Union Electric prices as high-grade market slows; Valero, Sysco deals make gains, GE Capital better

By Andrea Heisinger

New York, March 13 - The pace of issuance in the high-grade bond market slowed Friday, allowing a breather at the end of a week packed with new supply. An issue from Union Electric Co. was about the only thing in the primary market Friday.

Traders in the secondary market welcomed the slowdown, especially in the non-financial sector of the market, which has had to absorb the many new issues lately.

A recent deal from Valero Energy Corp. was one of the best performers of recent issues in the secondary, while Sysco Corp. also made gains.

On the financial side, it was a quiet day. Bonds from General Electric Co. were seen doing better, a trader said.

Spreads were, overall, tighter as Treasury yields widened. The 10-year Treasury note widened 4 basis points to yield 2.89% Friday.

Union Electric sells 30-year notes

St. Louis-based electricity and natural gas provider Union Electric priced $350 million 8.45% 30-year notes to yield Treasuries plus 482.5 bps.

Barclays Capital Inc. and Bank of New York Mellon Capital Markets were the bookrunners.

Goldman Sachs gives FDIC deal terms

Goldman Sachs Group Inc. gave terms Friday for its $5 billion issue of notes in four tranches backed by the Federal Deposit Insurance Corp. late Thursday.

It was a mix of fixed- and floating-rate notes.

The $1 billion of two-year floaters priced at par to yield three-month Libor plus 8 bps, while the $2 billion of three-year floaters priced at par to yield three-month Libor plus 20 bps.

A $1 billion tranche of 1.7% two-year notes priced to yield Treasuries plus 73.3 bps.

The final tranche was $1 billion of 2.15% three-year notes priced to yield Treasuries plus 77.5 bps.

The $5 billion issue was a self-led deal with Goldman Sachs & Co. Inc. as the bookrunner.

BP Capital gives terms

BP Capital Markets plc released terms Friday in a Securities and Exchange Commission filing for a small issue of floaters priced quietly Thursday.

The $250 million of two-year floaters priced at par to yield three-month Libor plus 100 bps. They are guaranteed by BP plc.

Goldman Sachs & Co. ran the books.

Week nets high volume

It was one of the busiest weeks so far in 2009, with more than $41 billion in deals priced. This makes it the busiest week since January, thanks to a large amount of issues from both industrial names and FDIC-backed financial deals.

A market source said that much of the reason for the large amount of issuance was the number of FDIC-backed transactions.

"There were a lot of them this week, and a lot of people didn't see that coming," he said.

The issues for the most part bucked the previous trend of being formally announced in an SEC filing and then pricing a day or two later. Many of this week's FDIC-guaranteed deals were not announced with any fanfare and priced somewhat quietly.

"I think you have a lot of names that need money right now," a syndicate source said. "They're not going to take a long time to get [a deal] done."

There was also a large number of industrial and utility names pricing, although for the most part they were smaller offerings topping out at a couple of billion dollars.

As has been the case lately, a source said he was reluctant to guess what the coming week, or even Monday, would hold.

"We were all cautious last week, and look what happened," he said, referring to the heavy slate of deals. "I think there could be a lot or a little depending on what the tone looks like."

Valero bond builds on gains

The two-tranche issue from Valero Energy priced Thursday was seen building on its gains in trading late Friday, a trader said.

The 9.375% notes due 2019 were at 611 bps bid, 610 bps offered, in about 40 bps from the 650 bps price.

The 10.5% notes due 2039 did nearly as well, seen at 649 bps offered, tightening from the 687.5 bps price.

Sysco bonds tighten

The Sysco issue that priced in two tranches Thursday was seen doing well in the secondary late Friday.

The 5.375% notes due 2019 were in slightly to 255 bps bid, 247 bps offered, a trader said.

The 6.625% issue due 2039 fared slightly better, tightening more than 10 bps to 302 bps bid, 298 bps offered from the 315 bps price.

Financial trading quiet

Both the financial and non-financial sectors of the secondary market were "very quiet," traders said.

With little bad or good going on in the headlines, and the industrial side continuing to absorb the amount of new deals that have come to the market in the past couple of weeks, it was time for a breather.

"It's kind of a relief," a trader on the non-financial side said. "It's pretty quiet for a change."

A trader on the financial side said he didn't see much movement on Berkshire Hathaway bonds despite a ratings cut to the holding company.

The up-and-down movement of General Electric Capital bonds continued Friday.

The company was hit with a credit ratings cut of one notch from its AAA rating this week. This was less than feared, and led to a bump in the company's spreads on Thursday. That feeling continued Friday, with a trader saying the company's bonds were "better."

GE Capital day's big mover

Illustrating what a difference a week can make, GE Capital had the day's biggest mover, with one of its bonds tightening more than 140 bps from the previous week's level.

It was the company's 5% bond due 2011 that made the big move.

Also tightening significantly were bonds from Target Corp. and Merrill Lynch & Co., moving in more than 130 bps and 110 bps, respectively.

French cement and aggregate maker Lafarge SA was seen moving the other direction, with its 6.15% bond due 2011 widening more than 125 bps from last week. HSBC Finance and Simon Property each widened more than 100 bps from the previous week.

Financials most traded

Financial names topped the day's most-traded list as of early afternoon Friday.

An issue of 5.25% notes due 2012 from GE Capital was at the top of the list. The company got a boost Thursday after it had its credit ratings cut, but not as much as feared.

Citigroup Inc. and Morgan Stanley each had issues that were heavily traded Friday.

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