Southern, Temasek, Santander US Debt sell notes; secondary volume fades; investors eye EM

By Andrea Heisinger

New York, Oct. 19 - Temasek Financial Ltd., Santander US Debt SA and Southern Co. were among the issuers in the investment-grade bond market on a Monday heavy with sales from emerging market and foreign names.

Singapore's Temasek priced $1.5 billion of 10-year notes in a deal that turned around quickly. It was priced by late afternoon, despite being expected to sell late Monday or on Tuesday.

Spain's Santander also sold $1.5 billion in two-year floating-rate notes.

Utility company Southern was the only straight industrial deal, pricing $300 million of two-year floaters in short order by early afternoon.

The secondary market, especially the industrial side, was low on volume. The emerging market sector was one of the only active areas, with traders in both the financial and non-bank or financial sectors reporting quiet conditions.

Spreads were slightly wider in general as Treasury yields moved tighter than the previous day. The five-year note was in 1 basis point to 2.33% while the 30-year bond moved 5 bps tighter to yield 4.19%.

Temasek unit offers 10-year

Singapore-based Temasek Financial, a subsidiary of Temasek Holdings Ltd., priced $1.5 billion of 4.3% 10-year guaranteed global notes at Treasuries plus 95 bps.

The deal was talked in the low-100 bps area, an informed source said, and priced tighter than that.

Deutsche Bank Securities, Goldman Sachs & Co. and Morgan Stanley & Co. were tapped as bookrunners by the state-owned investment fund.

The deal was done via Rule 144A and Regulation S. It is guaranteed by parent company Temasek Holdings Ltd.

This was the second bond offering by the company and its first since 2005, the source said. It was part of a $5 billion medium-term note program, according to a press release.

Proceeds are going for general corporate purposes.

Santander US Debt offers $1.5 billion

Spain-based financial services company Santander US Debt priced $1.5 billion of two-year floating-rate notes at par to yield three-month Libor plus 40 bps.

The deal priced "right at talk," an informed source said. The notes were sold via Rule 144A.

Bank of America Merrill Lynch and Deutsche Bank Securities ran the books.

The issuer is based in Madrid.

Earnings cloud IG issuance

The continuation of earnings announcements made it a dull day in both the primary and secondary bond markets.

The primary market's offerings were considered "weird issues," a market source said.

"There really wasn't much to speak of today," she said. "We had Southern, but that was small. The others were mostly emerging [markets] stuff."

There are several large companies and banks reporting earnings in the next two to three days. The Coca-Cola Co., Bank of New York Mellon Corp., DuPont and Pfizer are among the investment-grade-rated companies announcing on Tuesday.

The last of the large banks - Wells Fargo & Co. and Morgan Stanley - are giving earnings on Wednesday.

Many companies, even those not in blackouts, are "on hold for the next couple of days," a market source said. They are waiting for the major earnings announcements, he said.

This will likely ensure the remainder of the week will "not be as busy as last week," he said. "I don't think we could be any busier than last Tuesday. We were drowning."

Among the deals that day was the massive $5.5 billion sale in four parts from Anheuser-Busch Cos. Inc., Deere & Co., New York Life Global Funding and Barrick Australia Pty Ltd.

Southern sells floaters

Atlanta-based utility company Southern priced $300 million of two-year senior floating-rate notes by early in the afternoon. The notes were sold at par to yield three-month Libor plus 40 basis points, according to an FWP filing with the Securities and Exchange Commission.

Deutsche Bank Securities Inc. and RBS Securities Inc. ran the books.

Proceeds will be used to repay a portion of outstanding short-term debt and for general corporate purposes.

Secondary volume falls

Volume was "even less [than Friday], if that's possible," a trader in the industrial sector said late in the afternoon.

Emerging market bonds are "about the only thing left with any spread in it," he added.

The financial side of the secondary wasn't much busier. A trader in that sector called it "quiet" at the market close.

Bank bonds were "slightly tighter" than Friday, when they were generally a little wider following third-quarter losses from two large banks.

Another trader also called the market quiet and said that investors are "looking for bonds at the short end of the yield [curve], but they're not going to find any." Few bonds are being bid for, she added.

Trading volume was slightly lower than the normal $8 billion, the trader said, with about $7.6 billion on Monday.

The bonds in the emerging market sector are considered a value by some investors, the trader said.

"Everything's so expensive [in high grade]," she said. "That's why EM is so hot right now."

Industrials, bank bonds mixed

Bonds from a mix of names in the industrial and banking sectors were at the top of trading by volume as of early afternoon.

Dow Chemical Co. had one of the most-traded bonds with its 8.55% bond due 2019. It was quoted at 309 bps bid, 305 bps offered by a trader.

Another Dow bond - its 9.4% due 2039 - was one of the day's biggest movers. It tightened about 15 bps by late in the day and was quoted at 314 bps.

Citigroup Inc. bonds also continued to be actively traded, as they were since the financial services company announced during the previous week a third-quarter earning loss.

Its 5.5% bond due 2014 was among the most actives, as was its 8.5% note due 2019. The 2014 was quoted at 283 bps, and the 2019 at 298 bps.

Citi's 8.5% bond due 2019 was also one of the top-traded on Friday.

Bank of America Corp., which announced a third-quarter loss of more than $1 billion on Friday, saw its 6.5% bond due 2016 being actively traded.

A trader in the industrial sector said he wasn't sure why Dow bonds were trading heavily but said that investors were "biding their time until something happens."

Volume was "even less [than Friday], if that's possible," he said late in the afternoon.

Emerging market bonds are "about the only thing left with any spread in it," he added.

Bank, broker CDS move tighter

Credit-default swaps for bank and brokerage companies were unchanged to tighter by late in the day, a trader said.

Bank names were unchanged to 7 bps tighter, while brokerages were 2 to 5 bps better.

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