Issuers remain on sidelines ahead of holiday, jobs numbers; spreads flat during shortened session

By Aleesia Forni and Andrea Heisinger

New York, July 3 - Issuers of investment-grade bonds took the day off on Wednesday as the market closed early ahead of the July 4th holiday.

Although the market has been stable, the week has seen only one trade - a sovereign deal from Germany's KfW on Tuesday.

There was "some chatter" about a return to the euro zone crisis that plagued the market months ago, as Portugal faced a government crisis prompting a rise in yields of that country's bonds.

Although there are no sales expected, the market will also be watching for June employment numbers, which will be released Friday morning.

"We're in wait-and-see mode," a source said early Wednesday. "It's just been dead out there, so we're hoping it picks up [next week]."

A syndicate source noted that equities had wild swings on Wednesday, but it was hard to tell if those same gyrations were happening in the bond market.

"No deals, so no idea," the source said.

Spreads in the high-grade secondary bond market were mostly flat during the shortened session on Wednesday, as the recent two-part offering from ITC Holdings Corp. traded slightly wider on the day.

ITC Holdings' $250 million of 4.05% 10-year notes traded 1 basis point wider compared to levels seen late Tuesday at 160 bps bid, 155 bps offered, a trader said at the end of the session.

The company sold the notes at a spread of Treasuries plus 155 bps on Wednesday.

The $300 million tranche of 5.3% 30-year bonds was quoted 2 bps wider at 177 bps bid, 172 bps offered.

ITC Holdings sold the bonds at a spread of 175 bps over Treasuries.

The power transmission company is based in Novi, Mich.

Meanwhile, the Markit CDX North American Investment Grade index was 1 bp tighter a spread of 85 bps.

Investment-grade bank and brokerage credit default swap costs were flat across the board on Wednesday, according to a market source.

Bank of America Corp.'s CDS costs were unchanged at 130 bps bid, 135 bps offered. Citigroup Inc.'s CDS costs were also flat at 121 bps bid, 126 bps offered. JPMorgan Chase & Co. CDS costs remained at 95 bps bid, 100 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 73 bps bid, 78 bps offered.

Merrill Lynch's CDS costs were flat at 117 bps bid, 127 bps offered. Morgan Stanley's CDS costs declined also remained unchanged at 169 bps bid, 174 bps offered. Goldman Sachs Group, Inc.'s CDS costs were unchanged at 159 bps bid, 164 bps offered.

Paul Deckelman contributed to this review

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