ANZ National International, JPMorgan Chase unit offer bonds; spreads tighter; XTO gains more

By Andrea Heisinger and Paul Deckelman

New York, Dec. 15 - Financial names dominated the high-grade primary market Tuesday as ANZ National International Ltd. and JPMorgan Chase Capital XXVIII each sold bond deals.

The $1.5 billion JPMorgan Chase sale of 30-year hybrid notes went overnight from Monday. It was upsized and tripled in size from its original $500 million amount.

ANZ sold $1.25 billion of three-year notes under Rule 144A. The deal is guaranteed by the parent company.

A lack of deals following a busy start to the week was likely due to the start of a two-day Federal Reserve meeting. Issuers are expected to hold off on any sales until its conclusion, and any interest rate announcement, on Wednesday afternoon.

In the secondary market, a source said the CDX Series 13 North American high-grade index had risen 1 basis point to a mid bid-asked spread level of 92 bps.

Spreads also continued to tighten in line with rising Treasury yields. The benchmark 10-year government note held near the 3.6% yield level, up by 4 bps to 3.59% on Tuesday.

Advancing issues fell behind decliners by a seven-to-six margin, while overall market activity, as shown in dollar-volume totals, moved up about 10% from Monday.

A trader said that volume had picked up to just under $8.5 billion in trades, up from about $7.4 billion in trades the day before.

"It was actually a pretty good day," the trader said. "There's still this mentality out there to buy, buy, buy. The spreads keep tightening every day."

There wasn't much secondary dealing in the day's new issues, from ANZ National International and the JP Morgan hybrid notes. But there was brisk activity in some of Monday's new deals, notably Dr Pepper Snapple Group Inc. and BNP Paribas.

XTO Energy Inc.'s bonds continued tightening in the wake of Monday's announcement of the pending acquisition of the Fort Worth, Tex.-based independent oil and gas company by ExxonMobil Corp.

JPMorgan prices hybrid notes

JPMorgan Chase Capital sold an upsized $1.5 billion, or 60 million shares, of 7.2% 30-year fixed-to-floating-rate capital securities at par of $25, a source away from the sale said.

The coupon changes to a floating rate over three-month Libor after 2014, but that rate was not available at press time.

The size was initially $500 million when the deal was announced on Monday. The notes were talked to yield between 7.25% and 7.375%, the source said, and came in at the tight end of that.

The deal is guaranteed by JPMorgan Chase & Co.

J.P. Morgan Securities ran the books.

The issuing arm of the financial services company is based in New York City.

ANZ sells short bond

ANZ National International priced $1.25 billion of 2.375% three-year notes via Rule 144A at Treasuries plus 105 bps.

Bank of America Merrill Lynch and Citigroup Global Markets were bookrunners.

The subsidiary of ANZ Banking Group Ltd. is based in Wellington, New Zealand.

Primary quiets ahead of Fed

The start of a two-day Federal Reserve meeting may have hampered any companies wanting to issue bonds in the investment-grade market.

A small amount of supply remains for the rest of the week, but it is possible companies will hold off on announcing any deals until late Wednesday or even Thursday, a syndicate source said.

"I don't know if there's a sense of what will come out of it [the Fed], but they're not taking chances," he said. "There's limited time [to issue] this year."

With little in new deals or headlines, it was classified as an "uneventful, or boring" day by another syndicate source.

"It's pretty dead today," he said. "I guess people are playing catch up."

It may have simply been an "off day," he said, adding "I hope it picks up again."

Dr Pepper notes make welcome entrance

In secondary trading on Tuesday, Dr Pepper Snapple Group's $850 million in notes "came in nicely" a day after the bonds were sold in the primary market, a trader said.

"The two-years priced at 90 bps and the bonds were offered at 70 bps today," the trader said of the $400 million in 1.7% notes.

A $450 million tranche of 2.35% three-year notes from the Plano, Texas-based beverage maker priced at 103 bps over Treasuries and were offered at 80 bps, the trader said.

BNP notes move nicely

The large offering of $1 billion of three-year notes from BNP Paribas also saw trading on Tuesday.

The 2.125% notes priced on Monday at 80 bps over Treasuries and were quoted at 73 bps bid, a trader said.

"Those came in really nicely."

Aflac's dealings just ducky

Aflac Inc.'s new 6.90% bonds due 2039 were seen by a trader having tightened up, to around 240 bps on the offered side, from the 250 bps over spread versus Treasuries at which the Columbus, Ga.-based insurer's $400 million issue - upsized from the original $350 million - priced on Monday.

Duke Energy bonds better

Meanwhile, Duke Energy Ohio, Inc.'s $250 million of 2.1% first mortgage bonds due 2013 priced at Treasuries plus 78 bps on Monday and on Tuesday were offered at 67 bps, one trader said.

"So they're real tight."

A second trader pegged the bonds - issued by a subsidiary of Charlotte, N.C.-based power producer Duke Energy Corp. - offered at 76 bps over.

XTO tightens more on Exxon buyout

Away from the new-deal arena, XTO Energy's bonds "tightened dramatically" a day after the announcement the company would be acquired by Exxon Mobil Corp., a trader said. The deal - valued at approximately $40 billion - includes the assumption or repayment of some $10 billion of XTO debt.

XTO's three-year bonds were offered at 55 bps on Tuesday - in contrast to the day before, when "blocks [of bonds] were trading close to 100 bps over the three-year."

However, levels were seen about the same in XTO's 10-year bonds.

"[Monday], they were trading between 50 bps and 55 bps over and today they're trading the same way," the trader said.

Shopping for brand-name debt

Elsewhere, some brand name shopping for corporate debt also is popping up before the end of the year, a trader told Prospect News.

"They want to window-dress at the year end with buying a good name and stocking that in their portfolios." But, as the year draws to a close, buyers are finding less debt on offer.

"If you're a buyer, it's hard to find paper," the trader said. "When someone buys it, they're holding on to it. There's not a lot of it out there and what is, is trading very well. A lot of people don't want to extend themselves too far. They think the yield curve is going to steepen and they don't want to lock themselves in."

Bank, finance spreads tighten

Among the financials, a trader said that banking sector spreads tightened on Tuesday on market reaction to news that Wells Fargo & Co. and Citigroup Inc. plan to repay the funds which they got from the government under the Troubled Asset Relief Program.

"Most banks are at least 5 basis points tighter today," the trader said.

However, at another desk, a trader opined that the banks "kind of did their [tightening on TARP news] thing over the last two weeks, with the news of Bank of America and Citigroup" repaying Uncle Sam his TARP cash.

Asked whether he had seen any movement in Wells Fargo on the news that the San Francisco-based banking giant will follow the lead of B of A, Citi and others in repaying TARP funds, he said: "Not really."

Overall, he said, the market "is squishy, after the run we've had." He said generically speaking things were "unchanged to a little wider."

-Cristal Cody contributed to this report

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