Toyota Motor Credit sells floaters, Rentenbank plans deal; oil and gas bonds firm 10 points

By Andrea Heisinger and Cristal Cody

New York, Sept. 1 - Toyota Motor Credit Corp. and Landwirtschaftliche Rentenbank were the only issuers to tap the high-grade bond market on an otherwise quiet Wednesday.

Toyota Motor Credit priced $120 million of one-year floaters by mid-afternoon.

Germany's Rentenbank announced a benchmark sale of seven-year notes, although pricing is not expected until Thursday.

Issuance is expected to be at mostly zero for the rest of the week, although a "sovereign or two" could come into the market on Thursday. Friday is not expected to see any deals price.

"I think we closed OK today," a source said. "There were some good headlines [on the economy], but there weren't any deals anyway."

Despite the temporary slowdown, there is expected to be a sharp uptick in new deals in the coming week provided nothing drastic changes over the long Labor Day weekend.

Secondary trading in corporate bonds was better on Wednesday, although Treasuries impacted the market, according to sources.

The Markit CDX Series 14 North American investment-grade index firmed 5 basis points to a spread of 109 bps, according to Markit Group Ltd.

"I'm still holding out for next week," one trader said of more activity. "Moving Treasuries created a bid for 30-year paper in secondary."

Treasuries sank, sending yields up as investors favored stocks over bonds on positive manufacturing data on Wednesday. The yield on the 10-year note jumped to 2.57% from 2.47% the previous day. The yield on the 30-year bond rose to 3.65% from 3.52%.

High-grade debt in the oil and gas sectors tightened as crude oil climbed on the higher manufacturing reports for China and the United States, a trader said.

"The oil and gas names are 10 to 12 better today," the trader said.

Lower-quality high-grade debt in the retail, food and beverage sectors traded a quarter to half a point better on the day, according to a trader.

Bonds in the telecommunications sector also were stronger in the secondary.

"Probably 5 basis points better," the trader said.

"Corps seemed OK today," another source said. "Decent volume. Definitely people out on summer holiday."

Overall investment-grade Trace volume rose 7% to $13 billion, a source said.

Toyota arm sells floaters

Toyota Motor Credit sold $120 million of one-year floating-rate medium-term notes (Aa2/AA) at par to yield Federal Funds plus 25 bps, according to an FWP filing with the Securities and Exchange Commission.

Jefferies & Co. Inc. was the agent.

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

Rentenbank plans sale

Landwirtschaftliche Rentenbank announced a benchmark sale of seven-year global notes, according to a 424B5 filing with the SEC.

Pricing is expected on Thursday, a source close to the deal said late in the day. The notes had been talked on Tuesday in the area of mid-swaps plus 30 bps.

The notes (Aaa/AAA/AAA) are backed by the Republic of Germany.

The bookrunners are HSBC Securities, J.P. Morgan Securities and RBC Capital Markets.

Proceeds are going to finance lending activities.

The financial institution for the agriculture and food industry is based in Frankfurt.

R.R. Donnelley active

R.R. Donnelley & Sons Co.'s new notes sold in June remain active in secondary trading, a trader said.

The 7.625% senior notes due 2020 priced on June 16 at par.

The notes were seen trading Wednesday at 102 7/8 to 102 3/8.

"That one's been pretty active," a source said. "A couple of decent-sized sellers have caused it to stay unchanged on the day. There was a lot of action in that one today, but now [that] the sellers are taken out, there's room for it to take a peg higher."

R.R. Donnelley & Sons is a Chicago-based commercial printing company.

Bank, brokerage CDS costs drop

A trader who follows the credit default swaps market said that the cost of protecting holders of bonds issued by major banks such as Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. fell on a sign of increased investor confidence.

The trader said the cost of protecting holders of major bank paper via CDS contracts was down by zero to 10 bps on the day. The CDS costs for brokerage/investment bank paper ended 7 bps to 10 bps lower.

Paul Deckelman contributed to this report

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