Toyota Motor Credit braves primary as others defer on euro zone news; 'ugly' day, bonds widen

By Andrea Heisinger and Cristal Cody

New York, May 17 - New deals were mostly absent from the investment-grade bond market on Thursday, with the exception of Toyota Motor Credit Corp., as the situation with Greece and the euro zone evolved.

"It's all Spain and Greece again," a market source said. "Pretty ugly out there."

There are continuing talks over whether Greece will stay in the euro zone or not.

Toyota priced $1 billion of five-year notes, which surprised some at desks away from the trade.

"I think we were all a little surprised, more by the size," a source said.

The Dow Jones industrial average ended down nearly 1.25%, and other indexes were down similarly.

"This morning from the get-go, people were like 'Nope,'" a syndicate source said, referring to potential issuers standing down.

"They're going to wait until Monday and take another look."

Issuance for the week was initially expected to be between $25 billion and $30 billion but will instead be a fraction of that amount.

Bonds stayed weaker again on Thursday. The Markit CDX Series 18 North American Investment Grade index eased 4 basis points to a spread of 123 bps.

Bank and financial paper was anywhere from 15 bps to 25 bps wider on average on Thursday, a trader said.

Morgan Stanley's paper led the weakness, trading about 30 bps wider, the trader said.

"Everything was so ugly," a trader said of the secondary market on Thursday.

Investment-grade bank and brokerage credit default swap costs traded higher.

Bank of America's CDS costs rose 5 bps to 305 bps bid, 315 bps offered. Citi's traded 5 bps higher at 265 bps bid, 275 bps offered. JPMorgan's rose 5 bps to 155 bps bid, 165 bps offered. Wells Fargo's rose 5 bps to 120 bps bid, 130 bps offered.

Brokerage CDS costs traded 5 bps to 15 bps higher. Merrill Lynch's CDS costs were up 5 bps at 330 bps bid, 340 bps offered. Morgan Stanley's climbed 15 bps to 440 bps bid, 460 bps offered. Goldman Sachs' traded up 10 bps to 345 bps bid, 360 bps offered.

In secondary trading, cable and telecom bonds widened 10 bps to 25 bps on the day, led by CenturyLink, Inc.

Murphy Oil Corp.'s bonds widened in trading, along with Cardinal Health, Inc.'s 10-year notes that priced Wednesday.

Talisman Energy Inc.'s 30-year bonds sold earlier in the week traded flat.

J.C. Penny Co., Inc.'s bonds were not seen moving on the downgrade Thursday from Standard & Poor's, but the retailer's CDSs moved out 25 bps.

"It's been 25 wider all day - was already priced in," a trader said.

S&P downgraded the Plano, Texas-based retailer to BB- from BB following its poor first-quarter report.

Treasuries traded stronger on the focus on Europe and Greece and weaker economic data. The benchmark 10-year note yield dropped to 1.69% from 1.76%. The 30-year bond yield fell to 2.78% from 2.9%.

Toyota's five-year

Toyota Motor Credit sold $1 billion of 1.75% five-year medium-term notes (Aa3/AA-/) to yield Treasuries plus 110 bps, according to an FWP filing with the Securities and Exchange Commission.

The bookrunners were Barclays Capital Inc., HSBC Securities (USA) Inc., Bank of America Merrill Lynch, RBC Capital Markets LLC and UBS Securities LLC.

The U.S. funding arm of automaker Toyota is based in Torrance, Calif.

Morgan Stanley widens

Morgan Stanley's 5.5% notes due 2021 widened 30 bps on Thursday to 480 bps bid, 470 bps offered, a trader said.

The issue (A2/A/A) priced in a $1 billion offering on Oct. 27, 2011 at a spread of 335 bps over Treasuries.

The investment bank is based in New York.

CenturyLink moves out

CenturyLink's 5.8% senior notes due 2022 widened 25 bps to 450 bps bid, 440 bps offered, a trader said.

CenturyLink sold $1.4 billion of the notes (Baa3/BB/BBB-) on March 5 at a spread of Treasuries plus 380 bps.

The broadband and telecommunications company is based in Monroe, La.

Cardinal Health weaker

Cardinal Health's 3.2% senior notes due 2022 widened to 149 bps bid, 144 bps offered in early trading on Thursday, a trader said.

Cardinal Health sold $250 million of the notes (Baa2/A-/BBB+) at 145 bps over Treasuries on Wednesday.

The health-care services company is based in Dublin, Ohio.

Murphy Oil wider

Murphy Oil's 4% senior notes due 2022 were seen wider in midday trading on Thursday at 240 bps bid, 230 bps offered, a trader said.

"Stuff is much weaker from then," the trader said.

The company sold $500 million of the 10-year notes (Baa3/BBB/) at a spread of Treasuries plus 225 bps on Tuesday.

The oil and gas exploration and production company is based in El Dorado, Ark.

Talisman flat

Talisman Energy's 5.5% bonds due 2042 traded flat early in the day at 275 bps bid, 270 bps offered, a trader said.

Talisman Energy sold $600 million of the 30-year bonds (Baa2/BBB/) at a spread of Treasuries plus 270 bps on Tuesday.

The upstream oil and gas company is based in Calgary, Alta.

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