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High-grade new issue market empty; spreads firm on Federal Reserve tapering; trades thin
By Cristal Cody and Aleesia Forni
Virginia Beach, Dec. 18 - Another quiet primary session was seen on Wednesday for the high-grade primary, as the Federal Reserve announced that it would begin tapering its bond-purchasing program in January.
The program will be cut to $75 billion from $85 billion per month, the Fed said on Wednesday.
"It was just a matter of when it was going to happen," a market source said following the announcement.
The source said he was "not too surprised" by the news.
High-grade supply sits at $4 billion for the week so far, and the possibility of any new deals for the remainder of the week is slim, the source added.
Bond spreads tightened following the Federal Reserve's announcement that it will start to taper its purchases of Treasuries and mortgage bonds, sources said.
The Markit CDX North American Investment Grade series 21 index firmed 2 basis points to a spread of 68 bps.
Secondary action otherwise slowed with most desks beginning to close shop for the year, market sources said.
"We're about shut down," one source said.
Trades are spotty with small blocks of bonds here and there, a trader said.
Bank/brokerage CDS costs down
Investment-grade bank and brokerage CDS prices declined, according to a market source.
Bank of America Corp.'s CDS costs firmed 3 bps to 77 bps bid, 81 bps offered. Citigroup Inc.'s CDS costs declined to 71 bps bid, 76 bps offered. JPMorgan Chase & Co.'s CDS costs firmed to 67 bps bid, 71 bps offered. Wells Fargo & Co.'s CDS costs tightened 2 bps to 40 bps bid, 44 bps offered.
Merrill Lynch's CDS costs firmed 3 bps to 79 bps bid, 86 bps offered. Morgan Stanley's CDS costs came in 6 bps to 88 bps bid, 92 bps offered. Goldman Sachs Group, Inc.'s CDS costs firmed 5 bps to 93 bps bid, 97 bps offered.
Paul Deckelman contributed to this review.
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