Discover Bank prices add-on during muted session; Discover Bank, CVS notes tighten

By Cristal Cody and Aleesia Forni

Virginia Beach, Dec. 9 - The high-grade bond market was muted on Monday, with only one deal making its way to the primary market.

A new issue from Discover Bank was the lone deal to price during the unusually quiet session.

The company came to market with an upsized $500 million add-on to its existing 4.2% notes due 2023 priced with a spread of 145 basis points over Treasuries, according to a syndicate source.

The deal's orderbook was more than two times oversubscribed, the source said, and pricing came at the tight end of talk.

With conditions still looking positive for the high-grade bond market, sources had predicted around $20 billion of new issuance for the week.

"Today was sort of a fluke," a syndicate source said with respect to the lack of activity in the primary market.

The source added that he believes the pace of activity will resume on Tuesday.

Investment-grade bonds tightened over the day with new paper recently priced mostly firmer in the secondary market, according to sources.

Discover Bank's reopened 4.2% notes due 2023 headed out 4 bps tighter on the offered side, a trader said.

CVS Caremark Corp.'s 4% senior notes due 2023 sold a week ago traded about 8 bps better in the secondary market on Monday, according to a trader.

Discover Bank add-on

Discover Bank came to Monday's primary to price an upsized $500 million tap of its existing 4.2% notes due 2023. The add-on sold at 145 bps over Treasuries, according to a syndicate source.

The notes priced at 99.196 to yield 4.302%.

Price talk was set in the area of 150 bps over Treasuries.

Discover Bank's add-on was quoted offered at 141 bps going out in the secondary market on Monday, a trader said.

Barclays, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC were the joint bookrunners.

The Chicago-based issuer of the Discover credit card and unit of Discover Financial Services priced the original $500 million issue at 160 bps over Treasuries on Aug. 5.

CVS firms

CVS Caremark's 4% senior notes due 2023 firmed to 117 bps bid, 115 bps offered, a trader said late Monday afternoon.

The company sold $1.25 billion of the issue with a spread of 125 bps over Treasuries on Dec. 2 as part of a $4 billion four-part offering (Baa1/BBB+/) of senior notes.

The pharmacy retailer is based in Scarsdale, N.Y.

Bank/brokerage CDS costs down

Investment-grade bank and brokerage CDS prices were down on the day, according to a market source.

Bank of America Corp.'s CDS costs firmed 1 bp to 80 bps bid, 84 bps offered. Citigroup Inc.'s CDS costs firmed 2 bps to 75 bps bid, 79 bps offered. JPMorgan Chase & Co.'s CDS costs declined 2 bps to 71 bps bid, 75 bps offered. Wells Fargo & Co.'s CDS costs firmed 1 bp to 42 bps bid, 46 bps offered.

Merrill Lynch's CDS costs declined 1 bp to 82 bps bid, 86 bps offered. Morgan Stanley's CDS costs firmed 1 bp to 94 bps bid, 98 bps offered. Goldman Sachs Group, Inc.'s CDS costs tightened 1 bp to 97 bps bid, 101 bps offered.

Paul Deckelman contributed to this review.

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