AT&T, Morgan Stanley, Bank of Montreal pile into market ahead of Fed meeting; BB&T notes firm

By Andrea Heisinger and Cristal Cody

New York, April 26 - New issues from AT&T Inc., Bank of Montreal and Morgan Stanley came out of the woodwork on Tuesday ahead of the Federal Reserve Federal Open Markets Committee meeting.

Morgan Stanley had the largest sale at $4.5 billion in two parts. Like most of the day's offerings, it was split into two parts, in this case $2 billion of two-year floaters and $2.5 billion of five-year notes.

Dallas-based AT&T sold $3 billion including $1.75 billion of five-year notes and $1.25 billion of 10-year notes. Both priced at the tight end of guidance.

Bank of Montreal came to the market with a $1.1 billion deal. It was made up of $500 million of three-year floaters and $600 million of three-year notes.

Railway and freight management company TTX Co. sold $150 million of 10-year notes under Rule 144A.

Even if no other deals are priced throughout the week, there has already been "upwards of $10 billion" of new bonds priced in two days. This puts the week's total firmly in the middle of the $7 billion to $12 billion estimate for the week.

"There was a window today, and I think all of these were issuing for something specific," a source said.

The tone improved on some good headlines about earnings from Ford Motor Co. and others, and as the source said, "no one wants to price tomorrow until an announcement [from the Fed]."

Syndicate desks indicated that no deals are expected to price on Wednesday, although there may be a small amount of activity Thursday.

"[On Wednesday] we're all just going to be sitting around listening to Ben Bernanke speak," one source said.

In the secondary market, the new paper from Bank of Montreal, Morgan Stanley and AT&T firmed, traders said.

BB&T Corp.'s notes sold on Monday firmed 2 basis points, a trader said.

The series 14 Markit CDX North American Investment Grade index firmed 1 bp to a spread of 93 bps, according to Markit Group Ltd.

Treasuries exhibited surprising strength ahead of the Federal Reserve's policy statement on Wednesday. The benchmark 10-year Treasury note yield dropped 6 bps to 3.3%. The 30-year bond yield fell to 4.39% from 4.45%.

"It's surprising, especially the fact we've got $99 billion in coupon supply and the Fed meeting results tomorrow and Bernanke's press conference following that," said Mary Ann Hurley, a fixed-income trader for D.A. Davidson & Co.

Bernanke is expected to be "dovish" in his commentary, she said.

AT&T's $3 billion

AT&T sold $3 billion of notes in two parts ahead of the close, according to a market source.

There was "north of $10 billion" on the books for the deal, which the source also said "did very well."

A $1.75 billion tranche of 2.95% five-year notes priced at a spread of Treasuries plus 97 bps. Price talk was in the 100 bps area, and the notes were priced at the tight end of that.

The second part was $1.25 billion of 4.45% 10-year notes priced at 115 bps over Treasuries. They sold at the low end of guidance in the 120 bps area.

Citigroup Global Markets Inc., Goldman Sachs & Co., Merrill Lynch and Wells Fargo Securities LLC were the bookrunners.

Proceeds are being used for general corporate purposes.

In the secondary market, AT&T's bonds tightened about 5 bps, according to sources.

The notes due 2016 were seen at 90 bps offered, a trader said. Late afternoon, another trader saw the notes at 93 bps bid, 89 bps offered.

Also in trading, the notes due 2021 were seen at 110 bps offered and later at 113 bps bid, 109 bps offered, the traders said.

The telecommunications company is based in Dallas.

Morgan Stanley prices

Morgan Stanley priced $4.5 billion of notes (A2/A/A) in two tranches, according to a market source and an FWP filing with the Securities and Exchange Commission.

The $2 billion of two-year floating-rate notes priced at par to yield Libor plus 98 bps. This was at the low end of guidance in the Libor plus 100 bps area.

A $2.5 billion tranche of 3.8% five-year notes priced at a spread of 180 bps over Treasuries.

The bookrunner was Morgan Stanley & Co. Inc.

Morgan Stanley's notes were stronger in secondary trading. The notes due 2013 were seen at 90 bps offered, while the notes due 2016 tightened to 178 bps bid, a trader said.

Another trader saw the notes due 2016 at 178 bps bid, 176 bps offered.

The financial services company is based in New York.

BMO prices $1.1 billion

Bank of Montreal sold $1.1 billion of senior notes (Aa2/A+/AA-) in two tranches, an informed source said.

A $500 million tranche of three-year floating-rate notes priced at par to yield Libor plus 47 bps.

The second part was $600 million of 1.75% three-year notes priced at a spread of Treasuries plus 70 bps.

The bookrunners were BMO Capital Markets Corp., Barclays Capital Inc., Goldman Sachs and J.P. Morgan Securities LLC.

Proceeds are being contributed to one or more affiliates in connection with funding requirements of the expected acquisition of Marshall & Isley Corp.

In the secondary market, traders saw the fixed-rate notes slightly tighter. The notes were quoted at 69 bps bid, 67 bps offered and later at 70 bps bid, 65 bps offered, according to the traders.

The floating-rate notes were quoted flat at 47 bps.

The financial services company is based in Montreal and Toronto.

TTX sells 10-year notes

Chicago-based TTX sold $150 million of 4.4% 10-year notes (Baa1/A+) by mid-afternoon to yield 108 bps over Treasuries, a source close to the trade said.

Citigroup and JPMorgan were the bookrunners.

The sale was done under Rule 144A.

BB&T tighter

BB&T priced $700 million of 2.05% three-year notes (A2/A/A+) at a spread of Treasuries plus 95 bps on Monday.

The notes traded Tuesday at 93 bps bid, 91 bps offered, a trader said.

The financial services company is based in Winton-Salem, N.C.

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