Positive tone, financials stronger in trading; Morgan Stanley 10-years come in nearly 90 bps

By Andrea Heisinger and Cristal Cody

New York, Oct. 7 - A jobs report released on Friday didn't appear to have much impact on the investment-grade bond market, sources said.

In fact, the tone felt better in late morning and many hoped that the boost would hold over the long Columbus Day holiday weekend.

"Some things are trading better," one source said. "That's nice to see something positive."

The number of jobs added in September remained flat, as did the unemployment rate of 9.1% from August.

It was hard to predict what that positivity would mean for the coming week since the market will have to wait until Tuesday morning to gauge a tone.

"That's a lot of days for things to go wrong," the source said, referring to the three-day weekend.

Issuers mostly held off on pricing debt until Wednesday and Thursday of the past week, when a window opened.

Continuing talks on how to solve the debt crisis in the euro zone gave the tone a slight boost, and issuers who wanted to price debt had a reason for doing so. Many of the deals came from companies who hadn't tapped the market since 2010 or before.

Despite the number of issuers, there were more that chose not to chance pricing in still volatile conditions.

"There were a few who stood down this week," a syndicate source said. "We'll have some looking at the market [next week]."

Trading quieted by late afternoon as desks shut down for the long weekend, but bonds were seen trading better overall.

Telecom bonds were 5 bps to 10 bps stronger.

Hewlett-Packard Co.'s 10-year notes traded about "25 basis points better on the week," a trader said on Friday.

Sprint Nextel Corp.'s bonds dropped in trading after the company said at an investors meeting on Friday that it may raise more capital.

"The bonds are down about 3 to 4 points," a trader said.

Bank and financial paper came in 10 bps to 20 bps on the day. Bank of America Corp. and Morgan Stanley both traded stronger, with Morgan Stanley trading more than 50 bps tighter.

The Markit CDX Series 17 North American high-grade index ended unchanged at a spread of 139 bps.

Treasuries were lower with yields up on stronger job data. The 10-year note yield climbed above 2% on Friday to 2.07% from 1.99%. The 30-year bond yield rose 7 bps to 3.02%.

HP narrows

In the secondary market, Hewlett-Packard's 4.375% notes due 2021 firmed to 212 bps bid, 202 bps offered, 10 bps better since Thursday and about 25 bps better on the week, a trader said on Friday.

Hewlett-Packard priced the notes at a spread of 240 bps over Treasuries on Sept. 13.

The information technology company is based in Palo Alto, Calif.

Sprint lower

Sprint Nextel's 8.375% notes due 2017 were weaker at 88.50 bid, 89.50 offered on Friday, a trader said.

"This morning, they were at 92.50, 93.50," the trader said.

Sprint's stock also fell 20% on the day after company executives said in an investors' meeting that capital spending will jump in 2012.

Sprint is based in Overland Park, Kansas.

Bank of America firms

Along with other financials, Bank of America's paper traded tighter on Friday. The 5% notes due 2021 firmed to 465 bps bid, 450 bps offered, a trader said.

"Twenty basis points better than yesterday," the trader said.

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

Morgan Stanley comes in

Morgan Stanley's 5.5% notes due 2021 narrowed more than 50 bps in trading on Friday, to 475 bps bid, 455 bps offered, a trader said. The notes were quoted on Thursday at 560 bps bid, 530 bps offered, the trader said.

Morgan Stanley priced the notes on July 21 at 250 bps over Treasuries.

The investment bank is based in New York City.

CDS costs tighten

Bank and brokerage credit default swaps costs tightened on Friday, a trader said.

Bank of America's CDS costs were 10 bps tighter at 380 bps bid, 400 bps offered. JPMorgan's CDS costs were seen flat at 155 bps bid, 165 bps offered.

On broker CDS costs, Goldman Sachs' CDS costs firmed 5 bps to 355 bps bid, 375 bps offered.

Merrill Lynch's CDS costs ended 10 bps tighter at 430 bps bid, 460 bps offered. Morgan Stanley's CDS costs firmed the most on the day, 45 bps tighter to 420 bps bid, 435 bps offered.

Stephanie N. Rotondo contributed to this review

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