Issuers clam up as Euro bank stress test results out; GE Capital 10-year notes widen 16 bps

By Andrea Heisinger and Cristal Cody

New York, July 15 - No new deals were expected on Friday in the high-grade bond market, and none materialized during a session which heard the results of a stress test on European banks announced.

Eight out of the 90 banks tested failed with some others right on the border of acceptable capital levels.

A source said on Thursday that no issuer was going to touch the market until the results were disclosed.

Meanwhile the coming week's issuance total is up in the air. One syndicate source said it depends on progress with the U.S. debt ceiling talks as well as earnings from Bank of America Corp., Goldman Sachs Group Inc. and Wells Fargo & Co.

"I don't think it [issuance] is going to be too high for next week," one market source said.

"We have a few potentials, but nothing pressing."

Most issuers braving the market in the past week did so because of a financing concern that had timing pressures.

A syndicate source said estimates for the coming week were between $5 to $10 billion, and added that the total would likely be "on the lower end" of that range.

"It should be quiet," he said. "We just have to wait and see."

The Markit CDX Series 15 North American investment-grade index ended Friday unchanged at a spread of 97 bps, according to Markit Group Ltd.

Trading activity was light on Friday with overall trading volume down 40% to $7 billion.

Financials have weakened in trading with most names wider on the week, including General Electric Capital Corp.'s 4.625% senior notes due 2021, which were seen Friday about 16 bps weaker than at the start of the week.

"No doubt about it, the financial names are under pressure, even with good earnings by Citigroup today or JPMorgan the other day," a trader said.

JPMorgan Chase & Co.'s new 30-year bonds and Royal Bank of Canada's five-year notes priced earlier in the week were among the exceptions, firming about 2 basis points in trading.

Treasuries ended higher across the curve. The 10-year note yield fell 4 bps to 2.91%. The 30-year bond yield fell 1 bp to 4.24%.

GE Capital widens

General Electric Capital's benchmark 10-year notes widened in the secondary market on Friday to the 142 bps area, a trader said.

"A few days ago, it traded at 126 so it's widened about 16 basis points," the trader said.

The Fairfield, Conn.-based financing arm of General Electric Co. sold the notes on Jan. 4 at a spread of 135 bps over Treasuries.

JPMorgan firms

JPMorgan Chase's new 30-year bonds (Aa3/A-) traded tighter on the day to 138 bps, a trader said.

The $1.75 billion of 5.6% 30-year bonds due 2041 priced at a spread of Treasuries plus 140 bps after the release of its second-quarter earnings on Thursday.

"They're hanging in where it priced," the trader said.

In the secondary market, the new bonds due 2041 widened to 142 bps bid, 141 bps offered, a trader said.

The financial services company is based in New York City.

RBC tightens

Also in the financial sector, the Royal Bank of Canada's 2.3% notes due 2016 firmed to 86 bps offered on Friday, a trader said.

"They've improved a basis point or two from where they came," the trader said.

The Toronto-based bank priced $1.25 billion of the notes (Aa1/AA-) at a spread of Treasuries plus 88 bps on Wednesday.

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