High-grade primary market empty; issuers expected to be wary Monday; secondary sees low volume

By Aleesia Forni and Andrea Heisinger

New York, July 5 - The investment-grade bond market was "a ghost town" on Friday, a source said, following the July 4th holiday and market closure.

Unemployment numbers for June were released Friday morning. The Department of Labor reported 7.6% unemployment, which was unchanged from May, and an addition of 195,000 jobs last month.

"Generically, the market opened a little bit better," a market source said late Friday. "Banks and financials moved a little tighter and industrials were tighter."

Another source noted that the better-than-expected job numbers could lead to new worries about the Federal Reserve pulling back on its stimulus efforts at the end of 2013. These fears have led to volatility and huge sell-offs in the bond market in the past few weeks.

"I would guess issuers are going to be a little wary to go on Monday," the market source said. "If one guy jumps in and gets something done, I would imagine others will do the same."

There is between $10 billion and $15 billion of high-grade supply that could be priced in the coming week, the source added.

Volume 'really low'

In secondary market action, one source noted that trading volume was seen "really low" at $1.2 billion early during the session.

Meanwhile, the source said the Markit CDX North American Investment Grade index was 3 basis points wider at mid-morning compared to Wednesday's close and ended Friday at a spread of 85 bps.

"Definitely thinly staffed desks today," the source said.

Another trader quoted ITC Holdings Corp.'s recent deal 2 bps to 3 bps better compared to levels seen late Wednesday.

ITC Holdings' $250 million of 4.05% 10-year notes traded 3 bps tighter at 157 bps bid, 152 bps offered, the trader said.

The company sold the notes at a spread of Treasuries plus 155 bps on June 26.

The $300 million tranche of 5.3% 30-year bonds firmed 2 bps to 175 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.

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