Citigroup, Kinder Morgan, Cigna, Burlington Northern price bonds; Morgan Stanley floaters firm

By Andrea Heisinger and Cristal Cody

New York, May 12 - Citigroup Inc., Kinder Morgan Energy Partners LP, Cigna Corp. and Burlington Northern Santa Fe, LLC priced bonds on Wednesday as investors continued grabbing for high-grade paper.

Terms were also announced for a late-day sale on Tuesday by Morgan Stanley.

Kinder Morgan priced $1 billion of notes in tranches due in 2020 and 2040. Both priced at the tight end of guidance.

Cigna was the first to price its $300 million deal of 10-year notes.

A deal from Burlington Northern Santa Fe for 30-year debentures was upsized to $750 million from $500 million. The bonds were seen wider on the offer side in the secondary, a source said.

The last deal of the day to price came from Citigroup, which announced its deal around 2 p.m. ET and priced it a few hours later. The financial sold $1.5 billion of five-year notes following reverse inquiry.

The tone of the primary was decidedly more upbeat than the previous day.

"It was kind of surprising [...] how much we got done," one market source said.

Issuance continues to be "day to day," he said, adding that if the tone holds, there could be "a couple more" issues on Thursday.

The financial sector was seen firmer in secondary trading, with Morgan Stanley's new floaters firming despite a rumored government investigation, according to a trader.

Overall Trace volume in the investment-grade market rose 10% to about $13 billion, according to a source.

The CDX Series 14 North American high-grade index firmed 2 bps to a mid bid-asked spread level of 98 bps, according to a market source.

Treasuries weakened on Wednesday on the second day of a three-day government auction.

Yields on the 10-year benchmark Treasury note eased 4 bps to 3.57%, while yields on 30-year bonds rose 6 bps to 4.48%.

The Treasury Department sold $24 billion of 10-year notes and plans to auction $16 billion of 30-year bonds on Thursday.

Kinder Morgan prices $1 billion in two tranches

Houston-based pipeline Kinder Morgan Energy Partners priced $1 billion of senior notes (Baa2/BBB/BBB) in two tranches later in the afternoon, an informed source said.

The $600 million tranche of 5.3% 10-year notes priced at a spread of 175 bps over Treasuries. They priced at the tight end of guidance in the range of 175 bps to 180 bps.

A $400 million tranche of 6.55% 30-year bonds was sold to yield Treasuries plus 210 bps. These bonds also priced at the low end of talk in the 210 bps to 215 bps range.

The deal had about $4 billion on the books, the source said. Whispered price talk was "slightly tighter" than the formal guidance, he said, adding that "it was nothing meaningful."

Deutsche Bank Securities, RBS Securities and Wells Fargo Securities ran the books.

Proceeds are being used to repay short-term debt and for general corporate purposes.

Citi offers $1.5 billion

Citigroup Inc. priced $1.5 billion of 4.75% five-year senior notes (A3/A/A+) late in the day to yield Treasuries plus 260 bps, a source close to the deal said.

The sale was a late announcement at about 2 p.m. ET, the source said. It launched later in the afternoon after $750 million of reverse inquiry surfaced.

The deal followed a similar late-day sale the previous day by Morgan Stanley.

Bookrunner was Citigroup Global Markets.

The financial services company is based in New York City.

Financials return to primary

There were two issues from high-profile financial names in the past two days, both pricing late. Morgan Stanley priced $1.75 billion of short-dated floaters late on Tuesday, with Citigroup announcing and pricing its deal of five-year notes late Wednesday.

"I think people just want high-grade paper," a source away from both deals said. "That includes those two [Citigroup and Morgan Stanley]."

The new issues in recent weeks have skewed heavily toward sovereign and non-financial names. In the past couple of weeks, that was anchored by Goldman Sachs Group Inc. being investigated by the SEC for fraud related to its mortgage unit.

New issue concessions for financials "haven't quite bounced back," the source said. This was shown by the Citigroup bond pricing well above all of the day's other deals despite the fact that many were rated lower.

Cigna sells 10-year notes

Health services company Cigna priced $300 million of 5.125% 10-year senior unsecured notes (Baa2/BBB/BBB) at 162.5 bps over Treasuries, a source close to the sale said.

Bank of America Merrill Lynch, Deutsche Bank Securities and UBS Investment Bank were bookrunners.

Proceeds are being used for general corporate purposes.

The company is based in Philadelphia.

Burlington Northern upsizes to $750 million

Burlington Northern Santa Fe priced an upsized $750 million of 5.75% 30-year debentures (A3/BBB+) to yield Treasuries plus 128 bps, according to an FWP filing with the Securities and Exchange Commission.

The size of the deal was originally $500 million.

The debentures were quoted late afternoon at 128 bps bid, 124 bps offered.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities.

Proceeds are going for general corporate purposes.

The transportation holding company is based in Fort Worth, Texas.

The bonds were quoted late afternoon at 128 bps bid, 124 bps offered.

Market tone rebounds

A brief slowdown the previous day was mostly forgotten as three new deals from a variety of sectors came to the market.

"It wasn't that bad yesterday," a source who worked on one of the day's deals said. "We just didn't have many [issues]."

The market's tone was deemed "fine" at the start of the day by a source. The previous day had seen a drop and then a subsequent recoup of losses, following in the footsteps of the equity market.

Morgan Stanley gives deal terms

Morgan Stanley sold $1.75 billion of three-year global medium-term floating-rate notes (A2/A/A) at par to yield three-month Libor plus 250 bps, according to an FWP filing with the SEC released on Wednesday morning.

The sale was done late Tuesday, a source said. It's likely the timing was intentionally ahead of the launch of an investigation into the company's trading practices with a pair of mortgage-related securities by the SEC, the source said.

The agent was Morgan Stanley & Co.

The financial services company is based in New York City.

Morgan Stanley floaters firm

The tone of the high-grade financial sector was "much better" on Wednesday, one trader said.

"It's good. The senior bonds in financials were 10, 15 basis points tighter, and the hybrid bank stuff was up a point or two."

Morgan Stanley's $1.75 billion of floaters due 2013 tightened in trading after pricing earlier in the day.

The floaters were priced to yield Libor plus 250 bps.

"It's strange right on the Morgan Stanley rumor of a government investigation, but it seemed to do OK," the trader said. "They got it done."

The notes were seen tighter at 242 bps bid, 233 bps offered.

The Wall Street Journal reported that the government is investigating whether Morgan Stanley misled investors about its role in derivatives investments that were performance-tied to mortgage-backed securities.

Morgan Stanley said in media statements that it has not been contacted by the government. The New York-based financial holding company's stock fell 2.04% to $27.80.

The rumor comes as Goldman faces fraud charges by the SEC and a criminal investigation by the Justice Department into its role in subprime mortgage securities investments.

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