Caterpillar Financial prices to close out high-volume week; Bank of America paper tightens

By Andrea Heisinger and Cristal Cody

New York, Feb. 3 - Caterpillar Financial Services Corp. brought the only deal in the investment-grade bond market on Friday as the primary took a breather following two busy days.

There was $25.98 billion of new high-grade deals priced in the past week, according to Prospect News data, including those in the emerging markets space and Yankee bonds.

The coming week could have comparable issuance from corporates, with between $15 billion and $20 billion expected.

"I would say about $20 billion," a source said at the end of the day. "A lot of companies are coming out of earnings."

The market was showing a good tone on Friday, the source said, adding: "I was looking at secondary levels, and everything was performing well.

"Investors are hungry [for investment-grade paper], but there are no new issues to give them," the source said. "We've already put a good dent in [issuance for] February."

The month is expected to be busy after a sluggish January which had many companies stuck in earnings blackout.

A syndicate source said they were "more bullish" on the coming week, and predicted there would be closer to $15 billion of deals.

"More and more companies are coming out of earnings, and the demand is there," they said. "Hopefully the pipeline's there."

Investment-grade bonds ended the week stronger. The Markit CDX Series 17 North American investment-grade index closed Friday at a spread of 94 basis points.

Bank of America Corp.'s paper traded better on Friday, a bond source said.

Overall trading volume in the investment-grade market fell to $13.5 billion on Friday from $17 billion the previous session.

Treasuries dropped on better than expected job data from the Labor Department. The 10-year Treasury note yield climbed 10 bps to 1.92%. The 30-year bond yield traded as much as 15 bps higher before ending the day up 12 bps to 3.12%.

Financial CDS costs dip

Investment-grade bank and brokerage credit default swaps costs declined on Friday, a trader said.

Bank CDS costs fell 5 bps to 15 bps. Bank of America's CDS costs dropped 15 bps to 243 bps bid, 253 bps offered. Wells Fargo's CDS costs fell 5 bps to 100 bps bid, 110 bps offered.

Brokerage CDS costs declined 20 bps to 25 bps. Merrill Lynch's CDS costs traded down 25 bps to 260 bp bid, 275 bps offered.

Morgan Stanley's CDS costs fell 20 bps to 255 bps bid, 265 bps offered.

Goldman Sachs' CDS costs dropped 20 bps to 210 bps bid, 220 bps offered.

Caterpillar brings floaters

Caterpillar Financial Services priced $400 million of three-year medium-term floating-rate notes, series G, (A2/A/A) at par to yield Libor plus 35 bps, according to an FWP filing with the Securities and Exchange Commission.

J.P. Morgan Securities LLC was the bookrunner.

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

Bank of America tightens

Bank of America's notes traded tighter going out Friday, a bond source said.

The 6.5% notes due 2016 came in to 363 bps bid from 391 bps the previous day.

Bank of America's 7.625% notes due 2019 also traded tighter, going out about 13 bps better at 340 bps bid.

The financial services company is based in Charlotte, N.C.

Paul Deckelman contributed to this review

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