Hydro-Quebec does guaranteed deal; primary outlook dim, tone weak; new bonds flat in trading

By Andrea Heisinger and Cristal Cody

New York, June 23 - Montreal-based Hydro-Quebec sold bonds on Thursday as other issuers held off.

The electric utility sold $1 billion of five-year notes guaranteed by the Province of Quebec. The paper sold in line with revised guidance.

The primary side of the market was a "mess," according to one source who said that new deals are expected to be few and far between in the near future. Most companies have only been issuing for pressing financing needs, although those that do brave the market have been met with strong investor interest and low borrowing rates.

"I think it's going to be like this for a while," the source said. "It's kind of depressing."

The coming week isn't set to be much better as Greece remains in the headlines and quarterly earnings approach.

"It's going to be a long summer," a syndicate source said.

JPMorgan Chase & Co.'s notes edged 1 bp wider on the bid side in the secondary market, a trader said on Thursday. The notes had firmed soon after they priced on Wednesday, but the weakening was in line with market conditions, according to sources.

The Markit CDX Series 15 North American investment-grade index eased 2 bps to a spread of 99 bps, according to Markit Group Ltd.

BAA Funding Ltd.'s new 10-year notes also were flat in trading.

Overall trading volume fell more than 5% to about $12 billion.

Treasuries ended stronger late in the day. The 10-year note yield dropped 7 basis points to 2.91%. The 30-year bond yield fell 5 bps to 4.17%.

Hydro-Quebec sells at talk

Hydro-Quebec sold $1 billion of 2% global five-year notes (Aa2/A+) to yield mid-swaps plus 22 bps, or Treasuries plus 55.7 bps, an informed source said.

The notes were initially talked in the mid-to-low 20 bps area, and that was later revised to the mid-swaps plus 22 bps area. The notes priced in line with guidance.

Bookrunners were Bank of America Merrill Lynch, HSBC Securities, National Bank of Canada and RBC Capital Markets LLC.

Proceeds are being added to general funds to be used for general purposes.

The deal is guaranteed by Quebec.

The government-owned generator and distributor of electric power is based in Montreal.

JPMorgan notes 1 bp wider

In the secondary market, the new notes due 2016 that JPMorgan Chase priced in a $2.5 billion offering on Wednesday edged wider on Thursday, a trader said.

The 3.15% five-year notes (Aa3/A+/AA-) priced to yield 165 bps over Treasuries and traded on Thursday at 166 bps bid, 161 bps offered.

The financial services company is based in New York City.

BAA 10-years flat

Trading was mostly flat in BAA Funding's 10-year notes (/A-) on Thursday, according to a trader. The company sold $1 billion of 4.875% senior secured notes due 2021 to yield Treasuries plus 200 bps on Wednesday. Heading into the market close on Thursday, the notes traded at 200 bps bid, 190 bps offered, the trader said.

The bond insurer for BAA, which is the operator of six British airports, is based in London.

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