High-grade primary quiet after busy week; up to $20 billion on tap; deals weigh on trading

By Andrea Heisinger and Cristal Cody

New York, March 25 - A huge week came to an end in the high-grade primary market with no bonds reported to have priced during Friday's trading session.

For the week, $38.23 billion of new paper came to market - most of it priced in the top half of the week. There was a backlog of deals from two weeks of volatile market conditions and that led to the massive amount of volume.

The coming week is seen as "busy, but nothing like this week," a syndicate source said late in the day.

Another syndicate source at a large desk pegged the coming week at $15 billion to $20 billion in issuance.

"I know we're going to be generally busy," the source said, adding "and I'm hearing the same thing at a lot of other shops."

The end of March is also approaching, and April is historically quiet with earnings blackouts.

"This is the busiest March we've had in a while," the second syndicate source said. "Issuers are opportunistic, and I think we'll see a final pile-on [in the next week] before blackouts."

There is a total of $85 billion to $90 billion in volume expected for March, he said, and the month is already at about $73 billion.

Secondary volume slows

Overall investment-grade Trace volume dropped 30% to just under $12 billion on Friday, a market source said.

"[The] market did seem a little heavy from the overhang from all the new issues," a trader said. "I'm not getting as many bids as I usually do. [The] secondary had a little heavy feel to it just because everyone is snapping up new issue paper."

Industrial and utility bonds were flat to slightly tighter in trading, a source said.

Verizon Communications, Inc.'s $6.25 billion mega deal, which priced on Wednesday, was stronger in trading on Friday, a trader said.

Other new bonds from Caterpillar Financial Services Corp. and Viacom Inc. also firmed, a trader said.

"Most of them tightened from what I saw right after they priced, and they've stayed there," the trader said.

In other data, the Markit CDX Series 15 North American investment-grade index was flat at a spread of 95 basis points, according to Markit Group Ltd.

Treasuries took a different route than usual with a sell-off in bonds on Friday. The 10-year note yield rose 4 bps to 3.44%. The 30-year bond yield ended up 2 bps at 4.5%.

The moves came as Federal Reserve Bank of Philadelphia president Charles Plosser suggested in a speech Friday that the Fed should raise rates to stem inflation.

"People are usually afraid to bid against Treasuries on Friday, so you usually see a short-term rally," a source said. "Guys don't want to be caught on the wrong side come Monday because they won't be able to get out for 48 hours, so that makes the sell-off today more interesting but very much in tune with what Plosser's comments were."

Goodman sells 10-year

Goodman Group, through subsidiary Goodman Funding Pty. Ltd., sold $500 million of 6.375% 10-year senior notes at 312.5 bps over Treasuries, according to a press release and a source who worked on the trade.

The notes (Baa3/BBB) were sold under Rule 144A and Regulation S.

Bookrunners were Barclays Capital Inc., J.P. Morgan Securities LLC and Merrill Lynch.

Proceeds are being used to repay existing borrowings.

The property group is based in Sydney, Australia.

Verizon firms

Verizon Communications' bonds (A3/A-/A) sold on Wednesday continued to stay strong in the secondary on Friday, a trader said.

The 2% five-year notes were seen at 90 bps offered. The notes priced at Treasuries plus 105 bps.

"The 10-years were quoted earlier in the day at 123, 118," the source said. The 10-year notes priced at Treasuries plus 135 bps.

The 6% bonds due 2041, which priced at 165 bps over Treasuries, were seen at 147 bps offered, the trader said.

The broadband and telecommunications company is based in New York City.

Caterpillar Financial firms

Caterpillar Financial Services' notes (A2/A/A) sold on Wednesday also ended the week stronger, according to a trader.

The 1.65% three-year notes priced at a spread of Treasuries plus 53 bps and were seen with a bid early Friday at 50 bps, the trader said.

The tranche of 2.65% five-year notes, which priced at a spread of 65 bps over Treasuries, last traded at 61 bps bid, 56 bps offered.

The funding arm of heavy equipment maker Caterpillar is based in Nashville.

Viacom stronger

The new notes from Viacom, which priced $500 million of 3.5% six-year senior notes (Baa1/BBB+/BBB+) at a spread of Treasuries plus 155 bps on Thursday, tightened in the secondary market, a trader said.

"Saw those offered today at 148," the trader said.

The media company is based in New York City.

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