Financials widen as Citi stock sale falls short; new Sherwin-Williams bonds still trade tightly

By Cristal Cody and Andrea Heisinger

New York, Dec. 17 -- Citigroup Inc.'s less-than-overwhelming sale after the market closed Wednesday of $17 billion in stock to repay government loans caused widening in the bank and finance sector on Thursday.

The sale, which came up short $3 billion, also impacted Bank of America Corp.'s bonds more so than the bank's much-anticipated news that it had finally chosen a new chief executive officer, a trader said.

In other activity, Sherwin-Williams Co.'s new bonds, which had been freed for secondary trading late Wednesday, continued to pick up interest on Thursday, one trader said.

Meanwhile, secondary trading overall stayed "fairly light" on Thursday, and no help from the primary market is expected as the year closes, one trader said.

"I would be surprised if we see much between now and the end of the year in new issues."

No U.S. issues were seen having priced on Thursday.

In the secondary market, a source said the mid bid-asked spread level on the CDX Series 13 North American high-grade index rose 1 basis point to 91 bps.

Spreads were seen generally wider, as Treasuries made gains and their yields declined on Thursday. For example, the yield on the benchmark 10-year notes moved down to 3.48% from 3.59% a day earlier.

Advancing issues moved ahead of decliners, while dollar-volume totals for overall market activity slipped about 9%. A trader estimated volume at a little more than $8 billion.

Primary takes break

There was virtually no new issuance in the primary market, in a trend that is expected to continue until after the holidays. The lone investment-grade deal came from the emerging markets side, with Chile's Banco Santander reopening some notes, a market source said.

"It was extremely quiet today," the source said. "I think everyone's done for the year. I know we are."

There could be a "couple of deals" in the coming week, another source said.

"We've had so much [already] this year, that a lot of companies just don't need to issue," he said. "And I don't think anyone's working next week."

Citigroup stock sale widens finance sector

Citigroup saw its bonds widen at least 10 bps on Thursday after the bank came up $3 billion short in its plan to sell $20 billion of stock at a discount to repay government loans.

The New York-based bank said it would sell 5.4 billion shares at a steep discount of $3.15 each, for proceeds of about $17 billion..

Citi's 6.015% notes due 2015 "widened out this morning," a trader said.

"Right off the bat they were 10 basis points wider. It traded between 10 bps and 20 bps wider throughout the day," versus the 290 bps bid, 280 bps offered level at which the bonds had been seen late Wednesday, ahead of the stock-sale results.

Another market source saw Citi's 5% notes due 2014 out more than 30 bps on the day, around the 330 bps mark.

Bank of America names new CEO

Meanwhile, news that Bank of America had selected a new chief executive officer did not affect the spread much on the bank's bonds, one trader said.

Bank of America named Brian Moynihan, currently its head of consumer banking, as the new CEO.

"It didn't have much effect on the bonds today," the trader said.

"Bank of America widened by 5 basis points on sympathy with Citigroup. It's a little wider, but it didn't have anything to do with the CEO. The whole bank and finance sector got a couple basis points wider because of the Citigroup news."

Sherwin-Williams notes spark interest

Sherwin-Williams's new bonds, which priced Wednesday and then were freed for aftermarket dealings, continued to see activity a day later.

On Wednesday, the Cleveland, Ohio-based paint manufacturer - back in the market after a 12-year hiatus - sold $500 million of 3.125% five-year senior unsecured notes at Treasuries plus 82 bps.

By early Thursday, the notes were offered at 73 bps, 76 bps bid, a trader said.

"It seems like everything is getting a little lighter and there's less people around - but it's still decent."

-Paul Deckelman contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.