Citi, B of A results lift financials, EM names plan deals; primary to pick up after earnings

By Andrea Heisinger

New York, July 17 - Earnings announcements from two more big banking names lifted at least the financial sector of the investment-grade bond market Friday, although they didn't spur any new deals.

Citigroup Inc. and Bank of America Corp. each announced positive second-quarter earnings. Both of these names also received large amounts of government money during the financial bailout earlier in the year, and were also boosted by recent asset sales.

They followed similarly positive earnings from Goldman Sachs Group Inc. and JPMorgan Chase & Co. earlier in the week.

There were two upcoming sales announced by emerging markets names Dolphin Energy Ltd. and Centrais Eletricas Brasileiras SA.

And KazMunaiGaz Finance Sub BV gave terms for its deal priced late Thursday.

The financial sector of the secondary was lifted again by the continued bank earnings, a trader said. The new Goldman Sachs bonds remained firmer than their issue price from Wednesday.

Spreads were considerably tighter by late Friday as Treasury yields moved out. The 10-year government note was 8 basis points higher than the day before at 3.65% and the 30-year bond was out 9 bps.

Dolphin Energy plans offering

Dolphin Energy mandated RBS Securities and BNP Paribas Securities for a bond issue, an emerging market source said.

Initial guidance is expected in the coming week.

Dolphin Energy is 51% owned by Mubadala Development Co. of the Emirate of Abu Dhabi.

Eletrobras announces road show

Centrais Eletricas Brasileiras announced a road show for its upcoming dollar-denominated benchmark-size 10-year senior unsecured fixed-rate bullet notes (/BBB-/BBB-), an emerging market source said.

The road show will begin July 21 in London and on the U.S. west coast as well as New York and Boston on July 22.

Credit Suisse Securities is bookrunner for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes.

Eletrobras is a Rio de Janeiro-based government owned power firm.

Primary to slowly pick up

Market sources said Friday that they are not expecting the high-grade market to be bombarded with bond deals in the coming week, but there should be a slight uptick in sales.

"Almost 30 non-bank or financial businesses did earnings this week," a source said. "So we'll probably see some more stuff. I would say it will pick up, but not a lot."

Another source agreed, saying some of the larger banking names could issue bonds but have yet to solidly announce anything.

"You would think maybe they would get in there right after [earnings] like Goldman, but you don't know," he said.

The only high-grade deals on the plate are on the emerging markets side.

"We don't watch those so much, especially if there's other stuff [pricing]," the source said.

Kazakh energy firm sells bonds

KazMunaiGaz Finance priced $1.25 billion of 11.75% split-rated global notes (Baa2 / BB+ / BBB-) due 2015 to yield 12% late Thursday, according to a market source.

Citigroup Global Markets and J.P. Morgan Securities were bookrunners for the Rule 144A and Regulation S deal.

The government-run energy firm is based in Astana, Kazakhstan.

Financial bonds improve

Bank and other financial bonds were better generically following two positive earnings announcements from Citigroup and Bank of America early Friday.

A trader in the financial sector of the secondary said that his bonds were 5 to 15 bps firmer overall as of mid-afternoon.

He did not have specific information on how outstanding Citigroup and Bank of America bonds were performing.

The new issue from Goldman Sachs Group Inc. - done after its own stellar earnings announcement earlier in the week - was holding about 20 bps better than where it priced at 212.5 bps over Treasuries, the trader said.

CIT, banks top trading

A bond from CIT Group Inc. Income Fundings Trust sat atop high-grade trading late Friday, a source said. The same bond has been heavily traded since earlier in the week when it became clear junk-rated small-business lender CIT was likely headed for a bankruptcy filing.

The floating-rate bond is due on Aug. 17.

Other bonds from Citigroup Inc. and Barclays Bank plc followed the CIT bond. Both were recent issues, and were riding on the success of banks in their second-quarter earnings announcements, including Friday's from Citigroup.

Bank, broker CDS tighten

Bank and broker credit-default swaps were tighter late Friday, a trader said. Banking names were 10 bps better, while brokerages were in 5 to 10 bps, he said.

Banking names among big movers

Bonds from some large banking and financial names were among the biggest movers late Friday, a source said.

A 5% bond due 2015 from CIT was about 50 bps better than a week ago.

Bonds from JPMorgan Chase and Citigroup were improved about 40 and 35 bps respectively.

Goldman Sachs had a 5.25% bond due 2013 widen more than 25 bps from the previous week. JPMorgan's 5.75% due 2013 was more than 20 bps worse.

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