Week of woes sees $5.65 billion of new deals, ends on uncertain note; CIT widens, Wachovia tightens

By Andrea Heisinger

New York, Oct. 10 - The investment-grade primary market was mostly quiet Friday before its early close. After a rocky start to the day, things improved slightly, but not enough to get deals done.

The secondary saw little action to end the week that was mostly dominated by financial names.

By the time the market closed early Friday, there was some optimism about the prospect for new issues. There was also uncertainty over when those deals would actually price.

"There are potentially a couple of deals that could come through," a source said late morning.

"I'm working on a couple of things, but it's hard to tell with the early close."

It did not appear that those deals came to the market Friday, although it could not be confirmed at press time.

When asked what the market was looking like, the source said it was "really ugly."

The day's news was mixed, with the stock market see-sawing throughout the day after a steep drop after the open. The world's markets also continued to worsen.

This news made the weekend's G7 meeting in Washington more urgent. Finance ministers will meet to try to come up with a universal solution to stop the spread of the financial crisis.

The United States and Britain were said to be working on similar programs that included injections of government funding into banks and guarantees on loans between banks. All of this is intended to unfreeze credit markets.

Week's deals top $5 billion

The week saw about $5.65 billion in new issues, the bulk of which came from a $4 billion, three-tranche deal from International Business Machines Corp. that priced Thursday.

The remainder of the issuance was heavy on utilities, which sources said are normally higher rated and considered safe during market conditions like those seen currently.

Detroit Edison Co. and Southern California Edison Co. each priced deals late Wednesday.

And Export Development Canada also priced an issue.

It's unclear how much issuance there will be for the coming week, a source said.

"It totally depends on what happens this weekend," he said, referring to the summit of world leaders meeting in Washington, D.C., Saturday to talk about a solution to the world's deepening financial crisis.

"I don't know what they would have to do to get things moving again," he said.

Another source commented that sour market conditions don't seem to be keeping companies completely away from the market.

"It's been the same for a while," the source said. "If they can pay and need a deal done, they'll do it."

GE reports Q3 drop

General Electric Co. announced earnings Friday of $4.5 billion for the third quarter, with a 12% drop in continued operations revenue.

The company had predicted it was going to take losses and has recently tried to remedy this with a $3 billion investment from Berkshire Hathaway.

The company has taken most of its losses through decreases in its financial services earnings in its General Electric Capital Corp. arm.

GE bonds mostly unchanged

Outstanding bonds from General Electric were seen mostly unchanged after the company's earnings announcement Friday morning.

By late morning, a trader said he had not seen any movement in the company's bonds.

Morgan Stanley most traded

Morgan Stanley & Co. Inc. remained the top-traded bond by volume Friday afternoon on continued doubt about the health of investment banks and the threat of a rate cut from Moody's Investors Service.

The company's 6.625% notes due 2018 were seen as the top traded, with its 3.875% bonds due 2009 the second most traded.

CIT, Wachovia biggest movers

Lender and financial company CIT Group Inc. was seen widening significantly by the end of the day Friday, with its 5.6% notes due 2011 going out more than 450 basis points.

Another financial name, Wachovia, was seen doing the opposite on news that Citigroup would not challenge its merger with Wells Fargo.

The financial services company's 5.8% notes due 2011 came in more than 420 bps on the news.

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