Aegon sells notes; secondary trading volume low; new bonds tighten; spreads better overall

By Andrea Heisinger

New York, Nov. 23 - Aegon NV was about the only new deal in the high-grade bond market on Monday as volume declined ahead of the Thanksgiving holiday.

The insurance company based in the Netherlands sold $500 million of six-year notes in a deal that took much of the day to get done.

In the secondary market, recent new deals were not seen trading much, but those that were improved overall.

Two tranches of the recent TD Ameritrade Holding Co. issue remained 5 to 10 basis points better than where they were priced.

The three tranches from CDP Financial Inc. that were sold the same day were also tighter across the board, although in some cases it was only by a couple of basis points.

Aegon's new bond was not seen in trading by the close of the market as it priced late.

Bond spreads were mixed by the end of the day as Treasury yields moved both tighter and wider. A trader said that "spreads were a little tighter overall, maybe 1 to 1.5 bps."

Bonds were weaker at the start of the day, a market source said. This move was credited to global equity, the firmness of commodities, and signs that the Federal Reserve will keep rates low.

Aegon sells six-year notes

The Netherlands' Aegon priced $500 million of 4.625% six-year senior unsecured notes late in the afternoon at Treasuries plus 250 bps, a source away from the sale said.

The notes were priced in line with guidance of 250 bps, a syndicate source said. The sale was about 1.5 times oversubscribed, he said.

"There wasn't tons [of demand]," he said. "They accomplished what they needed to get done."

The size of the sale did not increase from the planned $500 million, he added.

Citigroup Global Markets, Morgan Stanley and Wells Fargo Securities were the bookrunners.

Proceeds will be used for general corporate purposes, including repayment of short-term debt.

The holding subsidiary for insurance company Aegon Group is based in the Hague, the Netherlands.

There was no trading level available at the market close because of the late pricing, a trader said.

Sources added that the issue could tighten nicely by Tuesday, if there is investor interest.

"Insurance [bonds] trade in spurts," the trader said. "You never know."

New deals scarce for week

High-grade bond issuance could be virtually done for the week after Aegon's lone deal was priced on Monday.

"We don't have anything more for the week," a syndicate source said late in the day.

Another source said the same thing, adding that "everyone's just waiting for Wednesday at about 3 p.m."

The syndicate source jokingly said that "I think we're done for the year."

Many issuers crammed their bond deals into the past three weeks as they came out of earnings blackout and before the Thanksgiving holiday.

Any other deals set to come to the market in the coming two days will likely be from foreign issuers, such as Aegon, which hails from the Netherlands.

"It's going to be a boring two days," the second source said.

TD Ameritrade bonds hold firm

Two of the three new tranches of TD Ameritrade Holding bonds priced Friday remained tighter than the level at which they were sold, a trader in the financial sector said.

The 4.15% bond due 2014 lost some ground from the previous day but remained better than its price of 200 bps over Treasuries. The trader quoted it at 195 bps bid, with no offer. It was quoted at 192 bps bid on Friday.

The 5.6% bond due 2019 was priced at 225 bps over Treasuries. It was offered at 214 bps, with no bid, the trader said. On Friday it was at 217 bps bid, 211 bps offered.

There was no level for the 2.95% bond due in 2012 that made up the remainder of the deal.

CDP Financial bonds tighter

The three new bonds from CDP Financial remained at least slightly tighter than where they were priced on Friday, a trader said late in the day.

The 5.6% bond due 2039 performed the best. It priced at 130 bps over Treasuries, and was quoted at 118 bps bid, 113 bps offered.

"Wow, that one really came in," the trade said of the level. It was quoted at 121 bps bid on Friday.

The other two tranches were only minimally better.

CDP Financial's 4.4% bond due 2019 was quoted at 102 bps bid, 98 bps offered. It priced at Treasuries plus 105 bps.

The company's 3% bond due 2014 priced at Treasuries plus 83 bps and was quoted at 82 bps bid, 78 bps offered.

Trading volume lower

The lack of new deals has tapered off and has led to a decrease in volume in the secondary, a trader said.

"It's a little lackadaisical as things wrap up [before Thanksgiving]," she said, quoting trading volume at below $7 billion.

"It's a little more illiquid right now."

Much of the recent crop of new bonds has disappeared from active trading, she said.

"I didn't notice many of the new issues trading around, except for Cisco [Systems Inc.]."

One of the three bonds priced by Cisco Systems on Nov. 9 was one of Monday's biggest movers in the secondary market.

The 5.5% tranche due 2040 was about 60 bps wider than a week ago, quoted at 136 bps. It priced at 130 bps over Treasuries.

GE Capital, Dow Chemical top trading

Bonds from General Electric Capital Corp. and Dow Chemical Co. were at the top of trading volume by early afternoon, a trader said.

GE Capital saw its 1.8% bond due 2011 trade heavily. The bond, which is backed by the Federal Deposit Insurance Corp., was quoted at 17 bps. The issuer was recently in the news as it completed a $500 million sale of sukuk bonds to broaden its investor base to the Islamic countries.

Those bonds were sold on Nov. 19, and it was the first such deal from GE Capital.

A trader had a different theory as to the renewed interest in one of GE's government-backed issues.

"It may be that they've upsized it, and it hasn't shown up yet," she said. "There's a lot of demand for this government-backed paper. It's viewed as kind of a sure thing."

Dow Chemical retained its hold on investors with its 8.55% bond due 2019 trading nicely behind the GE Capital notes. It was quoted at 250 bps.

Bank, broker CDS tighten

Credit-default swaps for bank and brokerage names were tighter overall by late afternoon, a trader said.

Bank names were between 4 and 7 bps improved. Brokers were about 4 bps tighter across the board, he said.

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