Mississippi Power, sovereigns price debt as earnings season starts; banks, telecoms firm

By Andrea Heisinger and Cristal Cody

New York, Oct. 11 - There was a small amount of activity on Tuesday as the short week got started with an upbeat tone on news of an aid plan for Greece and the rest of the euro zone.

Mississippi Power Co. did two different deals that totaled $300 million. The electric subsidiary of Southern Co. priced $150 million of five-year paper and $150 million of 30-year bonds.

There were two sovereign names in the market taking advantage of the absence of corporate names due to earnings blackouts.

Inter-American Development Bank priced $2.25 billion of five-year notes. It was joined by Nederlandse Waterschapsbank NV, which sold $1 billion of three-year notes.

There is a proposal coming out on aid to banks in Europe, and individual countries are taking steps to shore up their financial institutions. The plans would also aid Greece in avoiding a default on its debts.

There was also word that Slovakia voted not to participate in the expansion of the euro zone's European Financial Stability Facility rescue fund.

"That was a negative data point there," a market source said.

Headlines like these won't factor much into issuance in the high-grade market on Wednesday and Thursday, sources said, because many companies are in earnings blackouts for the next three weeks.

"I've heard of very little [new issuance]," a syndicate source said. "Nothing in the non-financial space, and probably nothing in financials until later in the week or after. We don't have anything mandated for tomorrow."

After the headlines on Europe came out, there wasn't a noticeable boost to the market and likely won't be until there's a concrete resolution announced, the syndicate source said.

"Credit was feeling better and so were spreads, but the risk appetite remains low," he said.

Overall trading volume was about $11 billion on the day.

Bank and financial paper improved 10 basis points to 50 bps on the day, with Bank of America Corp. and Morgan Stanley among the outperformers, a trader said.

Telecom bonds also firmed 5 bps to 15 bps in trading.

"Hewlett-Packard, Time Warner Cable, DirecTV and Verizon are all about 10 basis points better," a trader said.

Hewlett-Packard Co.'s 10-year notes traded about 15 bps tighter on Tuesday.

The Markit CDX Series 17 North American Investment Grade index firmed 4 bps to a spread of 135 bps on Tuesday from Friday's market session.

Treasuries moved lower. The 10-year benchmark note yield rose 8 bps to 2.15%. The 30-year bond yield rose to 3.1% from 3.02%.

Mississippi Power's two deals

Mississippi Power sold $150 million each of five-year and 30-year paper (A2/A/A+), according to an FWP filing with the Securities and Exchange Commission.

The 2.35% five-year series 2011A senior notes priced to yield Treasuries plus 125 bps

The bookrunners were Barclays Capital Inc., Deutsche Bank Securities Inc. and Mitsubishi UFJ Securities (USA) Inc.

There was a separate sale of 4.75% 30-year series 2011B senior bonds priced to yield Treasuries plus 165 bps.

Barclays, Deutsche Bank and Scotia Capital (USA) Inc. were the bookrunners for the bonds.

Proceeds will be used to provide funds to repay at maturity all of Mississippi Business Finance Corp.'s $50 million of 6.62% series 1999B taxable revenue bonds due 2011 and $15.63 million of series 2005 taxable revenue bonds due 2011, which currently bear interest at 0.59%, and for general corporate purposes, including the company's continuous construction program.

The issuer is based in Gulfport, Miss.

Sovereigns tap primary

The Inter-American Development Bank sold $2.25 billion of 1.375% five-year global notes (Aaa/AAA/AAA) to yield Treasuries plus 31.45 bps, an informed source said.

The bookrunners were Citigroup Global Markets Inc., Deutsche Bank and HSBC Securities (USA) Inc.

The issuer provides financing for Latin American and Caribbean countries and is based in Washington, D.C.

There was a second triple-A rated deal, this one from Nederlandse Waterschapsbank. The lender to municipal and public programs sold $1 billion of 1.25% three-year global notes at a spread of Treasuries plus 78.2 bps, a market source said.

The notes (Aaa/AAA) were talked in the mid-swaps plus 40 bps area.

They sold under Rule 144A and Regulation S.

Barclays, Deutsche Bank and Morgan Stanley & Co. LLC were the bookrunners.

The issuer is based in the Hague, the Netherlands.

HP firms

Hewlett-Packard's 4.375% notes due 2021 traded about 15 bps tighter at 200 bps bid, 190 bps offered on Tuesday, a trader said.

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

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

Bank of America tightens

Bank of America's 5% notes due 2021 traded late Tuesday 30 bps better, a trader said.

The notes were seen Friday 20 bps better at 465 bps bid, 450 bps offered.

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

Morgan Stanley stronger

Morgan Stanley's 5.5% notes due 2021 tightened about 45 bps on Tuesday in secondary trading.

A trader saw the notes tighter at 435 bps bid, 415 bps offered. On Friday, the notes were quoted 50 bps tighter at 475 bps bid, 455 bps offered.

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

The investment bank is based in New York.

CDS costs decline

Bank and brokerage credit default swaps costs fell on Tuesday, a sign of increased investor confidence in the financial sector, a trader said.

Citi's CDS costs fell 30 bps to 255 bps bid, 270 bps offered. Bank of America's CDS costs dropped 25 bps to 355 bps bid, 370 bps offered. JPMorgan's CDS costs fell 15 bps to 140 bps bid, 150 bps offered.

On the brokerage side, Goldman Sachs' CDS costs tightened 40 bps to 315 bps bid, 330 bps offered.

Morgan Stanley's CDS costs dropped 40 bps to 380 bps bid, 395 bps offered. Merrill Lynch's CDS costs closed out the day 35 bps tighter at 395 bps bid, 420 bps offered.

Paul Deckelman contributed to this review

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