High-grade primary empties as jobless data released; upcoming volume modest; Carnival tightens

By Andrea Heisinger

New York, Feb. 1 - High-grade bond issuers took the day off Friday as unemployment numbers were released by the Labor Department, ending a somewhat lackluster week of sales.

The jobless rate stayed relatively steady. More jobs were added, but there was no real drop in the 7.9% unemployment rate.

Terms were given for a $500 million sale of floating-rate notes due 2017 from Citigroup Inc. That sale was done on Thursday.

Issuance is expected to stay moderate in the coming week, sources said late Friday.

"We're hearing $10 [billion] to $15 billion," a market source said. "Not too much - a handful of trades."

A syndicate source called the first full week of February "modest" and echoed the $10 billion to $15 billion of expected volume.

"We still have earnings for the next couple of weeks," the syndicate source said. "We're looking at $70 [billion] to $80 billion for February, which is lower than last year's $97 billion, but we also had way more issuance in January than last year."

There could be some opportunistic trades in the coming week, but there are no big marquee trades on tap, the source added.

In a research note on fixed-income indexes released on Friday, Kevin Horan, director of the S&P Dow Jones Fixed Income Indices, wrote that "corporate issuance has been active with rates being so low, but performance is another story."

Horan said that the Dow Jones U.S. Corporate Bond index's performance was down 0.86% for the month, though it has performed well as rates have come down over the past few years. According to the research note, the index is an equally weighted strategic index whose members are the most recently issued, liquid investment-grade bonds.

Sleepy secondary

In the secondary market, there was little change on the jobs data, a trader said.

"It was a little better," he said. "Treasuries and stocks are up. It mostly didn't make as much of a jump in bonds as it did in those other markets."

Recent deals like the $500 million of 1.2% notes due 2016 priced Thursday by Carnival Corp. were seen contracting in the secondary.

A trader said that the Carnival notes were seen late Thursday at a bid of 70 basis points over Treasuries after pricing at Treasuries plus 80 bps earlier that afternoon. By Friday midday the notes were seen trading in the low-to-mid 70 bps, that trader said.

Later in the afternoon, the notes were seen little changed from the day's earlier levels, a secondary source said.

There was no trading seen in Air Products and Chemicals Inc.'s $400 million of 2.75% bonds due 2023 that priced on Wednesday, traders said at midday Friday.

By the afternoon, there was little change in trading as desks emptied and others looked to the week ahead.

"I think everyone's just getting geared up toward the weekend," the secondary source said.

The most actively traded high-grade bonds were a mixed bag as of mid-afternoon, a market source said, including some recent issues and foreign names.

Financials trade actively

Bonds from Intesa Sanpaolo SpA, General Electric Capital Corp. and Rio Tinto Finance plc were all active in trading on Friday afternoon, a market source said.

Intesa's 3.875% notes due 2018 were seen at the highest volume at a spread of 341 bps over Treasuries, which was wider than where they initially priced. The $1.5 billion of bonds was sold on Jan. 7 at Treasuries plus 310 bps.

A 3.1% bond due 2023 from GE Capital was seen behind Intesa in volume at a level of Treasuries plus 128 bps, which was slightly wider than where the bonds originally priced. The $2 billion of GE notes was priced on Jan. 3 at 122 bps over Treasuries.

There was also a Rio Tinto Finance 2.875% bond due 2022 that was trading at high volume with a spread of 104 bps over Treasuries. The $1 billion of bonds sold on Aug. 16 at Treasuries plus 120 bps.

Citi's floaters

Citigroup gave the terms of its $500 million of floating-rate notes due 2017 (Baa2/A-/A). They were sold at par to yield Libor plus 105 bps, according to an FWP filing with the Securities and Exchange Commission.

Citigroup Global Markets Inc. was the bookrunner.

The financial services company is based in New York.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.