Coming week seen heavy with deals if tone rebounds; financials, new issues trade wider

By Andrea Heisinger and Cristal Cody

New York, Sept. 9 - No investment-grade bond deals were reported to have priced on Friday, which was the only day of the short week to not have any new high-grade paper.

Terms were given for a reopening of notes by Associated Banc-Corp. The notes were sold late Thursday to help repurchase preferred stock sold to the U.S. Treasury under the Troubled Asset Relief Program.

Despite the slow pace in the primary on Friday, there was a hefty sum of new bonds sold during the week totaling more than $17 billion as of early Friday. This by far surpassed the $10 billion amount that was predicted for the week following the long Labor Day holiday weekend.

There's even more expected for the coming week, sources said, as there is a full week to work with and record-low yields persist.

"It should be pretty heavy Monday, Tuesday and Wednesday," a syndicate source said. "It's going to be frontloaded."

There is another $20 billion in supply expected for the coming week, although the tone suffered at the close on Friday as the Dow Jones industrial average was down more than 300 points.

"We were on multiple calls today," the source said. "People are eager to get out in the market."

Some of those potential issuers were getting nervous as the stock market sank, but the tone could rebound by the open on Monday.

"If they stand down Monday then they'll just all cram in on Tuesday," a market source said.

The weaker sentiment continued in the secondary market on Friday. The Markit CDX Series 16 North American high-grade index eased 7 basis points to a spread of 132 bps.

Bonds overall traded wider on the day. Financial paper was seen 10 bps to 20 bps wider, a trader said.

Bank of America Corp.'s 5% notes due 2020 widened 20 bps to 380 bps bid, 370 bps offered.

"Things picked up a little this morning and then died out around noon, a typical Friday," the trader said. "New issuance is supposed to pick up again next week, but aside from that everybody is just waiting to see what happens with Greece this weekend."

Overall trading volume dropped to about $9 billion on Friday.

In other trading, the recent new issues from Toyota Motor Credit Corp. and American International Group, Inc. also widened.

"Everything's definitely much weaker," a trader said.

Telecommunications paper widened 5 bps to 10 bps in trading, including AT&T Inc.

Treasuries rallied on the market concerns in the euro zone. The benchmark 10-year Treasury note yield fell 6 bps to 1.91% from 1.97%. The yield on the 30-year bond also fell to 3.25% from 3.31%.

Associated Bank's reopening

Associated Banc-Corp reopened its issue of 5.125% notes due 2016 to add $130 million, according to an FWP filing with the Securities and Exchange Commission.

The notes (Baa1/BBB-/BBB-) were priced at a spread of Treasuries plus 315 bps.

Total issuance is $430 million, including $300 million priced on March 21 at 320 bps over Treasuries.

Goldman Sachs & Co. was the bookrunner.

Proceeds are being used to help repay the balance of $262.5 billion in fixed-rate cumulative perpetual preferred stock sold to the U.S. Treasury under the Troubled Asset Relief Program.

Associated also sold $65 million of perpetual preferred stock on Wednesday at par of $25.00.

The bank holding company is based in Green Bay, Wis.

EIB gives terms

European Investment Bank sold $3 billion of 1.25% five-year notes (Aaa/AAA/AAA) to yield Treasuries plus 36.05 bps, according to an FWP filing with the SEC.

Bookrunners were Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and UBS Securities LLC.

The funding arm of the European Union is based in Kirchberg, Luxembourg.

Toyota Motor Credit weaker

Toyota Motor Credit's notes ended the week weaker in secondary trading, a source said.

The company priced $2.5 billion of notes (Aa3/AA-) in two tranches on Thursday.

The $1.5 billion of notes due 2016 were seen flat at 125 bps bid, 122 bps offered. The notes priced at a spread of Treasuries plus 125 bps.

The $1 billion of notes due 2021 widened to 150 bps bid, 145 bps offered from the issue price of 145 bps over Treasuries.

The U.S. financing arm of Toyota Financial Services is based in Torrance, Calif.

AIG notes widen

American International Group's $2 billion of notes (Baa1/A-) sold in two parts on Thursday widened along with other bonds on Friday, a trader said.

The $1.2 billion of 4.25% notes due 2014, which priced at a spread of Treasuries plus 412.5 bps, widened to 425 bps bid, 420 bps offered in secondary trading.

The second tranche of 4.875% notes due 2016 widened to 435 bps bid, 430 bps offered. The notes were sold at a spread of 425 bps over Treasuries.

AIG is based in New York City.

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