Investment-grade primary quiet ahead of long weekend; funds see $6.89 billion inflows

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 10 – The high-grade bond market was empty of new issuance on Friday ahead of the extended Columbus Day-holiday weekend.

The quiet session kept the week’s total issuance at $16.5 billion, falling in line with what was predicted to be a $15 billion to $20 billion week.

Meanwhile, the week saw another staggering amount of cash flowing into investment-grade bond funds, with Lipper reporting net inflows of $6.89 billion for the week.

This follows last week’s inflows of $3.13 billion, bringing the year-to-date total to more than $65 billion.

Looking forward, the primary is expected to remain relatively subdued for the shortened week ahead.

With earnings season underway and the majority of potential corporate issuers sitting on the sidelines, financial names will likely make up the bulk of next week’s supply.

“We’re expecting around $15 [billion],” one market source said.

Bonds were mixed over the session, according to market sources.

Wal-Mart Stores Inc.’s 3.3% notes due 2024 that reopened on Tuesday headed out unchanged over the past two sessions, according to a market source.

Telecom bonds have been active over the week but traded mostly weaker, a source said.

AT&T Inc.’s 4.8% bonds due 2044 ended 5 basis points wider.

Verizon Communications Inc.’s 6.35% notes due 2019 eased 5 bps in secondary trading, a source said.

Bank and financial paper was mixed, a market source said.

Morgan Stanley & Co. Inc.’s 3.875% notes due 2024 traded 5 bps to 6 bps wider over the day.

Goldman Sachs Group Inc.’s 3.85% notes due 2024 headed out flat, according to a market source.

Wal-Mart stable

Wal-Mart’s 3.3% notes due 2024 (Aa2/AA/AA) traded flat at 69 bps offered on Friday, a source said.

The company priced a $500 million add-on to the existing notes on Tuesday at a spread of Treasuries plus 73 bps.

Wal-Mart originally sold $1 billion of the notes at a spread of Treasuries plus 73 bps on April 15.

The discount retailer is based in Bentonville, Ark.

AT&T widens

AT&T’s 4.8% notes due 2044 (A3/A-/A) widened to 164 bps offered over the afternoon on Friday from where the notes traded on Thursday at 159 bps offered, a source said.

AT&T sold $2 billion of the 30-year notes at a spread of Treasuries plus 140 bps on June 3.

The telecommunications company is based in Dallas.

Verizon softens

Verizon’s 6.35% notes due 2019 (Baa1/BBB+/A-) eased 5 bps to 71 bps offered, according to a market source.

Verizon sold $1.75 billion of the notes on March 24, 2009 at Treasuries plus 387.5 bps.

The telecommunications company is based in New York City.

Morgan Stanley eases

Morgan Stanley’s 3.875% notes due 2024 (Baa2/A-/A-) traded 5 bps to 6 bps wider at 135 bps offered on Friday, a source said.

Morgan Stanley sold $3 billion of the notes at Treasuries plus 130 bps on April 23.

The financial services company is based in New York City.

Goldman unchanged

Goldman Sachs’ 3.85% notes due 2024 (Baa1/A-/A) were unchanged on the day at 138 bps offered, a source said.

Goldman Sachs sold $2.25 billion of the notes on June 30 at a spread of Treasuries plus 135 bps.

The financial services company is based in New York City.

Bank/brokerage CDS costs drop

Investment-grade bank and brokerage CDS prices were higher on Friday, according to a market source.

Bank of America Corp.’s CDS costs rose 1 bp to 72 bps bid, 75 bps offered. Citigroup Inc.’s CDS costs were also 1 bp higher at 72 bps bid, 75 bps offered. JPMorgan Chase & Co.’s CDS costs were also 3 bps higher at 59 bps bid, 62 bps offered. Wells Fargo & Co.’s CDS costs rose 1 bp to 45 bps bid, 50 bps offered.

Merrill Lynch’s CDS costs were 1 bp higher at 76 bps bid, 79 bps offered. Morgan Stanley’s CDS costs ended 1 bps higher at 84 bps bid, 87 bps offered. Goldman Sachs’ CDS costs were 1 bp lower at 84 bps bid, 87 bps offered.

Stephanie N. Rotondo contributed to this review

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