Citi sells non-FDIC bonds, primary set to pick up; bank bonds active, new Wal-Mart stays put

By Andrea Heisinger

New York, May 15 - Issuance slowed further Friday, with only one deal from Citigroup Inc. in the primary.

The company's sale of notes without the backing of the Federal Deposit Insurance Corp. adds to a growing list of financial names that have done such issues in recent days and weeks. It was the fourth such issue for the week.

The secondary side of the market was decidedly slow, especially in the non-financial sector. Many of the top-traded deals came from bank holding companies that have issued bonds recently without the FDIC guarantee.

A trader said the quiet gave the market a chance to absorb and mop up from the hectic previous few days.

The new Citigroup bonds were nicely tighter in trading, he said.

Spreads in general were better as Treasury yields rose. The five-year government note was 4 basis points out to 2% while the 30-year bond was 3 bps wider at 4.08%.

Citigroup sells non-FDIC notes

Citigroup announced and priced a $2 billion deal of 8.5% 10-year notes on Friday without the guarantee of the FDIC.

It is the fourth such issue for the week, following in the footsteps of US Bancorp, JPMorgan Chase & Co. and American Express Co.

The notes priced at 562.5 bps over Treasuries, which was in line with guidance, a source said.

Citigroup Global Markets ran the books.

Primary set to pick up

Despite a slow end to the week, with only one new deal to speak of Friday, the coming week should be "fairly busy," a syndicate source said late in the day.

Friday marked the end to a week with more than $31 billion in sales, most of them happening on Monday and Tuesday. The top-heavy trend is expected to repeat next week ahead of the long Memorial Day weekend.

"We should see a lot of names the first couple of days," a source said. He added that there was "nothing concrete" yet, and it was a matter of how the tone looks at Monday's open.

"It's always a wait-and-see thing," he said.

No one thought the past week would be as jam-packed with new deals as it was, but many were done opportunistically or were backlogged from the weeks before.

"People want to get in as long as the tone's good," the source said.

Citigroup bond firms

The new 8.5% bond due 2019 from Citigroup was nicely tighter soon after selling, a trader said late Friday.

It priced at 562.5 bps over Treasuries, and was offered at 535 bps.

This contrasts with other similar issues done earlier in the week by US Bancorp, JPMorgan Chase and American Express, which either moved very little or widened.

Wal-Mart bond unchanged

A new 3.2% bond due 2014 from Wal-Mart Stores, Inc. was unchanged from Thursday's trading level after pricing, a trader said late Friday.

It was "kind of a boring bond," he said.

The notes sold at Treasuries plus 125 bps, and tightened in trading to 115 bps soon after. They remained at a bid of 115 bps Friday, the trader said.

ArcelorMittal trades up

A two-tranche issue from ArcelorMittal priced Wednesday was at levels elevated from pricing, a trader said.

The 9% notes due 2015 were at par bid, 100.5 offered, he said, up from their pricing level of 98.931. The 9.85% bonds due 2019 sold at 97.522 and were trading between 98.75 and 99.25, he said.

Non-financial secondary slows

The non-financial sector of trading was a ghost town Friday, a trader said.

"It's really quiet today," he said. "There's really not much interesting going on."

Much of the activity was in non-FDIC-guaranteed issues from financial names.

Bank bonds lead trading

Bonds from banking names were some of the most traded by early Friday afternoon, a trader said.

They were mostly bonds done without the FDIC guarantee, as a handful of those deals have been done in the past week.

Bank of America Corp. led the charge with its 7.375% bond due 2014, while a 6% due 2014 from Goldman Sachs Group Inc. was also popular.

There were more from Bank of America, and a couple from JPMorgan Chase also among the most highly-traded of the day.

Among the non-financial names, a recent sale of 7.6% bonds due 2014 from Dow Chemical Co. remained among the most active in the secondary.

Hartford Financial, Citi move big

Two of the day's largest bond movements came from Hartford Financial Services and Citigroup.

Hartford's stock was down late Friday as preliminary word came that it may get bailout money from the federal government.

The company's 5.25% bond due 2011 was more than 75 bps tighter than the previous week, a market source said.

Citigroup's 6.125% bond due 2018 was around 65 bps wider than a week ago. This was directly after the bank's stress test results were revealed by the government.

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