Companies stand down despite rally in equities; AT&T bonds mixed on T-Mobile deal collapse

By Andrea Heisinger and Cristal Cody

New York, Dec. 20 - The high-grade bond market quieted further on Tuesday from the previous day's one deal.

There is no new issuance expected for the remainder of the year as "desks have basically shut down," a market source said.

"A lot of people are out starting tomorrow and it's going to be completely dead," he said. "Everybody's doing year-end stuff."

There was still some activity in trading, a syndicate source said, but the primary was inactive despite the day's rally in equities.

"If it stays like this, some people who have been standing down are looking at January," the syndicate source said. "Some of them have been holding for two or three weeks, so if they're willing to pay concessions, they'll go."

Many funds and other potential investors are done with the bond market for the year, which also is leading to the lack of new deals, he added.

Overall trading volume rose about $1.5 billion to $8 billion on Tuesday from the previous day.

In the secondary market, corporate bonds traded mostly better. The Markit CDX Series 17 North American investment-grade index firmed 5 basis points to a spread of 127 bps.

Financials were mixed but active, sources said.

Investment-grade bank and brokerage credit default swaps costs fell on improved sentiment about the financial sector.

Bank paper CDS costs were down 5 bps to 20 bps. Bank of America's CDS costs were 20 bps lower at 400 bps bid, 415 bps offered. JP Morgan's CDS costs traded 5 bps lower at 140 bps bid, 150 bps offered.

Brokerage company paper CDS costs traded 15 bps lower across the board. Merrill Lynch's CDS costs were down at 460 bps bid, 475 bps offered. Goldman Sachs' was quoted at 315 bps bid, 325 bps offered. Morgan Stanley's CDS costs also were lower at 415 bps, 425 bps offered.

AT&T, Inc.'s bonds were mixed in trading on Tuesday, a day after the company nixed its takeover attempt for T-Mobile, with short-dated notes firmer and long-dated bonds weaker on the day, one source said.

Government bonds fell, pushing yields up across the curve after a successful Spanish bond auction and on positive U.S. housing data.

The 10-year benchmark Treasury note yield rose to 1.92% from 1.81%. The 30-year bond yield climbed 14 bps to 2.93%.

AT&T short-dated notes firm

AT&T's 5.8% notes due 2019 firmed to 112 bps in trading on Tuesday, about 8 bps tighter from the start of the week, a source said.

The longer-dated debt was wider, with the 6.55% bonds due 2039 out about 6 bps to 200 bps, the source said.

AT&T withdrew its offer for T-Mobile after months of trying to convince regulators. The takeover would have made AT&T the largest wireless company.

The telecommunications company is based in Dallas.

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