ANZ Banking Group alone in new issue space; deals expected Wednesday; oil, gas bonds widen

By Andrea Heisinger and Cristal Cody

New York, Feb. 22 - ANZ Banking Group Ltd. was the only company to tap the high-grade market on Tuesday as others stayed on the sidelines after the long holiday weekend.

The bank sold $1 billion of five-year notes under Rule 144A.

There wasn't much other activity in the market. Continuing unrest overseas once again made potential issuers cautious.

"I think we said last week that it wasn't going to be busy, and that's probably right," said a syndicate source.

There was $12 billion or upward of new deals predicted. Any new deals are likely to come out on Wednesday or Thursday, the source said.

"[The market tone] wasn't too bad, but maybe no one had [their deal] ready," another source said.

No secondary activity was immediately seen in ANZ's new notes, but investment-grade bonds widened on light flows on Tuesday, traders said.

The Markit CDX Series 14 North American investment-grade index eased 4 basis points to a spread of 84 bps, according to Markit Group Ltd.

Corporate bonds weakened across all sectors, including telecommunications, which were out 3 bps to 5 bps, sources said.

Bank and financial paper traded 5 bps to 10 bps wider, a trader said.

Oil and gas widened 5 bps to 15 bps in trading, "depending on the name," a trader said. "Oxy and Marathon are leading the charge wider."

Marathon Petroleum Corp.'s 6.5% bonds due 2041 were seen trading at 191 bps bid, 186 bps offered, though still tighter than issue price. The Houston-based oil company sold the senior notes (Baa1/BBB) on Jan. 27 at a spread of 200 bps over Treasuries.

Occidental Petroleum Corp.'s 4.1% notes due 2021 were out 10 bps wider at 84 bps bid, 79 bps offered, the trader said. The notes priced on Dec. 13 at an 80-bps spread.

Overall investment-grade Trace volume moved up 45% to more than $12 billion from the low levels on Friday before the three-day weekend, a market source said.

Treasuries gained on unrest in Libya, which pushed oil prices up and sent yields down across the curve from Friday's close.

"Government markets are really rallying on this Middle East flight to quality," a source said.

The 10-year Treasury note yield fell 12 bps to 3.46% from 3.58%. The 30-year bond yield dropped 9 bps to 4.6%.

ANZ prices five-year notes

Australia-based ANZ Banking Group priced $1 billion of 3.25% five-year notes at a spread of Treasuries plus 120 bps, an informed source said.

The notes (Aa1/AA/AA-) were priced under Rule 144A.

The bookrunners were ANZ, Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc.

ANZ Banking Group last priced bonds in a $3 billion sale in three parts on Jan. 5. The company's last sale of five-year notes totaled $1.25 billion as part of a $3 billion sale on Jan. 6, 2010. They priced with a coupon of 3.7% and a spread of 115 bps over Treasuries.

The financial services company is based in Melbourne.

Some CDS costs widen

A source who follows the credit default swaps market said that the cost of protecting holders of big-bank paper against a possible event of default was 2 bps to 4 bps wider.

The CDS costs for brokers widened 2 bps to 3 bps.

Stephanie Rotondo contributed to this report

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