New issue volume about $9 billion for week; issuers hold off until Tuesday

By Andrea Heisinger

Omaha, Oct. 5 -Friday saw little in the way of new investment-grade issues, as market sources had predicted.

The week ended with about $9 billion in new issues, down considerably from last week's more than $24.5 billion in new issues.

The slowdown was expected, some sources said, leading into the long holiday weekend. Others were surprised more issuers weren't entering the market given the prime conditions.

"There's quite a bit of a backlog, and I think we're going to see a bunch starting Tuesday," a source said.

Many people were out Friday, and shutting down the books early, the source said.

Among this week's issuers were Target Corp. with an upsized $1.25 billion in senior bonds, and TransCanada Pipelines Ltd. with $1 billion in bonds.

Another big issue came from Teachers Insurance and Annuity Association with $1 billion in notes.

Delta Air Lines, Inc. priced $1.189 billion of passthrough certificates in two classes.

Clorox Co. priced $750 million of notes in two tranches, while Viacom Inc. priced $500 million in notes.

Other issues included Fannie Mae, Kimco Realty Corp., Northwest Airlines, Inc., Florida Power & Light Co., Georgia Power Co., Lincoln National Corp. and Schwab Capital Trust I.

Portland General Electric Co. sold $75 million in first mortgage bonds through a private placement Thursday, according to a filing with the Securities and Exchange Commission.

Tepid issuance expected

Next week should have similar volume.

"I think there will be a little less supply than this week," a source said. "There are some things in the pipeline right now, and we have supply, but we're unsure whether they will come to the market."

The benchmark 10-year Treasury notes were yielding 4.59% Friday, weaker from 4.52% Thursday.

Brokers strong

The secondary market was equally as quiet as new issues.

"Brokers have a strong bid to them, even with the Merrill news out there," a secondary source said, referring to Merrill Lynch posting a third-quarter loss.

Brokers were doing about 3 to 5 basis points better, the source said.

Thursday's issue from TIAA was trading tighter Friday at 93 bps bid, 90 bps offered from pricing at Treasuries plus 95 bps the session before.

This is following the trend of tightened spreads in the secondary over the last couple of weeks.

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