Investment-grade primary market empties amid continued unrest in Egypt; Apache bonds widen

By Andrea Heisinger and Cristal Cody

New York, Jan. 28 - The high-grade bond market was empty to end the week, sources said, as supply dwindled.

"We were expecting something today, but it didn't happen," a source said. "I think things were a little shaky and the headlines didn't help."

The source was referring to unrest in Egypt that unsettled the markets.

"I think some [companies] were planning to come today but decided to hold off," a syndicate source said.

The coming week's potential issuance is unclear, although one source estimated about $20 billion could price. That depends on what the market looks like at the open on Monday and what happens abroad over the weekend.

"We could not see anything until Tuesday," the syndicate source said.

In the secondary market, little activity was seen in Kimberly-Clark Corp.'s bonds, while Family Dollar Stores, Inc.'s notes narrowed after weakening earlier in the week, according to sources.

Overall investment-grade Trace volume dropped 5% to about $10.5 billion, a market source said, noting the market was "dragging all week."

The Markit CDX Series 14 North American investment-grade index eased 3 basis points to a spread of 86 bps, a market source said.

Bonds in the oil and gas sector were mixed on Friday on concerns about the anti-government protests in Egypt.

Marathon Petroleum Corp.'s notes and Enterprise Products Operating LLC's debt firmed while Apache Corp.'s bonds moved out in trading, according to sources.

"Industrial spreads were unchanged with the exception of Apache," a trader said.

Apache's bonds were seen trading 5 bps to 10 bps wider on concerns of how the protests in Egypt would impact the company's operations. Apache receives about 30% of its production revenue from Egyptian operations.

Apache said in a statement on Thursday that its oil and gas production operations in Egypt are unaffected by the anti-government protests.

Apache's 5.1% bonds due 2040 fell on Friday to about 92.00 from the "high 94 handles" on Wednesday, a trader said.

Also, Apache's 5.25% bonds due 2042 fell 2 bps to 3 bps in trading to around 94.00, the trader said.

Houston-based Apache is a natural gas and crude oil exploration, development and production company.

The Egyptian unrest sent investors into Treasuries, which rose on Friday and pushed yields down.

The 10-year note yield fell 6 bps to 3.33%. The 30-year bond yield fell 4 bps to 4.53%.

Marathon Petroleum tightens

Marathon Petroleum's notes tightened in early secondary trading on Friday, a trader said.

"Most of these are from this morning. It's been pretty quiet all afternoon," the trader said.

Marathon Petroleum sold $3 billion of senior notes (Baa1/BBB) in three tranches on Thursday.

The 3.5% notes due 2016, which were sold at a spread of Treasuries plus 155 bps, tightened to 130 bps bid, 127 bps offered.

A second tranche of 5.125% notes due 2021 that priced at Treasuries plus 175 bps firmed to 164 bps bid, 161 bps offered.

The third tranche of 6.5% 30-year bonds that priced at a spread of 200 bps over Treasuries traded stronger at 194 bps bid, 191 bps offered, the trader said.

"They all came in pretty good," the trader said. "People still want those fives."

The oil company is based in Houston.

Enterprise Products firms

Enterprise Products Operating's new five-year senior notes (Baa3/BBB-/BBB-), which priced on Jan. 4, firmed in trading, a source said.

The $750 million of 3.2% five-year notes were priced at a spread of 120 bps over Treasuries and were seen at 110 bps offered on Friday, compared to 112 bps offered on Thursday.

The natural gas and crude oil pipeline company is based in Houston.

Family Dollar narrows

Family Dollar Stores' 5% senior notes (Baa3/BBB-) due 2021 had widened in next-day secondary trading but ended the week stronger, a trader said.

The notes priced to yield Treasuries plus 175 bps on Tuesday, moved out to 181 bps bid, 176 bps offered on Wednesday and back in to 178 bps bid, 172 bps offered.

The offering was the company's first bond sale.

The discount retailer is based in Charlotte, N.C.

Kimberly-Clark quiet

Not much trading activity was seen in Kimberly-Clark's notes (A2/A/A), which were sold on Thursday, a trader said.

The company priced $250 million of 3.875% 10-year notes at a spread of Treasuries plus 60 bps and $450 million of 5.3% 30-year bonds at a spread of 80 bps over Treasuries.

There was "nothing" on the 10-year paper in the secondary market, and the 30-year bonds were offered at 78 over, the trader said.

The consumer products company is based in Irving, Texas.

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