Issuers wait for market tone turnaround in coming week; HP firms, Bank of America widens

By Andrea Heisinger and Cristal Cody

New York, Sept. 23 - The volatile week ended Friday with virtually no new deals priced and some doubt about when issuers would tap the market again.

John Deere Capital Corp. had been the only company selling high-grade bonds for the week, pricing $350 million between in an original sale on Monday and a small add on.

The coming week is viewed as a waiting game to see who will be the first to jump into the primary.

"We're expecting moderate supply, and that's what everyone else is saying," one syndicate source said.

"There's a lot of economic data coming out next week, so that doesn't help. No one's just going to jump into the market right now. They're going to weigh it carefully."

The source added that the new issue "calendar is building for October" when calmer market conditions could prevail.

Another market source agreed that the coming week looks tentatively busy, with a fair amount of companies eyeing the market but not willing to price debt until volatility subsides.

"Anyone looking at this week obviously didn't go," she said. "After a week like this, the question is what's going to be the catalyst to make the market do a 180 and there's really nothing. I think it's just going to take some time to turn around."

Bonds were mixed in trading on Friday, sources said.

The Markit CDX Series 16 North American high-grade index firmed 5 basis points to a spread of 141 bps.

Hewlett-Packard Co.'s recently priced notes tightened on Friday after widening about 20 bps the previous day.

Bank of America Corp.'s paper widened another 2 bps in trading. Bank and brokerage credit default swaps costs were seen mostly lower, though, indicating higher investor confidence in the sector.

Overall trading volume dropped to about $10 billion on the day.

Treasuries shed some gains ahead of the weekend after two days of historic low yields after equities calmed. The benchmark 10-year note yield rose to 1.83% from 1.72%. The 30-year bond yield rose 11 bps to 2.9% on Friday.

Bank of America widens

In trading, Bank of America's paper stayed wider on the week. On Friday, the 5% notes due 2021 widened to 457 bps from 455 bps bid, 435 bps offered on Thursday, a source said.

The notes were quoted at 409 bps on Wednesday. Bank of America priced the notes on May 10 at 185 bps over.

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

CDS costs mixed

Credit default swaps costs were mostly lower on Friday, a source said.

Bank of America's CDS costs were 25 bps lower to 385 bps bid, 395 bps offered. JPMorgan's CDS costs were 5 bps lower at 150 bps bid, 165 bps offered.

On the brokerage side, Merrill Lynch's CDS costs were 10 bps lower at 425 bps bid, 445 bps offered. Goldman Sachs' CDS costs dropped 5 bps to 290 bps bid, 300 bps offered.

Morgan Stanley's CDS costs were higher on the day, moving about 20 bps higher to 425 bps bid, 445 bps offered.

HP firms

Hewlett-Packard's 4.375% notes due 2021 firmed to 246 bps in trading on Friday after widening 20 bps the previous day in the secondary market, a trader said.

The notes were seen at 255 bps bid, 245 bps offered on Thursday.

Hewlett-Packard priced the notes at a spread of 240 bps over Treasuries on Sept. 13.

The information technology company is based in Palo Alto, Calif.

Paul Deckelman contributed to this review

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