JPMorgan Chase, Morgan Stanley add to FDIC-backed deals; CAT, Hewlett-Packard bonds tighten

By Andrea Heisinger

New York, Dec. 5 - The investment-grade primary market was light on deals Friday as the market absorbed the many issues it saw priced throughout the week. JPMorgan Chase & Co. and Morgan Stanley each priced more notes under the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program, extending issuance that began before Thanksgiving.

"I think people saw the market needed a break," a source said late Friday. "We had a busy week."

The secondary was also absorbing all of the issues, although all of the FDIC-backed deals were priced and traded off agency desks.

Caterpillar Inc. and Hewlett-Packard Co. notes remained markedly tighter in trading, although they showed that interest was mostly in the shorter-dated parts of the deals.

JPMorgan prices $1.25 billion

JPMorgan Chase priced another issue backed by the FDIC late Friday, market sources said.

The financial services company priced $1.25 billion of two-year notes to yield Treasuries plus 171 bps.

The full terms were not available at press time because a full writing prospectus was not completed, a source close to the deal said.

J.P. Morgan Securities Inc. ran the books.

The company also announced terms for a reopening of FDIC-backed notes traded Thursday.

The company reopened its three-year floating-rate notes to add $300 million. They have a coupon of one-month Libor plus 76 bps with a price of 100.017 plus interest.

JPMorgan was also the bookrunner.

Morgan Stanley reopens bonds

Morgan Stanley also added to its previous issues of FDIC-backed offerings, although it reopened previous deals instead of pricing fresh ones.

The bank holding company reopened its 2.9% two-year notes to add $250 million. They priced at 101.088.

Total issuance is $2.5 billion, including $2.25 billion issued on Dec. 2.

The company also reopened its FDIC-backed three-year floating-rate notes to add $100 million. They priced at par plus accrued interest and have a quarterly coupon of three-month Libor plus 57.5 bps.

Total issuance is $575 million, including $475 million issued on Dec. 4.

Morgan Stanley & Co. Inc. ran the books for both reopenings.

Ameren unit announces terms

Central Illinois Light Co., which does business as Ameren Cilco, priced $150 million of 8.875% five-year notes Thursday, with full terms released Friday.

The notes priced at 99.997 to yield 8.875%, or Treasuries plus 734.9 bps.

BNP Paribas Securities and Goldman Sachs & Co. were the bookrunners.

Primary awaits more FDIC issues

More financial names are expected to issue under the FDIC guarantee in the coming week, a source said Friday.

Companies wanting to issue bonds before the end of the year will also be pricing in the next two weeks before that window closes, he added.

By afternoon, no more takers under the FDIC-guarantee program had officially been announced in a filing with the Securities and Exchange Commission.

This didn't stop the rumor mill about who might be next to issue. Names floating around to issue the week of Dec. 8 have included American Express, Regions Bank, and on Friday, SunTrust Bank.

Many of the smaller, more regional banks, have waited until the larger financial names issued to see how it would all work and how much they would have to pay to issue, a source said Friday.

The issues have proved popular with overseas investors in Europe and Asia. The books on nearly all of the issues have been compiled over one or two nights to take advantage of this.

"Of course they want in," a source said Friday. "They're getting a good deal."

The week's non-financial issuers were often left as afterthoughts as they were overshadowed by the often much larger financial issues, although names like Hewlett-Packard and Caterpillar ended up performing well in the secondary market.

"I think it will be like this next week, but with maybe more names," a source said.

He noted that although the unemployment numbers for November were announced Friday, it had little effect on the primary market as "everyone was expecting it to be bad."

CAT bonds continue trading

The three tranches of bonds priced earlier in the week from Caterpillar continued to perform well in the secondary late Friday afternoon.

The 7% five-year notes were seen much tighter at about 450 bps bid, 440 bps offered, a trader said.

The 7.9% 10-year notes were at 495 bps bid, 480 bps offered. This is also in sharply from the 525 bps pricing level.

The 8.25% 30-year bonds were the least active, with the trader at first not seeing any new levels for the tranche.

They were at 470 bps bid, 445 bps offered, also in from pricing at 510 bps.

HP bonds 40 bps tighter

The 6.125% notes due 2014 from Hewlett-Packard were seen moving in from the 460 bps price, to about 420 bps bid, 405 bps offered, a trader said late Friday.

Altria most traded

Altria Group Inc.'s 9.7% notes due 2018 were seen as the most heavily traded bond early Friday afternoon.

This came a day after the shareholders of smokeless tobacco company UST Inc. approved its acquisition by Altria.

Altria priced a $6 billion issue of bonds on Nov. 5, with proceeds going toward the acquisition.

The rest of the day's bonds seeing high volume were heavy on the financial names. Deutsche Bank AG London and Goldman Sachs Group Inc. each were seen with issues trading at high volume.

Morgan Stanley moves big

A bond from Morgan Stanley was seen as one of the day's biggest movers late afternoon Friday.

Its 6% notes due 2015 were seen tightening more than 60 bps.

The remainder of the day's movers was mainly industrials and other non-financial names.

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