High-grade market quiet; Fannie Mae passes; trading thin in AutoZone bonds

By Cristal Cody and Aleesia Forni

Virginia Beach, Jan. 2 - The high-grade primary market was muted to kick off the new year on Thursday, with no new issues pricing during the session.

"Nothing yet," a market source said. "Pretty quiet day."

The source added that activity should resume in the week ahead.

In other market news, the session saw Fannie Mae report it would not use its Jan. 2 Benchmark Notes announcement date this month.

According to a press release, the company may pass on any scheduled issuance date.

The government-backed mortgage lender is based in Washington, D.C.

Investment-grade bond market activity stayed quiet for much of the first session of the new year with many desks cleared by late afternoon, sources said.

"I think tomorrow is going to be even worse," a trader said. "There's really not much happening. It may be a little better on Monday."

Another trader noted that a "snowstorm hitting the East Cost doesn't bode well for tomorrow."

The first day of the year was spent mostly on typical "administrative" duties, a market source at another desk said.

Investment-grade bond spreads widened slightly over the day.

The Markit CDX North American Investment Grade series 21 index eased 1 basis point to a spread of 63 bps.

"It seems like things are coming back, but [are] not quite back to full force," a trader said.

In the secondary market, little reaction showed in AutoZone, Inc.'s bonds following the ratings upgrade by Moody's Investors Service, according to a trader.

Moody's said it raised the senior ratings to Baa1 from Baa2.

Thin trading was seen in the Memphis-based auto parts and accessories retailer's paper, (Baa1/BBB/BBB), including the 3.125% senior notes due 2023 and 3.7% senior notes due 2022, market sources said.

"Not seeing anything," a trader said. "Only three issues traded and all very odd lots."

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS prices rose on Thursday, according to a market source.

Bank of America Corp.'s CDS costs eased 1 bp to 75 bps bid, 80 bps offered. Citigroup Inc.'s CDS costs were unchanged at 68 bps bid, 73 bps offered. JPMorgan Chase & Co.'s CDS costs eased 1 bp to 66 bps bid, 71 bps offered. Wells Fargo & Co.'s CDS costs widened 1 bp to 38 bps bid, 43 bps offered.

Merrill Lynch's CDS costs eased 1 bp to 77 bps bid, 84 bps offered. Morgan Stanley's CDS costs rose 1 bp to 85 bps bid, 90 bps offered. Goldman Sachs Group, Inc.'s CDS costs ended flat at 91 bps bid, 94 bps offered.

Paul Deckelman contributed to this review.

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