Wal-Mart, Entergy Texas sell bonds; primary takes a breather; spreads ease; Wal-Mart gains

By Andrea Heisinger and Paul Deckelman

New York, May 14 - Investment-grade issuance slowed considerably Thursday with Wal-Mart Stores Inc. and Entergy Texas, Inc. the lone entrants in the primary.

Desks are still "mopping up" from the glut of sales earlier in the week, a market source said.

In the secondary sphere on Thursday, a market source said the CDX Series 12 North American high-grade index was wider by 2 basis points at a mid bid-asked spread level of 155bps.

Advancing issues again led decliners, but only by a ratio of less than seven-to-six.

Overall market activity, reflected in dollar volumes, fell by nearly 4% from Wednesday's levels.

Spreads in general were seen marginally wider, in line with slightly lower Treasury yields; for instance, the yield on the benchmark 10-year issue was 2 bps tighter at 3.09%.

Although the new-deal pace slackened markedly on Thursday from the frenetic pace seen through Wednesday, secondary market focus remained on the behavior of the newly priced issues like Wal-Mart Stores, JP Morgan Chase & Co. and Microsoft Corp.

Wal-Mart sells $1 billion

Discount retailer Wal-Mart sold $1 billion of 3.2% five-year notes Thursday at Treasuries plus 125 bps.

This was much tighter than talk of 135.5 bps, a market source said in the morning.

Barclays Capital, Deutsche Bank Securities and J.P. Morgan Securities were bookrunners.

The company on Thursday reported flat earnings for the quarter compared to a year ago.

The Bentonville, Ark.-based company posted a $3.02 billion profit for the quarter.

The deal was "pretty oversubscribed," a source who worked on it said. "It's a good name and got a good level."

They came in well below price talk and were seen trading even lower.

"Investors want good quality paper right now and this is about as good as they can get," the source said.

Entergy Texas offers mortgage bonds

Entergy Corp. subsidiary Entergy Texas sold $150 million in 7.875% mortgage bonds at par of $25. This equals 6 million units.

The company plans to use proceeds to repay first mortgage bonds due Dec. 1 and for general corporate purposes. Pending this, it intends to use a portion to repay borrowings from the Entergy System money pool and for short-term investments.

The issuer is based in Beaumont, Texas.

Citigroup Global Markets, Morgan Stanley & Co. and Wachovia Capital Markets were bookrunners.

Market hits slowdown

After a deluge of deals in the first half of the week, the supply was temporarily exhausted on Thursday with only two sales.

That compared to the 10 of Monday and nearly as many on Tuesday.

Wednesday also had its fair share.

"I think we just ran out for the week," a market source said. "There should be more next week ahead of the [holiday] weekend."

As the rush of issues hit Monday, sources said it was due to companies waiting until after the bank stress test results were revealed on May 7 combined with trying to sell ahead of the long Memorial Day weekend.

It is normal after that for issuance to slow for the summer, although that pattern may not hold in the economic climate.

"It will be interesting to see what happens," a syndicate source said Thursday. "A lot of companies still need to issue debt, so it may not be quite as slow as usual. There are the banks, too."

Friday may have "a couple" of sales, said a market source, although it's unlikely it will compete with the previous few days' volume.

"We're still mopping up," he said.

Wal-Mart quoted tighter

When the new Wal-Mart Stores 3.20% notes due 2014 were freed for secondary dealings, a trader saw those bonds offered at a spread of 115 bps over comparable Treasuries, although he saw no equivalent bid levels.

The Bentonville, Ark.-based retailing goliath earlier priced $1 billion of those bonds at 125 bps over.

Microsoft short bonds hot, longer bonds are not

Among other recently priced issues, the trader noted that Redmond Wash.-based software industry leader Microsoft's short-dated new issue continued to trade at firm levels in the secondary. He saw the 2.95% notes due 2014 at 78 bps bid, 75 bps offered.

While that was essentially unchanged on the day, it was still well in from the bonds' issue spread; the company priced that $2 billion of five-year paper at 95 bid on Monday, as part of its $3.75 billion three-part deal, Microsoft's first U.S. bond offering.

But while the short bonds continued to do well, it was another story for the longer paper that priced as part of that big deal.

Microsoft's $1 billion of new 4.20% notes due 2019, which had priced at 105 bps over, and then had initially tightened to 95 bps bid, 90 bps offered, were seen on Thursday at 110 bps bid, 108 bps offered, about 4 bps wider on the day.

And its $750 million of 5.20% bonds due 2039, which had also priced at 105 bps over and then firmed in the secondary later Monday to 98 bid, 90 offered, were being offered at 110 bps on Thursday, with no bid, not much changed from Wednesday's finish at 116 bps over bid, 110 bps offered , the trader said.

Bud goes flat

The trader said that whatever excitement had been attached to Anheuser Busch Cos. Inc.'s new three-part issue had "died down" after the St. Louis based brewer's deal priced on Monday. He saw its $1.55 billion of 5.375% notes due 2014 at 340 bps bid, 338 bps offered, "right around" their 337.5 bps pricing level.

He saw its $450 million of 8% bonds due 2039 offered at 385 bps over, versus their 390 bps pricing level, and saw no trading in its $1 billion of 6.875% notes due 2019, which priced at 375 bps over.

Hasbro bonds higher

The trader saw Hasbro Inc.'s 6.125% notes due 2014 at 380 bps bid, 375 bps offered.

The Pawtucket, R.I.-based toymaker's $425 million issue priced at 400 bps over back on May 8.

Amex, JP Morgan dominate financials

In the financial sector, the trader said that much of the focus was on the big deals brought to market on Wednesday by American Express Co. and JP Morgan Chase.

He saw New York-based credit card powerhouse American Express' new deal having widened out and "trading right around issue, more or less - maybe still a little bit behind issue, or right on top, but it widened out initially."

The company's $3 billion non-FDIC-backed deal came to market in two parts on Wednesday -- $1.25 billion of 7.25% notes due 2014, which priced at 530 bps over, and $1.75 billion of 8.125% notes due 2019, which priced at 505 bps over.

The trader also saw JP Morgan's new 4.65% notes due 2014 having initially widened out to around 15 bps behind its issue price, become coming back from those lows to finish around 280 bps bid, 275 bps offered, some 5 bps wider than the 275 bps over level at which the New York-based investment bank-turned-commercial lender had priced its $2.5 billion of bonds on Wednesday.

B of A bonds hold their own

Also among the financials, a market source saw Bank of America Corp.'s 7.375% notes due 2014 trading around 516 bps over. While that was about 5 bps wider than the level those bonds held on Wednesday, it was still considerably tighter than the 537.5 bps level at which the Charlotte, N.C. based banking supermarket priced its $3 billion deal last Friday.

Bank, broker CDS costs mostly unchanged

In the credit-default swaps market, a trader said that CDS costs to protect holders of big-bank paper against a possible default were pretty much unchanged, while CDS costs for the bonds of former investment banks - which have turned into commercial banks -were unchanged to about 10 bps tighter.

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