High-grade supply wanes amid continued credit losses; ITC notes weaken despite positive tone

By Aleesia Forni and Andrea Heisinger

New York, July 1 - Issuers opted not to tap the high-grade bond market on Monday, with minimal supply expected for the shortened week.

There could be no issuance for the week, or up to $5 billion, sources said. Anyone who does decide to brave the market would likely do it Tuesday, since Wednesday is considered an unofficial half day, a syndicate source said.

One market source said it "seems very unlikely" that a company would sell bonds on Tuesday.

A source at a large syndicate desk said that "just one will take a look" in Tuesday's session.

This has been the third straight week of volatility in corporate bonds as 10-year Treasury yields remained high, forcing the slowdown in investment-grade issuers tapping the market unless they absolutely need to.

"No one probably needs to issue this week so it's not happening," said one source in mid-afternoon.

Corporate credit has suffered some of its worst losses in five years, following remarks from Federal Reserve chairman Ben Bernanke in mid-June about plans to taper stimulus measures later in 2013.

Despite muted activity throughout the session, market sources noted that the secondary market's tone was positive on Monday.

The Markit CDX North American Investment Grade index was 4 basis points tighter at a spread of 84 bps at Monday's close.

Meanwhile, a trader saw ITC Holdings Corp.'s two-part deal trading "a couple of [basis points] wider" on the day.

Investment-grade bank and brokerage credit default swap costs declined on Monday, according to a market source.

Bank of America Corp.'s CDS costs were 2 bps lower at 130 bps bid, 135 bps offered. Citigroup Inc.'s CDS costs declined 3 bps to 118 bps bid, 123 bps offered. JPMorgan Chase & Co.'s CDS costs declined 2 bps to 95 bps bid, 100 bps offered. Wells Fargo & Co.'s CDS costs were down 1 bp at 71 bps bid, 76 bps offered.

Merrill Lynch's CDS costs lowered 1 bp to 117 bps bid, 127 bps offered. Morgan Stanley's CDS costs declined 3 bps to 169 bps bid, 174 bps offered. Goldman Sachs Group, Inc.'s CDS costs were down 3 bps at 155 bps bid, 160 bps offered.

SEK gives terms

Swedish Export Credit Corp. sold $500 million of global floating-rate notes due 2015 at par to yield Libor plus 5 bps, according to a 424B2 filing with the Securities and Exchange Commission on Monday.

The floaters were priced on Friday.

Bookrunners were Goldman Sachs International, HSBC Bank plc and J.P. Morgan Securities plc.

Proceeds are being used for general corporate purposes.

Based in Stockholm, Svensk is the lender to Sweden's export industry.

ITC notes weaker

A trader quoted ITC Holdings' $250 million of 4.05% 10-year notes at 4 bps wider at 157 bps bid, 152 bps offered late during Monday's session.

A trader at another desk had quoted the notes at 153 bps bid, 150 bps offered late Friday.

ITC Holdings sold the notes at a spread of Treasuries plus 155 bps on Wednesday.

The $300 million tranche of 5.3% 30-year bonds was quoted 2 bps wider at 175 bps bid, 170 bps offered.

ITC Holdings sold the bonds at a spread of 175 bps over Treasuries.

The power transmission company is based in Novi, Mich.

Paul Deckelman contributed to this review.

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