Union Pacific, Honda, Rentenbank price on slower than expected day

By Andrea Heisinger and Paul Deckelman

Omaha, Jan. 31 - Union Pacific Corp., American Honda Finance and Rentenbank priced issues on a somewhat quieter than expected Thursday.

In the investment-grade secondary market Thursday, advancing issues topped decliners by a three-to-two margin, while overall market activity, reflected in dollar volumes, rose about 3% from Wednesday's levels.

Financial names like JP Morgan Chase and Lehman Brothers were seen better, as the sector got a boost from troubled bond insurer MBIA Inc.'s assertions that it has sufficient liquidity. Other upsiders included retailer Target Corp. and United Parcel Service's recently sold bonds.

Union Pacific's low premium

Union Pacific priced $750 million of 5.7% 10-year notes at 99.661 to yield 5.743% with a spread of Treasuries plus 210 basis points.

Citigroup Global Markets Inc., Credit Suisse Securities LLC and J.P. Morgan Securities Inc. were bookrunners.

The company paid "not much of a premium" for the issue, a market source said.

A source close to the issue noted it went "very well."

Honda priced its $1 billion issue via Rule 144A. The two-year floating-rate notes priced at par to yield three-month Libor plus 40 bps.

Bookrunners were Barclays Capital Inc., Deutsche Bank Securities Inc. and J.P. Morgan.

This issue carried about a 25 to 30 bps new issue premium, a source said. This was about right for the company's rating, the source added.

Rentenbank upsizes

Rentenbank priced and upsized $1.75 billion in 3.25% five-year senior notes at 99.54. The issue was increased from $1 billion, a source said.

Credit Suisse, J.P. Morgan and RBC Capital Markets were bookrunners.

Terms for an add on from John Deere Capital Corp. were also announced.

The company reopened its three-year floating-rate notes Wednesday to add $75 million. They had a coupon of Libor plus 70 bps and priced at 100.1513.

Total outstanding for the issue is now $425 million including $350 million priced Jan. 14.

Waiting for jobs data

The somewhat small amount of issuance Thursday could be credited to employment numbers scheduled for release Friday, sources said.

"I don't know why more didn't come out today," a source said. "That's the only reason I could think of, especially after the Fed cut."

The open looked significantly weaker Thursday, a source said, and this coupled with the jobs reports coming out could have caused potential issuers to hold off.

It's also been a heavy month for new issue volume, so many that have wanted to come out already have, he said.

There are no upcoming deals that have been announced, the source said.

Friday's activity will largely depend on the jobs data.

"It depends on what happens in the morning," a market source said. "There are more than a couple of issuers wanting to get in the market."

Although Fridays are not traditionally high issuance days, there could be a couple of small ones snuck into the market this week, a source said.

"You just can't tell," he said. "No one really announces anything ahead of time so you just have to wait and see."

Financials better

Troubled bond insurer MBIA's claims during its four-hour marathon conference call that it has sufficient capital to meet all of its commitments, even after the company reported a worse-than-expected loss, gave Wall Street a shot in the arm and also helped financial-company bonds in general firm up on Thursday.

A market source saw JP Morgan Chase's 5.60% notes due 2011 narrow by 20 basis points to a spread level between 105 and 110 bps over comparable Treasuries, while its 6% notes due 2018 - the most actively traded issue on the day, according to another source - was also about 20 bps tighter at 173 bps over.

Lehman Brothers' 5.625% notes due 2013 saw a late surge that lowered its yield to 213 bps.

Here and there were a few downsiders among the financials, such as Bear Stearns' 5.35% notes due 2012, which widened out to about 315 bps over, and Wells Fargo Bank's 6.45% notes due 201, which closed about 150 bps over, out around 20 bps on the day.

Among the non-financial names, Target's 5.875% notes due 2012 came in by about 25 bps to the 140 bps level. Its recently priced 7% notes due 2038 tightened to 226 bps, remaining well in from their 270 bps spread at issue.

Likewise, UPS's 4.5% notes due 2013, which priced around mid-month at 145 bps over, continued to firm on Thursday and were heard around the 112 bps level.

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