Ontario sells five-year notes during muted day; Cummins, Nissan bonds better in quiet trading

By Cristal Cody and Aleesia Forni

Virginia Beach, Sept. 20 - The high-grade bond market saw no new U.S. issuers come to the primary on Friday, though the session did see the Province of Ontario price a new deal.

Ontario priced $1.75 billion of 2% five-year notes with a spread of mid-swaps plus 34 basis points, according to an informed source.

Elsewhere, the market was "mostly quiet," a source said, following a week that saw more than $20 billion of new paper issued.

Issuers jumped into the market following the Federal Reserve's surprising announcement on Wednesday that it would continue its bond purchasing program.

Sources believe the market is not likely to see a slowdown in new issuance anytime soon.

One syndicate source is expecting $20 billion to $25 billion of new paper to price during the week ahead, while another market source guided "closer to $25 billion."

In the preferred space, CHS Inc. priced a $250 million issue of 7.875% series 1 class B $25-par cumulative redeemable preferred stock late Thursday, though details didn't emerge until Friday morning.

Initial price talk was 7.75% to 8%.

Around noon ET, a trader said the deal had not yet freed to trade, seeing paper moving in a $24.85 to $24.87 context.

At the close, another source said the new deal had in fact freed from the syndicate. He saw the shares offered at $25.20.

Secondary market activity was "minimal" late afternoon, a trader said.

"Very quiet day," the trader said. "Hard week."

New issues traded better in the light action, with Cummins Inc.'s two tranches of senior notes priced on Thursday firmer over the day.

Nissan Motor Acceptance Corp.'s fixed-rate notes due 2018 sold in the previous session traded about 4 bps tighter going out on Friday, a trader said.

The Markit CDX North American Investment Grade series 21 index, which rolled to a new index and increased spreads by about 10 bps due to the extension in maturity, ended Friday at a spread of 80 bps, sources said.

Ontario new issue

The Province of Ontario came to Friday's market with $1.75 billion of 2% five-year notes (/AA-/) priced at mid-swaps plus 34 bps, according to an informed source and an FWP filing with the Securities and Exchange Commission.

Pricing was at 99.986 to yield 2.003%.

Bookrunners were CIBC, Citigroup Global Markets Inc., HSBC Securities and Morgan Stanley & Co. LLC.

Proceeds will be used for general provincial purposes.

Cummins stronger

Cummins' new notes (A3/A/A) traded about 7 bps to 9 bps better than issuance, according to a market source on Friday.

The tranche of 3.65% senior notes due 2023 firmed to 90 bps bid, 86 bps offered.

The company priced $500 million of the 10-year notes with a spread of Treasuries plus 97 bps on Thursday.

Cummins' other slice of 4.875% bonds due 2043 tightened to 98 bps bid, 93 bps offered earlier in the session, better than where the bonds traded at 106 bps bid, 104 bps offered late Thursday.

The long bonds priced in a $500 million offering at Treasuries plus 117 bps.

The Columbus, Ind.-based company designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products.

Nissan firms

In other trading on Friday, Nissan's tranche of 2.65% notes due 2018 (A3/BBB+/) firmed to 116 bps bid, 112 bps offered, with not much action seen late afternoon, a trader said.

Nissan sold $300 million of the notes at a spread of 120 bps plus Treasuries in Thursday's session.

The financing and leasing company for Nissan Motor Co., Ltd. is based in Irving, Texas.

Bank/brokerage CDS costs mixed

Investment-grade bank and brokerage CDS costs were mixed on Friday, according to a market source.

Bank of America Corp.'s CDS costs increased 1 bp to 98 bps bid, 103 bps offered. Citigroup Inc.'s CDS costs were up 1 bp at 90 bps bid, 95 bps offered. JPMorgan Chase & Co.'s CDS costs closed unchanged at 81 bps bid, 86 bps offered. Wells Fargo & Co.'s CDS costs increased 1 bp to 60 bps bid, 65 bps offered.

Merrill Lynch's CDS costs declined 1 bp to 91 bps bid, 96 bps offered. Morgan Stanley's CDS costs were flat at 126 bps bid, 131 bps offered. Goldman Sachs Group, Inc.'s CDS costs were unchanged at 116 bps bid, 121 bps offered.

Stephanie Rotondo contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.