Scotiabank, Toyota Motor Credit tap market to end week; Citigroup, Goldman paper firms

By Andrea Heisinger and Cristal Cody

New York, Jan. 20 - Bank of Nova Scotia issued covered bonds, and Toyota Motor Credit Corp. continued its recent string of issuance in the high-grade bond market with $205 million of one-year floaters on Friday.

Scotiabank priced $2.5 billion of five-year covered bonds, following the lead of UBS AG, which priced the same kind of debt on Thursday in a $1.5 billion deal.

A market source said that Federal Express sold $250.1 million of pass-through certificates due 2018. The debt was sold by Deutsche Bank Securities Inc. Terms of the deal weren't available at press time on Friday.

Although the coming week has a full five days of trading, it's not expected to be much busier than the past holiday-shortened four-day week.

"There's the FOMC meeting on Wednesday, so I would say Monday and Tuesday are going to be modestly active," a syndicate source said, referring to the Federal Reserve's Federal Open Market Committee meeting.

There was roughly $12 billion of new bonds priced in the past week, most of which was sold in a rush on Thursday.

One source estimated between $10 billion and $15 billion in new debt in the pipeline, but others were more conservative.

"I think that's too high," a market source said. "I'm thinking more on the lower end, like $5 billion to $10 billion."

High-grade bond spreads were about 2 basis points to 3 bps better on Friday, a day after Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and UBS AG came to the market.

"Depending on the deal, new issuance is definitely outperforming," a source said. "Financials are doing pretty well. The most intriguing deal of the week was the Citi long-term issuance. It's pretty rare to see banks put out 30-year notes these days."

Citigroup's bonds traded stronger on Friday on high demand for the long end of the curve on lack of supply.

Bank of America's notes underperformed on the day.

"That reflects investor hesitancy in regard to the name," a source said. "Unlike the other deals by Goldman and Citi that seemed to tighten, that's languishing a little bit and still wrapped around new issue pricing."

The Markit CDX Series 17 North American investment-grade index firmed 2 bps to a spread of 106 bps on Friday.

"We had a pretty good tone in the market throughout the day, particularly this afternoon as dealers were looking to reload inventories after the new issues over the week," a bond source said.

Overall trading volume dipped to about $14 billion from $16 billion the previous day.

Stronger home sales data helped pressure government bonds. The benchmark 10-year Treasury note yield rose 4 bps to 2.02%. The 30-year bond yield climbed 6 bps to 3.1%.

Scotiabank's covered bonds

The Bank of Nova Scotia sold $2.5 billion of 1.95% five-year covered bonds via Rule 144A and Regulation S, a market source said.

The bonds (Aaa/AAA) were sold at a spread of mid-swaps plus 177 bps, or Treasuries plus 109.1 bps.

Bank of America Merrill Lynch, Barclays Capital Inc., Morgan Stanley & Co., LLC, Scotia Capital (USA) Inc. and UBS Securities LLC were the bookrunners.

The bank was last in the market with $2.75 billion of notes in three parts on Jan. 5.

The Canadian bank is based in Halifax, N.S.

Toyota sells floaters

Toyota Motor Credit priced $205 million of one-year floating-rate notes (Aa3/AA-) at par to yield Libor plus 20 bps, according to an FWP filing with the Securities and Exchange Commission.

Bank of America Merrill Lynch was the agent.

The U.S. funding arm of Toyota is based in Torrance, Calif.

Citigroup's long bond firms

Citigroup's 5.875% 30-year senior bonds (A3/A-/A) traded better on Friday at 290 bps bid, a source said.

"Citi bonds are doing pretty well," the source said.

Citigroup sold $1 billion of the bonds at a spread of Treasuries plus 297 bps on Thursday.

The financial services company is based in New York City.

Goldman notes better

Goldman Sachs' new 5.75% notes due 2022 continue to hold stronger in trading, a bond source said.

The notes had firmed 15 bps in early trading after the deal priced and were seen trading at 365 bps bid late Friday.

Goldman Sachs Group sold $4.25 billion of the 10-year notes (A1/A-/A) at a spread of Treasuries plus 380 bps on Thursday.

The financial services company is based in New York City.

Bank of America languishes

Bank of America's 5.7% notes due 2022 traded weaker at 380 bps bid, a source said.

"Bank of America is underperforming a little bit," the source said.

Bank of America sold $1.5 billion of the 10-year debt (Baa1/A/A-) on Thursday at a spread of Treasuries plus 378 bps.

The financial services company is based in Charlotte, N.C.

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