Manitoba sells bonds as market remains unsettled; new Alcoa 10-year notes widen 3 bps

By Andrea Heisinger and Cristal Cody

New York, April 19 - There was one new bond sale on Tuesday from the Province of Manitoba.

The province's offering of $750 million of three-year global notes was the first new deal of the week. It came to market in line with early guidance.

"I think they already planned to do this," a market source away from the deal said. "[It was] definitely not opportunistic."

The primary market tone remained as depressed as it was on Monday due to several factors both earnings-related and not.

Issuance was not expected to be strong for the week with both Passover and Easter holidays, but it's likely to be even less than thought at the end of the previous week.

"We could still see something but I'm guessing everyone's waiting until next week to reassess," the market source said.

In the secondary market, "corporate bond spreads are a little bit wider," a source said. "GE Capital's widened 2 to 3 basis points over the last couple of days but nothing significant."

Alcoa Inc.'s bonds were marginally wider on Tuesday, mostly a result of the rally in Treasuries, a trader said.

The weaker tone did not impact overall trading activity, which climbed on Tuesday. Overall investment-grade Trace volume jumped more than 50% to nearly $12.5 billion, a market source said.

The Markit CDX Series 14 North American investment-grade index firmed 1 bp to a spread of 95 bps, according to Markit Group Ltd.

Treasuries ended higher as investors shrugged off Standard & Poor's negative outlook the previous day on the United States' credit. The climb sent yields down 1 basis point to 3 bps, wider on the longer end of the curve. The 10-year Treasury note yield edged down 1 bp to 3.36%. The 30-year bond yield dropped 3 bps and closed the day at 4.43%.

Manitoba's short bond

The Province of Manitoba sold $750 million of 1.375% three-year global bonds (Aa1/AA) at a spread of mid-swaps plus 5 bps, or Treasuries plus 28.25 bps, an informed source said.

This was in line with talk in the mid-swaps plus 5 bps area.

CIBC World Markets Corp., HSBC Securities (USA) Inc., National Bank Financial Inc. and RBC Capital Markets Corp. were bookrunners.

Proceeds are going toward funding advances to Manitoba Hydro-Electric board and for general corporate purposes.

The issuer is based in Winnipeg.

Alcoa widens

Alcoa Inc.'s 5.4% notes due 2021, which priced at 195 bps over Treasuries on April 13, widened 3 bps on Tuesday, a trader said.

"That's a bit of a surprise because it looked like fairly decent pricing," the trader said, adding he hadn't traded any of the new issue but had a "shorter bond in play."

Alcoa's older 5.72% notes due 2019 were quoted marginally tighter at 159 bps.

Bank, broker CDS firm

The costs of protecting holders of big-bank bonds against a possible event of default via a credit-default swap contract and a CDS contract covering bonds of major brokerage houses were both seen 4 bps to 2 bps tighter, a source said.

Stephanie Rotondo contributed to this review.

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