Midday Commentary: Investment-grade bonds widen; Burlington eases, Paccar tightens

By Cristal Cody

Tupelo, Miss., Aug. 14 - Investment-grade bonds headed slightly wider in trading early Wednesday with new issues from Burlington Northern Santa Fe, LLC and CA Inc. weaker, according to market sources.

"The morning opened up unchanged but as the day has gone on, things have leaked a little wider," a trader said Wednesday morning. "A lot of the movement is based on lighter volumes. A ton of people are out."

Paccar Financial Corp.'s 1.15% series N notes due 2016 sold on Tuesday were among the standouts early Wednesday and "tightened up a significant amount" in early trading to 44 basis points bid, 41 bps offered, a trader said.

The Bellevue, Wash.-based retail and commercial truck financing arm for Paccar Inc. sold $500 million of the notes (A1/A+/) at Treasuries plus 50 bps in Tuesday's primary market.

Meanwhile, Burlington Northern Santa Fe's two tranches of debentures (A3/BBB+/) priced in a $1.5 billion offering on Tuesday, widened in early trading, a source said.

Burlington Northern's 3.85% debentures due 2023, priced in an $800 million offering at Treasuries plus 117 bps, widened to 121 bps bid, 118 bps offered early Wednesday.

The tranche of 5.15% debentures due 2043, which the Fort Worth, Texas-based holding company for railroad transportation subsidiaries sold in a $700 million offering at Treasuries plus 140 bps, eased to 142 bps bid, 139 bps offered, the source said.

Also in the secondary market early Wednesday, CA's two tranches of senior notes (Baa2/BBB+/BBB+) priced in the previous session traded wrapped around the issue price, a trader said.

The Islandia, N.Y.-based information technology company's 2.875% notes due 2018, priced in a $250 million offering at Treasuries plus 143 bps, traded at 144 bps bid, 142 bps offered.

The tranche of 4.5% notes due 2023 was quoted early Wednesday at 183 bps bid, 182 bps offered. CA sold $250 million of the 10-year notes at Treasuries plus 183 bps.

"Don't see too much volatility in that name," the trader said.

In other trading, Barclays Bank plc's 7.625% contingent capital notes due 2022 (A2/A/A) climbed higher, a trader said.

"Yesterday going out the door, they were 99½ to par, and today, they're par ¾ to par 1/8," the trader said. "They're a little bit stronger with most other names 1 to 2 basis points weaker."

Barclays, the London-based unit of Barclays plc, sold $3 billion of the notes in November at par.

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