Philip Morris reopens bonds; issuers set to sell if tone holds; telecom bonds widen

By Andrea Heisinger and Cristal Cody

New York, Aug. 12 - There was one new deal in the investment-grade primary on Friday: a reopening of notes from Philip Morris International Inc.

The sale from the tobacco giant added $600 million to its outstanding 2.5% notes due 2016.

This capped an up-and-down week during which nearly all of the new high-grade debt was sold in one day.

According to Prospect News data, there was $10.851 billion in 16 new investment-grade deals for the week. Most of those were sold on Wednesday.

There are issuers wanting to tap the market in the coming week, sources said late Friday, but no issuer is committed to selling until getting sight of conditions.

"We have several issuers looking at Monday or Tuesday," said one syndicate source. "We did some calls, but everyone wants to wait and see if anything happens over the weekend."

The day ended with a good market tone thanks to a lack of bad news to sour the otherwise productive week.

"There was some radio silence out there, and that was a good thing," said one syndicate source.

Overall trading volume dropped about 20% to $11 billion on Friday.

High-grade bonds were seen mostly wider on the week in the secondary markets, traders said.

The telecommunications sector ended the week about 10 basis points to 20 bps wider. Time Warner Cable Inc.'s 10-year notes traded about 22 bps wider on the week, while CenturyLink, Inc.'s long bonds moved out in trading since a week ago, a trader said.

In other secondary trading, Berkshire Hathaway Inc.'s new 10-year notes were firmer on the day.

The Markit CDX Series 16 North American high-grade index firmed 2 bps to a spread of 115 bps on Friday, according to Markit Group Ltd.

Government bonds ended Friday better as yields fell to new lows on the week. The 10-year benchmark Treasury note yield fell to 2.25% from 2.34% on Thursday. The 30-year bond yield dropped 4 bps to 3.72%.

Philip Morris reopens debt

Philip Morris International reopened its issue of 2.5% senior notes due 2016 to add $600 million, according to a source away from the trade.

The sale was done due to reverse inquiry, the source said.

The notes (A2/A/A) were priced at a spread of Treasuries plus 95 bps.

Total issuance is $1.25 billion, including $650 million priced on May 10 at 75 bps over Treasuries.

Deutsche Bank Securities Inc. and Societe Generale were bookrunners.

Proceeds are being added to the company's general funds.

The tobacco company is based in New York City.

Time Warner wider

Time Warner Cable's 4.125% notes due 2021 widened to 177 bps bid, 167 bps offered in secondary trading on Friday, a trader said.

The notes (Baa2/BBB/BBB) ended the week about 22 bps wider, the trader said. The company priced the 10-year notes on Nov. 19 at Treasuries plus 155 bps.

The cable TV operator is based in New York City.

CenturyLink drops

CenturyLink's (Baa3/BB/BBB-) bonds "massively underperformed earlier in the week," a trader said on Friday.

The company's 7.6% bonds due 2039 were seen closing on Friday at 440 bps bid, 350 bps offered. On Monday, the bonds traded at 410 bps bid, 395 bps offered.

CenturyLink reopened the issue on June 9 at a spread of Treasuries plus 380 bps.

The integrated communications company is based in Monroe, La.

Berkshire narrows

Berkshire Hathaway's 3.75% notes due 2021 firmed in the secondary market on Friday to 155 bps bid, 150 bps offered, a trader said.

The notes were seen on Thursday wider at 162 bps bid, 157 bps offered in late afternoon trading before going out at 155 bps bid, the traders said. The notes priced on Wednesday at 160 bps over Treasuries.

The holding company for various subsidiaries is based in Omaha, Neb.

Bank/Broker CDS costs fall

A trader said that investment-grade bank and brokerage credit default swaps costs were lower on Friday, showing great investor confidence in the sector.

The costs of bank CDS fell to between zero and 8 bps. Brokerage/investment bank CDS costs were flat to 5 bps lower.

Paul Deckelman contributed to this review

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