High-grade primary quiets to close busy week; Wells Fargo flat; bank/brokerage CDS costs rise

By Aleesia Forni and Cristal Cody

Virginia Beach, Va., Aug. 9 - The investment-grade bond market quieted down on Friday to end a week that was packed with issuers hitting the primary, market sources said.

Nearly $20 billion of high-grade bonds sold during the week, according to Prospect News data, falling in line with earlier estimates of a $15 billion to $20 billion week.

The session on Friday did see the Tennessee Valley Authority price $360 million of 3.846% senior notes due Aug. 15, 2033.

The deal was part of a lease-purchase transaction that provides the company with $400 million of financing to acquire the Southaven Combined Cycle Plant in Desoto County, Miss., according to a company news release.

"We are pleased with the success of this financing, which drew broad investor support and establishes a new opportunity for programming with TVA's customers," chief financial officer John Thomas said in the release.

BofA Merrill Lynch, Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC were the lead underwriters.

The government-owned electric utility is based in Knoxville, Tenn.

Also during Friday's session, Wells Fargo & Co. detailed its $1.5 billion issue of 4.125% notes due 2023.

The company priced the notes on Thursday at a spread of 160 basis points over Treasuries, or 99.659 to yield 4.167%, according to a filing with the Securities and Exchange Commission.

Wells Fargo Securities LLC was the bookrunner.

Looking ahead, one syndicate source expected the dollar amount for the week ahead to come in similar to the week ended Friday, predicting $15 billion to $20 billion of new paper.

Secondary market activity was light on Friday as many traders headed out early, sources said.

Wells Fargo's new subordinated medium-term notes (A3/A/A+) traded flat to slightly wider late in the afternoon, a trader said.

In other activity, bank and brokerage credit default swap costs increased, a market source said.

The Markit CDX Series 20 North American Investment Grade index closed flat at a spread of 75 basis points.

Wells Fargo flat

Wells Fargo's 4.125% notes due 2023 traded on Friday at 160 bps offered to 162 bps offered in the secondary market, a trader said.

Wells Fargo sold $1.5 billion of the notes on Thursday at a spread of 160 bps over Treasuries.

The financial services company is based in San Francisco.

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS costs rose on Friday, a market source said.

Bank of America Corp.'s CDS costs increased 2 bps to 107 bps bid, 111 bps offered. Citigroup Inc.'s CDS costs rose 2 bps to 100 bps bid, 104 bps offered. JPMorgan Chase & Co.'s CDS costs eased 3 bps to 79 bps bid, 83 bps offered. Wells Fargo & Co.'s CDS costs closed up 1 bp at 63 bps bid, 67 bps offered.

Merrill Lynch's CDS costs rose 4 bps to 104 bps bid, 110 bps offered. Morgan Stanley's CDS costs ended 2 bps higher at 136 bps bid, 140 bps offered. Goldman Sachs Group, Inc.'s CDS costs rose 2 bps to 126 bps bid, 130 bps offered.

Paul Deckelman contributed to this review

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