Issuers creep back to market as Com Ed, USAA Capital sell debt; Bank of America paper firms

By Andrea Heisinger and Cristal Cody

New York, Aug. 30 - New deals returned to the high-grade bond market on Tuesday after issuers stood down the previous day due to the effects of Tropical Storm Irene.

Fears of not being able to get in touch with investors lead names like Commonwealth Edison Co. and USAA Capital Corp. to hold off selling bonds for a day.

USAA priced its $250 million of three-year paper by early afternoon on Tuesday via Rule 144A. It was the first time the company has sold debt since 2009.

Commonwealth Edison sold $600 million of first mortgage bonds in two tranches. The deal included $250 million of five-year notes and $350 million of 10-year notes.

There was little difference in the market's tone from Monday, one source said.

"It was a normal day - the best kind of day - nothing good or bad came out," the source said.

There were headlines about how the Federal Reserve had considered other economic-stimulus alternatives before deciding to keep low interest rates intact and some economic data that home prices were up generically, but none of that had an impact on issuers pricing bonds or not.

"It's pretty quiet - nothing really on the radar," a market source said. It's unclear whether the few issuers that held off on Monday could tap the market on Wednesday after waiting to see how the Commonwealth Edison and USAA deals performed, they added.

"I was surprised we didn't see more jump in after these were announced," the source said.

Overall trading volume climbed to more than $11 billion on Tuesday from about $7.7 billion the previous day.

USAA Capital's notes were not seen trading late afternoon in the secondary market, while Commonwealth Edison's tranches tightened in trading, according to bond sources.

The Markit CDX Series 16 North American Investment Grade index firmed 2 basis points to a spread of 118 bps on Tuesday.

Bank of America Corp.'s paper continues to come in from the spreads seen earlier in the month, with the bank's benchmark 10-year notes trading nearly 100 bps tighter from a week ago, a trader said.

Investment-grade bank/brokerage credit default swaps costs also declined again on Tuesday, indicating more confidence in the economy, a source said.

Bank paper CDS costs declined by 3 bps to 15 bps, while brokerage/investment bank CDS costs came in by 10 bps to 15 bps.

Treasuries were better on weaker consumer confidence data. The 10-year Treasury note yield fell to 2.18% from 2.26%. The 30-year bond yield dropped 7 bps to 3.52%.

Com Ed offers two maturities

Commonwealth Edison sold $600 million of first mortgage bonds (Baa1/A-/BBB+) in two tranches, said a source who worked on the trade.

There was roughly $2 billion in demand for the notes, the source said.

The $250 million of 1.95% five-year bonds was sold at a spread of Treasuries plus 103 bps. The tranche priced at the tight end of guidance in the 105 bps area, plus or minus 2 bps.

A second part was $350 million of 3.4% 10-year notes priced at 123 bps over Treasuries. These notes were sold at the lowest end of talk in the 125 bps area, plus or minus 2 bps.

BNP Paribas Securities Corp., U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC were active bookrunners.

Proceeds are being used to refinance $191 million of three series of variable-rate tax-exempt bonds and to refinance $345 million of 5.4% first mortgage bonds due on Dec. 15. Any remainder will be used for general corporate purposes.

In the secondary market, the tranche of notes due 2016 tightened in trading to 100 bps bid, 97 bps offered, a trader said. The company's notes due 2021 also firmed to 122 bps bid, 117 bps offered.

The electric subsidiary of Exelon Corp. is based in Chicago.

USAA sells short bonds

USAA Capital sold $250 million of 1.05% three-year notes (Aa1/AA+) to yield Treasuries plus 77 bps, an informed source said.

The sale was more than two times oversubscribed with about $700 million on the books, the source said.

"It was very quick," they said. "We had a lot of high-quality accounts and were in and out."

The notes were offered under Rule 144A and Regulation S.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Wells Fargo were the bookrunners.

USAA last priced paper in a $200 million issue of 3.5% five-year notes on July 14, 2009.

The issuer offers insurance, banking and credit card services through subsidiaries and is based in San Antonio.

Bank of America firms

Bank of America's 5% notes due 2021 (A2/A/A+) traded on Tuesday at 330 bps bid, 325 bps offered, compared with where they traded a week ago at 440 bps bid, 430 bps offered, a trader said.

Bank of America sold the 10-year notes on May 10 at a spread of 185 bps over Treasuries.

Another trader also said the company's notes were "very active" in Trace trading on Tuesday. Bank of America's notes have narrowed in trading since the announcement last week that Berkshire Hathaway will inject $5 billion into the bank.

The financial services company is based in Charlotte, N.C.

Paul Deckelman contributed to this review

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