Spreads tighten as Treasuries ease, Wells Fargo earnings provide lift

By Andrea Heisinger

New York, April 9 - A short and quiet week ended Thursday with spreads were generally much tighter.

Wells Fargo & Co.'s earnings announcement provided a lift to the market, but the status of the bank's outstanding bonds was unavailable Thursday.

Meanwhile Treasuries were weak. By the end of the session, the 10-year note was out 8 basis points to yield 2.93%. The five-year note was slightly better, easing 6 bps to yield 1.89%.

Overall there was "very little" activity in the secondary market, without much in the way of new issues to watch.

Slow trend to continue

A trader and a syndicate source both said the coming week will likely continue the slow trend as companies and banks remain in earnings blackouts ahead of first-quarter results.

"It should be slow," the syndicate source said. "People will be in and out of earnings blackouts, so we're not going to see much."

The trader said the coming week "should be a little slow" and that volume for much of the current week has been "very light."

The market received a bump Thursday after Wells Fargo announced investors should expect an earnings announcement of a $3 billion quarterly profit in the coming week.

A source said without any new issues to use, it was difficult to tell how much, if any, impact the news had on the investment-grade bond market.

"It's good news, for sure," he said.

More supply on tap

There are a small number of issues that are beginning roadshows or expected to price in the coming week.

Brazil's Telemar Norte Leste SA is planning a sale of five-year notes, while OAO Gazprom is set to sell a $2 billion issue of bonds.

Both begin roadshows on April 13.

International Finance Corp., the private sector arm of the World Bank, is planning a benchmark-sized issue of five-year global bonds. Timing on the offering is post-Easter, a market source said.

Financials head trading

A large chunk of the day's most-traded bonds came from financial names, as many of them prepare to issue first-quarter earnings in the coming week.

After announcing investors should expect a $3 billion profit for the quarter, two bond issues from Wells Fargo were among the most-traded on the day. The issues included the company's 4.625% bonds due 2010 and 4.375% bonds due 2013.

These were eclipsed by Goldman Sachs Group Inc., whose 1.625% FDIC-backed note due 2011 was in the top spot as of early afternoon.

Other names with bonds among the most traded were American Express, JPMorgan Chase & Co. and General Electric Capital Corp.

Bank, broker CDS better

Bank and broker name credit-default swaps were tighter by 10 bps later Thursday, a trader said. This is a reversal from much of the week when they were wider.

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