January supply tops $113 billion; Time Warner Cable bonds improve in secondary

By Cristal Cody and Aleesia Forni

Virginia Beach, Jan. 31 - The high-grade primary market closed the week on a quiet note Friday, with no new issues pricing during the session.

In total, $11.4 billion of supply was raised for the week, with the bulk of that pricing on Monday and Tuesday.

The total for the week fell short of earlier estimates of $15 billion to $20 billion of supply predicted for the last week of the month.

However, the month of January saw more than $113 billion of high-grade paper price, beating expectations of $90 billion to $100 billion of supply.

Looking to the week ahead, activity is expected to pick up despite lingering market volatility and concerns over emerging markets.

"It should be fairly busy with some [companies] coming out of [earnings] blackouts," a market source said on Friday.

Investment-grade bond spreads ended moderately better on Friday after opening the session wider, according to market sources.

Time Warner Cable Inc.'s long-dated bonds (Baa2/BBB/BBB) rose on Friday but continue to be volatile in secondary trading following the company's rejection of Charter Communications Inc.'s acquisition offer earlier in January, according to market sources.

Cable bonds under pressure

Time Warner Cable and other cable bonds remain under pressure on potential merger and acquisition activity, according to Barclays analysts Shobhit Gupta and Alex Gennis on Friday.

"The credit's long-dated bond prices have been volatile as a result of both significant interest rate moves and spread volatility following headlines about potential M&A," the analysts said in a note.

Time Warner Cable has six 20-year-plus bonds in the U.S. corporate index with prices that range from 77 to 103.

"The 4.5s have outperformed the 6.75s of 2039 by almost 60 bps since January 2013 in spread terms," the Barclays analysts said. "As a result, even though the former have a higher duration owing to their lower coupon, they outperformed in price terms, dropping 3 [points] less than the 6.75s. The 4.5s now trade at the tightest spread because of their higher recovery in default and better liquidity."

The company's 4.5% senior debentures due 2042 were quoted going out better on Friday at 79 from 77 earlier in the day. Time Warner Cable priced $1.25 billion of the 4.5% debentures due 2042 on Aug. 7, 2012 at 99.439 to yield 4.534%.

Time Warner Cable's 6.75% debentures due 2039 traded higher on the day at 98.19, up from 97 on Thursday, according to a market source. Time Warner Cable sold $1.5 billion of the 6.75% debentures due 2039 on June 24, 2009 at 97.131 to yield 6.98%.

In other trading, Time Warner Cable's 5.5% notes due 2041 were quoted in the secondary market late afternoon at 85.01. The issue priced on Sept. 7, 2011 in a $1.25 billion offering at 98.216 to yield 5.624%.

Time Warner Cable is a broadband communications company based in New York City.

Bank/brokerage CDS costs up

Investment-grade bank and brokerage CDS prices were higher on Friday, according to a market source.

Bank of America Corp.'s CDS costs eased 3 bps to 89 bps bid, 93 bps offered. Citigroup Inc.'s CDS costs rose 3 bps to 93 bps bid, 96 bps offered. JPMorgan Chase & Co.'s CDS costs widened 3 bps to 73 bps bid, 77 bps offered. Wells Fargo & Co.'s CDS costs eased 3 bps to 44 bps bid, 48 bps offered.

Merrill Lynch's CDS costs rose 3 bps to 92 bps bid, 96 bps offered. Morgan Stanley's CDS costs eased 5 bps to 103 bps bid, 107 bps offered. Goldman Sachs Group, Inc.'s CDS widened 6 bps to 105 bps bid, 109 bps offered.

Paul Deckelman contributed to this review.

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