TIAA prices 30-year; Boston Scientific tranches in sharply, Citigroup, Time Warner active

By Andrea Heisinger

New York, Dec. 11 - It was a mostly quiet in the investment-grade bond market Friday with a lone issue late in the day from Teachers Insurance and Annuity Association of America.

The $2 billion sale of 30-year surplus notes priced after the market close, a source said. The bond was not seen in the secondary.

There was continued heavy trading in two recent issues from BlackRock Inc. and Time Warner Cable Inc., a trader said.

Also performing well was a three-tranche, split-rated deal priced the previous day by Boston Scientific Corp. All of the notes were tighter by 25 to 40 basis points.

Spreads were tighter to unchanged by late in the afternoon based on Treasury yields moving wider or not at all. The five-year note was out by 5 bps to yield 2.25%, and the 30-year bond was unchanged at a yield of 4.5%.

TIAA prices 30-year

Teachers Insurance and Annuity Association of America priced $2 billion of 6.85% 30-year surplus notes late in the day at Treasuries plus 237.5 bps, a source away from the sale said.

The notes were priced via Rule 144A.

Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities Inc. and Morgan Stanley & Co. ran the books.

The financial services company is based in New York City.

"It's a big deal," a source said of the offering.

The company's decision sell a long maturity had other impacts, the source said.

"The Treasury curve, everything's down on the 30-year because I'm hearing people are hedging because of this deal," the source said.

Slow day no surprise

The lack of deals in the high-grade primary on Friday was not a surprise to many who were already impressed at the number of sales that priced in the past week.

"Really, I was kind of shocked that a big deal got done," a syndicate source said. "And it was late, too."

The $2 billion deal from TIAA was larger than most that priced previously this week.

The coming week could see "a couple busy days, but nothing major," the source said. It's expected to be similar to the past week, although perhaps less busy.

"We should see some stuff at the top of the week," the source said. "It's getting down to crunch time" ahead of the Christmas and New Year's holidays, he added.

Trading volume drops

The amount of paper changing hands in the secondary dropped back to somewhat normal levels after a high on Thursday, a trader said.

Trading volume hit $10 billion on Thursday and was at about $7.8 billion by late on Friday.

Among the bonds contributing to Friday's volume was Time Warner, which was the most-active bond overall in the investment-grade secondary, the trader said.

About $123 million of the company's new 5% notes due 2020 were traded on Friday. This was less than half than the $300 million traded the previous day, a trader said.

Boston Scientific tranches contract

The three tranches of bonds from Boston Scientific were quoted much tighter than the previous day's trading levels, a trader said.

The tranches had all tightened significantly after a late sale on Thursday. By late Friday, the 4.5% due 2015 was in more than 40 bps to 195 bps bid, 190 bps offered. It was quoted at a bid of 230 bps the previous day.

The 6% bond due 2020 made the biggest leap, tightening to 217 bps bid, 213 bps offered from its price of 262.5 bps over Treasuries. It was at a bid of 250 bps previously.

A final tranche of 7.375% notes due 2040 was more than 40 bps better than its Treasuries plus 287.5 bps price. It was quoted at 245 bps bid, 240 bps offered after having a bid of 280 bps the previous day.

A trader called them "rich offerings" and said that the notes were not priced too cheaply but were tightening so much because of the number of buyers for them.

"It's a real buy, buy, buy mentality in the corporate," the trader said. "All we've seen is buyers, not sellers."

A lot of people are expecting Moody's Investors Service and Fitch Ratings to upgrade the medical device maker to investment grade, she said. Both ratings agencies currently have the company rated as junk, with Standard & Poor's rating it BBB-.

American Transmission bonds stay in

A new 5.25% bond due 2022 priced Thursday by American Transmission Systems Inc. remained at the same level it was quoted at soon after pricing, a trader said late in the day.

The bond was sold at 180 bps over Treasuries and was again trading at 170 bps bid, 165 bps offered.

Citi, Time Warner bonds top trading

Two of the top-traded bonds of the day by early afternoon were continuing their reign from previous days.

Citigroup Inc.'s 6.01% bond due in 2015 that was remarketed the previous week was at the top of trading volume, according to Trace data. The bond shot to the top following the bank's announcement on Wednesday that it aimed to repay its $45 billion in Troubled Asset Relief Program funds to the government.

The bond was quoted at a bid of 272 bps.

Time Warner Cable Inc.'s new 5% note due in 2020 came in behind the Citi issue in terms of trading volume. It was part of a two-tranche deal sold on Tuesday.

The paper was quoted at 168 bps bid.

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