Sempra Energy, Desjardins unit price during agreeable primary session; Cisco, bank bonds widen

By Andrea Heisinger and Cristal Cody

New York, March 17 - Sempra Energy and Caisse Centrale Desjardins du Quebec issued on Thursday as the market recovered slightly but remained sluggish for new deals, sources said.

Desjardins priced its $1 billion sale of five-year covered bonds by late afternoon under Rule 144A. They sold at the tight end of guidance in the mid-swaps.

The issuer was joined in the primary by natural gas and electric utility Sempra Energy. The company sold $800 million of fixed- and floating-rate notes, both with three-year maturities.

It was difficult to tell if the tone of the primary was due to a lack of activity in the secondary, a syndicate source said late in the day.

"There wasn't much trading going on, so it's hard to tell if anything's changed," he said.

The market "early on, opened with a positive tone," he said, adding that for most of the day the bond market followed equities.

By the end of the day, the outlook was that the tone "wasn't negative, so that's something," a source said.

Friday is expected to be quiet. It will end a difficult week that was expected to be busy before being derailed by headlines from Japan.

In trading on Thursday, Cisco Systems, Inc.'s 4.95% notes due 2019 were wider, along with bank and financial bonds, sources said. Citigroup Inc.'s 6.375% note due 2014 widened 6 basis points to 197 bps, a source said.

Investment-grade bond spreads are likely to remain down for the week, sources said.

"I.G. had a little bit of a sell-off today, which we're going to have a modest move higher in yield from, but the spread's widening 5 to 6 basis points by the time it's all said and done," one source said.

Overall investment-grade Trace volume fell nearly 2.5% to $12 billion, a source said.

On Thursday, the series 15 Markit CDX North American Investment Grade index firmed after two days of weakness. The index was 2 bps tighter at a spread of 90 bps, according to Markit Group Ltd.

Treasuries gave back some on Thursday, sending yields up, though bond yields still remain down on the week on the nuclear crisis in Japan. The benchmark 10-year note yield rose 5 bps to 3.25%, and the 30-year bond yield rose 5 bps to 4.43%.

"Over the course of the weekend, everybody ran for the hills. We have a big sell-off today, where rates are ending the day down," said Dan Greenhaus, market strategist at Miller Tabak & Co. "The 10-year is still down 15 basis points or so for the week."

Sempra prices $800 million

Sempra Energy priced $800 million of senior notes (Baa1/BBB+/A-) in two parts on Thursday, said a source who worked on the trade.

The $300 million of three-year floating-rate notes priced at par to yield Libor plus 76 bps. The tranche is non-callable.

A second part was $500 million of 2% three-year notes that sold at 99.876 to yield 2.043% with a spread of Treasuries plus 100 bps. They have a make-whole call at Treasuries plus 15 bps.

There was no talk on the fixed-rate notes - more like price discovery since the company has no outstanding three-year debt, the source said.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC were the bookrunners.

Proceeds are going toward general corporate purposes, including repayment of commercial paper bearing interest rates of less than 1%.

The electric and natural gas utility is based in San Diego.

Desjardins sells five-years

Canada's Caisse Centrale Desjardins du Quebec sold $1 billion of 2.55% five-year covered bonds to yield Treasuries plus 68.85 bps, or mid-swaps plus 45 bps, a source said ahead of the market close.

They sold at the tight end of guidance in the range of mid-swaps plus 45 bps to 47 bps.

The notes (Aaa/AAA/AAA) were sold under Rule 144A.

Barclays Capital Inc., HSBC Securities (USA) Inc., Morgan Stanley & Co., Inc. and RBS Securities Inc. were the bookrunners.

The treasury arm of the Desjardins Group is based in Montreal.

Cisco wider

In trading on Thursday, Cisco Systems' 4.95% notes due 2019 widened out in trading to 51 bps from 44 bps, a source said.

San Jose, Calif.-based Cisco produces internet protocol-based networking and other communications and information technology products.

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