Primary likely shutdown for 2013; volume drops in thin trading; Verizon paper tightens

By Cristal Cody and Aleesia Forni

Virginia Beach, Dec. 24 - The holiday lull in activity in the high-grade primary continued on Tuesday, with many players out of the office ahead of the Christmas holiday.

"Nothing to speak of," a market source said during the session.

The primary market is expected to remain empty for the rest of the year, though sources continue to predict a busy start to 2014.

Few high-grade bonds traded over the shortened session on Tuesday, according to market sources.

"Corporates are pretty much done for the most part for the year," a source said. "Most of the books are closed on the dealer desks."

The bond markets closed early on Tuesday and will be closed on Wednesday for the Christmas holiday.

"It's pretty dead," a trader said. "Definitely on the quiet side. Volume is only $2.2 billion."

Bond spreads ended a "tad tighter," but trading was minimal, the trader said.

In the secondary market, Verizon Communications Inc.'s 5.15% notes due 2023 tightened from Monday's session.

Royal Bank of Scotland Group plc's 6% subordinated tier 2 notes due 2023 traded better from where the issue priced a week ago.

"Everything has come in," the trader said.

Verizon tightens

Verizon's 5.15% notes due 2023 (Baa1/BBB+/A-) tightened to 122.8 bps bid on Tuesday, a trader said.

The notes traded late Monday at 129 bps bid, 125 bps offered.

Verizon sold $11 billion of the 10-year notes with a spread of Treasuries plus 225 bps on Sept. 11 as part of the company's record $49 billion eight-tranche bond offering.

The telecommunications company is based in New York City.

RBS better

Royal Bank of Scotland's 6% subordinated tier 2 notes due 2023 (Ba2/ BB+/BBB-) firmed to the 290 bps area, a trader said.

Royal Bank of Scotland sold $2 billion of the 10-year notes on Dec. 16 at a spread of Treasuries plus 325 bps.

The financial services company is based in Edinburgh.

Bank/brokerage CDS costs flat

Investment-grade bank and brokerage CDS prices were unchanged on Tuesday, according to a market source.

Bank of America Corp.'s CDS costs were flat at 75 bps bid, 80 bps offered. Citigroup Inc.'s CDS costs were unchanged at 69 bps bid, 74 bps offered. JPMorgan Chase & Co.'s CDS costs headed out flat at 65 bps bid, 70 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 38 bps bid, 43 bps offered.

Merrill Lynch's CDS costs ended flat at 77 bps bid, 84 bps offered. Morgan Stanley's CDS costs were unchanged at 86 bps bid, 91 bps offered. Goldman Sachs Group, Inc.'s CDS costs ended flat at 90 bps bid, 95 bps offered.

Paul Deckelman contributed to this review.

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