Teck Resources prices to strong demand as tone holds; Teck firms; Barclays mixed in trading

By Andrea Heisinger and Cristal Cody

New York, Feb. 16 - There was one deal in the again lackluster high-grade bond market Thursday. Canada's Teck Resources Ltd. priced a $1 billion issue that was divided equally between seven- and 30-year maturities. Proceeds will be used to redeem outstanding debt.

"I think we're done for the week," a market source said. Although the market doesn't close early Friday, it is leading into the long Presidents Day holiday weekend.

The market tone didn't take a hit on Thursday; there just wasn't much issuance to be had.

"I'm not sure why the [equity] market's up 125 points," one syndicate source said at the end of the day. "I'm not buying it."

He added that the high-grade "market's still fine" and rebounded after "it felt like we were hitting a wall this morning."

Corporate bonds overall were stronger on the day. The Markit CDX Series 17 North American Investment Grade index firmed 2 basis points to a spread of 99 bps.

Teck's new bonds tightened as the session was closing, traders said.

"It's a couple basis points better on the bid from where it came," one trader said.

Barclays Bank plc's notes were trading flat to slightly wider over the day, traders said.

Bank and financial paper was mixed in trading, but "it certainly got its footing back," a trader said.

Investment-grade bank and brokerage credit default swaps costs declined on Thursday.

On the bank paper side, Citigroup Inc.'s CDS costs dropped 20 bps to 230 bps bid, 240 bps offered, a source said. Wells Fargo & Co.'s CDS costs traded 8 bps lower at 105 bps bid, 115 bps offered.

Brokerage paper CDS costs also fell, the source said. Goldman Sachs Group Inc.'s CDS costs ended 20 bps lower at 255 bps bid, 265 bps offered. Merrill Lynch's CDS costs fell 15 bps to 300 bps bid, 320 bps offered. Morgan Stanley's CDS costs dropped 5 bps to 310 bps bid, 325 bps offered.

Overall trading volume was $10 billion.

Treasuries fell on stronger economic data and hope for a Greek debt crisis resolution. The yield on the benchmark 10-year note climbed 5 bps to 1.98%. The 30-year bond yield rose to 3.14% from 3.09%.

Teck's two tranches

Teck Resources priced $1 billion of senior notes (Baa2/BBB) in two tranches, a source close to the trade said.

There was roughly $4.5 billion on the books for the deal, the source said.

A $500 million tranche of 3% seven-year paper sold at a spread of Treasuries plus 165 bps. This tranche priced at the tight end of guidance in the 170 bps area.

The company opted to do the somewhat unusual seven-year maturity because it "fit their maturity profile," the source added.

"It was a good deal," the source said.

There was also a $500 million tranche of 5.2% 30-year bonds priced at a spread of 210 bps over Treasuries. The paper sold at the low end of talk in the 210 bps to 215 bps range.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Bank of America Merrill Lynch, Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the bookrunners.

Proceeds, along with cash on hand, are being used to fund the redemption of $530 million of 9.75% notes due 2014 and a portion of $1.04 billion of outstanding 10.75% notes due 2019.

The deal is guaranteed by subsidiary Teck Metals Ltd.

Teck's new bonds traded better in the secondary market, traders said.

"It's doing a little bit better," one trader said.

A couple traders saw the notes due 2019 at 164 bps bid, 161 bps offered.

The long bonds traded tighter, ranging from 208 bps bid, 206 bps offered to 208 bps bid, 203 bps offered.

The diversified mining company is based in Vancouver, B.C.

Barclays gives terms

Barclays Bank gave the terms of its $1.25 billion of notes (Aa3/A+/A) that priced on Wednesday. The 2.75% three-year senior notes priced at a spread of Treasuries plus 240 bps, according to an FWP filing with the Securities and Exchange Commission.

Barclays Capital Inc. was the bookrunner.

Barclays' notes were mixed in trading over the day, a handful of traders said.

"Barclays is doing about flat from where it came yesterday," one trader said.

The 2.75% notes due 2015 were quoted in late afternoon wider at 242 bps bid, 238 bps offered by another trader.

A trader at another desk saw the notes at 237 bps offered.

The financial services company is based in London.

Paul Deckelman contributed to this review

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