Citigroup, other bank names in focus as day lacks new deals; Citi, GE Capital gain, Chevron better

By Andrea Heisinger

New York, Feb. 27 - A lack of new issues Friday put the focus on financial names - namely Citigroup Inc. and General Electric Capital Corp.

The announcement that the U.S. Treasury Department plans to raise its equity stake in Citigroup spurred a positive move in the bank's outstanding bonds. A week ago there were fears that Citi, along with Bank of America Corp., may be forced into nationalization to survive.

GE Capital cut its dividend by 68% in a step to maintain its AAA credit rating.

Both names' bonds reacted favorably to the announcements.

In non-financial trading, a recent issue from Chevron Corp. and half of one from Abbott Laboratories were seen gaining solidly in the secondary market.

Others issues priced Thursday made only modest gains Friday.

Spreads were mixed Friday, with short-dated Treasury bonds moving in while 10- and 30-year maturities were moving out. For instance, the 10-year Treasury yield was at 3.01%, which was 2 bps higher than the previous day's level.

Financials dominate day

The high-grade primary market was mostly barren Friday, and the focus turned to what was viewed as positive news on Citigroup.

The bank, which recently announced a nearly $28 billion loss for 2008, will be getting a boost from the U.S. Treasury in the form of an equity stake increase to 36% from 8%. This comes from converting preferred stock to common stock and is meant to stabilize the bank.

A syndicate source said that although the move was largely viewed as a positive "both here and away," it was unclear what impact it had on the market or its tone.

"I think any move by the government to help banks is viewed as a good thing now," he said. "There weren't any deals today, so it's hard to tell. If it had happened yesterday, we'd know better."

After a glut of new deals throughout most of the week, Friday was the lone day of the week that saw little to no issuance.

The calm is not expected to last long. Sources on syndicate desks reported busy calendars for the week ahead, with one source saying there "is a lot coming down the pipeline for next week. Expect it to be busy."

JPMorgan reopens bonds

JPMorgan Chase & Co. released terms Friday for a reopening of bonds backed by the Federal Deposit Insurance Corp. that priced Thursday.

The financial reopened its FDIC-backed bonds due 2012 to add $1.279 billion. They priced at 100.22 with accrued interest and with a coupon of three-month Libor plus 23 basis points.

Total issuance is $5.279 billion, including $4 billion priced Feb. 19.

J.P. Morgan Securities Inc. was the bookrunner.

Chevron day's winner

The three tranches of the Chevron deal priced Thursday were seen making at least slight gains late Friday, a trader said.

"They're a highly regarded name," he said in reference to why they were the best performing of the day.

The short bond was doing particularly well in comparison to the other two tranches due 2014 and 2019. All three priced at 195 bps over Treasuries.

The 3.45% tranche due 2012 was at 175 bps bid, 172 bps offered, which was about 20 bps in from the price.

The 3.95% bond due 2014 made more modest gains, seen at 184 bps bid, 182 bps offered.

The 4.95% notes due 2019 moved the least, only coming in a few basis points to 193 bps bid, 190 bps offered.

Citi, GE Capital bonds better

Bonds from Citigroup and GE Capital were each seen better Friday versus the rest of the week, a secondary source said.

Citigroup bonds were about 15 bps tighter in the morning, and the sources said that hadn't changed much throughout the day.

GE Capital bonds were also trading better, he said, although he was unable to quantify how much.

Abbott Labs make gains

The two tranches of Thursday's deal from Abbott Laboratories were seen making gains, with the long bond coming out on top.

A trader said the 5.125% notes due 2019 were at 215 bps bid, about 5 bps in from the 220 bps price.

The 6% bond due 2039 tightened more significantly, seen at 227 bps bid, 222 bps offered from the 235 bps price.

Oneok bonds in slightly

The new issue of 8.625% bonds due 2019 from Oneok Partners, LP was seen tightening 5 to 10 bps from the price of Treasuries plus 570 bps.

A trader saw them at 565 bps bid, 560 bps offered late Friday.

Danaher, Alabama Power little changed

The issue of 5.4% bonds due 2019 from Danaher Corp. was seen moving in only slightly Friday, a trader said.

The Alabama Power Co. sale from Thursday was seen making even less gain.

The Danaher bonds were at 241 bps bid, 240 bps offered, which was only a few basis points tighter than the 245 bps over Treasuries price.

Alabama Power's 6% bond due 2039 were basically unchanged at 235 bps bid, 230 bps offered, which is where they priced.

Citigroup bond top traded

Following the news of the government's increased stake in the bank, Citigroup's 5% bond due 2014 was seen at the top of the trading volume list early Friday afternoon.

The government could have a 36% stake in the bank.

Bank, broker CDS tighten

Bank and broker credit-default swaps came in Friday between 5 and 20 bps, a trader said.

Bank names were between 5 to 20 bps better. Citigroup was at the wide end of that scale, tightening 20 bps to 360 bps bid, 380 bps offered.

Brokers were seen 5 to 15 bps tighter.

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