Citigroup sells short bond; coming week seen lower in primary volume; bank paper improves

By Andrea Heisinger and Cristal Cody

New York, Dec. 2 - Citigroup Inc. sold short-dated paper on Friday, wrapping up a solid week of new deals in the high-grade bond market.

Citi priced $500 million of three-year notes by early afternoon. That was the only deal of the day, according to a source who worked on the trade.

The coming week should see a drop in volume from the past week, sources said.

There was roughly $14.5 billion of new bonds priced in the past week. One syndicate source said that predictions for the coming week are between $10 billion and $15 billion.

"I would say it's going to be on the lower end of that scale," she said.

Another source was hearing of between $10 billion and $12 billion of new bonds that could be priced in the primary.

"There's the possibility we could have a busy Monday," the source said. "There's nothing jam-packed. There are a couple of big deals that we could see on Monday. A number of issuers are just trying to get in ahead of the holidays."

Citigroup's new three-year notes were not seen immediately in the secondary market, but bank and financial paper traded stronger over the day, according to sources.

"Most of the financials - Morgan Stanley, Bank of America - all are considerably tighter than where they were on Monday," a trader said.

Morgan Stanley's 5.5% notes due 2021 have gained about 8 points.

Bank of America Corp.'s benchmark 10-year notes improved about 7 points in the secondary market, the trader said.

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

Bank CDS costs traded 3 basis points to 20 bps lower. Citi's fell 20 bps to 243 bps bid, 258 bps offered. Wells Fargo's CDS costs traded 3 bps lower at 151 bps bid, 155 bps offered.

Brokerage CDS costs fell 20 bps to 37 bps. Merrill Lynch's CDS costs traded 20 bps lower to 460 bps bid, 475 bps offered. Goldman Sachs' was seen 37 bps lower at 310 bps bid, 320 bps offered.

The new notes from BP Capital Markets plc and BP Capital UK traded about 1 bp tighter.

In other trading, John Deere Capital Corp.'s five-year notes sold on Tuesday traded about 8 bps tighter on Friday.

The 10-year notes that Canadian Pacific Railway Co. sold on Friday traded about 25 bps tighter than where the notes priced at the start of the week, a trader said.

The Markit CDX Series 17 North American high-grade index ended unchanged at a spread of 126 bps on Friday.

Treasuries rallied on the long end on weaker data and euro zone debt fears. The 10-year note yield fell 6 bps to 2.03%. The 30-year bond yield dropped to 3.03% from 3.09%.

Citigroup's short bond

Citigroup Inc. priced $500 million of 3.625% three-year notes (A3/A-/A+) at a spread of Treasuries plus 323.9 bps, according to an FWP with the Securities and Exchange Commission.

Citigroup Global Markets Inc. was bookrunner.

The financial services company is based in New York City.

BP units give terms

BP Capital Markets plc and BP Capital UK sold $1.6 billion of guaranteed notes (A2/A) in three parts late on Thursday, according to an FWP filing with the SEC.

BP Capital Markets sold $500 million of floating-rate notes due 2013 at par to yield Libor plus 45 bps.

BP Capital UK sold two tranches including $450 million of two-year floaters priced at Libor plus 62.5 bps and $650 million of 1.7% three-year notes priced at Treasuries plus 130 bps.

Bookrunners were Credit Agricole Securities (USA) Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC.

The deal is guaranteed by BP plc.

The 1.7% notes due 2014 traded 1 bp tighter at 129 bps bid, 125 bps offered in the secondary market, a trader said Friday afternoon.

"Don't see a real big market in it," he said.

The issuing arms of oil company BP plc are based in Middlesex, England.

Morgan Stanley better

Morgan Stanley's 5.5% notes due 2021 rose to 93.50 offered on Friday, a trader said.

"I bought them on Monday morning at 851/2," the trader said.

"That's quite a recovery, especially when you consider the 10-year Treasuries are actually a little higher in yield than they were on Monday."

Morgan Stanley reopened the 5.5% 10-year notes (A2/A/A) in a $1 billion offering on Oct. 27 at a spread of Treasuries plus 335 bps.

The financial services company is based in New York City.

Bank of America improves

Bank of America's 5% notes due 2021 rose to 89 bid, 90 offered on Friday, a trader said.

"Last Friday, they traded at 82.25," the trader said.

Bank of America sold the notes on May 10 at 99.565.

The financial services company is based in Charlotte, N.C.

John Deere stays expensive

John Deere Capital's 2% notes due 2017 traded in to 102 bps bid, 85 bps offered on Friday, a trader said.

John Deere Capital sold the notes in a $500 million offering as part of a two-part $1.1 billion deal (A2/A/A) on Tuesday.

The 2% five-year notes priced at 110 bps over Treasuries.

"That name is so expensive," the trader said.

The funding arm of the heavy equipment maker is based in Reno, Nev.

Canadian Pacific narrows

Canadian Pacific Railway's 4.5% notes due 2022 firmed to 248 bps bid on Friday, a trader said.

"They've tightened in 22-25 basis points from where they came," the trader said. "That issue is pretty well placed."

Canadian Pacific Railway sold the notes (Baa3/BBB-) in a $250 million tranche at a spread of Treasuries plus 275 bps late Monday.

The railroad operator is based in Calgary.

Paul Deckelman contributed to this review

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