Canada's CIBC sells short bonds, supply dwindles; late rally lifts market; CIBC, Adobe gain

By Andrea Heisinger and Cristal Cody

New York, Jan. 27 - Canadian Imperial Bank of Commerce was about the only entrant in the investment-grade bond market on Wednesday.

Otherwise, it was a day filled with headlines and news, including the conclusion of a two-day Federal Reserve meeting and Treasury Secretary Timothy Geithner testifying about the bailout of American International Group. President Barack Obama's State of the Union address was also on tap for the evening.

The deal from CIBC was $2 billion in three-year notes. It was announced early on Tuesday, but went overnight and priced in the morning ahead of any announcement from the Fed.

Between all of the headlines and continued earnings blackouts, there has been little in the way of new deals for the week.

This is expected to continue on Thursday and Friday as supply has mostly dried up.

"There could be a couple of things [Thursday]," one market source said. "There could be somebody waiting [until] after the Fed."

Secondary trading zigzagged much of the day, but levels ended up firmer, sources said.

"Generally speaking, spreads seemed firm in the a.m. but widened out a couple basis points throughout the day," a trader said.

Volume fell from Tuesday, which was the "largest in quite a while, but it seemed like a fairly quiet day," one source said.

Secondary trading in the financial sector also was tighter and then weaker before the sector overall firmed about 5 bps in the last hour, a trader said.

"With the Fed out of the way and the State of the Union tonight, maybe things will look better in the morning," a source said. "Tomorrow is month end - maybe some window dressing."

The Federal Reserve said Wednesday that it would leave interest rates at zero and noted that the economy continues to improve.

The yield on the 10-year benchmark Treasury note eased 3 bps to 3.65% on the news as investors pulled their money out of safer investments and into stocks. In addition, the yield on the 30-year Treasury bond was seen at 4.56%, from 4.55% the day before.

The stock markets rallied in part after the "Fed came out unchanged," one source said. "It seemed to put pressure on Treasuries that translated into the spread doing better in our paper."

In investment-grade trading on Wednesday, Trace volume fell about 19% to $13 billion, one source reported.

The CDX Series 13 North American high-grade index gave up 1 bp to a mid bid-asked spread level of 95 bps.

Meanwhile, in the secondary markets, the new CIBC notes were seen tighter by 10 basis points. Also, during the day, Adobe Systems Inc. new notes firmed, while the financial sector came out ahead of Tuesday thanks to the late rally in the stock market, according to sources.

CIBC sells $2 billion short bonds

Canadian Imperial Bank of Commerce sold $2 billion of 2% three-year notes early in the day at 30 bps over mid-swaps. The deal had gone overnight from Tuesday.

It priced at the tight end of price guidance that was set at between 30 and 32 bps over mid-swaps late on Tuesday, a source said.

The notes are backed by the Canadian government and priced under Rule 144A.

Bank of America Merrill Lynch, CIBC, HSBC Securities and RBS Securities ran the books.

The chartered bank is based in Toronto.

Supply dries up, headlines overtake

The primary market was wanting for activity on Wednesday as headlines and the end of a two-day Fed meeting dominated. The CIBC sale was held from the day before and priced well before the announcement that key interest rates would be held at near-zero.

Other news came from Apple and hearings about AIG at which Treasury secretary Geithner and former Treasury secretary Henry Paulson testified.

All of the headlines did not help push deals into the investment-grade market, but one syndicate source pointed to another reason.

"There just really aren't any deals out there now," he said. "I think everyone knew the Fed wasn't going to do anything drastic."

A syndicate source from a large desk said he doesn't have any deals on tap for the remainder of the week, but added that "next week should be busy. I think everybody's just waiting until after earnings."

When asked why there were virtually no offerings priced for the day, the source said "I have no idea. It's just a quiet week."

CIBC firms

In financials, CIBC's new 2% notes due 2013 tightened 10 bps in secondary, a trader said.

The trader "saw a 56 bid for size."

The $2 billion deal, which priced at Treasuries plus 66 bps, was "rumored to have $3 billion in orders."

Goldman Sachs zigzags

Goldman Sachs Group Inc.'s 7.5% notes due 2019 "started the day at 165, 155 and then they widened out to 170, 161 and then I saw them back to the 165 bid," a trader said Wednesday.

Goldman's 6.15% notes due 2018 were unchanged at 156 bps, while the New York-based bank's 6.75% bonds due 2037 widened 6 bps to 230 bps over Treasuries.

"In the last hour today, things have gotten generally better as the stock market rallied and [Treasury] bonds sold off," the source said. "They weakened a little bit from yesterday to this morning. We're probably 5 bps better on go-go paper [Goldman Sachs, Morgan Stanley and other banks]. We're net better on the day than yesterday."

Adobe paper tightens

Adobe's new 3.25% bonds due 2015 were seen early Wednesday tightening in the secondary to 86 bps bid, 82 bps offered but had not moved much by later in the day, according to one source.

The five-year bonds priced on Monday at Treasuries plus 93 bps.

In addition, Adobe's 4.75% notes due 2020 also moved early Wednesday at 125 bps bid, 120 bps offered. The notes priced at Treasuries plus 120 bps.

Neither level saw "much" activity later in the day, the source said.

The $1.5 billion issuance was a first for the San Jose, Calif.-based software company.

Zions a busy name again

A trader said that Zions Bancorporation paper remained busily traded on Wednesday, although the volume in the name was down from the unusually heavy trading seen on Tuesday in the market's initial response to the Salt Lake City, Utah-based regional banking company's quarterly numbers.

He saw more than $20 million of its 7.75% senior notes due 2014 traded - down from the more than $60 million which changed hands on Tuesday.

He saw those bonds in "kind of a tight range," with most of the round-lot transactions taking place inside a 95.5- 96.75 context. "That's where most of your volume took place today," he said. "That seems to be the active one on the high yield desk," despite its mostly high-grade rating of nr/BBB-/BBB. He saw the bonds going home around 95.5 bid - actually down slightly from the late levels about 96 quoted on Tuesday, although there was some paper traded Wednesday around 96.375, "but most of it was between 95.5 and 96."

At another desk, a trader saw the Zions 7.75s trading just under 97 bid during the afternoon, pegging that up some 1.75 points from their closing levels on Tuesday.

During Tuesday's session, the Zions bonds had pushed into a 95-96 context, up from previous levels around 94, after the company's announcement after the close on Monday that its fourth-quarter loss attributable to common shareholders shrank to $176.5 million, or $1.26 per share, well down from a loss of $498.1 million, or $4.37 per share, in the year-earlier period, as the bank took considerably less in the way of charges and write downs.

The $1.26 per share loss was well below the roughly $1.65 per share analysts had been expecting. Company executives expressed optimism that that peak levels of loan losses are behind the company, and that economic conditions in the majority of its markets in 10 Western states have begun to stabilize.

-Paul Deckelman contributed to this report

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