Primary awaits mid-week market stability; secondary sees minimal activity, AIG bonds top trading

By Andrea Heisinger

New York, Nov. 10 - The investment-grade primary market was a "non event" Monday, a source said, as the early market close and continued negative economic headlines started the week.

"It was really like we lost two days this week," the source said.

The secondary market was essentially shut down, a trader said, with very little activity.

Issuers wait for mid-week

Potential issuers are waiting to feel out the market Wednesday morning and hoping conditions are good enough to price a deal, a source said.

"It's the same as last week," he said. "It's pretty weak, but that doesn't mean no one will issue."

The previous week's market conditions were also weak, but not enough to discourage a handful of issuers, including Altria Group Inc. with its $6 billion deal.

"We're probably not going to see another big one like that," a source said, "but there are plenty of issuers waiting."

The week started with another government cash infusion into American International Group Inc., which "didn't help things," according to one market source.

The stock market was up in the morning but fell as reality set in and more bad news came out.

It also brought more company bankruptcy filings and massive layoffs.

The market source was not optimistic about the economy but was confident issuers will still come to the market.

"[New issue] concessions have come down a little," he said. "Companies are looking at that stuff."

Secondary trading low

The investment-grade secondary market was barely open Monday, a trader said, commenting that the phone did not ring all morning.

"There's absolutely nothing going on today," he said. "Everyone's gone home. It's absolutely dead."

There were no new levels on recent issues including Friday's reopening of Diageo Capital plc notes or Thursday's issue from Atlantic City Electric Co.

"Nothing's trading around," he said.

AIG tops trading

AIG's 5.85% bonds due 2018 were seen at the top of the trading list Monday afternoon after its double punch of bad news.

The insurer received more government aid in the form of a $40 billion purchase of the company's preferred stock. This brings the total amount pumped into the company to $150 billion, including the previous bailout.

The company also announced a $24.47 billion loss Monday.

Other financially troubled names were at the top of the trading list. These included Citigroup Inc., whose 8.4% perpetual preferreds were seen second in trading volume.

SLM Corp. bonds were also near the top of the most-traded list.

AIG bonds move around

A handful of AIG bonds were seen moving in round-lot trading Monday, a trader said.

The 5.45% notes due 2011 rose to 76 compared to 74 on Thursday. The 5.75% notes due 2011were also at 76, up from 69.875 on Thursday when the last round-lot trade took place.

The trader said the 5.3% notes due 2012 were unchanged at 73.

Bank, broker mixed

Bank credit-default swaps were 4 to 9 basis points tighter Monday afternoon, a trader said.

Broker names were 5 to 10 bps wider. Goldman Sachs was 10 bps wider at 317 bps bid, 327 bps offered.

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