Primary quiets at end of hectic week; financials seen readying sales; Freeport-McMoRan gains

By Andrea Heisinger

New York, March 1 - The investment-grade bond market was quiet Friday on the new issue front following a jam-packed Thursday when more than $12 billion of bonds were sold.

A source said there weren't any new deals announced Friday. There was more than $25 billion of high-grade bonds priced during the week.

The coming week is expected to see between $15 billion and $20 billion of supply, with issuance starting on Monday.

A source said late Friday that there are "a handful of trades" on tap including "a few larger ones from financials."

The remainder of supply is smaller trades from industrial names, the source added.

A new report out from Standard & Poor's said that investor sentiment on bank bonds remains guarded.

The influx of bonds from Thursday saw some mixed performance in trading, a secondary source said at midday.

Volume was "about what you'd expect for a Friday," the source said. "There was a lot of flow early, but now it's died down."

At the end of the day's session, trading was "quieter, but we're all busy tracking the [new] stuff."

The $6.5 billion sale in four parts from Phoenix-based multinational mining company Freeport-McMoRan Copper & Gold Inc. was being closely watched. An outstanding 10-year note from Freeport was among the day's most actively traded issues, a source said.

Both tranches of the $1 billion sale from Rogers Communications Inc. were seen improved, the trader said.

"They each moved a couple [basis points] tighter," he said.

The Toronto-based wireless and cable TV company sold 3% notes due 2023 at 113 bps over Treasuries and 4.5% 30-year bonds at Treasuries plus 145 bps.

A trader said that the two fixed-rate tranches of notes from Coca-Cola Co. "didn't really go anywhere" in the secondary market. The Atlanta-based beverage company priced $2.5 billion in three tranches, including a two-year floating-rate note, on Thursday.

Among recent preferred stock deals, Ventas Realty LP's new $225 million issue of 5.45% $25-par senior notes due 2043 freed from the syndicate early in Friday's session. The deal priced late Thursday.

"It's been bid up," a trader said, seeing a trade as high as $25.25, though he placed the issue at $25.15 bid. "I don't get it, but so be it."

By the end of business, the issue had reached the top of the preferred market's most active list, with over 4.1 million notes changing hands, according to a market source.

The notes technically closed down 17 cents, the source said, but he noted that the last trade of the day was among the lowest prices seen all day. For most of the day, he said, the issue was at par or above.

He said the volume-weighted average price was "probably a more indicative price," which was $25.06.

Freeport bonds move

The four tranches of bonds from Freeport-McMoRan were seen making gains, giving them up and then moving tighter by the end of Friday's session.

A trader said at midday that the four bonds, with maturities of 2018, 2020, 2023 and 2043, initially moved 10 bps to 15 bps tighter in early trading. Most of the tranches then moved back to pricing levels, he added.

The 3.875% 10-year note was seen at about its 200 bps over Treasuries price at midday, later quoted as 11 bps better at 189 bps bid, 196 bps offered.

The 5.45% 30-year bond was seen about 5 bps tighter than its price of 237.5 bps over Treasuries at midday. Later in the day it was seen about 7 bps improved at 230 bps, a trader said.

Near the close, the 2.375% five-year notes were quoted at 145 bps, or about 18 bps tighter than their 162.5 bps over Treasuries price.

Freeport's 3.55% notes due March 1, 2022 were atop the most actives list in mid-afternoon trading. The notes, sold Feb. 8, 2012, were trading at a spread of 195 bps, which is 35 bps wider than when the bonds priced at 160 bps over Treasuries.

The mining company is based in Phoenix.

S&P sees investor shift

A report out Thursday from S&P focused on how the financial crisis of 2007 to 2009 shifted investor sentiment about the risks of the bank and industrial sectors.

The cost of debt for industrial names has been pushed down by increased investor demand, according to the report. Prior to the financial crisis, A rated bank bonds were trading tighter than industrials, but the two sectors have since switched places. Spreads on industrial bonds rated A trade an average of 34 bps better than banks and have less downgrade risk, according to the report.

Banks have been perceived as riskier since mid-2007 when the financial crisis began, and after the collapse of Lehman Brothers, investors have demanded more than 300 bps of additional risk margin for financials versus industrials, according to the S&P report. Investors remain guarded on financials.

Later in the report, S&P analysts stated that the buoy that prevented economic collapse during the financial system breakdown was government intervention. Since that period, bank spreads have been linked to government activity and are subject to shocks during events like the impending risk of sequestration.

Stephanie N. Rotondo contributed to this review

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