High-grade issuance active; smaller deals expected in coming week; Sprint bonds stronger

By Andrea Heisinger and Cristal Cody

New York, March 11 - The high-grade bond market finished the week ahead of issuance predictions, sources said Friday.

There was more than $26.27 billion of new deals, according to Prospect News data late Friday.

One source admitted that the week turned out busier than expected, boosted by good yields, high investor interest and several large deals coming to the market amid an optimistic tone.

"I think [issuance] surprised everybody," a syndicate source said.

Another source at a large syndicate desk was more cautious about the coming week, saying that they "possibly" would have something off the bat Monday.

He also noted that his desk had "nothing fantastic" for new deals coming up.

Others had more optimism about volume, saying that a lot of the major desks had four deals or more on their calendars coming up.

One major syndicate desk was saying they were going to have a double-digit amount of deals for the coming week, although others said they weren't sure that was possible based on others having only four to six new deals.

"I think [the week] should be pretty OK if the tone holds," one source said. "We should have two to three [deals], across the board [for sectors]."

Estimates for dollar amounts ranged from $15 billion to $20 billion and a more conservative $12 billion to $17 billion.

"It's definitely not going to be as busy as this week," said a market source.

"I think everyone's saying they have four to five trades. It's definitely going to be steady, and we have things coming. There just won't be any multi-billion [dollar], multi-tranche deals."

Trading volume declines

Overall investment-grade Trace volume dropped about 15% to less than $11 billion for the day, a market source said.

In the secondary market, energy bonds "opened 3 to 5 [bps] wider and are closing a couple [basis points] better," a trader said.

Bank and financial paper continued to widen early Friday but made some gains closing out, a trader said.

"It's better on the day by 1 to 2 basis points," the trader said. "Looks like things reversed the course from where they opened this morning a couple of basis points wider."

The Markit CDX Series 15 North American investment-grade index firmed 1 bp to a spread of 86 bps, according to Markit Group Ltd.

Also in trading, the European Investment Bank's new notes were mixed, while Cisco Systems, Inc.'s senior notes it sold on Wednesday were stronger, a trader said.

One standout of the day was Sprint Nextel Corp.'s bonds, a source said.

The company's bonds traded up earlier in the week on the news it may buy competitor T-Mobile USA.

"Sprint paper is closing the day up about a point and a half on no news," the trader said.

Sprint's 8.75% bonds due 2032 closed up at 110.5 bid, 111.5 offered on Friday, compared to 108.25, 109.00 on Tuesday.

Treasuries fell on the long end of the curve on Friday as the market digested the week's auctions of $66 billion of debt. The 10-year note yield ended at 3.4% from 3.36% the previous day. The 30-year bond yield rose 5 bps to 4.55%.

EIB mixed

The European Investment Bank's $3.5 billion of 2.5% five-year notes it sold at Treasuries plus 33.4 bps were mixed in secondary trading, a source said.

The notes were seen at 35 bps bid, 33 bps offered.

The funding arm of the European Union is based in Kirchberg, Luxembourg.

Cisco Systems notes firm

Cisco Systems' senior notes (A1/A+/A+) firmed in trading on Friday, a trader said.

The 1.625% notes due March 14, 2014, which priced at Treasuries plus 50 bps, firmed to 44 bps bid, 42 bps offered, a trader said.

The tranche of 3.15% notes due March 14, 2017 narrowed to 101 bps bid, 99 bps offered from where it priced at Treasuries plus 105 bps.

Based in San Jose, Calif., Cisco produces internet protocol-based networking and other communications and information technology products.

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