Zions Bank prices; Qwest sells $25-par deal; primary tone sours; Morgan Stanley, banks widen

By Andrea Heisinger and Cristal Cody

New York, March 22 - A small deal was priced by Zions Bancorporation, but otherwise there was "absolutely nothing" happening in the high-grade primary market on Thursday following a packed calendar on Wednesday.

Zions sold $300 million of five-year notes.

Qwest Corp. priced an upsized $500 million of 40-year $25-par bonds in a deal announced on Wednesday. The size of the trade was doubled from what was expected.

"It's pretty boring, but you know, everyone did say it was going to be top heavy [this week]," a market source said early in the day.

Sources weren't surprised to see a mostly empty primary market. The tone at the open was down, and things were trading weaker in the secondary, they said.

"There were a lot of negative numbers from other countries," one syndicate source said, referring to data out of China showing growth wasn't as strong as hoped and more headlines on the debt crisis in the eurozone involving Greece.

Volume had reached the predicted level for the week by the end of Wednesday, which was between $15 billion and $20 billion, one market source said, although Prospect News data had the number at about $13 billion as of late in the day.

"Yesterday, all of the big names came out," a source said. "No one was enthusiastic about coming in today with the tone the way it was."

The Markit CDX Series 18 North American Investment Grade index eased 3 basis points to a spread of 90 bps.

Bank and financial paper traded 5 bps to 25 bps wider on the day, a trader said.

Morgan Stanley's 5.5% notes due 2021 led the weakness, trading 25 bps wider at 360 bps bid, 350 bps offered, a trader said.

The new paper priced on Wednesday mostly traded better in Thursday's session, sources said.

Lloyds TSB Bank plc's bonds tightened 2 bps, and Caterpillar Financial Services Corp.'s two tranches traded 2 bps to 3 bps better.

Capital One Financial Corp.'s new issue traded flat, while American Express Credit Corp.'s notes eased 3 bps in the secondary market.

Bank of Montreal's five-year notes sold earlier this year traded 5 bps weaker.

Investment-grade bank and brokerage credit default swaps costs were higher over the day.

Bank of America's CDS costs rose 11 bps to 205 bps bid, 210 bps offered. Citi's CDS costs widened 12 bps to 190 bps bid, 195 bps offered.

On the brokerage side, Merrill Lynch's CDS costs traded 8 bps higher at 220 bps bid, 230 bps offered. Morgan Stanley's CDS costs eased 18 bps to 293 bps bid, 298 bps offered. Goldman Sachs' CDS costs rose 13 bps to 228 bps bid, 233 bps offered.

In other trading, Husky Energy Inc.'s bonds have widened 8 bps since the issue priced on Monday.

Treasuries ended the day with gains for a third day. The 10-year Treasury note yield fell 1 bp to 2.28%. The 30-year bond yield closed down 2 bps at 3.36%.

Zions' five-year notes

Salt Lake City-based Zions Bank sold $300 million of 4.5% five-year senior notes at 94.25, according to an FWP filing with the Securities and Exchange Commission.

The notes (/BBB-/BBB-) were priced to yield 5.843%.

The bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC.

Zions is a financial holding company.

Qwest brings $25-par deal

Qwest priced a $500 million issue of 7% $25-par 40-year notes (Baa3/BBB-/BBB-), a trader told Prospect News.

Price talk was 7% to 7.125%. The company had originally indicated it would sell $250 million of the baby bonds.

Just after mid-day, a trader said he saw the notes trading at a less 13 cents bid in the gray market, or $24.87.

But after the bell, a market source said the deal was "not doing so well once they doubled the size of it. The price just backed right up. Go figure."

He said the issue closed at $24.85 bid, $24.90 offered - unchanged to slightly lower from the previous session - but added that the notes traded lower earlier in the day.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities LLC were the bookrunners.

Proceeds will be used, together with available cash or additional borrowings available under CenturyLink, Inc.'s revolving credit facility, to repurchase two series of debt securities for a purchase price of up to $500 million through a tender offer.

Qwest is a Monroe, La.-based telecommunications company and a subsidiary of CenturyLink.

Lloyds edges tighter

Lloyds TSB Bank's 4.2% senior notes due 2017 firmed to 308 bps bid, 304 bps offered, a trader said.

Lloyds sold $1.5 billion of the five-year notes (Aa3/A+/AA-) to yield Treasuries plus 310 bps on Wednesday.

The retail bank is based in London and Edinburgh.

Caterpillar Financial holds

Caterpillar Financial Services sold $600 million of medium-term notes, series G, (A2/A/A) in two tranches on Wednesday, and the notes traded 2 bps to 3 bps tighter in the secondary market, a trader said on Thursday.

The 1.05% notes due 2015 were quoted at 48 bps bid, 45 bps offered, in from the issue price of Treasuries plus 50 bps.

The tranche of 1.75% notes due 2017 firmed to 62 bps bid, 58 bps offered. Caterpillar Financial sold $275 million of the five-year notes at a spread of 65 bps over Treasuries.

The funding arm of heavy equipment maker Caterpillar is based in Nashville.

Capital One unchanged

Capital One Financial's 2.15% notes due 2015 were flat in secondary trading at 160 bps bid, 155 bps offered, according to a trader.

Capital One Financial sold $1.25 billion of the senior notes (Baa1/BBB/A-) at a spread of Treasuries plus 160 bps on Wednesday.

The bank holding company for Capital One Bank is based in McLean, Va.

American Express widens

American Express Credit's 2.375% senior notes due 2017 eased to 133 bps bid, 130 bps offered in the secondary market on Thursday, a trader said.

American Express Credit sold $1.5 billion of the notes (A2/BBB+/A+) at Treasuries plus 130 bps on Wednesday.

The financial services company is based in New York.

Bank of Montreal eases

Bank of Montreal's 2.5% senior notes due 2017 (Aa2/A+/AA-) eased 5 bps to 110 bps over Treasuries on Thursday in the secondary market, a source said.

The notes priced in a $1.5 billion offering on Jan. 6 at a spread of 170 bps plus Treasuries.

The financial services company is based in Toronto and Montreal.

Husky weaker

Husky Energy's 3.95% senior notes due 2022 widened to 168 bps bid, 163 bps offered in trading, a trader said on Thursday.

The company sold $500 million of the 10-year notes (Baa2/BBB+/) at Treasuries plus 160 bps on March 19.

The petroleum company is based in Calgary, Alta.

Stephanie N. Rotondo contributed to this review

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