Citigroup sells debt in high-demand trade; other banks could tap primary; Citi, Goldman firm

By Andrea Heisinger and Cristal Cody

New York, Oct. 25 - Citigroup Inc. became the first high-grade issuer of the week on Tuesday as it braved the market with a sale of long-dated debt.

The New York-based financial services company priced $1 billion of notes due 2022. It was Citigroup's first debt sale since June.

The bank decided to jump into the market due to "a combo of the market feeling good and an absence of the 10-year" in its outstanding debt curve, a source said.

"We thought it was a good time to establish a 10-year benchmark to keep our visibility up."

He added that Citigroup hasn't priced 10-year paper for more than a year - since August 2010.

"There was a window of opportunity and demand from investors," he said.

Goldman Sachs Group, Inc. priced a $1 billion add-on to its 5.25% senior notes due July 27, 2021.

The market will likely go back to uncertainty on Wednesday as the euro zone leaders reconvene for meetings to solve the debt crisis.

Other financial issuers paved the way for Citigroup's trade, including JPMorgan Chase & Co., which issued last week after announcing third-quarter earnings.

There could also be more Yankee bond issuers and regional banks tapping the market in the near future, a source said.

"There is demand for financial borrowers," the source said. "Credit in general felt better today."

Overall trading volume climbed to nearly $14 billion on Tuesday from $10.5 billion on Monday.

In the secondary market, the new issues that Citigroup and Goldman Sachs sold narrowed in trading.

Citigroup's notes traded "about 6 basis points better," one trader said.

Goldman's notes were seen 2 bps better in afternoon trading after they were reopened at a spread of 295 bps over Treasuries. They firmed to 293 bps bid, 291 bps offered, a trader said.

Overall, though, bank and financial paper ended the day moderately weaker.

"It seems it opened up really firm and pulled back a little bit with the stock market," a source said.

Corporate bonds closed wider. The Markit CDX Series 17 North American Investment Grade index eased 4 bps to a spread of 130 bps on Tuesday.

Treasuries finished strong on weaker economic data and pessimism over a solution to Europe's debt crisis. The benchmark 10-year note yield dropped to 2.11% from 2.23%. The 30-year bond yield fell to 3.13% from 3.27%.

Citi taps primary

Citigroup sold $1 billion of 4.5% notes due 2022 (A3/A/A+) to yield 245 bps over Treasuries, an informed source said.

Investors had plenty of appetite for the bonds, which had more than $7 billion on the books, the source said. There were over 200 investors involved, he added.

The bookrunner was Citigroup Global Markets Inc.

Citi last sold debt in a $1.875 billion remarketing of 3.953% notes due 2016 priced on June 8.

In the secondary market, Citigroup's notes due 2022 firmed to 239 bps bid, 235 bps offered, a trader said.

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