JPM prices two tranches; RBC to reopen; bank bonds trade weaker; new issues see modest gains

By Andrea Heisinger

New York, Oct. 14 - JPMorgan Chase & Co. was one of the only sellers in the high-grade corporate bond market on Thursday.

The banking giant got a $4 billion deal done a day after it announced third-quarter earnings and on a day when banks were in the news on mortgage foreclosures.

The sale was in tranches due 2020 and 2040, with the shorter tranche pricing at a higher spread than the longer bond.

A syndicate source said that the Royal Bank of Canada was supposed to reopen some bonds on Thursday after announcing the deal and price guidance the previous day. As of 5:30 p.m. ET, he said he hadn't seen them price.

More bank names are expected to price deals after emerging from earnings blackouts, a syndicate source said at the end of the day, adding that most will wait until the coming week instead of pricing Friday.

It was uncertain whether news on the financial sector had any impact on the primary side of the market, a source said.

"It was pretty quiet in the primary today, so it was hard to tell."

After earnings season is over, he said the market couldn't "rule out" financial names looking to the bond market to raise capital.

Bank names were also a focus of traders who saw a lot of activity in bonds from names like JPMorgan, Bank of America Corp. and Goldman Sachs Group Inc. Big banks could have to pay up for their handling of foreclosure paperwork, and some like Bank of America have suspended foreclosures.

New bonds from Raytheon Inc., Post Apartment Homes LP and ING Bank NV made only slight gains in trading after pricing the previous day. The new JPMorgan tranches also performed well, with the shorter bond tightening more than the 30-year maturity.

Outside of that, the secondary saw "lousy to mediocre" Treasury auctions for the week.

"[It] seems like everything is down - except Treasury yields," the source said.

Yields were up across the board from the previous day. The 10-year note was up 9 basis points to 2.51% from the previous day, and the 30-year bond was at 3.91% or 10 bps higher than the previous day.

Friday has a lot of data released, plus General Electric Co. is out with earnings, a source noted.

JPMorgan sells $4 billion

JPMorgan priced $4 billion of senior unsecured notes (Aa3/A+) on Thursday in two tranches, a source away from the deal said.

A $2.75 billion tranche of 4.25% 10-year notes sold at a spread of Treasuries plus 180 basis points.

The $1.25 billion tranche of 5.5% 30-year bonds priced at 165 bps over Treasuries.

There was "really no price talk," the source said. The deal was announced later in the day and launched soon after.

Another source commented on the 30-year bond pricing tighter than the 10-year note.

"It was quite the curve, right?" he said. "I don't know what to make of that."

J.P. Morgan Securities LLC ran the books.

The bonds tightened slightly once released for trading, with the 10-year note losing some of its gains.

The 4.25% notes due 2020 initially were quoted in the gray market at a bid of 176 bps. Later, they were seen trading by another source at 179 bps bid, 178 bps offer.

The 5.5% bonds due 2040 also tightened a couple of basis points. A trader quoted it at 164 bps bid, 160 bps offered in the gray market, with the same bid given once the securities were released for trading and an offer of 161 bps.

Proceeds from the deal will go toward general corporate purposes.

The financial services company is based in New York City.

RBC reopening five-years

The Royal Bank of Canada is expected to reopen an issue of 2.625% global notes due 2015 (Aaa/AA-) to add a benchmark size of at least $500 million, a market source said late in the day.

The reopening had been announced on Wednesday, along with price guidance in the 68 bps area, with pricing expected on Thursday. The source said he had not seen the notes price as of 5:30 pm ET.

The original notes totaled $1 billion and were priced at 90 bps over Treasuries on July 7.

The bank is based in Montreal and Toronto.

Bank bonds weaken

The financial and bank sectors of the secondary "just felt weaker," a trader said, attributing it to the news about foreclosures hurting banks.

The trader couldn't put a spread range on how much weaker bank bonds were, but did say that the "whole index was 2 wider," adding that this was not much changed from the previous day.

"JPMorgan was able to do a deal, so that's something," he said.

There was a lot of activity in Goldman Sachs Group's 6% bond due 2020 and JPMorgan's 4.4% due 2020. A 6.4% bond due 2038 from JPMorgan was also active.

Market sources said that they were not sure as to why there was a lot of activity in the bonds from Goldman and JPMorgan, but that "all banks were weaker today," including stocks and bonds, "on the foreclosure mess in the forefront of the news."

Depending on the name and maturity, some bank bonds were between 5 and 20 bps wider, they said.

Raytheon trades mixed

Three new bonds came into the secondary from a $2 billion deal priced on Wednesday by defense contractor Raytheon. Those notes were mixed in next-day trading, with only one making gains.

The 1.625% bond due 2015 priced at 60 bps over Treasuries and was quoted at 55 bps bid, 52 bps offered.

The other two longer bonds were mostly unchanged to slightly wider.

A 3.125% note due 2020 was priced at Treasuries plus 77 bps, and a trader said the securities were at 77 bps bid, with an offer of 74 bps.

The final tranche of 4.875% bonds due 2040 was quoted as wider on the bid at 111 bps and slightly tighter on the offer side at 108 bps.

Post Apartment tighter

A new bond from Post Apartment Homes' $150 million deal traded tighter on the offer side in next-day trading, with no bids.

The 4.75% notes due 2017 were quoted at an offer of 290 bps. This was about 10 bps tighter than the previous day's price of 300 bps over Treasuries.

Later, another trader quoted the bonds at a bid of 295 bps and an offer of 290 bps.

ING Bank tranche better

The fixed-rate tranche of the $2 billion deal from ING Bank was seen trading slightly better on the offer side, a source said.

The $1.5 billion of 2% notes due 2013 priced at 150 bps over Treasuries and was quoted at an offer of 148 bps.

A second $500 million tranche of three-year floating-rate notes was not seen trading.

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