Solid week ends with no new high-grade issuance; paper trades mostly better in quiet session

By Cristal Cody and Aleesia Forni

Virginia Beach, Oct. 18 - The U.S. high-grade bond market was empty of new issuance on Friday, capping off a positive week for the market.

A solid crop of new deals were priced during the shortened week due to the Columbus Day holiday despite the turmoil in Washington.

Roughly $11 billion of new paper was issued, slightly higher than predictions of a $10 billion week.

With the bulk of the week's new deals meeting strong investor demand, a surge of new deals are expected to hit the investment-grade primary market for the week ahead.

Players are expecting up to $25 billion of new issuance for the week.

"I'd say it's about to heat up," a market source said on Friday.

Secondary market activity stayed fairly quiet on Friday to close out the short week, sources said.

The Markit CDX North American Investment Grade series 21 index was unchanged at a spread of 71 basis points.

Investment-grade bonds ended "generally slightly better," a trader said.

New issues from Bank of America Corp. and Dominion Gas Holdings LLC traded flat over the session, according to traders.

Overall trading volume was about $13.7 billion, a source said.

BofA holds

Bank of America's 2.6% notes due 2019 (Baa2/A-/A) firmed about 1 bp in the secondary market over the day to 117 bps bid, 115 bps offered, a trader said Friday afternoon.

"So no real change," the trader said.

The paper was quoted earlier in the day at 118 bps bid, 115 bps.

Bank of America sold $2.5 billion of the notes at Treasuries plus 128 bps on Thursday.

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

Dominion Gas flat

Dominion Gas' 4.8% bonds due 2043 (A3/A-/BBB+) traded mostly flat with the notes quoted at 107 bps bid, 103 bps offered late afternoon, a trader said.

"They're unchanged from yesterday," the trader said.

The long bonds were quoted early Friday at 101 bps offered.

Dominion Gas priced $400 million of the 30-year bonds at Treasuries plus 112 bps on Thursday.

The company is a wholly owned subsidiary of Richmond, Va.-based energy producer and transporter Dominion Resources Inc.

Bank/brokerage CDS prices down

Investment-grade bank and brokerage CDS prices ended lower on Friday, according to a market source.

Bank of America Corp.'s CDS costs firmed 2 bps to 89 bps bid, 93 bps offered. Citigroup Inc.'s CDS costs tightened 2 bps to 80 bps bid, 84 bps offered. JPMorgan Chase & Co.'s CDS costs firmed 1 bp to 76 bps bid, 79 bps offered. Wells Fargo & Co.'s CDS costs tightened 2 bps to 52 bps bid, 56 bps offered.

Merrill Lynch's CDS costs firmed 1 bp to 90 bps bid, 95 bps offered. Morgan Stanley's CDS costs tightened 5 bps to 110 bps bid, 114 bps offered. Goldman Sachs Group, Inc.'s CDS costs firmed 5 bps to 113 bps bid, 118 bps offered.

Paul Deckelman contributed to this review

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