After slew of deals, primary quiets while awaiting debt ceiling resolution; Nokia, banks widen

By Andrea Heisinger and Cristal Cody

New York, July 27 - The primary high-grade market was once again empty on Wednesday as debt ceiling talks continued and a small window for new deals closed.

On Tuesday, three deals were priced, including a sale of floating-rate notes from Goldman Sachs Group, Inc.

The Bank of Nova Scotia gave terms for its $2 billion deal of five-year covered bonds that was sold on Tuesday in the Rule 144A market.

It's likely to be quiet for the remainder of the week and until any resolution is reached by Congress, a source said, adding, "We don't have a calendar really right now."

A week remains before the Aug. 2 deadline when the U.S could have its credit ratings cut or default on some debt. This caused a drop in equities by the end of the day and companies and investors to shy away from the bond market.

On Wednesday, the president of Standard & Poor's testified before Congress, telling them that the U.S. could still keep its AAA credit rating from the agency if a sufficient debt plan is passed.

The summer slowdown and earnings haven't helped keep issuance up, and although foreign names often tap the U.S. market when domestic ones are in blackout, that has not been the case for the past week.

"It's just really uncertain out there," one source said. "I can't imagine it will change until next week."

Overall trading volume slipped to about $12.5 billion on Wednesday.

"Looks like all the action was in high yield," one trader said of new deals.

Nokia Corp.'s bonds widened 20 bps in secondary trading after Moody's Investor Services cut the company's credit ratings by two notches to Baa2 from A3.

Caterpillar Financial Services Corp.'s deal sold the previous day firmed 2 bps in trading. Other new bank and financial paper traded wider, including the Bank of Nova Scotia's bonds and the new deals from Morgan Stanley and Goldman Sachs Group Inc.

"Financials are closing plus or minus 2 basis points depending on the credit," a trader said.

Telecommunications and cable bonds also traded 1 bp to 2 bps wider.

The Markit CDX Series 15 North American investment-grade index eased 2 bps to a spread of 96 bps, according to Markit Group Ltd.

Treasuries rallied late in the day on the short end of the bond curve. The 10-year benchmark note yield rose to 2.98%. The 30-year bond yield was unchanged at 4.28%.

Scotiabank gives terms

The Bank of Nova Scotia sold $2 billion of 2.15% five-year covered bonds in the Rule 144A, Regulation S market, a source said.

The bonds (Aaa/AAA) were priced at Treasuries plus 69 bps.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc., Morgan Stanley & Co., Inc., Scotia Capital (USA) Inc. and UBS Securities LLC.

In the secondary market, the notes were seen offered at 84 bps early Wednesday, a trader said.

The financial services company is based in Toronto.

Nokia widens

Nokia's bonds moved out in trading over the day after the Moody's downgrade.

"The bonds were trading 15 to 20 basis points wider and then they've traded back off a little bit today," a trader said. "They're closing about 10 wider on the day."

Nokia's 5.375% notes due 2019 widened 10 bps on Wednesday to 295 bps bid, 285 bps offered.

The mobile phone manufacturer and internet services provider is based in Espoo, Finland.

Caterpillar Financial tighter

Caterpillar Financial Services' 2.05% five-year medium-term notes, series G, (A2/A/A) traded at 60 bps bid, 58 bps offered, a trader said Wednesday.

The company sold $750 million of the notes to yield Treasuries plus 62 bps.

The funding arm of heavy equipment maker Caterpillar is based in Nashville.

Financials weaker

Morgan Stanley's 5.5% 10-year notes (A2/A/A) were seen trading slightly weaker on Wednesday at 236 bps bid, 231 bps offered from 228 bps bid, 226 bps offered, a trader said.

Morgan Stanley sold $1.5 billion of 5.5% notes due 2021 on Thursday at 250 bps over Treasuries.

The investment bank is based in New York City.

Goldman wider

The 5.25% 10-year notes that Goldman Sachs sold moved out 6 bps from the previous day in trading to 223 bps bid, 220 bps offered, according to a trader.

The notes were seen on Tuesday at 217 bps bid, 215 bps offered.

Goldman sold the 10-year notes (A1/A/A+) on Friday at a spread of 230 bps over Treasuries.

The investment bank is based in New York City.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.