Primary void of new paper as it retraces losses by close; Japanese corporate bonds widen

By Andrea Heisinger and Cristal Cody

New York, March 15 - Jitters about the market tone left issuers on the sidelines Tuesday on what could have been a busy day, sources said.

After $3.8 billion of bonds was priced Monday, companies sat out the primary on advice from syndicate desks.

"It was kind of ugly out there," a source said about the open. "There was the sell-off [in equities] and I don't think anyone wanted into the market."

A syndicate source said after the close that the initial reaction in the bond market was "muted" and that, by the close, it had "retraced any losses today."

When asked if any companies had pulled deals temporarily, he said that "there are always go, no-go calls, so yes."

Many companies have already built up cash reserves during a rally at the end of 2010 or have already tapped the market earlier this year after reporting earnings.

"I don't think issuers are dying for funding," the syndicate source said.

It doesn't mean that all bets are off for issuance on Wednesday, although companies will be cautious and it all hinges on the tone at the open in the morning.

Widening spreads offset the Treasury rally on Tuesday, the source said.

Overall investment-grade Trace volume climbed nearly 20% to about $12.4 billion, a market source said.

Japanese high-grade bonds widened in the secondary market, including new bonds from Dai-Ichi Life Insurance Co. and Nomura Holdings Inc. on uncertainty after an earthquake and tsunami caused massive destruction, according to sources.

Trading on Tuesday was a "mixed bag," a trader said.

"In the morning, we were 10 basis points weaker out of the gates. It kind of went a little bit wider, 2 basis points, and then seems to have rallied all the way back here," the trader said.

Bank and financial bonds also were weaker, sources said.

Bank of America Corp.'s 6.5% notes due 2016 widened to 220 bps from 201 bps the previous day, a source said.

Other sectors also moved out in trading over the day, but regained some losses.

"Energy and utility names are closing about 5 to 10 wider after being as much as 20 wider today," a trader said.

The Markit CDX Series 15 North American investment-grade index eased 2 bps to a spread of 89 bps, according to Markit Group Ltd.

Treasuries rallied as uncertainty over Japan drove investors into safer government bonds, sending yields down on the long end of the curve.

The 10-year benchmark Treasury note yield dropped 6 bps to 3.3%. The 30-year bond yield was down 9 bps to 4.45%.

Dai-Ichi Life widens

The new bonds that Dai-Ichi Life Insurance sold on March 8 widened in the secondary market, a trader said.

The Tokyo-based insurer sold the 7.25% 10-year perpetual bonds at par on March 8, just three days before the earthquake and tsunami hit Japan.

"Last I saw was 941/2, 951/2, which is a point and a half off the lows," a trader said.

Nomura weaker

Also, Nomura Holdings' 4.125% senior notes due 2016 that sold on Jan. 12 at 225 basis points over Treasuries moved out in trading.

The notes were seen Tuesday wider at 245 bps bid, 230 bps offered, a source said.

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