Shortened week kicks off with little activity; Simon widens following hostile bid for rival

By Cristal Cody

Tupelo, Miss., Feb. 16 - Investment-grade trading was "pretty quiet" to "pretty dead," sources said Tuesday after the federal holiday kept markets closed on Monday for Presidents' Day.

The primary high-grade market also was "dead" at the start of the four-day trading week, one trader said.

"Nothing's happening in new issues."

On Tuesday, overall Trace volume slipped about 6% to just under $9 billion, according to one source.

Meanwhile, the CDX Series 13 North American high-grade index firmed 1 basis point to a mid bid-asked spread level of 98 bps.

Also on Tuesday, Treasuries continued to tighten from Friday's market. For example, the yield on the 10-year Treasury note was 3 bps firmer at 3.66%. In addition, the yield on the 30-year Treasury bond firmed 2 bps to 4.63%, a source said.

In secondary trading, the financials sector overall was 3 bps to 5 bps better on the day, a source said.

But the main activity in the secondary market was seen from Simon Property Group Inc.'s notes, which were on the move on Tuesday after the company made a $10 billion hostile bid for rival General Growth Properties Inc.

"Other than that, it's been a quiet Tuesday after the holiday," one source said.

Simon Property widens

Mega shopping mall owner Simon Property's bonds were as much as 10 bps to 15 bps wider on Tuesday after the company made the offer for General Growth Properties, which filed for Chapter 11 bankruptcy protection last year, sources told Prospect News.

Under the terms, Simon Property would pay Chicago-based General Growth's unsecured creditors in full with $7 billion, while shareholders would receive about $3 billion.

"Simon Property with their bid for General Growth Properties was out only 10 bps or 15 bps, and it looks like it's coming in a little bit so it's holding well considering," a trader said near the market's close.

Indianapolis-based Simon Property's 6.75% notes due 2040 "traded around 200 bps over on Friday, and it was 220 bps, 205 bps mid market at 10 to 15 bps wider, but it's a better bid for it now."

Simon Property's debt through operating partnership Simon Property Group, LP, also includes 5.3% notes due 2013; 6.75% notes due 2014; 4.2% notes due 2015; 6.125% notes due 2018; and 5.65% notes due 2020.

Other traders also saw Simon Property's 30-year bonds weakening on the buyout news before firming late in the day.

"I heard their bonds were about 5 bps tighter," one source said.

Financials sector

The financials sector made improvements on Tuesday, according to sources.

"Financials did OK," one trader said. "Nothing earth-shattering, generically it was better bid - maybe 3 bps to 5 bps depending on the name."

For example, Bank of America Corp.'s 6.5% notes due 2016 "look about 5 bps better on the day," the source said.

The notes were seen late Tuesday at 225 bps bid, 235 bps offered.

By the market close, the Charlotte, N.C.-based bank's notes ended tighter at 174 bps from 180 bps on Friday, according to one source.

Elsewhere in the sector, New York-based Citigroup Inc.'s 5.5% notes due 2014 moved 4 bps tighter to 274 bps on Tuesday.

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