Export Development Canada sells notes; worries hit financials; PepsiCo tighter on bottler bid

By Andrea Heisinger

New York, April 20 - Fear over the health of the banking and financial sectors made for a dull start to the week, with a new deal from Export Development Canada pricing.

Both the primary and secondary sides of the market were weaker, sources said, and issuers stayed away.

"We could see more tomorrow if the tone is better," a syndicate source said.

Banking spreads were generally wider, a trader said. Even Bank of America Corp., which reported a profit for the first quarter on Monday, moved out, he said.

Spreads in general were wider by late afternoon as Treasury yields came in. The 30-year bond was 12 basis points tighter at 3.68% while the five-year note was in 10 bps to 1.79%.

Export Development sells five-years

Export Development Canada priced $1 billion of 3.125% five-year bonds at Treasuries plus 137.75 bps.

There was "little talk about" with the issue, a source close to it said, adding that "it priced but there was nothing interesting about it."

The export credit agency - based in Ottawa, Ont. - tapped Banc of America Securities LLC, BNP Paribas Securities, HSBC Securities and RBC Capital Markets as bookrunners.

Tone keeps issuance quiet

A market source said a dismal tone at the beginning of the day kept issuers from getting the "go" call from syndicate desks Monday.

"It's kind of bad out there today," he said.

An announcement of a $4.2 billion profit for the first quarter of the year by Bank of America couldn't boost the tone, the source said.

"It was pretty dull today, but I think it will pick up later in the week," the source said. "More companies are coming out of earnings [blackout]. I think some financials, too."

JPMorgan tops trading

A bond issued recently by JPMorgan Chase & Co. without the backing of the Federal Deposit Insurance Corp. was the top traded issue as of mid-afternoon, a market source said.

The 6.3% notes due 2019 were sold following the announcement on April 16 of a profitable first quarter for the financial services company.

On Monday, Citigroup analysts said JPMorgan Chase is poised to pass the government's stress test and does not need to issue more equity, according to Reuters.

It was the first non-FDIC issue for JPMorgan since August 2008.

PepsiCo active on acquisitions

At least two PepsiCo Inc. bonds were active Monday afternoon as the company beverage company announced its offer to acquire the remaining shares of its two anchor bottlers, according to a press release from the company.

The company has proposed acquiring remaining common stock shares in both Pepsi Bottling Group and PepsiAmericas. It would be a $6 billion deal.

A trader in the non-financial sector said two of PepsiCo's bonds were about 5 bps tighter late Monday. The 7.9% due 2018, which was also one of the most-traded bonds of the day, was at 195 bps bid, 190 bps offered, he said. The company's 5% bond due 2018 was at 160 bps bid, he said.

PepsiCo's 3.75% due 2014 was also seen on list of notes with high trading volume, a market source said.

StatoilHydro continues gains

A recent two-tranche sale from StatoilHydro ASA was seen continuing and holding gains in the secondary, a trader said.

The 3.875% notes due 2014 were at 175 bps bid, 170 bps offered. They priced at Treasuries plus 220 bps, and were trading Friday at 178 bps bid, 172 bps offered.

The tranche of 5.25% bonds due 2019 was doing even better. It was trading Monday at 215 bps bid, tightening from Friday's level of 220 bps bid, 212 bps offered.

Secondary drags

With new issues at a minimum to trade, the secondary was "dull," a trader in the non-financial sector said. The financial side wasn't much better, with most names weaker as bank and financial names dragged down the stock and bond markets.

B of A, financial bonds weaken

Despite a positive earnings announcement earlier in the day, Bank of America bonds were weaker by late afternoon, a trader in the financial sector said.

When asked why they were weaker despite the profit, he said "the whole market is."

The financial sector and banks dragged the stock and bond markets down Monday as fears about their health resurfaced.

Merrill Lynch, Alcoa big movers

A bond from Merrill Lynch & Co. was one of the day's biggest movers late Monday, tightening in response to word that its buyout by Bank of America contributed to the bank's solid first quarter.

Merrill Lynch's 6.05% bond due 2016 was more than 80 bps tighter than the previous week.

At the other end of the spectrum was aluminum and fabricated products company Alcoa Inc. Its 6.5% bond due 2011 was more than 60 bps wider than the previous week.

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