New deals continue hiatus; financials active in trading, others quiet

By Andrea Heisinger and Cristal Cody

New York, Dec. 24 - The short holiday week ended on Thursday with no new deals to be had and extremely light high-grade bond trading and an early close ahead of the Christmas Day holiday.

Meanwhile, Treasuries were lower Thursday. The Treasury will auction $118 billion of notes in the week before the New Year's Day holiday.

The yield on the benchmark 10-year Treasury note eased 4 basis points to 3.79% on Thursday from 3.75% on Wednesday. The yield on the 5-year note eased to 2.53% on Thursday from 2.48% the day before, while the 30-year bond's yield eased 5 basis points to 4.66%.

"Ten-year T-notes are yielding 3.77%, up 2 bps from yesterday's close," a market source said early Thursday.

The Treasury Department plans to auction two-year, five-year and seven-year notes during the last week of the year.

Otherwise, no major activity is expected in the week before the New Year's Day holiday, though there could be some light trading, sources said.

"There's a little bit of business that goes on next week, but many accounts have shut down for the week," a trader said. "It's going to be quiet until after the first of the year."

For instance, a source reported that the CDX Series 13 North American high-grade index changed only slightly the whole week.

On Wednesday, the mid bid-asked spread level was unchanged at 84 bps from Tuesday. On Monday, the mid bid-asked spread level declined three basis points to 86 bps.

"I would say everything's very quiet," said one trader reached shortly before the market closed early on Christmas Eve.

On the day before Christmas Day, many traders had already left and expect to be off for the week ahead, according to sources.

"I'm out till January," one trader said.

Another trader plans for extra clean-up time between the Christmas Day and New Year's Day holidays.

"I don't expect much action. I'm hoping to get everything organized for next year."

Desks empty early

Syndicate desks emptied early ahead of the holiday weekend. New deals were again absent, leaving many desks with little to do other than end-of-the-year tasks.

"I'm pretty sure everyone's already bailed," said one syndicate source in late morning. "We've just been doing busy work."

The lone deal of the week came from JPMorgan Chase & Co. on Monday. Even that offering surprised some.

"Honestly, I'm surprised anyone issued this week," the source said. "There are still a lot of people looking for paper out there, though."

Financials active

The financials sector in high-grade bonds showed slight activity during the short trading day and week. High-grade bonds from Citigroup Inc., Morgan Stanley & Co., Merrill Lynch & Co., JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs & Co. have been active all week, according to sources.

Bank of America's 6.5% bonds due 2016 widened 3 basis points to 130 bps over Treasuries on Thursday from 127 bps over on Wednesday, according to a market source.

In secondary trading in other Bank of America bonds, a source noted that at the start of the week, the Charlotte, N.C.-based Bank of America's 7.625% notes due 2019 tightened 9 basis points to 176 bps over Treasuries.

Meanwhile, on Wednesday, Wells Fargo & Co. and Citigroup said the banks had repaid government loans under the Troubled Asset Relief Program. Wells Fargo repaid $25 billion and Citigroup repaid $20 billion.

A source noted Wells Fargo's 5.30% two-year bonds remained unchanged on Thursday at 55 bps over Treasuries.

But Citigroup's 6.375% bonds due 2014 widened to 264 bps over Treasuries on Thursday from 258 bps over.

On Wednesday, Citigroup's 5.50% bonds due 2014 tightened 16 basis points to 255 bps over. The New York financial services company's other bonds also have been active over the week.

On Tuesday, a source quoted that Citigroup's 6.37% five-year bonds had tightened to 258 bps over Treasuries from 275 bps over. The same day, Citigroup's 8.125% bonds due 2039 also tightened by 10 bps to 242 bps over, according to a source.

Cisco notes tighten 5 bps

In other trading on Thursday, a source said Cisco Systems, Inc.'s 4.95% notes due 2019 tightened 5 basis points to 70 bps over from 75 bps over on Wednesday.

Also, San Jose, Calif.-based Cisco's 5.95% bonds due 2039 tightened 2 basis points to 114 bps over on Thursday.

Dow 8.55% notes tighten

Meanwhile, according to one source, Dow Chemical Co.'s 8.55% notes due 2019 tightened 5 basis points to 200 bps over.

Earlier this year, the Midland, Mich.-based company completed its acquisition of Rohm and Haas Co.

Pfizer notes quoted at 80 bps over

Moving to the pharmaceutical sector, on Thursday, a source noted that Pfizer Inc.'s 6.20% notes due 2019 tightened 5 basis points to 80 bps over on Thursday from 85 bps over on Wednesday.

New York-based Pfizer completed its $68 billion takeover of Madison, N.J.-based Wyeth in 2009

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