treasuries. The notes were quoted at 29 bps bid, 26 bps offered before the market close. A little later a source quoted them at 28 bps bid, 27 bps offered.

The 1.5% notes due 2015 did a little better than their 52 bps over Treasuries price. A source said they were at 47 bps bid, with an offer of 43 bps in mid-afternoon. After the close they were at 46 bps bid, 43 bps offered, another source said.

The best performer of all was the longest dated 3.15% notes due 2020. The notes priced at 72 bps over Treasuries and were seen trading at 64 bps bid, 60 bps offered before the close, a source said.

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