Southern, Fannie Mae bring new deals; Abbey National notes tighten; credit spreads widen

By Cristal Cody and Aleesia Forni

Virginia Beach, Va., Aug. 21 - With all eyes on the Federal Open Market Committee meeting minutes on Wednesday, one corporate name was able to hit the primary market early during the session.

Southern Co. came to Wednesday's primary with an upsized $500 million offering of five-year senior notes priced at a spread of Treasuries plus 93 basis points, according to a market source.

There was also a $4 billion issue from Fannie Mae of 1.875% five-year Benchmark Notes priced to yield Treasuries plus 34 bps, according to an informed source.

The late-summer lull in the market along with continued volatility in Treasuries have resulted in higher-rated names coming to the primary market during the week, according to one market source.

"Really only seeing high-quality names," the source said of the week's issuance.

The high-grade secondary bond market felt a "little soft" going out on Wednesday after the minutes from the last Federal Open Market Committee meeting revealed few hints for when the Federal Reserve will begin to taper its $85 billion-a-month asset purchases, a trader said.

"It feels like it wants to get a little messy," the trader said.

The Markit CDX Series 20 North American Investment Grade index widened 1 bp to a spread of 83 bps.

However, new issues traded tighter over the day, according to traders.

Southern's new 2.45% notes due 2018 went out 4 bps better in the secondary market, a trader said.

Abbey National Treasury Services plc's 3.05% senior notes due 2018 continued to trade better over the day, according to traders.

Southern upsizes

Wednesday's session saw Southern sell an upsized $500 million of five-year 2.45% senior notes at a spread of Treasuries plus 93 bps, according to a market source and a filing with the Securities and Exchange Commission.

The notes were sold at 99.798 to yield 2.493%.

Southern's new notes tightened to 89 bps bid, 85 bps offered in the secondary market, a trader said.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC were the joint bookrunners.

Proceeds will be used to pay a portion of the company's outstanding short-term debt and for other general corporate purposes.

The utility company is based in Atlanta.

Fannie Mae prices

In other market news, Fannie Mae priced $4 billion of 1.875% five-year Benchmark Notes Wednesday to yield Treasuries plus 34 bps, according to an informed source.

The bonds priced at 99.827 to yield 1.911%.

Barclays, Citigroup Global Markets Inc. and JPMorgan were the bookrunners.

The government-backed mortgage buyer is based in Washington, D.C.

Abbey National tightens

Abbey National Treasury Services' 3.05% notes due 2018 (A2/A/A) firmed to 146 bps bid in the late afternoon session, a trader said.

The notes were quoted at 147 bps bid, 146 bps offered and 148 bps bid, 143 bps offered early Wednesday.

The London-based financial services company sold $1 billion of the notes at a spread of Treasuries plus 155 bps on Tuesday.

CDS costs flat to wider

Investment-grade bank and brokerage CDS costs were unchanged to wider on the day, a market source said.

Bank of America Corp.'s CDS costs eased 2 bps to 116 bps bid, 121 bps offered. Citigroup Inc.'s CDS costs widened 3 bps to 110 bps bid, 115 bps offered. JPMorgan Chase & Co.'s CDS costs ended flat at 87 bps bid, 92 bps offered. Wells Fargo & Co.'s CDS costs closed unchanged at 67 bps bid, 72 bps offered.

Merrill Lynch's CDS costs were flat at 111 bps bid, 118 bps offered. Morgan Stanley's CDS costs eased 3 bps to 148 bps bid, 153 bps offered. Goldman Sachs Group, Inc.'s CDS costs widened 5 bps to 139 bps bid, 144 bps offered.

Paul Deckelman contributed to this review

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