Primary quiets to close active week; Prudential, Barclays notes widen in secondary

By Cristal Cody and Aleesia Forni

Virginia Beach, May 16 - The primary was muted on Friday, closing an active week for the high-grade bond market despite a somewhat weaker overall tone.

More than $33 billion of investment-grade paper sold this week, topping earlier expectations of a $25 billion to $30 billion of supply.

Despite the continued rush of new deals, investors continue to flock to high-grade bonds.

For the week ended May 14, Lipper reported $2.028 billion of inflows into corporate investment-grade funds.

This brings the year-to-date figure to nearly $38 billion.

"Demand wasn't really as strong as we saw last week, but still solid," a source said on Friday.

Investment-grade bond spreads headed out flat to slightly tighter on the day, according to market sources.

The Markit CDX North American Investment Grade series 22 index was unchanged at a spread of 65 basis points.

"It's been mostly unchanged," a source said. "It didn't seem like much was moving either way today."

DirecTV Holdings LLC's 4.45% notes due 2024 were not very active in Friday's secondary session, a trader said.

The bonds have traded mostly stronger on reports that AT&T Inc. plans to acquire the satellite TV provider.

AT&T's 3.9% notes due 2024 traded mostly in "odd blocks" on Friday, a trader said.

"Not much trading today," the trader said. "Yesterday, there were lots of blocks trading around the 107ish area, but really nothing today."

Prudential Financial, Inc.'s 3.5% medium-term notes due 2024 (Baa1/A/) brought on Monday headed out about 10 bps wider, according to a trader.

"Volume flow is decent on that one," the trader said.

Barclays Bank plc's new 3.75% senior notes due 2024 widened 5 bps in the secondary market, according to a trader.

DirecTV flat

DirecTV's 4.45% notes due 2024 (Baa2/BBB/) were seen trading in the 137 bps to 138 bps offered area late Friday, mostly unchanged from Thursday, a trader said.

The notes traded higher at 105.67 going out from 104.49 on Thursday, according to a market source.

DirecTV Holdings and co-issuer DirecTV Financing Co. sold $1.25 billion of the 10-year notes on March 17 at 99.63 to yield 4.496%, or Treasuries plus 180 bps.

The digital entertainment company is based in El Segundo, Calif.

AT&T volume drops

AT&T's 3.9% notes due 2024 (A3/A- /A) last traded in the 107 bps to 110 bps area on Thursday, a trader said.

"Very minimal trading," the trader said of Friday's action.

The notes slipped on Friday to close at 102.75 from 104.8 in the previous session, according to a market source.

AT&T sold $1 billion of the 10-year notes on March 5 at 99.696 to yield 3.937%, or a spread of Treasuries plus 125 bps.

The telecommunications company is based in Dallas.

Prudential eases

Prudential Financial's 3.5% notes due 2024 (Baa1/A/) widened to 100 bps bid, 97 bps offered early on Friday, a trader said.

Prudential Financial sold $700 million of the notes on Monday at Treasuries plus 90 bps.

The insurance, investment management and financial products and services provider is based in Newark, N.J.

Barclays eases

Barclays Bank's 3.75% senior notes due 2024 (A2/A/A) traded on Friday at 115 bps bid and around the 110 bps to 113 bps offered area over the session, a trader said.

Barclays sold $2.25 billion of the 10-year notes at Treasuries plus 110 bps on Monday.

The financial services provider is based in London.

Bank/brokerage CDS costs up

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

Bank of America Corp.'s CDS costs were unchanged at 64 bps bid, 67 bps offered. Citigroup Inc.'s CDS costs were flat at 68 bps bid, 70 bps offered. JPMorgan Chase & Co.'s CDS costs eased 1 bp to 53 bps bid, 56 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 33 bps bid, 36 bps offered.

Merrill Lynch's CDS costs eased 1 bp to 70 bps bid, 73 bps offered. Morgan Stanley's CDS costs rose 1 bp to 71 bps bid, 74 bps offered. Goldman Sachs Group, Inc.'s CDS costs eased 1 bp to 80 bps bid, 83 bps offered.

S&P sees spreads widen

The Standard & Poor's investment-grade composite spread widened 1 bp to 146 bps on Thursday, according to a report from the ratings agency.

By rating, the AA and A spreads widened by 2 bps each to 102 bps and 123 bps, respectively.

The BBB spread remained flat at 174 bps.

By industry, banks and utilities widened by 1 bp each to 169 bps and 147 bps, respectively, while industrials and telecommunications widened by 2 bps each to 196 bps and 249 bps, respectively.

Financial institutions remained flat at 193 bps.

The composite spread is tighter than its one-year moving average of 171 bps and its five-year moving average of 197 bps.

Paul Deckelman contributed to this review.

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