Primary expecting slower-than-usual start to January; corporates trade flat on light volume

By Andrea Heisinger and Cristal Cody

New York, Dec. 23 - With an early close for the high-grade bond market on Friday, there was no activity in the primary market.

Syndicate desks cleared out early ahead of the holiday weekend, and sources said there were no new deals expected for the remainder of 2011.

Issuance in the short first week of January is hard to predict because headlines could affect the market tone in the coming week, a market source said.

"We're not expecting a lot," he said. "I think people might feel out that first day [Jan. 3] and then we might see more the next day."

One syndicate desk predicted about $65 billion of new deals for January and about $10 billion to $15 billion for the first week of the month.

"We could see some Yankee guys come out of the woodwork," a syndicate source from that desk said.

"There aren't a whole lot of mandates on the corporate side that we're seeing."

A source at another desk said that it will be "a little quiet the first week" of 2012 but that the month of January could pick up after that.

According to Prospect News data, issuers had priced $34.17 billion in 54 investment-grade deals in December as of Friday.

Secondary quiet

Bonds traded mostly flat in light volume on Friday.

"Absolutely nothing," one trader said of activity. "Trace volume is not even $1 billion."

The Markit CDX Series 17 North American Investment Grade index ended Friday unchanged at a spread of 122 basis points.

A few trades were seen in AT&T, Inc.'s bonds early in the day, a trader said, including one trade for more than $1 million of the Dallas-based telecommunications company's 4.95% global notes due 2013 at 50 bps over Treasuries.

AT&T sold the two-year notes in 2008 at a spread of 168 bps over Treasuries.

"Not seeing much at all. There's only been a couple other [AT&T] issues with trading over $500,000," the trader said.

Treasuries traded much lower on Friday, pushing yields up as stocks rose on positive U.S. economic data and European optimism. The 10-year benchmark note yield climbed 7 bps to 2.02%. The 30-year bond yield rose to 3.05% from 2.98%.

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