Primary action dead; bank, financial paper trades better; General Mills meets analyst expectations

By Sheri Kasprzak and Aleesia Forni

New York, Dec. 19 - The investment-grade primary market was extremely quiet on Wednesday as the market prepares to wind down ahead of the holidays.

"There's not a lot going on," said one market source reached in the afternoon.

"I expect that the primary will be very quiet until the beginning of next year."

Meanwhile, General Mills (Baa1/BBB+/BBB+) met analysts' expectations for sales and beat earnings estimates for the second quarter of 2013, said Jody Lurie, corporate credit analyst with Janney Montgomery Scott LLC.

The Markit CDX Series 18 North American Investment Grade index widened 1 bp to a spread of 90 bps on Wednesday.

Bank and financial paper was traded better during the session, with issues from Bank of America, Citigroup and Goldman Sachs tightening in the secondary.

Investment-grade bank and brokerage credit default swaps costs were mostly higher on Wednesday.

Bank of America's CDS costs were 1 bp wider at 118 bps bid, 123 bps offered. Citi's CDS costs were 2 bps wider at 117 bps bid, 122 bps offered. J.P. Morgan's CDS costs also rose 2 bps to 82 bps bid, 87 bps offered. Wells Fargo's CDS costs were unchanged at 70 bps bid, 75 bps offered.

Merrill Lynch's CDS costs were 2 bps wider at 122 bps bid, 132 bps offered. Morgan Stanley's CDS costs were unchanged at 170 bps bid, 175 bps offered. Goldman Sachs' CDS costs were 1 bp wider at 136 bps bid, 141 bps offered.

Bank of America tightens

In the secondary market, Bank of America's 7.375% notes due 2014 firmed 16 bps to 94 bps bid during the session.

The bank priced $3 billion notes due 2014 at Treasuries plus 537.5 bps on May 8, 2009.

Citi tightens

Citigroup's 8.5% 10-year notes tightened 8 bps to 82 bps bid.

The bank priced $1 billion notes due 2019 at Treasuries plus 437.5 bps on June 11, 2009.

Goldman Sachs firms

Meanwhile, Goldman Sachs' bond due 2018 tightened 2 bps to 191 bps bid on Wednesday.

The bank priced $1.5 billion 6.15% 10-year bonds in April 2008 at Treasuries plus 237.5 bps.

Acquisitions bolster sales

"Sales grew 5.6% [year over year] to $4.9 billion, bolstered by recent acquisitions of Yoki Alimentos and Yoplait Canada, offset somewhat by pricing," credit analyst Lurie said on Wednesday.

"Operating margins bumped up almost 150 basis points on lower advertising costs, and net income margins showed a similar movement.

"In turn, cash flows from operations were strong this year versus last, while capex held steady. As such, $820 million in cash year-to-date went towards the Yoki acquisition, while $434 million went towards dividends and $479 million towards share buybacks.

"General Mills had $735 million in cash at quarter-end, down from 1Q end, while debt declined from last quarter, leading to a marginal drop in leverage to 2.5x debt to EBIDTA. Management guided for FY2013 cost inflation to fall in at the high end of the 2 to 3% range, partly attributable to the drought this summer.

"Nevertheless, it expanded its full-year EPS guidance range to $2.65 to $2.67 from approximately $2.65," Lurie added.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.