Coming week seen top heavy as primary ends week empty; GE Capital notes widen 15 basis points

By Andrea Heisinger and Cristal Cody

New York, Feb. 25 - No new investment-grade bonds priced on Friday, capping a volatile week with little issuance.

According to Prospect News data, less than $6 billion of new bonds was priced in the market during the short week. This was nearly half of the low estimate of the $10 billion to $12 billion expected.

"I think we said last week that if the tone was bad, we wouldn't see much," a source said. "It was a rough week."

The source added that it was "painfully brutal."

A syndicate source said that the coming week is expected to be top heavy with around $15 billion of new deals.

"That's a ballpark," she said. "We'll be busy on Monday, Tuesday, Wednesday."

Another source said late in the day that he knew of five or six new deals expected in the market, possibly starting off the bat on Monday depending on what happens over the weekend.

"We'll have people [on Monday] waiting to see how things went globally," the source said, referring to the situation in Libya and other countries.

Overall investment-grade Trace volume dropped for a typical Friday, a source said. Volume fell more than 20% to less than $11 billion.

The spike in oil prices hurt corporate bonds, with some widening in spreads and certain names cheaper in trading, sources said.

General Electric Capital Corp.'s bonds were weaker on the impact, a trader said.

In other trading, Waste Management, Inc.'s new 4.6% notes due 2021 firmed 3 basis points, a source said.

The Markit CDX Series 14 North American investment-grade index ended the day 2 bps to a spread of 83 bps, according to Markit Group Ltd.

Treasuries were higher on continued flight to safety bids. The 10-year note yield fell 4 bps to 3.41%. The 30-year bond yield dropped 4 bps to 4.5%.

"There's a little bit of uncertainty in a situation like this," said Dan Greenhaus, market strategist at Miller Tabak. "As long as the uncertainty is persisting, you could make a case for further declines in yields."

Trading was "fairly quiet" through the day, though there "continues to be appeal for the Treasury market," Greenhaus said. "The equity market garnered much of the headlines."

Waste Management firms

Waste Management's 4.6% notes due 2021 that the company sold on Wednesday firmed 3 bps in secondary trading by Friday, a source said.

"It's 115 to the 10-year so it's tightening a few basis points. That's decent because on the week, there were quite a lot of names that got cheaper with the flight to quality rally," the trader said. "Corporates didn't fare so well."

Waste Management priced $400 million of the 10-year notes (Baa3/BBB/BBB) to yield Treasuries plus 118 bps.

The company handles the collection, transfer, recycling and disposal of waste and is based in Houston.

GE Capital notes widen

One name that was seen weaker was General Electric Capital and its 5.3% subordinated notes due 2021, a trader said.

"It's down to a spread of 134 this morning, and it was in the mid-120s last week," the trader said. "It's widened out 15 basis points on the week."

Fairfield, Conn.-based General Electric Capital is the financing arm of General Electric Co.

Bank, broker CDS weak

The cost of protecting holders of big-bank bonds against a possible event of default via a credit-default swap contract was unchanged to down 6 basis points, reflecting increased investor confidence in the sector.

The cost of a CDS contract covering bonds of major brokerage houses was down by 3 bps to 6 bps, reflecting increased investor confidence.

Paul Deckelman contributed to this review

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