Japan Finance, EIB, Credit Agricole sell bonds, CIBC plans deal; financials rebound

By Andrea Heisinger and Cristal Cody

New York, Jan. 26 - Japan Finance Corp., European Investment Bank and Credit Agricole SA, London branch each priced bonds on an otherwise slow Tuesday.

The lack of domestic issuers coming into the market continued for the second week, as foreign names took advantage of the emptiness.

One source said that Germany's NRW Bank sold $500 million in three-year floating-rate notes on Tuesday, but full terms and confirmation of the pricing were not available at press time. The notes were said to have priced at par to yield Libor plus 25 basis points.

Canadian Imperial Bank of Commerce also tossed its hat into the ring, and announced it will sell short bonds. The issue is expected to price early on Wednesday.

Bond deals are likely to be few for the remainder of the week, as sources at syndicate desks reported little to nothing on their upcoming calendars.

"Should be nice and boring," one syndicate source said.

Secondary markets continued to stay quiet on Tuesday, though the financial and insurance sectors improved slightly, sources told Prospect News.

"We didn't get back everything we gave up over the last week and half, but we are probably 5 bps better on the day," one trader said. "The stock market did better and things were probably a little overdone the other way."

Overall Trace volume in high-grade trading rose to about $16 billion on Tuesday, according to a source.

Treasuries were mostly flat to slightly firmer. The yield on the 10-year Treasury note tightened 1 bps to 3.62%, while the yield on the 30-year Treasury bond was unchanged at 4.55%.

The CDX Series 13 North American high-grade index firmed 1 bp to a mid bid-asked spread level of 94 bps.

Meanwhile in secondary trading, Allstate Corp.'s notes tightened along with the financial sector, with other gainers including General Electric Capital Corp., Bank of America Corp. and other banks, according to sources.

Credit Agricole sells floaters

France's Credit Agricole priced $1.5 billion of two-year floating-rate notes through its London branch at par late in the day to yield 35 bps over three-month Libor, a source close to the deal said.

The notes were priced under Rule 144A.

Calyon Securities and Deutsche Bank Securities were bookrunners.

The retail bank is based in Paris.

Japan Finance sells guaranteed notes

Government-run Japan Finance priced $1.25 billion of 2.875% five-year notes early in the day at Treasuries plus 60 bps, according to an FWP filing with the Securities and Exchange Commission.

They are guaranteed by the government of Japan.

Bank of America Merrill Lynch, Deutsche Bank Securities and J.P. Morgan Securities were bookrunners.

The lender to businesses for development in Japan is based in Tokyo.

Sovereigns, foreigners take over

New deals for the day came exclusively from issuers based overseas, with many of them connected to a government.

Sources say this trend is likely to continue, at least for the remainder of the week.

"I think it's earnings blackout more than anything," a syndicate source said.

He added that Tuesday's start to a two-day Federal Reserve meeting didn't really factor into the lack of bond offerings.

"No one really has anything," he said of investment-grade supply.

Another source said that the "EM and super-sovereign space is busy, but regular U.S. stuff - not so much."

All of the bond sales that were confirmed as pricing for the day were from other countries - including Japan, France and Luxembourg. Those from Japan Finance and EIB were backed by government entities.

Canada's CIBC announced a sale and gave price guidance, but its deal was not expected to price until early Wednesday.

"It's the same as last week," the syndicate source said of the day's and week's deals.

"It could be slow for another week."

Wednesday could be another void for new deals as the Fed meeting wraps up in the afternoon, and ahead of president Barack Obama's State of the Union address.

EIB sells three-year notes

European Investment Bank priced $3.5 billion of 1.625% three-year global notes in the morning at mid-swaps minus 3 bps, a market source said.

Deutsche Bank Securities, Goldman Sachs & Co. and UBS Investment Bank were bookrunners.

The lender to the European Union is based in Kirchberg, Luxembourg.

CIBC plans $2 billion offering

Canadian Imperial Bank of Commerce announced a sale of $2 billion in three-year notes, with pricing expected early on Wednesday, a source away from the deal said.

Price guidance is between 30 and 32 bps over mid-swaps, with pricing expected at the lower end of that, the source said.

The notes are backed by the Canadian government and are being sold under Rule 144A.

Bank of America Merrill Lynch, CIBC, HSBC Securities and RBS Securities are running the books.

The chartered bank is based in Toronto, Canada.

GE Capital tightens

General Electric Capital's new 5.5% notes due 2020 firmed on Tuesday, a trader said.

The 10-year notes were "trading at 200 bps and ended the day at 198, 193."

GE Capital priced the notes on Jan. 5 at 180 bps over Treasuries.

The other part of the tranche that GE brought - the 2.8% notes due 2013 - was seen at 146 bps on Tuesday. The notes had not moved much this week but have widened in the secondary since they were priced at Treasuries plus 130 bps, according to a source.

The Fairfield, Conn.-based company provides financing for General Electric Corp.

Allstate firms

Overall, the financials and insurance sectors were a "little better across the board," one trader said.

For example, Allstate's 7.45% notes due 2019 tightened in the secondary.

The notes were at 160 bps "yesterday and traded today at 145 bps. It's just a low bid to get things started," the trader said.

The Northbrook, Ill.-based insurance company sold the notes in May 2009 at a spread of Treasuries plus 430 bps.

Financials improves

The financial sector overall saw gains on Tuesday, though some banks came in mixed, according to sources.

Charlotte, N.C.-based Bank of America's 7.375% notes due 2014 tightened 10 bps to 150 bps over Treasuries, and New York-based Citigroup Inc.'s 8.5% notes due 2019 firmed 6 bps to 241 bps over.

Meanwhile, the 7.25% bonds due 2032 from New York-based Morgan Stanley widened 18 bps to 153 bps over.

CDS widens

A trader who watches the credit default swaps market said that the cost of insuring holders of big-bank paper against a possible default widened out by between 3 bps and 5 bps from Monday's levels.

He also saw CDS costs for major brokerage-house paper increase by 2 bps, on average.

Zions zooms on better numbers

A trader said that "a name that was very busy today" was Zions Bancorporation, whose split-rated bonds rose solidly in very active dealings after the regional banking company reported improved fourth-quarter financials from a year earlier, coming in with a smaller loss than Wall Street had been expecting.

"They had kind of decent, stable earnings," he said. "The writedowns seemed to be moderating, so with that stabilization, a lot of people are thinking that the company may be profitable in the second half."

He saw "north of $60 million" of the company's 7.75% senior notes due 2014 (nr/BBB-/BBB) changing hands, with "a lot of the activity" taking place with the paper straddling the 95 bid mark. Some of the trades took place as high as 97 bid, though most of the day's activity took place with the bonds between 95 and 96. He said the bonds were seen going home at 96.5 bid.

Over the previous several days, he said, those bonds had been hanging around within a 94.5 to 95.5 range, "so today, they gapped up a little higher."

He also saw Zions' 5.50% subordinated notes due 2015 (nr/BB+/BBB-) trading between 81-82, and here too, he said, "they also gapped up, after having been 1 to 1½ points lower."

Another market source pegged the 5.5s at the 81.125 level, up slightly on the day, after having gotten as good as 81.375 earlier in the session, and saw the company's 6% notes due 2015 at 83 bid, up four points on the day.

Zions' Nasdaq-traded shares shot up by $1.16, or 6.47% on Tuesday to end at $19.08. Volume of 26.3 million shares was nearly four times the average daily turnover.

Salt Lake City-based Zions, which operates in nine other Western states in addition to its Utah home base, announced after the close of trading on Monday that its fourth-quarter loss attributable to common shareholders shrank to $176.5 million, or $1.26 per share, down from a loss of $498.1 million, or $4.37 per share, in the year-earlier period, as the bank took considerably less in the way of charges and writedowns. Its impairment charge for the latest quarter was just $2.2 million, versus the yawning year-earlier charge of $353.8 million, or $2.97 per share.

The $1.26 per share loss was well below the roughly $1.65 per share analysts had been expecting. The per-share results reflected a 23% increase in the number of shares outstanding in the latest quarter, following a stock offering.

Although the lender reported sharp rise in nonperforming assets - i.e. loans that are substantially past due ($2.33 billion in the latest period, more than double $1.14 billion a year earlier), and in net loan and lease charge-offs -- loans written off as uncollectable which rose to $292.1 million, from $179.7 million a year ago - the company's chairman and chief executive officer, Harris H. Simmons, declared that Zions was entering 2010 "feeling increasingly confident that peak levels of loan losses are behind us, and that economic conditions in the majority of our markets have begun to stabilize."

-Paul Deckelman contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.