Little primary action seen during holiday week; Paccar prices; Citigroup short debt active

By Cristal Cody and Sheri Kasprzak

New York, March 29 - Citigroup Inc.'s short paper was attracting the most attention Monday in the investment-grade market, a switch from Friday when its longer paper was seen as the most active.

The shift in focus came after the U.S. Treasury announced plans to sell its 27% stake, amounting to 7.7 billion shares, in the New York-based bank sometime this year, a source reported.

The primary portion of the market was extremely quiet to kick off what insiders expect will be a very slow week.

"There's nothing definitive planned [for the week]," one sellsider reported Monday afternoon.

"The holidays are coming at the end of the week, so we don't expect too much, but some things could crop up, maybe tomorrow or Wednesday."

The Thursday ahead of Good Friday, and Good Friday itself, the market insider said, are likely to be a total wash.

"I don't expect anything at all at the end of the week," he noted.

Meanwhile, Treasuries were weaker on Monday after easing out as much as 17 bps in the previous week.

On Monday, the yield on the 10-year benchmark Treasury note eased 2 bps to 3.87%. Likewise, the yield on the 30-year Treasury bond moved out 2 bps to 4.77%, according to a source.

Mary Ann Hurley, a trader with D.A. Davidson & Co., told Prospect News on Monday that the Citigroup announcement played a part in the weakness in Treasuries.

"That's one factor, but the overall concern is about the amount of debt the Treasury has to issue and how poorly the auctions went last week," Hurley said.

"We're definitely off of our lows. I think a little bit of bottom fishing has been going on. It's going to be really difficult for the market to get much traction prior to the release of Friday's unemployment and non-farm payroll reports."

Still, traders expect some movement on Wednesday with the economic release on initial claims.

"It should be in the fairly narrow range until then," Hurley said.

Elsewhere in investment-grade trading, the CDX Series 14 North American high-grade index tightened 2 bps to a mid bid-asked spread level of 85 bps, according to a source.

Also, the secondary market was quieter on Monday, according to a source, as many along the East Coast are expected to be out for spring break over the week.

Overall Trace volume dropped 14% to about $9.2 billion, according to a source.

Paccar sells $300 million

The only new deal activity during the session came from Paccar Financial Corp., which priced $300 million of three-year floating-rate medium-term notes at par to yield one-month Libor plus 45 basis points.

The bookrunners were Barclays Capital Inc., BNP Paribas Securities Corp., J.P. Morgan Securities Inc., HSBC Securities (USA) Inc. and BBVA Securities, Inc.

The financing and lease unit of truck maker Paccar Inc. is based in Bellevue, Wash.

Goldman widens

Meanwhile in secondary trading, Goldman Sachs Group Inc.'s 5.375% notes due 2020 moved out nearly 20 bps on Monday, according to a source.

The notes from New York-based Goldman were seen at 165 bps from 147 bps on Friday.

Citi short paper active

Also in the secondary, Citigroup's short paper traded heavily on Monday, according to a source.

For example, Citigroup's 6.125% notes due 2018, which were quoted Monday at 219 bps, and the 6.01% notes due 2015, last seen at 200 bps, traded among the most active, according to the source. Bids from Friday on the notes were not immediately available.

The Treasury announced plans on Monday to sell its 27% stake in Citigroup sometime this year. Morgan Stanley will handle the stock sale.

One source said it is "unlikely to begin selling until after Q1 earnings are released next month."

If the Treasury sold the shares today, it would make a profit of $7.5 billion, "on top of another $8 billion in interest payments and other fees it has collected," one source said.

The government received 7.7 billion shares of Citigroup in exchange for $25 billion as part of the Troubled Asset Relief Program, or TARP, bailout to banks. The Treasury paid $3.25 a share for the stock.

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