High grade volume slumps before holiday; primary ends slow week with little hope for days ahead

By Andrea Heisinger and Cristal Cody

New York, Feb. 12 - Primary and secondary high-grade market activity slowed dramatically on Friday ahead of Monday's federal holiday. The markets will be closed for President's Day.

"Volume was really, really, really light. And I emphasize that," one source said.

In fact, overall Trace volume dropped 36% to about $9.5 billion, according to a source.

"Not really a whole lot has traded," a trader said.

Meanwhile, the CDX Series 13 North American high-grade index eased 1 bp to a mid bid-asked spread level of 99 bps, a source reported.

Also, Treasuries tightened on Friday. The yield on the 10-year Treasury note firmed 3 bps to 3.69%, while the yield on the 30-year Treasury bond tightened 1 bps to 4.65%, according to a market source.

Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co., told Prospect News on Friday that the market was nearly deserted for Treasuries and agencies before the upcoming holiday.

"We opened up and we were busy for about the first hour and it steadily declined in volume since then," she said.

Bank of America Corp.'s 7.625% notes stood unchanged on the day, while other financials were seen weaker on more unusual trading spikes due to the low volume, sources said.

The primary side of the market saw no new deals on Friday to close out a slow week with only a handful of sales.

Market tone was at least partly to blame for the lack of sales, but one source said he "had no idea" why no one was pricing any deals.

Coming deals scarce

The coming short week is not expected to see much action in terms of new issues, syndicate sources said late on Friday.

"It's not looking good," one source said when talking about the number of new deals for the coming week. He added that the long President's Day weekend won't have much impact on issuance, as there's not a lot to be issued.

Another source at a large syndicate desk agreed, saying that in terms of bond sales he had "nothing -zero" in deals on tap for the coming week.

"There might be a trade or two, but nothing solid at this point," he said.

The market was sluggish for much of the past week due to a combination of a tone that scared potential issuers away and continuing worries about the health of some countries in the European Union.

One source said there are simply not a lot of potential issuers sniffing around the high-grade market.

"I'm not talking to guys - they're just not calling us," he said. "There would normally be some opportunistic stuff out there, but we're telling them not to jump into the market right now."

Another market source said nearly the same thing, adding that "the market conditions don't feel good out there."

Financials flat to weaker

In the secondary, Bank of America's 7.625% notes due 2019, which had bounced around in secondary trading all week stood unchanged on Friday at 236 bps, according to a source.

The Charlotte, N.C.-based bank's notes were seen late Thursday at 237 bps bid after tightening from Wednesday's quote of 244 bps. The notes started the week at 210 bps before widening Tuesday to 225 bps.

Also, Citigroup Inc.'s 8.5% notes due 2019 widened 15 bps to 289 bps over on Friday from the previous day, one source said.

The notes have widened nearly 30 basis points since the start of February.

On Feb. 5, New York-based Citigroup's 8.5% notes due 2019 were seen at 260 bps.

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