Syndicates already looking to coming week as earnings clear out primary; bank paper firms

By Andrea Heisinger and Cristal Cody

New York, Oct. 18 - There were no new high-grade bond sales on Tuesday as big banks continued to report earnings and volatility kept issuers quiet.

One source said that the World Bank is prepping a sale for Wednesday, but details were not available as of press time.

Goldman Sachs Group, Inc. and Bank of America Corp. each reported third-quarter earnings. Goldman Sachs took a loss of $428 million, or 84 cents per share, compared to its profit of $1.7 billion a year ago.

Bank of America had a $6.23 billion, or 56 cents per share, profit that was a complete turnaround from its $7.3 billion loss during the same period in 2010. The profit was partly due to some asset sales.

Sources said a mid-week rush of issuers isn't expected.

"We haven't heard of zip," one syndicate source said.

Another source said that "[issuance] estimates for October weren't great anyway, but I don't think we'll come close to hitting that."

Many of the large banks are reporting soon or already have, as well as many large companies, so it's possible the drought could end.

"Next week is a new week, so hopefully we'll see something," the syndicate source said.

Overall trading volume climbed to more than $13 billion from about $9 billion on Monday.

Bank of America's 10-year notes traded tighter after the bank reported the stronger third-quarter earnings.

Goldman Sachs' 10-year notes also ended stronger as financial paper improved in trading.

Credit default swaps costs also moved lower on the day.

The Markit CDX Series 17 North American Investment Grade index ended 1 basis point tighter at a spread of 133 bps.

Treasuries gave back their gains on the longer end of the curve late afternoon on developments that may help push along a resolution for Europe's debt problems. The 10-year note yield rose 3 bps to 2.18%, and the 30-year bond yield was up 4 bps at 3.17%.

Goldman Sachs firms

In the secondary market, Goldman Sachs' 5.25% notes due 2021 were seen at 350 bps bid early Tuesday.

"This morning they traded as wide as the high 360s and now down to 350, 343," a trader said.

The 10-year notes were seen tighter going out at 335 bps bid, 320 bps offered, another trader said.

The investment bank is based in New York.

Bank of America firms

Bank of America's 5% notes due 2021 "started the day" at 440 bps and ended tighter at about 415 bps over Treasuries, a trader said.

The notes were seen by another source in afternoon trading at 420 bps bid, 415 bps offered.

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

CDS costs fall

Bank and brokerage CDS costs dropped on Tuesday, indicating greater investor confidence in the financial sector, a trader said.

In bank CDS costs, Bank of America's dropped 40 bps to 340 bps bid, 365 bps offered. Citi's firmed 30 bps to 230 bps bid, 250 bps offered. Wells Fargo & Co.'s CDS costs fell 10 bps to 142 bps bid, 152 bps offered. JPMorgan's CDS costs were seen 12 bps lower at 140 bps bid, 150 bps offered.

On the brokerage side, Merrill Lynch's CDS costs fell 40 bps to 395 bps bid, 415 bps offered. Morgan Stanley's CDS costs tightened 40 bps to 375 bps bid, 395 bps offered. Goldman Sachs' CDS costs firmed 35 bps to 330 bps bid, 350 bps offered.

Paul Deckelman contributed to this report

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