New high-grade deals absent following holiday, none expected until Monday; bank bonds tighten

By Aleesia Forni and Andrea Heisinger

New York, July 5 - The day after the Fourth of July holiday closure of the bond market was a quiet one Thursday. Headlines of central bank interest rate cuts had little effect as issuers were absent.

No new deals were expected for the day, and none are planned for Friday. Issuers have chalked the week up to a loss due to the mid-week holiday and an unsettled market on Monday, which had been deemed the "only viable day to issue" bonds for the week, as a source said earlier.

The European Central Bank, the Bank of England and the central bank of China each cut interest rates in an uncoordinated effort to help curb the economic downturn.

A syndicate source said late in the day that it was "hard to tell" if this news had any impact on high-grade bonds since there were no takers in the primary side of the market for the day.

"It's very quiet," a market source said. "Nothing's coming down the pipeline this week."

Issuers are said to be looking to price bonds as early as Monday.

"Next week we'll have more to talk about," the market source said.

Meanwhile, investment-grade bank and brokerage credit default swap costs rose on Thursday, according to a market source.

Bank of America's CDS costs widened 4 basis points to 240 bps bid, 250 bps offered. Citi's CDS costs also rose 4 bps to 231 bps bid, 241 bps offered. JPMorgan's CDS costs widened 5 bps to 127 bps bid, 137 bps offered.

Brokers also widened. Merrill Lynch's CDS costs were 3 bps wider at 249 bps bid, 269 bps offered. Morgan Stanley's CDS costs rose 19 bps to 344 bps bid, 354 bps offered. Goldman Sachs' CDS costs tightened 10 bps to 255 bps bid, 265 bps offered.

Merrill Lynch tightens

The secondary market saw Merrill Lynch's 6.875% notes due 2018 tighten 6 basis points to 373 bps bid near the end of New York's session.

On April 22, 2008, the bank priced $5.5 billion of the 10-year notes at 320 bps over Treasuries.

Goldman Sachs firms

Also in the secondary, Goldman Sachs Group, Inc.'s bonds due 2018 tightened 13 bps to 461 bps bid on Thursday, a market source said.

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

Citi tightens

In other trading, Citigroup, Inc.'s 6.375% notes due 2014 tightened 11 bps to 253 bps bid, according to a market source.

The bank priced $2.5 billion of the five-year notes at Treasuries plus 380 bps on Aug. 5, 2009.

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