Unemployment, other data cause tone to drop; coming week seen busy; Trace volume 'very low'

By Aleesia Forni and Andrea Heisinger

New York, July 6 - Companies in the high-grade market continued to look ahead to the coming week, as they have been doing for several days, on Friday as the week ended with almost no new deals.

There is promise for Monday and the week ahead as companies that have been standing down on advice from syndicate desks await the chance to jump into the market ahead of earning blackouts in the next couple of weeks.

"There were too many people out of the office - no investor focus," a source said of the past week.

Between $15 billion and $20 billion of new bonds could price in the coming week, the source said.

"Monday could be really busy. We could see $10 billion," he said, adding this was conditional on whether the "market plays nice" over the weekend and there are no negative headlines.

The market was soft on Friday. Unemployment numbers for June showed that while there was no increase, there was also no drop in those seeking jobs as the rate remained steady at 8.2%.

"This negativity's not helping," a market source said in mid-afternoon.

"You've got negative unemployment [data] for the third straight month and weakening data across the spectrum."

The Spanish 10-year treasury bond yield is about 7%, which the market source lumped into the category of negativity.

"The market's not completely shutting down, but volume's about half of what it was," he said.

The secondary market saw another "painfully quiet" session on Friday. The mid-week holiday "was not good for [business]," a bond source said.

Additionally, Trade Reporting and Compliance Engine (Trace) volume was "very low" at about $3 billion, the source continued.

S&P upgrades beat downgrades

Rated companies in the S&P 500 index were upgraded more than they were downgraded in the second quarter, according to a report released on Friday.

Standard & Poor's upgraded 13 companies in the index and downgraded five, although within the next three months to two years, downgrades could outnumber upgrades, according to the report.

Those companies included in the index are predominately investment grade, the report notes, at 87%.

There are 52 companies in total from the index that have the greatest possibility of being downgraded in the near term, while 39 have the potential for upgrades. Out of those, there are 41 investment-grade companies with potential for a downgrade and 29 potential upgrades, according to the report.

The telecommunications services and financial sectors have the highest potential for downgrades. Health care, information technologies and utilities have the greatest possibility for upgrades.

In the second quarter, there were six companies upgraded from the IT sector including Oracle Corp. and International Business Machines Corp. Upgrades outside that sector included Union Pacific Corp., Northeast Utilities and Principal Financial Group Inc.

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