Colonial Pipeline sells $275 million bonds; financial names dominate trading amid weakening

By Andrea Heisinger

New York, Oct. 15 - Colonial Pipeline Co. sold bonds to end the week Friday in a primary that was otherwise empty.

Shakiness from the previous day's news on bank foreclosure costs as well as economic data, earnings announcements and a speech by Federal Reserve chairman Ben Bernanke may have contributed to the quietness.

Colonial Pipeline sold $275 million of 10-year bonds in the Rule 144A market.

General Electric Co. announced third-quarter earnings that were down 18% from the same period a year ago.

"Basically everyone's looking at banks and not pricing," a syndicate source said. "We're hoping it picks up."

More earnings announcements are on the way, so it's unlikely there will be a surge of new issues in the coming week.

Another source said that the day was "boring on the primary side" and that everyone was looking at how financial names were dropping in the secondary.

They also said that issuance in the coming week should be higher than the small amount priced in the past few days.

Financial bonds continued to take a hit in trading, sources said, following the previous day's drop in the markets on bank foreclosure fears.

"[The] IG world was weak in general," for the day, a secondary source said. Bonds were 3 to 5 basis points wider overall.

Sectors that stood out other than financials were names with leveraged buyout risks and homebuilders on the back of the foreclosure and mortgage news from the previous day, the source said.

The two new bonds priced the previous day by JPMorgan Chase & Co. were both wider, giving up some gains they had made.

Treasury yields recovered somewhat from the previous day's widening. A couple of the shorter bonds, like the three-year maturity, were a couple of basis points better than the previous day at 0.55%.

The five-year note was 1 bp wider at 1.19%, and the 10-year note was quoted at 2.56%, or 5 bps higher than the previous day.

Volume was about $8 billion for the day, which was "lower than it has been" at about $9 billion.

Colonial Pipeline taps market

Colonial Pipeline priced $275 million of 3.5% 10-year notes in the afternoon to yield 95 bps over Treasuries, a source close to the deal said.

They priced at the tight end of guidance in the range of 95 to 100 bps.

The notes (A2/A) priced under Rule 144A.

RBS Securities and Wells Fargo Securities LLC were the bookrunners.

The bond tightened slightly on the offer side after pricing, a trader said, who quoted it at about 10 bps better on the offer side at 86 bps, with no bid. Another source said she did not see it trading.

The fuel pipeline is based in Alpharetta, Ga.

Bank bonds remain weak

Financials were down by late afternoon following a general weakening in names like Bank of America Corp., JPMorgan Chase and Goldman Sachs Group, Inc. on Thursday.

This sector was "in general 5 to 10 bps wider today, with the worst performer being JPM," a trader said.

The trader quoted credit default swaps on JPMorgan at 15 bps wider and 10 bps wider in cash.

"[Bank] CDS spreads gapped out quite a bit today," a source said.

General Electric Capital Corp. bonds "moved in tandem with the rest of the financials on the back of earnings," the trader said, quoting them 5 to 10 bps wider.

Bank of America saw its spreads weaken the most throughout the week, a source said, calling them "the widest of the bunch."

She quoted the 5.625% notes due 2020 at 272 bid, 266 offer, or 54 bps wider.

Citigroup Inc.'s 5.375% notes due 2020 were at 247 bps bid, 242 bps offer, or 29 bps wider.

JPMorgan bonds widen

The two new bonds from JPMorgan that were part of the $4 billion deal priced on Thursday were quoted wider in next-day trading.

A source said the 4.25% note due 2020 was at a bid of 181 bps and offer of 180 bps. This was around the 180 bps over Treasuries level the bond had priced at. Soon after pricing, they had tightened a couple of basis points on the offer side.

Early in the day, they were seen trading at a bid of 184 bps and offer of 179 bps.

The 5.5% bond due 2040 performed about the same after pricing at 165 bps over Treasuries. A trader quoted it at 166 bps bid, with an offer of 164 bps.

The bonds had moved 1 to 5 bps better after pricing.

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