John Deere Capital, Network Rail sell at guidance; financial paper, Bank of America widen

By Andrea Heisinger and Cristal Cody

New York, Aug. 23 - Small amounts of issuance continued to trickle into the investment-grade bond market as frequent issuer John Deere Capital Corp. priced debt along with Britain's Network Rail Infrastructure Finance plc.

John Deere priced $500 million of five-year notes by early afternoon. The notes were priced in line with guidance.

Network Rail did its debut offering of dollar-denominated bonds in July and came back to price $1 billion of five-year notes.

The tone was "fine" at the beginning of the day "but not that great," said one syndicate source who worked on the John Deere deal.

"It's a good name so they jumped in, but it priced fast," he said.

By day's end, the Dow Jones Industrial Average was up and there was some optimism about some sort of Federal Reserve move coming out of Friday's gathering that includes a speech from Fed chairman Ben Bernanke.

"It was another good news, bad news day," a market source said, adding that people were mostly talking about the earthquake that hit the East Coast in the afternoon.

Wednesday will likely see more small deals from established names, the market source said.

"I know there were calls today," he said.

Trading stalled for a few minutes after the earthquake but picked back up by late afternoon, traders said.

"Some people went home, but most everything's back up," a trader said.

Overall trading volume rose nearly 30% to just under $13 billion.

Bank and financial paper moved out in trading, with notes from Bank of America Corp. and Goldman Sachs Group, Inc. among the weakest, traders said.

Financials overall traded about 10 basis points to 15 bps wider, a trader said.

"Bank of America and Goldman Sachs got hit the hardest, probably 25 [bps] wider on the day," the trader said.

Yum! Brands Inc.'s new 10-year notes widened, PepsiCo, Inc.'s notes traded unchanged, and no activity was seen in Duke Energy Corp.'s new 10-year notes, traders said.

The Markit CDX Series 16 North American Investment Grade index improved 1 bp to a spread of 126 bps on Tuesday.

Treasuries were lower on the longer end on Tuesday on a strong government auction of two-year notes. The two-year note yield rose 1 bp to 0.21%. The 10-year benchmark Treasury note yield rose 4 bps to 2.15%, and the 30-year bond yield increased 7 bps to 3.49%.

John Deere sells at talk

John Deere Capital priced $500 million of 1.85% five-year notes (A2/A) at a spread of Treasuries plus 95 bps, a source close to the trade said.

They priced in line with guidance in the 95 bps area.

Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC ran the books.

Proceeds are being used for general corporate purposes.

The notes priced late in the day, and not much activity was immediately seen, traders said.

One trader saw the notes "offered at 90 [bps], not sure if it traded."

The financing arm of heavy equipment maker Deere & Co. is based in Reno, Nev.

Network Rail's $1 billion trade

Network Rail Infrastructure Finance sold $1 billion of 1.25% five-year notes (Aaa/AAA) to yield mid-swaps plus 8 bps, or Treasuries plus 40 bps, said a source away from the deal.

They were priced in line with guidance in the mid-swaps plus 8 bps area.

They were sold under Rule 144A and Regulation S.

The bookrunners were Bank of America Merrill Lynch, Deutsche Bank Securities and HSBC Securities (USA) Inc.

The debt is guaranteed by the government of the United Kingdom.

Network Rail first sold debt in the United States in a $300 million deal of two-year floating-rate notes on July 20.

The government-operated rail infrastructure company is based in London.

Bank of America trades wider

Bank of America's paper continues to move out in trading, sources said.

The bank's 5% notes due 2021 (A2/A/A+) traded on Tuesday at 440 bps bid, 430 bps offered - "30 [bps] wider on the day," one trader said.

Bank of America's 6.06% notes due 2016 were seen offered at 505 bps on Monday and at 530 bps on Tuesday, another trader said.

"All Bank of America paper was out at least 25 bps," the trader said.

The Charlotte, N.C.-based bank's Canadian and U.S. high-grade bonds and subordinated debt widened in the previous week also.

PepsiCo flat

PepsiCo's two tranches traded mostly flat in the secondary market on Tuesday, traders said.

The company sold $1.25 billion of senior notes (Aa3/A-/A+) in two maturities on Monday, including $500 million of 0.75% three-year notes priced at a spread of Treasuries plus 57 bps. The notes edged tighter to 56 bps bid, 51 bps offered, a trader said.

The second tranche of $750 million of 3% notes due 2021 traded at 97 bps bid, 94 bps offered, a trader said. Closing out the day, the notes eased on the bid side to 98 bps bid, 95 bps offered, a trader at another desk said. The notes priced at a spread of 97 bps over Treasuries.

The food, snack and beverage company is based in Purchase, N.Y.

Yum! widens

Yum! Brands' 3.75% notes due 2021 (Baa3/BBB-/BBB) widened in trading to 173 bps bid, 168 bps offered, a trader said Tuesday.

The company sold $350 million of the 10-year notes on Monday to yield Treasuries plus 170 bps.

The fast food chain operator is based in Louisville, Ky.

Bank, brokerage CDSs fall

A trader said investment-grade bank/brokerage credit default swaps costs declined on Tuesday. Bank of America's was down 15 bps to 365 bps, 385 bps. JPMorgan Chase & Co. bank CDS contracts were flat at 125 bps, 135 bps.

On the broker side, Goldman Sachs' CDS costs were 20 bps lower at 235 bps, 245 bps. Morgan Stanley's fell 10 bps to 305 bps, 325 bps.

Paul Deckelman contributed to this review

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