Flood of deals forecast; trading light ahead of holiday weekend; Apache narrows in secondary

By Cristal Cody

Tupelo, Miss., Sept. 3 - Little to no activity was seen in the investment-grade primary market, and the secondary market reported extremely light trading volume, sources said.

"Nothing going on. It is dead," a trader said Friday.

Overall investment-grade Trace volume dropped 50% to less than $6 billion, a source said.

But new deals are expected to flood the market in the month ahead.

"We've got a pretty active month in September - estimates of $80, $90 billion in investment grade for September," a source said. "We expect it to be pretty aggressive for new issues."

A strong September is expected to follow the $62 billion of U.S. industrial and financial company investment-grade bond issuance recorded in August.

"When the financial community returns from its summer siesta, a heavy deluge of U.S. corporate investment-grade issuance is poised to take advantage of rock-bottom yields," Ben Garber, economist with Moody's Analytics, Inc., said in a research note. "Last week's remarks from Fed chairman Ben Bernanke posited that central bank purchases of Treasury and agency debt are squeezing investors into comparable securities such as long-term, high-quality corporate bonds."

In secondary trading, Anadarko Petroleum Corp. and other oil and gas names remained active, according to sources.

Apache Corp.'s bonds due 2040 came in slightly after widening the previous day on an oil rig explosion.

The Markit CDX Series 14 North American investment-grade index continued to firm on Friday and ended the day 2 basis points tighter at a spread of 104 bps, according to Markit Group Ltd.

Treasuries slumped as stocks rallied on better-than-expected payroll and employment data on Friday in light trading.

"Treasuries got hit on it," a trader said. "The long bond was down 2 points and is now down a point and a quarter. Everything is trading on low volume."

The markets are closed on Monday in observance of the Labor Day holiday.

The yield on the 10-year note rose 8 bps to 2.71%. The yield on the 30-year bond closed at 3.78%, down from 3.71% the previous day.

Anadarko active

Corporate bonds in the oil and gas sector continued to firm in secondary trading for a third day after reports of manufacturing growth in China and the United States.

Anadarko Petroleum's notes due 2017 were trading higher at 101.25 to 102.00 on Friday, a trader said. The notes were quoted Thursday at 99 7/8 to 100 3/8.

The 6.375% notes (Ba1/BBB-/BBB-) were sold on Aug. 10 at par and at a spread of Treasuries plus 415.6 bps.

The oil and gas exploration and production company is based in the Woodlands, Texas.

Apache comes in

Apache's bonds came in slightly on Friday after widening the previous day.

The 5.1% senior notes due 2040 were seen Friday at 135 bps bid, 137 bps offered. The notes traded early Thursday at 142 bps bid, 137 bps offered, wider from a quote on Wednesday at 138 bps bid, 130 bps offered.

"It looks like they've come in a little bit since yesterday," the trader said.

The bonds widened Thursday afternoon after an oil and gas rig owned by Mariner Energy Inc. exploded off the coast of Louisiana.

Apache said in April that it would buy Houston-based Mariner Energy for $2.7 billion in cash and stock.

Apache, a Houston-based energy company, sold the 5.1% notes on Aug. 17 at a spread of 140 bps over Treasuries.

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