Primary takes break after $14 billion week; Hershey, Newell lead new issues tighter

By Andrea Heisinger and Paul Deckelman

Omaha, March 28 - Investment-grade issuers took a breather from the market Friday despite stable conditions.

In the investment-grade secondary market Friday, advancing issues led decliners by about a seven-to-six ratio, while overall market activity, reflected in dollar volumes, fell about 28% from Thursday's pace.

Spreads in general widened a bit, as Treasury yields tightened, the yield on the benchmark 10-year issue, for instance, narrowing by 9 basis points to 3.44%.

Once again, newly priced issues were among the most active movers on a mostly dull day. For instance, a market source saw Hershey Corp.'s 5% notes due 2018, which priced at 250 bps over comparable Treasuries this past Monday, trading at 218 bps, a pickup of nearly 15 bps on the session.

Newell Rubbermaid Inc.'s 5.5% notes due 2013 were seen at 283 bps bid, versus their 295 bps spread at Tuesday's pricing, while its 6.25% notes due 2018, which had priced at 280 bps over, were bid at 241 bps over.

Goldman Sachs's 6.15% notes due 2018 traded at 266 bps over versus Tuesday's 270 bps spread at the pricing.

Commonwealth Edison Co.'s 5.8% notes due 2018, which had priced at 245 bps over on March 20, were trading on Friday at 231 bps over.

But while CSX Corp.'s new 6.25% notes due 2015 continued trading around 330 bps bid, 320 bps offered, in from their spread at this past Monday's pricing of 337.5 bps, the railroad operator's outstanding 6.25% notes due 2018 widened some 15 bps to the 305 bps level, a market source said.

Among the financials, Bank of America's 5.75% notes due 2017 tightened nearly 20 bps to around the 170 bps level, while Bear Stearns Cos.' 7.25% notes due 2018 were seen 10 bps better at the 330 bps level.

Primary pauses

Following a week of steady issuance, sources said the market needed a break so the secondary would have a chance to catch up and levels could be assessed.

"There was no issuance really and no flows in secondary," a market source said. "I think we'll see a handful of issuers next week but nothing overwhelming."

New issue concessions are ranging from 25 to 40 basis points depending on the name, the source said, which is another reason some issuers are pausing before coming into the market.

Russia's government-run oil producer OAO Gazprom announced a roadshow for its $2 billion bond issue.

The roadshow runs from March 31 to April 2, with Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc. as bookrunners.

Altogether the past week had more than $14 billion in new issues, topping the week before's $7.5 billion, which was mostly priced in one day.

Those at or over the $1 billion mark included Teppco Partners, LP, CSX Corp., Credit Suisse acting through its Guernsey branch, Goldman Sachs Group, Energy Transfer Partners, LP and Morgan Stanley.

Smaller issuers included Potomac Electric Power Co., Texas Gas Transmission, LLC, Cooper US, Inc., Questar Gas Co., Hershey Co., Newell Rubbermaid Inc., MidAmerican Energy Holdings Co., International Lease Finance Corp., Avista Corp., Dun & Bradstreet Corp., Wilmington Trust Corp., International Transmission Co. and America Honda Finance Corp.

The coming week will likely start quietly, with about the same volume as this week, sources said.

"With Friday as quiet as it was, there will be no fresh data points to go off and no one wants to be first out of the gate," a market source said of why Monday will likely be quiet.

"People will want to see how secondary trading is doing and take a little bit of a break before getting in," he said.

"I think it will pick up Tuesday or Wednesday and those will be the big issuance days."

Much of the recent backlogged supply came out this week, sources said, with financial and brokerage names coming back to the market.

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