Coming week seen busier, but market expected to be quiet until May; GE Capital firms 8 bps

By Andrea Heisinger and Cristal Cody

New York, April 21 - The early market close on Thursday saw no new bonds price and marked the end of a quiet week with few deals.

The coming week following a long Easter weekend is looking slightly busier, although sources were not expecting any blockbuster trades.

"I would say it will be busier but moderate," one market source said.

There's a Federal Reserve Federal Open Market Committee meeting on Wednesday that will likely leave issuers on the sidelines, and a Treasury auction of five-year notes is also scheduled for that day.

"Issuers are risk averse, and they're not going to dream [of issuing that day]," a syndicate source said. "The gravity of the meeting is going to be one day out."

The syndicate source said there is between $7 billion and $12 billion of new paper expected for the coming week, depending on any headlines or other market disruptions.

After one more week of low volume in a typically slow April, the pace is expected to pick up at the top of May.

"April's been quiet," a source said. "We've had about $35 billion so far and looking at maybe $10 [billion] more."

The market source said that the "May calendar is building" and added that "the first couple of weeks are looking busy."

Secondary trading volume on Thursday was light, though bond markets were "moving stronger" early in the day, a source said.

"Spreads in credit are mostly unchanged. The rally in Treasuries is helping a little bit in terms of value," the source said.

The series 14 Markit CDX North American Investment Grade index was unchanged at a spread of 93 basis points, according to Markit Group Ltd.

In the secondary market, the dollar-denominated deal brought on Tuesday by the Province of Manitoba traded 3 bps to 4 bps tighter on Thursday, according to a source.

In other activity, General Electric Capital Corp.'s 5.9% notes due 2014 firmed from earlier in the week after parent company General Electric Co. beat earnings estimates on Thursday, a source said.

"Those are about 8 [bps] tighter versus Monday," the source said.

Morgan Stanley's notes also narrowed after the company reported a 45% drop in first-quarter earnings, a source said.

Treasuries were mixed on Thursday on light trading volume ahead of the long holiday weekend.

The 10-year benchmark note yield fell 1 bp to 3.4%, and the 30-year bond yield rose 1 bp to 4.47%.

"Volume is really anemic," said Guy LeBas, chief fixed-income strategist with Janney Montgomery Scott in Philadelphia. "Phones are quiet. It's been about 60% of the usual volume thus far in the day, and that's going to start dropping real fast."

BNP gives terms

BNP Paribas reopened its issue of 3.25% notes due 2015 to add $150 million, a market source said.

The deal was done on Wednesday.

The notes (Aa2/AA/AA) sold at a spread of Treasuries plus 72 bps.

Total issuance is $750 million including $600 million sold on Oct. 7, 2010 at 107 bps over Treasuries.

BNP Paribas Securities Corp. was the bookrunner.

The financial services company is based in Paris.

Manitoba notes firm

The Province of Manitoba sold $750 million of 1.375% three-year global bonds on Tuesday at a spread of mid-swaps plus 5 bps, or Treasuries plus 28.25 bps, an informed source said.

The bonds (Aa1/AA) are now at "mid-swaps plus 1, so it's cranked in a good 3 to 4 basis points," one source said.

While much of the interest likely is from U.S. investors, a percentage of the bonds was sold to European and Asian central banks, according to the source.

"We figure there's a lot of interest in the U.S.; we just had better distribution overseas," the source said.

Proceeds are going toward funding advances to the Manitoba Hydro-Electric board and for general corporate purposes.

The provincial capital is Winnipeg.

GE Capital firms

In trading, GE Capital's notes narrowed from where they traded at the start of the week.

The company's 5.9% notes due 2014 "had a big block trade this morning," a bond source said. "It's pretty much unchanged [from the previous day] at 96 over."

The notes were seen trading on Monday at 104 bps over Treasuries. Parent General Electric on Thursday reported that first-quarter earnings jumped to $3.6 billion, or 33 cents a share, from $1.9 billion, or 17 cents, a year ago. GE also announced it will increase its quarterly dividend payout by a penny to 15 cents a share.

Fairfield, Conn.-based GE Capital is the financing arm of General Electric.

Morgan Stanley tighter

Bonds from Morgan Stanley, which released earnings that disappointed some market participants, also traded tighter, a source said.

Morgan Stanley said profit fell to $968 million, or 50 cents a share, from $1.78 billion, or 99 cents a share, a year ago. The earnings still came in higher than forecasts of 42 cents a share.

"Their paper's been trading maybe 2 tighter on the day," the source said.

Morgan Stanley's 5.75% notes due 2021 firmed 3 bps to 195 bps over Treasuries. The notes priced on Jan. 20 at a spread of 237.5 bps over Treasuries.

The financial services company is based in New York.

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