Week's issuance exceeds expectations; supply set to decrease; Morgan Stanley slightly weaker

By Aleesia Forni and Andrea Heisinger

New York, May 17 - Issuance for the past week met expectations and then some, although there were no new sales on Friday.

A market source said there was "about $39 billion by our count" for the week including emerging markets issues.

According to Prospect News data, there was about $18.2 billion of bonds sold in the high-grade market during the past week not including emerging markets issues like the Petroleo Brasileiro SA sale that totaled $11 billion.

There was between $20 billion and $25 billion expected, sources said late the previous week.

The coming week should see in the ballpark of $20 billion, a source said late Friday.

"The last two weeks have been $30 billion plus. It's calming down a bit before the Memorial Day weekend."

There is less supply on tap, although there are still issuers looking to get in before the long weekend for the Memorial Day holiday.

Although issuance is expected to be concentrated in the first three days of the coming week, "Thursday's still on the table," the source said.

In secondary market action, Morgan Stanley's notes traded 1 basis point wider during Friday's session compared to levels seen late Thursday, while spreads remained "mostly flat," a trader said.

Investment-grade bank and brokerage credit default swap costs declined on Friday.

Bank of America Corp.'s CDS costs were 4 bps tighter at 84 bps bid, 87 bps offered. Citigroup Inc.'s CDS costs were 4 bps tighter at 83 bps bid, 86 bps offered. JPMorgan Chase & Co.'s CDS costs firmed 2 bps to 75 bps bid, 78 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 62 bps bid, 65 bps offered.

Merrill Lynch's CDS costs declined 2 bps to 80 bps bid, 88 bps offered. Morgan Stanley's CDS costs firmed 3 bps to 112 bps bid, 115 bps offered. Goldman Sachs Group, Inc.'s CDS costs were 2 bps tighter at 100 bps bid, 103 bps offered.

Zions brings hybrids

Zions Bancorporation priced $300.89 million of 5.8% series I fixed-to-floating-rate noncumulative perpetual preferred stock via an online auction, according to an FWP filing with the Securities and Exchange Commission on Friday.

The auction began Wednesday and ended Thursday at 4 p.m. ET.

The preferreds sold at par of $1,000.

The bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co., Keefe, Bruyette & Woods, Inc., Macquarie Capital (USA) Inc. and Zions Direct, Inc.

The rate is fixed until June 15, 2023. After that, there is a floating rate of Libor plus 380 basis points.

Proceeds will be used for general corporate purposes, including a possible redemption of securities.

The financial holding company is based in Salt Lake City.

Morgan Stanley weaker

Morgan Stanley's recent 4.1% 10-year notes traded 1 bp wider on Friday at 229 bps bid, 224 bps offered.

The notes were quoted at 225 bps bid earlier during the session.

Morgan Stanley sold the $2 billion global medium-term notes on Thursday at a spread of 225 bps over Treasuries.

Morgan Stanley & Co. LLC was the bookrunner.

The financial services company is based in New York City.

Stephanie N. Rotondo contributed to this review

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