Bond sales at standstill on headlines out of Europe; Wal-Mart, CenturyLink, bank paper widen

By Andrea Heisinger and Cristal Cody

New York, April 23 - The high-grade bond market was met with a string of negative headlines at the open on Monday, leading to issuers standing down on a day that could have seen at least a couple of new deals.

There was news both economic and political out of the euro zone over the past weekend. There were elections in France and a stalemate on budget cut talks in the Netherlands that led to the government resigning.

Also, European stock markets were down on economic data from Germany and signs of a recession in Spain. The Dow Jones industrial average fell at the open of trading on Monday and never rebounded, ending down more than 100 points.

The outlook for the remainder of the week has changed as well.

"We're thinking single digits," a source said, referring to issuance volume. Predictions at the end of the previous week were for $5 billion to $10 billion of new deals, with four or five ready to tap the market.

"There might be something tomorrow if anything improves," the source said. "Today wasn't that great. I haven't heard of anything for tomorrow."

There's a Federal Reserve Federal Open Market Committee meeting that starts on Tuesday and concludes on Wednesday. The announcement out of that meeting on Wednesday is going to take the day out of play for issuance, and there is gross domestic product data coming out Friday, which will also mean no deals, a syndicate source said.

"Tuesday and Thursday are the only viable days at this point," the source said.

Kellogg Co.'s stock fell more than 5% on Monday after it cut its full-year profit view, while no secondary trading was seen in the company's bonds, which are "very illiquid," a trader said.

Wal-Mart Stores Inc.'s bonds widened 3 basis points and its stock fell 5% following a report that company representatives helped block an internal investigation into bribery allegations at Walmart de Mexico.

Nokia Corp.'s bonds, which traded 2½ to 3 points lower on Friday on the back of weaker first-quarter sales, traded flat going out on Monday, a trader said.

"It's been relatively quiet today," a trader said. "Everything's a little bit weaker."

The Markit CDX Series 18 North American investment-grade index eased 1 bp to a spread of 101 bps.

Cable and telecommunications bonds traded about 3 bps to 5 bps wider, while CenturyLink, Inc. moved out 10 bps on the day.

Teck Resources Ltd.'s bonds traded 2 bps weaker.

Bank and financial paper widened 5 bps to 15 bps in trading.

Morgan Stanley's 5.5% notes due 2021 widened 15 bps on Monday to 417 bps bid, 412 bps offered, a trader said.

Bank of Nova Scotia's notes traded unchanged.

Investment-grade bank and brokerage credit default swaps costs rose on the day.

Banks were higher. Bank of America's CDS costs traded up 6 bps to 266 bps bid, 271 bps offered. Citi's CDS costs widened 4 bps to 244 bps bid, 249 bps offered. J.P. Morgan's CDS costs eased 1 bp to 105 bps bid, 110 bps offered. Wells Fargo's CDS costs ended flat at 90 bps bid, 95 bps offered.

Brokers also widened. Merrill Lynch's CDS costs traded 1 bp wider to 281 bps bid, 291 bps offered. Morgan Stanley's CDS costs rose 7 bps to 377 bps bid, 382 bps offered. Goldman Sachs' CDS costs widened 4 bps to 279 bps bid, 284 bps offered.

Treasuries were stronger on the weaker global tone. The benchmark 10-year note yield fell 3 bps to 1.93%. The 30-year bond yield dropped to 3.09% from 3.12%.

Wal-Mart eases

In the secondary market, Wal-Mart's 3.25% notes due 2020 traded 3 bps wider going out on Monday to 70 bps bid, 62 bps offered, a trader said.

The notes (Aa2/AA/) priced on Oct. 18 at a spread of 78 bps over Treasuries.

Earlier Monday, the retailer's bonds "look to be out 5-8 bps, but not many bonds [are] actually trading," another trader said.

The discount retailer is based in Bentonville, Ark.

CenturyLink widens

CenturyLink's 5.8% notes due 2022 widened 10 bps to 410 bps bid, 400 bps offered, a trader said.

CenturyLink sold $1.4 billion of the notes (Baa3/BB/BBB-) at a spread of Treasuries plus 380 bps on March 5.

The broadband and telecommunications company is based in Monroe, La.

Teck lower

Teck's 4.475% notes due 2022 traded 2 bps wider to 205 bps bid, 185 bps offered on Monday, a trader said.

Teck sold $700 million of the notes on June 29 at a spread of Treasuries plus 165 bps.

The diversified mining company is based in Vancouver, B.C.

Scotiabank flat

Bank of Nova Scotia's 2.55% notes due 2017 (Aa1/AA-/) traded unchanged on the day at 90 bps over Treasuries, a source said on Monday.

Scotiabank sold $1.25 billion of the notes (Aa1/AA-/) on Jan. 5 at a spread of 172 bps plus Treasuries.

The Canadian bank is based in Halifax, N.S.

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