JPMorgan Chase, Toyota Motor Credit price, likely end issuance for week; Wal-Mart better on earnings

By Andrea Heisinger and Paul Deckelman

New York, Aug. 14 - The tone of the investment-grade primary market was negative again Thursday on economic headlines, although it didn't stop JPMorgan Chase & Co. and Toyota Motor Credit Corp. from pricing new issues.

"I think, again, people are resistant to the market [conditions]," a source said. "If they need to get something done they're going to do it."

News of consumer prices rising again competed with some positivity from Wal-Mart Stores Inc., which showed a bump in earnings in the second quarter, and saw its bonds tighten in trading.

In the investment-grade secondary market Thursday, advancing issues led decliners by a nearly seven-to-five ratio, while overall market activity, reflected in dollar volumes, rose about 3% from Wednesday's pace.

Spreads in general were seen a little wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue tightened by 4 basis points to 3.89%.

JPMorgan prices preferreds

The largest new issue of the day came from JPMorgan Chase, pricing an upsized $1.6 billion, or 64 million shares, of non-cumulative preferred stock.

The 8.625% perpetual shares priced at par of $25 and are callable after five years on dividend payment dates.

The size of the issue was increased from the initial, standard $300 million it was announced at Wednesday.

Price talk was whispered at 8.75% Wednesday, but had tightened to the 8.625% area Thursday.

There is an over-allotment option of $240 million on the issue, to be used within 30 days.

J.P. Morgan Securities Inc. was bookrunner.

Also pricing Thursday was an issue from Toyota Motor Credit.

The financing arm of the company priced $130 million of one-year medium-term floating-rate notes at par to yield one-month Libor plus 2 bps.

Agent was Banc of America Securities LLC.

Toyota also announced that its issue of $75 million in two-year floaters from Wednesday had been added to, now totaling $325 million.

The medium-term notes are priced at par to yield three-month Libor plus 10 bps.

Morgan Stanley & Co., Inc. was agent.

Issuance slows on negative headlines

The primary market saw issuance decrease Thursday after the second consecutive day of negative economic data hit headlines.

News came out that the July's Consumer Price Index, though lower in its monthly ascent at 0.8% than June's 1.1% increase, was 5.6% higher than a year ago.

This followed the previous day's data that showed July's retail sales were the weakest in five months.

"I think predictions that there wouldn't be much today came true," a market source said. "Any issuers that were on the fence probably stepped back on the day's news."

On the other hand, the investment-grade market saw positive news from Wal-Mart, which reported that earnings rose 17% over the previous year's second quarter numbers.

The company also raised its outlook for the rest of the year.

"I think any time you have good news from a name like Wal-Mart, it's going to help things," a source said.

Even if market conditions hold overnight, it's unlikely there will be any issuance Friday.

Some of the moderate backlog that had built in the last couple of weeks was already issued this week, a source said.

Others, like one solid issuer that was looking at pricing Wednesday but ultimately held off, will be waiting until the right window opens.

"They just weren't ready," a source associated with the deal said.

AIG, Citi deals hold financials focus

A trader said that there was "a lot of focus" on the new American International Group Inc. offering of $3.25 billion of 8¼% notes due 2018, which had come to market on Wednesday at a spread of 432.8 bps. He saw the bonds trading in the neighborhood of 433 bps bid, 427 bps offered.

He saw the new Citigroup Inc. 6.50% notes due 2013 trading around 335 bps bid, 332 bps offered. The New York-based banking giant had priced $3 billion of the notes on Tuesday at a spread of 337.5 bps.

He also saw "very little" activity in Met Life's $1.03 billion offering of remarketed 6.817% notes due 2018, which priced Tuesday at 284 bps over.

In other financial names, AIG's established 5.45% notes due 2017 were seen having widened out by nearly 50 bps to around the 415 bps mark, while Wachovia Bank's 5.60% notes due 2016 were about 20 bps wider at that same level.

Wal-Mart tightens on results

Outside the financials, a trader said Wal-Mart Stores Inc.'s bonds were about 3 bps to 5 bps tighter pretty much across the board after the Bentonville, Ark.-based retailing giant reported favorable earnings. He saw Wal-Mart's 5.25% bonds due 2035 trading at 180 bps bid, 175 bps offered, while its 6.20% paper due 2038 was bid at 180 bps.

Another market source saw its 6 7/8% notes due 2009 at 88 bps bid, while also quoting the 5.25s at 173 bps bid.

Wal-Mart said that it earned $3.45 billion in the fiscal second quarter ended July 31, up 17% from $2.95 billion a year earlier. Profit from continuing operations rose 9.3% to $3.39 billion, while net sales gained 10% to $101.6 billion.

Wal-Mart upped its full-year earnings guidance to $3.43 to $3.50 per share for the year, versus its previous full-year forecast, issued in February, of $3.30 to $3.43 per share.

However, it also cautioned that sales growth in the current quarter would slow, as consumers remain under economic pressure. It projected that earnings for the current quarter should be from 73 cents to 76 cents per share, slightly below analysts' consensus expectations of around 76 cents a share.

New Ingersoll deal trades sluggishly

The second trader saw Ingersoll-Rand Global Holding Co. Ltd.'s new 6% notes due 2013 at 292 bps bid, 286 bps offered, versus the 287.5 bps spread at which the company priced $600 million of the bonds as part of a three-tranche offering Tuesday.

He also saw Ingersoll's new 6.875% notes due 2018 at 300 bps bid, 298 bps offered, right on top of the 300 bps spread at which it priced $750 million of the bonds Tuesday.

Bank CDS costs widen out

A trader who watches the credit-default swaps market said debt-protection costs for major banks were in a narrow range of 1 bp tighter to 3 bps wider.

He also saw the CDS costs of large brokerages 5 bps wider to unchanged on the session.

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