Issuers stand down due to headlines; financials trade wider; bank names remain most active

By Andrea Heisinger

New York, Nov. 22 - The primary half of the investment-grade bond market was empty on Tuesday as headlines ruined any chance of deals pricing.

"We knew by late yesterday that there weren't going to be any 'go' calls," a syndicate source said.

Headlines in the morning canceled out any chance for new deals, a market source said.

"We had a few potentials for today, but they saw the news in the morning and all decided to stand down," she said.

European banks were reported to be looking for more funding from the European Central Bank, and this was preceded by the news at the end of Monday that the Congressional super committee was unable to agree on how to cut the deficit.

The few issuers that were thinking of selling bonds decided to wait, a market source said. "It wasn't exactly a positive environment," the source said.

No issues are expected for Wednesday as syndicate desks empty out ahead of the Thanksgiving holiday.

The secondary market was quiet, and most trading was in the financial sector, a source said.

"It was dismal out there - very little volume," the source said.

The highest volume was seen in paper from big banks like Bank of America Corp. and JPMorgan Chase & Co. They widened on the day. The previous day's trend of bank paper being between 5 basis points and 15 bps wider was true again on Tuesday, a trader said.

Treasury yields were tighter for the second day in a row, a source said, following a successful auction of two-year notes the previous day. The yield on five-year notes improved by 2 bps to 0.88% while 10-year Treasuries also tightened 2 bps to yield 1.93%. The largest gain came from the 30-year bond, which came in 4 bps to 2.9%.

Financials dominate

The most-traded bonds in the high-grade secondary on Tuesday were overwhelmingly from the financial sector, a source said.

Bank of America paper remained active. Its 5% notes due 2021 were trading heavily and were quoted at a spread of 553 bps, which is much higher than the 185 bps over Treasuries level at which they priced in May.

Coming in behind that bond in volume were JPMorgan's 4.35% notes due 2021, which were the most-traded notes on Monday. They were quoted at 262 bps on Tuesday, which is about 40 bps wider than where they priced in October.

Jefferies Group Inc., Goldman Sachs Group, Inc. and General Electric Capital Corp. also had paper actively trading.

Goldman Sachs' 6% bond due 2020 was quoted at a spread of 432 bps, which is a sizeable difference from its original price of 280 bps over Treasuries in May 2010.

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