KfW, IADB, RBS Group, Cantor Fitzgerald sell bonds on strong day; JPMorgan firms; Bud strong

By Andrea Heisinger and Paul Deckelman

New York, Oct. 14 - KfW, Inter-American Development Bank, Royal Bank of Scotland Group plc and Cantor Fitzgerald LP offered bonds on a subdued day with positive earnings news.

Half of the deals were done in the morning, as they were announced the previous day and went overnight.

KfW sold its $3 billion of five-year notes before lunch, as did IADB with its $2.25 billion offering of three-year notes. The IADB sale priced in line with guidance set on Tuesday, a source said.

The other two sales were not done until later in the afternoon. Cantor Fitzgerald upsized its sale doubling it to $500 million in 10-year notes from $250 million.

The Royal Bank of Scotland was last to price, bringing 10-year notes totaling $1.5 billion.

Issuance was not affected by earnings announcements that came out on Wednesday, or the Dow Jones Industrial Average closing at more than 10,000 for the first time this year sources said. The day's news included positive third-quarter numbers from JPMorgan Chase.

Among the established issues in the secondary arena on Wednesday, a market source said the CDX Series 13 North American high-grade index was 5 basis points narrower versus Tuesday's level, at a mid bid-asked spread level of 96 bps.

Advancing issues fell behind decliners by around a five-to-four margin.

Overall market activity, reflected in dollar-volume totals, rose 20% from Tuesday's fairly busy post-holiday pace.

Spreads in general were seen tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year notes widened by 6 bps on Wednesday to 3.41%

The new Anheuser-Busch InBev bonds which priced Tuesday were the standout performer in Wednesday's secondary dealings, tightening anywhere from 15 bps to 32 bps, depending upon the issue.

Other Tuesday deals, such as Deere & Co. and Barrick Australia Pty. Ltd., also tightened, but not by as much.

Among established bonds, J.P. Morgan Chase & Co.'s paper was a few basis points firmer - but not as much as one might think, considering the blowout third-quarter earnings posted by the New York-based banking giant.

Cantor Fitzgerald upsizes 10-year

New York City-based financial services company Cantor Fitzgerald sold an upsized $500 million of 7.875% 10-year notes later in the day at 455 bps over Treasuries.

The size was originally $250 million, a source away from the sale said. The notes were sold via Rule 144A.

Bank of America Merrill Lynch and Cantor Fitzgerald were bookrunners.

RBS offers $1.5 billion late

The Royal Bank of Scotland Group priced $1.5 billion of 6.4% 10-year senior notes later in the day at Treasuries plus 300 bps, a syndicate source away from the sale said.

It was a self-led sale run by RBS Securities.

Proceeds are going for general corporate purposes.

The financial services company is based in Edinburgh, Scotland.

Earnings leave primary unaffected

Earnings season is in full swing, but there has been little impact - bad or good - from any reports of third quarter numbers.

JPMorgan's Q3 announcement of a $3.6 billion profit did little to the high-grade primary by late afternoon, a syndicate source said.

"We didn't really see anything today," he said. "I didn't work on any of the day's deals, really, but there wasn't much [movement]."

"The market was maybe up a little, and some of yesterday's deals were a few [basis points] tighter."

Citigroup Inc. announces its Q3 earnings on Thursday.

"We'll see what that does," a source said.

JPMorgan was the first of the large banks to announce numbers.

There is not a large amount of issuance expected for the remainder of the week, after two steady days of volume.

"We're still in [earnings] season," the source said. "I think we could see more of these non-U.S. banks or issuers. I don't really know of much coming out for sure."

KfW offers five-year

German government-owned bank KfW priced $3 billion of 2.75% five-year notes early in the day at Treasuries plus 44.25 bps. The sale was announced on Tuesday by the Frankfurt-based issuer and went overnight.

Barclays Capital, J.P. Morgan Securities and RBC Capital Markets ran the books.

IADB sells $2.25 billion

Inter-American Development Bank priced $2.25 billion of 1.75% three-year global notes by late morning at Treasuries plus 33.25 bps. This sale, along with KfW, was announced the previous day and went overnight.

The notes were talked at mid-swaps minus 10 bps, which was in line with where they priced, an informed source said.

Citigroup Global Markets, Credit Suisse Securities, HSBC Securities and Morgan Stanley were bookrunners.

The issuer provides financing for Latin American and Caribbean countries and is based in Washington, D.C.

RBS, Cantor unseen

Traders did not see any immediate aftermarket activity in either the new Cantor Fitzgerald or Royal Bank of Scotland issues. Cantor "will likely free up in the morning," one of them said.

This BUD's for you

Anheuser-Busch InBev's gigantic new four-part $5.5 billion mega-deal, which came to market on Tuesday, was the star performer in Wednesday's session.

The international brewing giant's $1.5 billion of 3.0% notes due 2012 were seen by a trader to have tightened to 135 bps bid, 128 bps offered, well in from the 160 bps spread over comparable Treasuries at which the bonds had priced the session before.

He saw its $1.25 billion of 4.125% notes due 2015 narrow to 170 bps bid, 165 bps offered, versus 185 bps over at Tuesday's pricing.

Its $2.25 billion of 5.375% notes due 2020 traded at 191 bps bid, 185 bps offered - well in from 210 bps over at the pricing.

And its $500 million of 6.375% bonds due 2040 improved to 192 bps bid, 188 bps offered versus their pricing spread of 220 bps.

The Bud bonds "tightened quite a bit," said another trader quoting the 2015 notes at 171 bid, 167 offered and the 2020s at 188 bps bid, 184 bps offered. "I was kind of surprised" that the issue did as well as it did.

Deere a bit firmer

The new Deere deal "just did not catch the eye" of aftermarket investors the way Bud's deal did, the trader said, seeing the Moline, Ill.-based tractor and agricultural implement manufacturer's $750 million of 4.375% notes due 2019 offered around 100-101.

Another trader saw those bonds bid at 105 bps over and offered at 101, versus the issue's 110 bps spread at Tuesday's pricing.

Its $500 million of 5.375% bonds due 2029 were seen having improved to 112 bps bid, 105 bps offered, versus their 120 bps spread at the pricing.

Barrick better

The first trader said that Barrick Gold's new $400 million of 4.95% notes due 2020, which had priced Tuesday at 175 bps over, tightened a little to 168 bps bid, 161 bps offered.

The Toronto-based precious metals company's $850 million of 5.95% bonds due 2039 meantime firmed a little to 189 bps bid, 184 bps offered.

JP Morgan not much moved

Among the financial issues, a trader said that JP Morgan's bonds were "probably about 5 [bps] better, because the market in general was better, but [the Morgan bonds] probably were only about 5 bps better," despite the company's stellar third-quarter numbers.

JP Morgan reported a quarterly profit of $3.6 billion, or 82 cents per share, about nine times its year-ago earnings of 9 cents per share, with the gain chiefly attributable to bond-trading profits. The earnings handily beat Wall Street expectations of about 50 cents to 52 cents per share.

Still, a trader said that issues like Morgan's 6.30% notes due 2019 did not tighten significantly, quoting the bonds at about 158 bps bid, versus 164 bps on Tuesday.

A market source saw about $30 million of the JP Morgan bonds having traded by mid-afternoon - and the second trader said that by the end of the day, it wasn't even among the most actives.

"There was a lot of chatter on them," but not all that much in actual dealings, considering the results the company posted, the trader said.

The first trader said that "generically, there was a better tone to the market," but nothing really stood out.

He saw New York Life Global Funding's 2.25% notes due 2012 "wrapped around 82 [bps]," some 10 bps in from the 92 bps level where the insurance company unit's upsized $500 million offering priced on Tuesday.

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