New deals dry up due to long weekend, earnings; trading quiet, spreads ease as Treasuries up

By Andrea Heisinger and Cristal Cody

New York, Jan. 15 - Investment-grade primary activity was nonexistent Friday, while secondary trading was light as many traders left early ahead of the three-day weekend.

In fact, overall trading dollar value in high-grade debt on Friday dropped 24% to about $9.5 billion, a source reported.

Bond markets were scheduled to be closed Monday in observance of Martin Luther King Jr. Day.

One trader said that a "Monday holiday is grand."

Meanwhile on Friday, "Treasuries are on fire," a source said. The governments made "new session highs."

Yields were pushed lower on Friday as Treasury prices gained on "tame" inflation. The yield on the benchmark 10-year Treasury note tightened to 3.68% from 3.74% on Thursday. The yield on the 30-year bond tightened 5 bps to 4.58%.

The Treasury completed the sale of $84 billion of bonds on Thursday.

Also, according to a market source, the CDX Series 13 North American high-grade index eased 4 bps to a mid bid-asked spread level of 84 bps.

Elsewhere on Friday, a high-grade trader noted that Moody's Investors Service "is upgrading more U.S. companies than downgrading for the first time since second quarter 2007."

The primary market saw no new activity for the day. The lack of deals was likely due to the impending long weekend, and not anything to do with the market's tone.

A source noted that if the tone were the case, there would have been issuers, due to JPMorgan Chase & Co. announcing an $11.7 billion profit for 2009. That was double what it reported for 2008.

New deals absent in primary

The market for new deals was effectively shut on Friday as syndicate desks cleared out early ahead of the long holiday.

"Was anyone even working today?" a syndicate source asked in late afternoon. "We didn't even really have any [deals] yesterday."

The market tone was "OK" on Friday, the syndicate source said. He added that because virtually no deals had priced in the past two days, it was hard to take the pulse of the primary market.

New deals are expected to return to the market on Tuesday after the long weekend, although not in full force. Some companies and banks are in earnings blackout, and it could mean even more issues coming from overseas companies, a market source said.

"I bet it will pick up," the source said. "It can't get much worse."

Big earnings week

Looking ahead to the coming short week, the market awaits a plethora of earnings announcements.

It's a "big Q4 earnings week," a trader said.

Just a few of the companies that expect to release earnings in the upcoming week include: Bank of America Corp.; Citigroup Inc.; Goldman Sachs Group Inc.; Morgan Stanley & Co.; Wells Fargo & Co.; State Street Corp.; International Business Machines Corp.; McDonald's Corp.; eBay Inc.; and Google Inc.

Financials sector moves out

JPMorgan Chase & Co.'s notes widened on Friday after the bank said it could not yet say if mortgage and loan losses had topped out.

JPMorgan's 6.3% notes due 2019 were at 123 bps over, according to a source, although they subsequently recovered some of the losses, with a market source reported that by the close the New York-based bank's notes had tightened from that earlier level to 118 bps over.

In other financials, a source noted that New York-based Citigroup's 5.5% notes due 2014 widened 19 basis points to 242 bps over.

In addition, Charlotte, N.C.-based Bank of America's 7.625% notes due 2019 widened 12 bps from midweek to 174 bps over on Friday, according to the source.

GE at 182 bps

According to one source, General Electric Capital Corp.'s 5.5% notes due 2020 traded on a volume of about $180 million at 182 bps over Treasuries on Friday.

The Fairfield, Conn.-based company is the financing arm of General Electric Corp.

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