JPMorgan sells debt after Q4 earnings; issuance to drop in coming week; Advance Auto firms

By Andrea Heisinger and Cristal Cody

New York, Jan. 13 - Standard & Poor's downgraded several European countries on Friday, leaving the primary high-grade market a ghost town other than a sale from JPMorgan Chase & Co.

There hadn't been any deals expected on Friday. Issuers piled in during the first three days of the week to get financing done ahead of bond auctions by Spain and Italy on Thursday and the outcome of a Greek debt swap.

"It was definitely frontloaded on purpose," a market source said of the week.

Another source added that there was $27.5 billion of debt sold during the week.

JPMorgan surprised with a $3 billion sale of 10-year notes after announcing fourth-quarter earnings in the morning. The banking giant saw an earnings drop of 23% for the quarter, to $3.72 billion, or 90 cents per share, from $4.83 billion, or $1.12 per share, for the same quarter in 2010.

The coming four-day week is not slated to have as much issuance volume as the past one.

"This was the first full week of the year, so people were waiting, but it's going to drop again," a market source said.

A syndicate source at a large desk said that the week following the Martin Luther King Jr. holiday is looking "relatively quiet" with between $5 billion and $10 billion of issuance at most.

"It's going to be nothing compared to the last couple of weeks," the source said.

Many companies are going into earnings blackouts, and the short week will also factor into the lower volume.

"Nothing too crazy's going to happen," the source said of any huge deals coming up.

Financial names are set to announce fourth-quarter earnings in the coming week.

"It's going to be a little quieter, but we're expecting it to pick back up the following week and in February," a market source said.

Secondary quiet

Bonds traded mostly unchanged on the day, sources said.

The Markit CDX Series 17 North American Investment Grade index eased 1 basis point to a spread of 116 bps.

JPMorgan's new issue traded about 1 bp tighter.

Grocery retailer Kroger Co.'s bonds sold Thursday edged wider on Friday.

SABMiller Holdings Inc.'s longer-dated bonds traded stronger in the secondary market on Friday, a source said.

Advance Auto Parts, Inc.'s notes due 2022 traded 10 bps better.

Bank and financial paper was largely flat on the day.

A trader saw Bank of America Corp.'s 5% notes due 2021 going out unchanged at 405 bps bid, 395 bps offered.

Investment-grade bank and brokerage credit default swaps costs were higher on Friday.

Bank paper CDS costs traded up 3 bps to 10 bps.

Bank of America's CDS costs were seen up 10 bps at 335 bps bid, 345 bps offered. Citi's CDS costs rose 3 bps to 235 bps bid, 245 bps offered.

Brokerage company paper CDS costs were 10 bps higher across the board.

Goldman Sachs' CDS costs traded up 10 bps to 285 bps bid, 295 bps offered. Morgan Stanley's CDS costs were 10 bps higher at 365 bps bid, 375 bps offered. Merrill Lynch's CDS costs traded up 10 bps to 380 bps bid, 400 bps offered.

Overall trading volume fell to about $10 billion on Friday from $13 billion the previous day.

"Not much going on," a source said.

Treasuries rallied on news that S&P cut credit ratings for France, Austria, Italy, Spain, Portugal, Slovakia, Slovenia, Cyprus and Malta. The 10-year note yield dropped to 1.86% from 1.92%. The 30-year bond yield fell to 2.91% from 2.97%.

JPMorgan's 10-year

JPMorgan sold $3 billion of 4.5% 10-year notes (Aa3/A/AA-) to yield Treasuries plus 270 bps, a market source said.

J.P. Morgan Securities LLC was the bookrunner.

Proceeds are being used for general corporate purposes.

The new notes due 2022 edged tighter to 269 bps bid, a trader said.

The financial services company is based in New York.

Kroger weaker

Kroger's 2.2% five-year senior notes (Baa2/BBB/BBB) traded wider on Friday at 140 bps bid, 135 bps offered, a trader said.

Kroger sold an upsized $450 million of the notes at Treasuries plus 137.5 bps on Thursday.

The grocery retailer is based in Cincinnati.

Advance Auto Parts tightens

Advance Auto Parts' 4.5% senior notes due 2022 traded on Friday at 250 bps bid, 245 bps offered, according to a trader.

The notes (Baa3/BBB-) were sold on Wednesday in a $300 million offering at Treasuries plus 260 bps.

The automotive retailer is based in Roanoke, Va.

SABMiller firms

SABMiller Holdings sold $7 billion of paper (Baa1/BBB+/BBB+) in four tranches on Tuesday. The longer-dated bonds remain active, trading tighter in Friday's session, a trader said.

The 3.75% notes due 2022 stayed 5 bps tighter on Friday at 180 bps bid, 175 bps offered. SABMiller priced the $2.5 billion tranche at a spread of 185 bps over Treasuries.

The tranche of 4.95% bonds due 2042 also firmed to 188 bps bid, 183 bps offered, in from the issue price of Treasuries plus 200 bps.

The brewer is based in London.

Paul Deckelman contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.