American Honda prices as market takes breather after heavy issuance

By Andrea Heisinger and Paul Deckelman

Omaha, March 26 - Just as some were surprised to see the week kick off with a high volume of issuers, others were surprised at Wednesday's slowdown with American Honda Finance Corp. about the only issue pricing.

"It was a little too quiet today," a market source said. "A large amount of deals jumped in after the Fed announcement and earlier this week and I think the secondary needed a chance to digest a little and see what spreads are doing."

In the investment-grade secondary market Wednesday, advancing issues outnumbered decliners by around a four-to-three ratio, while overall market activity, reflected in dollar volumes, eased about 1% from Tuesday's busy pace.

Spreads in general widened out, as Treasury yields came in, the benchmark 10-year issue, for instance, narrowing by 4 basis points, to 3.46%.

Washington Mutual's bonds were seen solidly firmer, even as its shares fell nearly 10%, although there was no positive news out on the troubled thrift operator.

Elsewhere, Bear Stearns' bonds continued to tighten, along with such other financial names as Morgan Stanley and Credit Suisse.

Among the non-financial names, CSX Corp. and Energy Transfer Partners LP's established bonds rose, after each company brought large new deals to market earlier in the week.

Honda sells $900 million

Honda priced $900 million 4.625% five-year notes at 99.588 with a spread of Treasuries plus 210 basis points in a Rule 144A deal.

Banc of America Securities LLC and Citigroup Global Markets Inc. were bookrunners.

This issue was different than Honda's normal offerings, a market source said.

"They usually do smaller one and two-year issues, and they're usually floaters," he said. "This is unusual for them. I think they also had to stomach a lot [of concession] to get one this size done."

A pause but positive signs

The equity market opened wishy-washy Wednesday, which may have caused some potential issuers to hold off, a source said.

Having a brokerage name like Goldman Sachs Group come into the market Tuesday helped confidence, he added.

The bank priced $2.5 billion of 10-year notes.

Coupons that remained in the mid-6s have also encouraged issuers despite the large new issue premiums some names have to pay to get a deal done.

The pace should pick up at least slightly Thursday, sources said, with most predicting a handful of deals.

"If the open is good, I don't think we'll be surprised if there will be a handful of deals. Most of them, there is a 50/50 chance they'll go. There have been some macro-economic headlines that haven't been too rosy today, so that didn't help."

This is a transition period after heavy issuance, meaning there likely will be a couple of days at least that won't have a ton of issuers.

"There will maybe be a couple more tomorrow," a source said. "I don't think we're done for the week. The market just needed a breather."

WaMu stock rocked, bonds roll

A market source saw Washington Mutual's 5.5% notes due 2011 having come in to 833 bps over comparable Treasuries - a solid tightening from its day-earlier levels around 910 bps. On a dollar-price basis, the bonds firmed to over 86 bid, a 2 point gain, in fairly busy dealings.

There was no positive news out on the nation's largest savings-and-loan, although investment-oriented internet bulletin boards were rife with takeover speculation. Perhaps on the theory that a would-be buyer might offer a low-ball price for its shares - not unlike the initial JP Morgan offer for Bear Stears, which pleased the to-be-made whole bondholders but riled the shareholders - the shares fell by $1.20, or 9.449%, to $11.50.

Bear bonds keep firming

Elsewhere among the financials, Bear Stearns' 7.25% notes due 2018 narrowed by 15 bps to around the 330 bps mark. Its 3.25% notes due 2009 were also narrower at 703 bps, as were the 2.875% notes due July 2, at 960 bps.

Among other financials on the upside, Morgan Stanley's 5.25% notes due 2012 came in by 30 bps to finish at 265 bps, while Credit Suisse's 4.875% notes due 2010 tightened by around 25 bps to 195.

CSX, Energy Transfer established bonds gain

Among non-financial issues, CSX Corp.'s 6.25% notes due 2015 narrowed by 15 bps to around the 255 bps region, while Energy Transfer Partners' 6.625% bonds due 2036 were seen 25 bps better at 280 bps over; both companies have brought big new deals over the past several sessions, CSX pricing a $1 billion offering of seven-year and 30-year paper on Monday, Energy Transfer Partners bringing a $1.5 billion three-part offering to market on Tuesday.

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