Rabobank, Wesfarmers prices; market encouraged by Verizon, Oracle success

By Andrea Heisinger and Paul Deckelman

Omaha, April 3 - As a large chunk of deals earlier in the week kept the investment-grade secondary market busy, the new issue market was largely quiet Thursday with Rabobank and Wesfarmers providing about the only issues.

In the investment-grade secondary market Thursday, advancing issues led decliners by a better-than five-to-four ratio, while overall market activity, reflected in dollar volumes, fell by about 11% Wednesday's pace.

Spreads in general were mixed, reflecting the changes in Treasury yields up and down the curve. The yield on the benchmark 10-year issue, for instance, came in 2 basis points to 3.58%, although the five-year note was 1 bp wider at 2.74%.

Traders saw continued firming in recently priced issues such as Verizon Communications and Oracle Corp.

Energy Transfer Partners and Enterprise Products Operating LLC were also seen moving around in the secondary.

With the continued improvement in market sentiment towards the financial issues, credit-default swap spreads for banks and brokerages like Lehman Brothers Holdings were seen having come in another 10 to 15 bps.

Rabobank sells floaters

Rabobank priced $3.25 billion of five-year extendible floaters at par.

They have an initial coupon of three-month Libor plus 19 basis points, increasing to Libor plus 22 bps after the first year and by 2 bps each year until maturity.

Their initial maturity is in 2009, with final maturity in 2013.

Goldman Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Inc. were bookrunners.

Wesfarmers brings $650 million

Australia's largest retailer, Wesfarmers, priced $650 million 6.998% five-year notes at par to yield 6.998% with a spread of Treasuries plus 425 bps.

Goldman Sachs, J.P. Morgan Securities Inc. and Barclays Capital Inc. ran the books.

The slowdown was expected, with the high volume of notes pricing Monday and Tuesday.

"It's no comment on the market, really," a source said. "We already had $20 billion come this week, so we're not doing too bad."

New deals trade well

He commented on how well both of the large issues of the week, deals from Verizon Communications Inc. and Oracle Corp., were doing in secondary trading, tightening considerably.

Each was well oversubscribed, sources said, with some saying Verizon was about five times and Oracle about four times.

"Everything's performing well this week," a source said. "The new issue premium was not too obscene on those two trades."

The market took the success of these two issues as a positive sign.

"It bodes well for the market that issues that size can come in right now and do well," a source said. "One outcome of concessions being reasonable is it's not too uncommon to see [secondary spreads] tightening."

The quiet streak will likely extend into Friday, with no issues expected.

"It's pretty dead today, and I don't think we'll see anything tomorrow," a source said. "We've already got $20 billion for the week, so that's probably enough."

The coming week will likely look much like this one in terms of volume, sources said.

Verizon, Oracle better in trading

Traders saw brisk demand in the new bonds of Verizon and Oracle, both of which had priced three-tranche mega-deals earlier in the week - $5 billion for Oracle on Wednesday and $4 billion for Verizon on Tuesday.

A market source saw the new Verizon 5.25% notes due 2013, which had priced at a spread of 270 bps over comparable Treasuries, trading Thursday at bid levels 253 bps over. Its 6.10% notes due 2018, which priced at 260 bps over, traded as tight as 242 bps, while its 6.90% bonds due 2037, which also priced at 260 bps over, traded at 240 bps.

The story was the same for Oracle. Its 4.95% notes due 2013, which had priced at 222 bps over, came in to a bid level at 215 bps over. Its 5.75% notes due 2018 narrowed to 205 bps over from their 215 bps spread at pricing, while its 6.50% notes due 2038 traded at 203 bps over versus 212 bps at the pricing.

Among other recently priced credits, Energy Transfer Partners' 7.5% bonds due 2038 which had priced at 330 bps over on Tuesday, were seen trading at 305 bps, while its 6.7% notes due 2018 narrowed all the way to 278 bps over from 325 bps at the pricing.

And Enterprise Products Operating's 6.5% notes due 2019 improved to 253 bps over from 310 bps at the March 21 pricing.

Goldman tightens

Back among the more established bonds, Goldman Sachs's 6.75% bonds due 2037 were seen having narrowed substantially to 285 bps.

"Spreads were pretty much better across the board," a trader said, "by 5 to 10 bps depending on the credit." On a dollar-price basis, for instance, he saw Citigroup "up one [point] if not more and WaMu [Washington Mutual] half to a point," on no real news.

Another trader quoted Bear Stearns' 7.25% notes due 2018 at 104.5 bid, 106 offered, saying the bonds had "been all over - but in general, there was a stronger tone to them."

In the CDS market, a trader said that Bear's debt-protection costs had narrowed to 125 bps bid, 135 bps offered; Lehman was 200 bps bid, 210 bps offered; Merrill Lynch was 195 bps bid, 205 bps offered, and Morgan Stanley was 150 bps bid. 155 bps offered, all of them about 10 bps to 15 bps tighter than Wednesday's levels.

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