San Diego G&E prices $250 million 30-year bonds; upcoming Fed meeting deters issuers

By Andrea Heisinger

Omaha, Sept. 17 - Issuers balked at pricing new issues Monday ahead of Tuesday's Federal Open Market Committee meeting, sources said.

San Diego Gas & Electric Co. brought was the only new deal with $250 million in 30-year 6.125% first mortgage bonds priced at a spread of Treasuries plus 142 basis points.

The bonds have a price of 99.688 with a yield of 6.148%.

One trader said potential issuers would do best to wait until after Tuesday's meeting.

"The Treasury market's not going to change much after the Fed, I don't think, but you never know," one trader said. "I don't know how much it will matter."

There were predictions last week that Monday's volume would be healthy in advance of the meeting, and again on Wednesday and Thursday.

"It's just been a quiet day, and kind of a non-event in my mind," said one market source. "It will be another waste of a day tomorrow."

Another source said Tuesday would be "very quiet."

"I don't think anything's going to make a move," the source said. "Everyone's going to wait until after the Fed meeting tomorrow."

Sources said unless there is a large change in rates announced after the meeting, it won't affect the flow of new issues.

"That [meeting] is regulating supply right now," a market source said.

New investment-grade issues for the first two weeks of September totaled more than $40 billion.

Secondary also quiet

In the secondary market, a trader said that things overall were "very quiet," ahead of Tuesday's much-anticipated meeting of the Federal Reserve's policy-setting body, which is widely expected to cut its key interest rate by at least 25 basis points, or perhaps more, to calm financial markets scared of a liquidity crunch.

He noted the pricing of the San Diego Gas & Electric 30-year deal at 142 bps over Treasuries, "which is pretty good compared to where things have been pricing out," but said that he had seen no aftermarket activity in the new bonds. With a relatively small-sized deal, he added, "you're not going to see a lot in secondary."

Another trader also said that the new bonds weren't seen trading around after having priced.

Florida Power gains

On the other hand, the first trader said, last week's new issue from Florida Power Corp. seemed to have firmed smartly, with the more liquid tranche of the two part offering, its $500 million of 6.35% bonds due 2037 having narrowed to 154 bps over from the 160 bps spread at their pricing on Thursday, "so it's a good follow-through," basically.

"The market feels pretty good in terms of tone," he said, with spreads in the banking and finance sector "a little bit better today," in apparent anticipation of the expected Fed rate cut, but he reiterated that it was "very quiet" ahead of the central bank's policy meeting.

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