GE Capital lone issuer; new issue volume light; energy debt firms; Telefonica bonds widen

By Cristal Cody and Sheri Kasprzak

New York, Feb. 8 - General Electric Capital Corp. sold $2 billion of 5.3% subordinated notes due Feb. 11, 2021 late on Tuesday, a source said.

New issue action for the high-grade market remained light for most of the day, said market insiders, as the world's largest steel producer indicated that its net debt will increase sharply in the coming year as it funds a $5 billion capital expenditure budget.

"It's been really quiet," said one sellside source reached during the session.

"There's not a lot of new stuff expected this week. There might be a few things coming later, but it's been really quiet."

Financial paper traded 5 basis points tighter on Tuesday in the secondary market, while General Electric Capital's new deal also firmed, traders said.

Unilever Capital Corp.'s new debt firmed in trading, but Telefonica Emisiones SAU's bonds widened, traders said.

Trading volume jumped on Tuesday, and bonds mostly were "3 to 5 better across all investment-grade today," a trader said.

Overall investment-grade Trace volume climbed 45% to more than $16 billion, a source said.

Oil prices fell early Tuesday, giving a boost to energy bonds, before rallying later in the day on service disruptions. Energy bonds ended the day "2 to 3 basis points better," a trader said.

Cenovus Energy Inc.'s bonds also traded tighter, sources said.

The Markit CDX Series 14 North American investment-grade index dipped 1 bp to a spread of 79 bps, according to Markit Group Ltd.

Treasuries started the day down and ended Tuesday cheaper, sending yields higher across the curve. There was a tepid three-year note auction Tuesday, and positive data contributed to a stronger economic picture.

The 10-year Treasury note rose 11 bps to 3.74% from 3.63%. The 30-year bond yield added 6 bps to end at 4.76%.

GE Capital prices

General Electric Capital sold $2 billion of 5.3% subordinated notes due Feb. 11, 2021 at 99.647 to yield 5.346% on Tuesday, a source said.

The notes (Aa3/AA/) priced at 162.5 bps over Treasuries.

Barclays Capital Inc., Citigroup Global Markets Inc. and Goldman Sachs & Co. were the managers.

In the secondary market, an offer of 151 bps was seen for the notes, a trader said.

Fairfield, Conn.-based General Electric Capital is the financing arm of General Electric Co.

ArcelorMittal debt to rise

Meanwhile, ArcelorMittal (Baa3/BBB-/) - the Luxemburg-based steelmaker and parent to Chicago's ArcelorMittal USA, the nation's largest steel manufacturer - said Tuesday that its net debt will increase sharply to fund its 2011 capex budget, which is estimated at $5 billion.

"During the quarter, Arcelor spun off its stainless steel business, which coupled with strong iron ore prices and soft steel prices negatively affected the bottom line for the quarter," said Jodie Laurie, corporate credit analyst with Janney Montgomery Scott LLC on Tuesday.

"Going forward, we expect to see the company directly benefit from progress within the construction and automotive industries. Although Arcelor holds enough cash on its balance sheet to meet short-term debt requirements, the company indicated its net debt will increase 'sharply' to fund a $5 billion 2011 capex budget."

Telefonica Emisiones widens

The new debt that Telefonica Emisiones sold on Monday widened in the secondary market, a trader said.

The company sold $2.75 billion of notes (Baa1/A-/A-), including 3.992% notes due 2016 at a spread of Treasuries plus 173 bps. Those notes widened to 178 bps bid, 176 bps offered.

The second tranche of 5.462% 10-year notes priced at a spread of 183 bps over Treasuries. The notes moved out to 189 bps bid, 184 bps offered.

The communications group is based in Madrid.

Unilever Capital firms

Unilever Capital's $1.5 billion of senior notes (A1/A+/A+) priced Monday were stronger in secondary trading.

The 2.75% notes due 2016 priced at a spread of Treasuries plus 50 bps and firmed to 47 bps bid, 45 bps offered on Tuesday, a trader said.

The tranche of 4.25% notes due 2021 traded at 64 bps bid, 61 bps offered, tighter than where it priced at 65 bps over Treasuries.

The multi-national maker of consumer products is based in Englewood Cliffs, N.J.

Cenovus better

Cenovus Energy's notes firmed in trading the past couple of days as oil prices fell.

The Calgary, Alta.-based oil company's 5.7% notes due 2019 were offered at 58 bps on Tuesday, in from 61 bps seen on Monday, a trader said.

Another trader saw the notes at 65 bps bid, 60 bps offered "yesterday afternoon in the Street."

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