Citigroup, Macquarie, ANZ National offer bonds; Dow up on earnings; Nexen, Northrop edge in

By Andrea Heisinger and Paul Deckelman

New York, July 30 - Citibank NA and Citigroup Funding Inc. did a large sale of FDIC-backed notes Thursday while other issuers included Australia's Macquarie Group Ltd. and New Zealand's ANZ National International Ltd.

Both the Citigroup and Macquarie sales were "extremely, extremely oversubscribed," a source close to them said.

The Macquarie sale went overnight, and earned twice as many investors because of it.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 12 North American high-grade index tightened 3 basis points to a mid bid-asked spread level of 113 bps.

Advancing issues - which led decliners for a fourth straight session on Wednesday - maintained their momentum on Thursday, by a better than three-to-two ratio.

Overall market activity, reflected in dollar-volume totals, rose about 11% from Wednesday's pace.

Spreads in general were seen a little wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue narrowed about 5 bps on Thursday to 3.66%.

Dow Chemical Co.'s bonds firmed smartly, on investor response to favorable quarterly numbers.

Monday's new issues from Nexen Inc. and Northrop Grumman Corp. were seen having tightened a little from Wednesday's levels, and remaining tighter versus their respective pricing spreads.

Citigroup sells FDIC tranches

Citibank NA and Citigroup Funding sold $5 billion of bonds backed by the FDIC in two tranches, an informed source said.

The $2.5 billion of 1.375% two-year notes sold by Citibank NA priced at a spread of Treasuries plus 26.3 bps.

The $2.5 billion of 2.25% three-year notes sold by Citibank Funding priced at a spread of 62.6 bps.

The books were heavily oversubscribed, the informed source said, which was expected. There was about $7 billion of investor interest in the two-year notes, and about $5 billion in the three-year notes.

The size was essentially set from the beginning, he said.

"It was announced as a benchmark and we did the $5 billion," he said. "When it was announced, there was the possibility of doing a floating-rate [tranche], but the fixed were doing so well so we didn't."

The deal was priced similar to a $5 billion sale of FDIC-backed notes in four tranches on May 28.

Citigroup Global Markets ran the books.

The financial services parent company, Citigroup Inc., is based in New York City.

Australia's Macquarie sells five-year

Macquarie Group sold an upsized $1 billion of 7.3% five-year notes at Treasuries plus 475 bps, an informed source said.

The size was increased from $250 million. It went overnight from Wednesday to allow Asian investors in on the deal. It was done via Rule 144A.

The sale had about $8.34 billion on the books when they closed, the source said. "It basically doubled overnight," he said. "We got about $4 billion from Asia [investors] which was a surprise. It was a pleasant surprise. It gave us more control over price, and we were able to [price] them tighter."

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities.

The financial services and banking company is based in Sydney, Australia.

ANZ sells two tranches

ANZ National International priced $1 billion of notes backed by the New Zealand government in two tranches, a market source said.

The $500 million of two-year floating-rate notes priced at par to yield three-month Libor plus 18 bps.

The company also reopened its 3.25% bonds due 2012 to add $500 million. They priced at a spread of Treasuries plus 58 bps.

Bookrunners were ANZ Securities, Citigroup Global Markets and RBC Capital Markets.

The financial services company is based in Wellington, New Zealand.

Financials lead primary

All of the deals hitting the high-grade primary on Thursday came from financial names, although two were from overseas and one was backed by the FDIC.

"I think it was an earnings thing," a source away from the deals said. "They all came out of blackout [recently]."

It was "strange" that two of them were backed by the government, he said. "The Citi one was kind of surprising, but not that much."

There "could be a couple" of sales for Friday, but it's more likely to be quiet, the source said.

The coming week is predicted to be busier, at least compared to recent slow weeks, a source said on Wednesday.

Northrop bonds seen better

A trader saw tightening in the bonds of Los Angeles aerospace company Northrop Grumman.

Its 3.70% notes due 2014, which had traded at 105 bps bid, 100 bps offered Wednesday, came in to 98 bid, 95 offered on Thursday. The $350 million of bonds had priced Monday at 115 bps over.

Its 5.05% notes due 2019 were seen at 118 bid, 114 offered, a little tighter than Wednesday's levels at 121 bps bid, 128 bps offered. The $500 million tranche priced Monday at 135 bps over.

Nexen bonds tighten up

A trader also saw Nexen 's recently priced bonds tightening a little from the levels seen on Wednesday, and remaining tight versus the levels at which the Calgary, Alta.-based energy company priced its $1 billion of bonds on Monday in a two-part offering.

Its $300 million of 6.20% notes due 2019 were seen Wednesday at a spread versus comparable Treasury issues of 234 bps bid, 239 bps offered. That was a tightening from Tuesday's 240 bps bid, 235 bps offered, and remains well in from the 250 bps over level at which they had priced on Monday.

Its $700 million of 7.50% bonds due 2039, which had priced Monday at 290 bps over and then had moved to 279 bps bid, 273 bps offered on Wednesday, narrowed to 268 bps bid, 255 bps offered on Thursday.

How now, Dow?

One of the busier issues was Midland, Mich.-based chemical maker Dow's 8.55% notes due 2019, which saw over $50 million traded after the company released favorable second-quarter earnings.

A trader saw those bonds having firmed to 362 bps bid, 358 bps offered. Those levels are well in from the 525 bps over level at which the $3.25 billion of bonds priced back in May.

He also saw the 9.40% bonds due 2039 at 345 bps bid, 335 bps offered.

At another desk, a trader estimated those bonds were as much as 40 bps tighter on the day, around that same 340 bps level.

The company had originally priced its billion-dollar tranche of bonds at 512.5 bps in May.

The bonds firmed after Dow reported adjusted earnings of a nickel a share for the second-quarter surprising analysts who had been expecting as much as 8 cents to 10 cents a share of red ink on that basis.

Financials firmer

A trader said that in the financial arena, things were "tighter, basically, across the board., anywhere from 5 bps to 15 bps, depending upon the credit.

He saw the Capital One Capital V 10¼% cumulative trust preferred certificates due 2039 which priced Wednesday staying in the 101-102 area, about where they were on Wednesday after the McLean, Va.-based banking company's $1 billion issue - double the $500 million originally talked around the market - priced at 98.846.

He quoted another Virginia bank, BB&T Corp.'s $250 million of 3.10% notes due 2011, at 205 bps bid, 195 bps offered, versus last week's 210 bps over pricing level. Its $1 billion of 3.85% notes due 2012 were at 190 bps bid, 180 bps offered, well in from 237.5 bps over at their pricing last week.

He also said insurance paper was about 20 bps tighter.

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