Bank of Montreal adds to list of financials pricing debt; Morgan Stanley, Citi, Comcast firm

By Andrea Heisinger and Cristal Cody

New York, Oct. 26 - Bank of Montreal sold debt on Wednesday following three trades from financial names Tuesday that saw strong demand.

The Canadian issuer sold $2 billion of three-year covered bonds in the Rule 144A and Regulation S market. They followed in the footsteps of Citigroup Inc., Goldman Sachs Group, Inc. and the Royal Bank of Canada, which all tapped the market on Tuesday as a window opened ahead of Wednesday's reconvening of leaders of euro zone countries to talk about the debt crisis.

A source said on Wednesday that financial names were tempted back into the market by spreads that have recently tightened for the sector. Many also just came out of third-quarter earnings blackout.

"The market was fine today, but the whole euro [zone] thing has people nervous," a market source said.

There could be sales on Thursday if the market tone holds overnight and nothing negative comes out of the euro zone summit.

"People want in, but we're hearing away from us that it's going to start getting busier next week and after," a syndicate source said.

Investment-grade bonds were better on the day. The Markit CDX Series 17 North American Investment Grade index firmed 4 basis points to a spread of 126 bps.

Bank and financial paper was "anywhere from 5 to 20 [basis points] better, with Morgan Stanley outperforming," a trader said.

Morgan Stanley's 10-year notes traded 20 bps better on the day.

The new financial paper priced on Tuesday improved also. Citigroup's new 10-year notes firmed 10 bps, and Goldman Sachs' reopened notes due 2021 traded 7 bps tighter.

Bank of Montreal's new notes sold on Wednesday traded 3 bps tighter.

Bank and brokerage credit default swaps costs also were lower on the day.

The telecom sector was mostly better, with bonds trading 5 bps to 10 bps better, a trader said.

Comcast Corp.'s bonds firmed 10 bps on the day.

Sprint Nextel Corp.'s bonds dropped after the company reported lower-than-expected third-quarter earnings.

"They're down anywhere from 1 to 3 points," a trader said.

Overall trading volume fell to less than $12 billion on Wednesday.

Treasuries reversed gains. The yield on the 10-year note climbed 9 bps to 2.2%. The 30-year bond yield rose to 3.22% from 3.13%.

BMO sells covered bonds

Bank of Montreal sold $2 billion of 1.3% three-year covered bonds at mid-swaps plus 50 bps, or Treasuries plus 84.9 bps, a market source said.

The notes (Aaa/AAA) were priced under Rule 144A and Regulation S.

"The books filled quite rapidly on that and were north of $3 billion," a Canadian bond source said. "It was a very strong area for BMO in the U.S. dollar market in the three-year space."

The bookrunners were Barclays Capital Inc., BMO Capital Markets Corp., J.P. Morgan Securities LLC and RBS Securities Inc.

In the secondary market, the notes firmed to 81 bps bid, 77 bps offered, a trader said.

The financial services company is based in Montreal.

RBC's two deals

Royal Bank of Canada gave terms on Wednesday for its two sales priced the previous day.

The bank sold $1.25 billion of three-year senior notes (Aa1/AA-/AA) to yield Treasuries plus 105 bps, according to an FWP filing with the Securities and Exchange Commission.

RBC also priced $750 million of three-year senior floating-rate notes at par to yield Libor plus 70 bps, according to another FWP filing with the SEC.

RBC Capital Markets LLC and Goldman Sachs & Co. were the bookrunners for both trades.

The financial services company is based in Toronto.

Goldman gives terms

Goldman Sachs reopened its issue of 5.25% notes due 2021 (A1/A/A+) to yield Treasuries plus 295 bps, a market source said.

Total issuance is $3.75 billion including $2.75 billion priced on July 22 at 230 bps.

Goldman Sachs & Co. was the bookrunner.

In the secondary market on Wednesday, the 5.25% notes firmed to 288 bps bid, 285 bps offered, a trader said.

The financial services company is based in New York.

Morgan Stanley narrows

Morgan Stanley's 5.5% notes due 2021 were quoted late Wednesday 20 bps tighter at 373 bps bid, 360 bps offered, a trader said.

The notes were quoted on Oct. 20 at 425 bps bid, 415 bps offered.

Morgan Stanley priced the notes on July 21 at 250 bps over Treasuries.

The investment bank is based in New York.

Citi tightens

Citigroup's 4.5% notes due 2022, which priced Tuesday, traded 10 bps tighter in the secondary market on Wednesday at 235 bps bid, 230 bps offered, a trader said.

Citigroup sold $1 billion of the notes (A3/A/A+) to yield 245 bps over Treasuries.

The financial services company is based in New York.

CDS costs decline

Bank and brokerage CDS costs declined on Wednesday, a sign of increased investor confidence in the financial sector, a trader said.

Citi's CDS costs fell 10 bps to 225 bps bid, 235 bps offered. Wells Fargo & Co.'s CDS costs firmed 5 bps to 141 bps bid, 146 bps offered.

On the brokerage side, Goldman Sachs' CDS costs fell 12 bps to 298 bps bid, 308 bps offered. Morgan Stanley's CDS costs dropped 7 bps to 345 bps bid, 355 bps offered.

Sprint falls

Sprint's bonds fell 1 point to 3 points in trading after the company reported better-than-expected earnings and a gain of more customers in the third quarter.

The company's 8.75% bonds due 2032 fell 3 points to 84.00 bid, 85.00 offered in the late afternoon, a trader said.

Sprint is based in Overland Park, Kan.

Comcast better

Comcast's 6.4% bonds due 2040 came in 10 bps to 175 bps bid, 165 bps offered on Wednesday, a trader said.

The bonds (Baa1/BBB+/BBB+) were priced on Feb. 24, 2010 at a spread of 180 bps over Treasuries.

The telecommunications company is based in Philadelphia.

Paul Deckelman contributed to this review

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