Wells Fargo taps market as others sit it out; bank, financial paper firms in secondary

By Andrea Heisinger and Cristal Cody

New York, Feb. 10 - Wells Fargo & Co. was the lone issuer in the high-grade market on Thursday following a previously packed day.

The San Francisco-based financial sold $2.501 billion of new five-year bonds in a sort of exchange offer with two banks in order to forgo outstanding junior subordinated debt.

There was no clear reason why there were no more bond sales for the day, a source said.

"I don't know. Maybe it was Egypt again?" the source said. "It's hard to tell. I thought we had a few things on tap from what I heard away yesterday. They could come tomorrow or wait [until next week]."

The previous day saw a mix of new corporate and sovereign names in the market. Many desks were happy for the deal flow, but had no explanation for the sudden influx.

"We were only thinking $10 [billion] to $15 [billion] for the week anyway, and I think we're mostly there," a syndicate source said.

The Markit CDX Series 14 North American investment-grade index eased 1 basis point to a spread of 82 bps, according to Markit Group Ltd.

Bank and financial paper was stronger on Thursday, with Bank of America Corp.'s five-year notes tightening 9 bps in the secondary market, a source said.

No secondary activity was immediately seen in the new deal from Wells Fargo, a trader said.

Overall investment-grade Trace volume dipped 16% to about $16 billion, according to a market source.

Treasuries reversed Wednesday's gains as yields picked up again on Thursday following the last refunding of $72 billion for the week. The 10-year note yield rose 4 basis points to 3.69%. The 30-year bond yield closed out the day up 5 bps at 4.76%.

The Treasury auctioned $16 billion of 30-year bonds at a high yield of 4.75%.

Wells Fargo prices new notes

Wells Fargo sold $2.501 billion of 3.676% five-year senior holding company notes (A1/AA-/AA-) at a spread of 120 bps over Treasuries, an informed source said late in the afternoon.

A source close to the sale said that the company, rather than do a remarketing of junior subordinated notes outstanding, opted to instead do an exchange offer with selling security holders Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. Inc. This resulted in the new issue in order that Wells Fargo would not have outstanding junior subordinated debt.

The dollar price is more than par because of accrued interest on the outstanding 5.2% notes from Sept. 15, 2010. The interest rate shifts to 3.676% on Feb. 15.

The notes priced late in the day and were not active initially in the secondary market, a trader said. "Haven't seen any markets on the new Wells."

The financial services company is based in San Francisco.

Financials stronger

Bank and financial paper traded tighter in the secondary market on Thursday, a source said.

Charlotte, N.C.-based Bank of America's 6.5% notes due 2016 firmed 9 basis points to 200 bps.

Citigroup Inc.'s long bonds narrowed. New York-based Citigroup's 8.125% bonds due 2039 firmed 5 bps to 165 bps over Treasuries, the source said.

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