Disney, Kennametal sell as primary digests recent crop of paper; HSBC firms 30 bps; AT&T flat

By Andrea Heisinger and Cristal Cody

New York, Feb. 9 - There was a smaller crop of new issues in the investment-grade bond market on Thursday. Walt Disney Co. and Kennametal, Inc. made up the calendar.

There were also a couple of deals in emerging markets.

Disney had the largest offering of the day at $1.4 billion. The five- and 10-year notes priced at the tight end of talk.

There was also a $300 million sale of 10-year paper from Kennametal, which has no outstanding bonds.

The market tone wasn't great the previous day in spite of the many deals that priced.

"Things looked about the same, really," a source said of the primary market tone on Thursday. "We were just watching how everything [was] absorbed from yesterday ... watching trading."

The slowdown was needed because "people were probably just trying to digest everything from the last two days," a syndicate source said.

Headlines in the morning over mortgages and settlements being paid out by big banks could have dropped the market tone, but not majorly, the source said.

Recent deals have all performed well; the major ones priced in February are all moving tighter in the secondary, a source said.

"We're seeing 15 [bps], 25[bps], a pretty wide range," the source said. "It's crazy. As soon as something's free to trade, it's immediately tighter. Everything's compressing."

Even the new paper recently priced by Bank of America Corp. and Wells Fargo & Co. moved tighter, and HSBC USA Inc.'s $1.5 billion of 2.375% three-year paper priced on Wednesday is about 30 basis points better, sources said.

Bank and financial paper overall traded 5 bps to 10 bps wider on the day, a trader said.

Kennametal's notes due 2022 traded about 8 bps tighter.

Disney's five-year notes firmed about 4 bps, while the 10-year tranche traded wrapped around issue price, a trader said.

AT&T Inc.'s new global notes traded "off the tights" and were seen wrapped around issuance on Thursday, a trader said.

The telecom sector was mostly flat.

"AT&T and Verizon both unchanged on the day," the trader said.

Bonds were mixed in trading, but the day had a "positive tone to the market," a trader said.

The Markit CDX Series 17 North American Investment Grade index eased 1 bp to a spread of 96 bps.

Treasuries fell on hope for a Greek debt resolution. The 10-year note yield rose to 2.04% from 1.98%. The 30-year bond yield closed up 3 bps at 3.18%.

Disney bonds price tight

Disney sold $1.4 billion of senior notes (A2/A/A) in two tranches, a market source said.

There was about $2.6 billion of demand for the deal, a source said.

The $1 billion of 1.125% five-year paper priced at a spread of 47 bps over Treasuries. They were sold at the tight end of guidance in the 50 bps area.

There was also a $400 million tranche of 2.55% 10-year notes sold at Treasuries plus 62 bps. These notes also priced at the tight end of talk in the 65 bps area.

The bookrunners were BNP Paribas Securities Corp., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes including terming out a portion of the company's outstanding commercial paper.

Disney was last in the market with a $1.6 billion issue of notes in three- and 30-year maturities on Nov. 29.

In secondary trading, the notes due 2017 firmed to 44 bps bid, 40 bps offered, a trader said.

The tranche of notes due 2022 traded flat at 62 bps bid, 57 bps offered.

The entertainment and media company is based in Burbank, Calif.

Kennametal's 10-year

Kennametal sold $300 million of 3.875% 10-year senior notes (Baa2/BBB/BBB) to yield Treasuries plus 187.5 bps, a market source said.

The notes were sold tighter than whispers in the low-to-mid 200 bps, a syndicate source said.

Bank of America Merrill Lynch, JPMorgan and RBS Securities were the bookrunners.

Proceeds will be used to repay 7.2% senior notes due June 2012. Pending that, they may be used to repay debt under a credit facility or used for general corporate purposes.

Kennametal's new notes due 2022 firmed to 179 bps bid, 175 bps offered in the secondary market, a trader said.

The supplier of tooling, engineered components and materials used in production processes is based in Latrobe, Pa.

AT&T gives terms

AT&T gave the terms of its $3 billion issue of global notes (A2/A-/A) in an FWP filing with the Securities and Exchange Commission on Thursday. The deal priced in three maturities on Wednesday.

A $1 billion tranche of 0.875% three-year paper priced at a spread of Treasuries plus 55 bps. This was at the tight end of guidance in the 60 bps area.

There was a $1 billion tranche of 1.6% five-year notes sold at a spread of 80 bps over Treasuries. The tranche sold at the tight end of talk in the 85 bps area.

Finally, a $1 billion tranche of 3% 10-year notes priced at a spread of Treasuries plus 105 bps. The notes came in at the tight end of guidance in the 110 bps area.

BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities were the bookrunners.

Proceeds are being used for general corporate purposes.

AT&T last priced debt in a $5 billion deal in four parts on Aug. 15. A 2.4% five-year note from that offering priced at 148 bps over Treasuries, while a tranche of 3.875% 10-year notes priced at 160 bps over Treasuries.

In the secondary market, the 1.6% notes due 2017 traded flat at 80 bps bid, 75 bps offered, according to a trader.

The 3% notes due 2022 were seen closing the day at 105 bps bid, 102 bps offered.

The communications company is based in Dallas.

HSBC narrows

HSBC USA's 2.375% senior notes due 2015 traded 30 bps tighter at 180 bps bid, 175 bps offered on Thursday, according to a trader.

HSBC USA sold $1.5 billion of the notes (A1/A+/AA) at a spread of 210 bps over Treasuries on Wednesday.

The U.S. subsidiary of U.K.-based HSBC Holdings plc is based in New York.

Wells Fargo firms

Wells Fargo's 1.25% notes due 2015 edged tighter to 98 bps bid, 95 bps offered, a trader said on Thursday.

The notes (A2/A+/AA-) priced in a $2 billion offering on Wednesday at 100 bps over Treasuries.

The financial services company is based in San Francisco.

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