Upcoming issuance predicted to stay moderate; AWAS plans sale; Microsoft, industrials tighter

By Andrea Heisinger and Cristal Cody

New York, Sept. 24 - New investment-grade bonds were mostly absent from the market on Friday, which one source called "a welcome breather."

The week wasn't as continuously busy as recent ones have been but still netted nearly $23 billion in new bonds.

"It was solid," a source said.

The coming week isn't completely mapped out, but it is expected to have about the same amount of new deals as the past week.

"We're seeing maybe $20 to $25 billion," a syndicate source at a busy desk said. "I think that's about what this week came out to."

With no Federal Reserve meeting to get in the way of companies tapping the market, deals could amount to the higher side of that.

"We basically lost a whole day this week," the source said.

Another source agreed with the deal total and added that with the end of the month and quarter approaching, there could be a slowdown with blackouts.

"I honestly can't tell you if we'll be busy Monday, but it's not going to be like today," the source said. "We're going to have something [price]."

The corporate bond market was "quiet" on Friday, a source said.

Overall investment-grade Trace volume dropped 5% to less than $12 billion, a source said.

"Things are stronger, but it's been very slow," one trader said Friday afternoon. "Everything was 3 to 5 basis points better, but not a lot of activity."

Microsoft Corp.'s four tranches of notes continued to narrow in the secondary market, according to sources.

Secondary trading in the financial sector had moved out on the new deals priced over the week but was coming back in on Friday, a source said.

"Finance is back to unchanged, but it was 5 to 10 weaker yesterday."

Paper in the industrial, oil, gas and energy sectors also firmed in trading and traded about 3 bps tighter overall, a source said.

The day had a "decent tone" in trading, the source said.

The Markit CDX Series 14 North American investment-grade index tightened for the first time in the week on Friday. The index firmed to a spread of 109 bps, compared to a spread of 114 bps the previous day, Markit Group Ltd. said.

In the market on Friday, Treasury yields rose on the long end as government debt lagged behind stocks. The Dow Jones Industrial Average gained 197.84 points, or 1.86%, to end at 10,860.26.

The yield on the 10-year Treasury note rose 6 bps to 2.61%. The 30-year bond yielded 3.79%, up from 3.73%.

AWAS plans split-rated sale

Irish aircraft leasing company AWAS Aviation Capital Ltd. announced plans for a $600 million sale of senior secured notes due 2016.

The split-rated notes (Ba2/BBB-) will be sold by bookrunners Goldman, Sachs & Co. and Morgan Stanley & Co. Inc.

They are being priced under Rule 144A and Regulation S following a roadshow the week of Sept. 27.

Proceeds are being used to repay debt, finance the purchase of new aircraft and for general corporate purposes.

The issuer is based in Dublin.

Microsoft tightens

Microsoft's four-tranche deal of $4.75 billion in senior unsecured notes (Aaa/AAA/AA+) sold on Wednesday traded tighter in the secondary, sources said Friday.

"It's a decent company, and there's a lot of cash out there to be put to work," one trader said.

On Friday, the tranche of 0.875% notes due 2013 firmed to an offer of 19 bps, a source said. The notes priced at a spread of Treasuries plus 25 bps.

The 1.625% notes due 2015, which priced at 40 bps over Treasuries, have narrowed in the secondary to about 30 bps.

"The five-year is 10 better since it priced," a trader said.

The tranche of notes due 2020 is "8 basis points better than where it priced at 55," the trader said.

Late in the afternoon, a source saw the 10-year notes 2 bps tighter on the offer side at 48 bps.

The final tranche of 4.5% bonds due 2040 came in about 4 bps from where the deal priced at a spread of 83 bps over Treasuries early Friday, one source said.

Another source saw the bonds later at 83 bps bid, 77 bps offer.

The software and computing device maker is based in Redmond, Wash.

Bank, brokerage CDS costs firm

A source saw the cost of credit default swap contracts protecting holders of bank paper against an event of default at 5 bps tighter to even.

In addition on Friday, CDS costs for brokerage/investment bank paper were "5 tighter across the board," the source said.

Stephanie Rotondo contributed to this report

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