Employment figures scare issuers away; trading at low volume; Citigroup bonds stay active

By Andrea Heisinger

New York, Oct. 2 - There were no new deals pricing on Friday in the investment-grade bond market as any potential issuers were likely scared away by September's unemployment figures that came out in the morning. The U.S. national unemployment number rose to 9.8% and sent both credit and equity markets downward.

"We weren't expecting any [new deals]," a syndicate source said. "It should be fairly quiet next week. It's a long weekend [at the end]."

There was little volume in the secondary market, with bank bonds and a few recent deals garnering the most attention.

The recent sale from ArcelorMittal was down at the dollar level from where it priced Thursday.

Citigroup Inc. had some of the most popular bonds of the day, although a trader said she wasn't exactly sure why.

Spreads were slightly tighter by day's end as Treasury yields widened. This was a change from the morning when spreads were wider.

The five-year Treasury note was out 2 basis points to 2.2% and the 30-year bond was 5 bps wider to yield 4%.

Corporates trade quietly

There wasn't much action on either side of the market on Friday, as dismal employment figures were released.

A trader said it was "quiet in corporates," especially in the morning when the unemployment figure of 9.8% came out.

"There were a lot of knee-jerk reactions," the trader said. "The IG index went wider by 5 bps."

By the end of the day, things had calmed some, and the index was only out 1 basis point and spreads came in, she said.

The coming week could be quiet with earnings blackouts ahead and many companies and banks having already issued during September.

"Next week I don't know what we're going to see," a market source said. "I don't think the calendars are very heavy, or at least mine's not."

A trader said she only saw "one on the docket," for the coming week. She said it's coming from Amal Products Ltd., a company based in India.

"It's just quiet out there," she said. "We're just not getting that many bids. No one's really interested."

ArcelorMittal bond trades around

A new 7% bond due 2039 from steel maker ArcelorMittal was quoted at levels on either side of its 95.202 price by late Friday.

A trader quoted the bond at 93.75 bid and 94.75 offered. A second trader said the bond was at 94.5 bid, 95.5 bid earlier on the day.

Soon after pricing on Thursday, it was quoted at 94.375 offered with no bid.

Enel bonds remain in flux

The three tranches priced earlier in the week by Enel Finance International SA were mostly wider, with only the shortest bond improving.

The 3.875% bond due 2014 was the only one to improve since the previous day. It was quoted late in the afternoon at 158 bps bid, 150 bps offered. It priced at 162.5 bps over Treasuries and was at 162 bps bid on Thursday.

The other two bonds improved from the previous day's levels but remained wider than where they priced.

A 5.125% bond due 2019 was sold at Treasuries plus 187.5 bps and was quoted at 193 bps bid, 191 bps offered. This was an improvement over the previous day, although a second trader said she saw the bond at 199 bps bid, 192 bps offered in the morning.

The 6% bond due 2039 was quoted at 208 bps bid, 205 bps offered, which was slightly wider than its 200 bps over Treasuries price.

There were "a couple million" traded of the 10-year and 30-year notes, the trader said.

Citi, B of A bonds top trading

Outstanding bonds from Citigroup and Bank of America Corp. were among the top-traded by early afternoon, a trader said.

Citigroup's 5.5% bond due 2014 was leading by volume. The $2 billion issue of bonds was priced on Sept. 15 and was not backed by the Federal Deposit Insurance Corp. Temporary Liquidity Program. The financial priced $5 billion in FDIC-backed bonds on Tuesday in four tranches through two of its subsidiaries.

A trader said there was "nothing particular" going on with Citigroup, and wasn't sure why the bank's bonds were trading so actively.

"All the bank paper trades crazy these days," she said.

Bank of America bonds have been active for much of the week as chief executive officer Ken Lewis announced he was resigning.

The bank's 7.375% bond due 2014 was among those actively trading on Friday.

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