International Finance plans deal; issuance slow for week; high-grade secondaries quiet

By Andrea Heisinger and Cristal Cody

New York, April 5 - The week got off to a slow start on Monday with no new deals and little expected for the remainder of the week.

Sources said that the upcoming issue calendar is small following a holiday weekend and the end of Passover. The tone did not appear to change much after the long weekend, although sources said it was difficult to tell due to the lack of new sales.

International Finance Corp. is expected to price some five-year notes at some point after a roadshow that goes until the end of the week, a source said.

U.S. Treasuries weakened on Monday, with the yield on the 10-year Treasury note easing to 4% - its highest level since 2008.

The yield on the 10-year benchmark Treasury note was seen at 3.99%, down from 3.87%, on Thursday. Also, the yield on the 30-year Treasury bond moved out to 4.84% from 4.73%.

The Treasury plans to auction $82 billion in debt this week and, on Monday, reopened $8 billion to add to its existing 10-year inflation protected securities.

"Treasuries are lower, likely trading off positive equities and supply coming this week," one source said.

Still, the "10-year TIPS auction went very well," the source said. "People are nervous with the 10-year hovering at 4%."

Economic reports including coverage for non-manufacturing and pending home sales released on Monday were "better than expected," a source said.

Meanwhile, the investment-grade market "was quiet today" on the day back from the markets being closed in observance of Good Friday, another source reiterated.

"Not much going on," one source said. "Spreads [are] tighter but I think that's more because Treasuries cheapened."

The CDX Series 14 North American high-grade index firmed 3 bps to a mid bid-asked spread level of 84 bps, according to a source.

The I.G. 14 "is about 2 bps tighter," a trader said. "Volume is low."

Overall Trace volume was down 5% at about $8.4 billion, according to a source.

In high-grade secondary trading, the markets were quiet, but the financial sector stayed hot, sources told Prospect News.

For example, short paper from Bank of America Corp., Goldman Sachs Group Inc., Citigroup Inc. and others tightened on the day.

International Finance to sell notes

International Finance announced an upcoming sale of five-year global notes (Aaa/AAA), a market source said.

Timing for the sale is expected to be in the "near future," with a launch happening either late this week or early in the coming week. It's in "very preliminary" stages, he added, with no size or guidance decided.

Deutsche Bank Securities, HSBC Securities and UBS Investment Bank ran the books.

The lender to the private sector in developing countries is based in Washington, D.C.

Slow week expected

Issuance is not expected to be large for the week as some desks continue to be lightly staffed after holidays.

"I think people [today] were watching things," a source said. Another source noted that some traders were likely "jetting early" due to the evening's NCAA basketball final and due to the lack of new deals to work on.

It was unclear if anything had changed in the market tone since there were no deals. A source did say that the lack of bond offerings did not have anything to do with bad news or investor unease.

"There's a spring thaw going on," a market source said. "[Issuance] should be very light this week."

There have not been any official announcements of deals, other than the International Finance sale.

Financials tighter

Financial names with short paper saw higher activity on Monday, according to sources.

"Heard bank and financials continued to do well," one trader said. "Tighter spreads but higher yields."

For example, New York-based Merrill Lynch & Co.'s 6.875% notes due 2018 were seen trading 14 bps tighter at 165 bps on Monday, according to a source.

In addition, General Electric Capital Corp.'s 5.625% notes due 2018 firmed 10 bps to 105 bps on Monday. The Fairfield, Conn.-based company is the financing division of General Electric Corp.

Meanwhile, New York-based Goldman's 7.5% notes due 2019 were 12 bps tighter at 149 bps on Monday.

Also, New York-based Citigroup's 8.5% notes due 2019 firmed to 218 bps on Monday from 226 bps on Thursday, according to a source.

Not to be left out, Bank of America's 6.5% notes due 2016 last traded at 115 bps over Treasuries on Thursday and by Monday, the notes were tighter at 109 bps, a source told Prospect News.

Also on Monday, the Charlotte, N.C.-based bank's 7.625% notes due 2019 firmed 6 bps to 171 bps, the source said.

Bank, broker CDS levels firm

Meanwhile in financials, the cost of insuring holders of major bank or brokerage house paper against a possible default was tighter, according to sources.

For example, bank paper CDS levels were quoted from 8 bps to 2 bps tighter.

In addition, brokerage-name CDS costs were seen 7 bps to 3 bps firmer.

© 2015 Prospect News.
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