Caterpillar taps floaters amidst primary pause, quiet month-end clean-up; BHP mostly flat

By Aleesia Forni and Cristal Cody

Virginia Beach, Sept. 30 - The investment-grade bond market was mostly quiet on Monday, as players during the session were focused on the possibility of a government shutdown.

The session did see a lone deal from Caterpillar Financial Services Corp., which priced an add-on to its floating-rate notes due 2016.

The company priced the $150 million add-on at 100.056.

This muted session comes on the heels of what has been robust issuance for the month of September, with the previous week seeing roughly $31 billion of new paper sold.

"Nothing going on today," one syndicate source said near the end of the session.

Sources had expected up to $20 billion of new issuance for the current week.

Bonds traded flat to moderately weaker in quiet month-end activity as the market waited for a possible government shutdown on Monday, sources said.

"It's dead," one trader said. "It's quarter-end and month-end, and most people got everything set up in advance."

The Markit CDX North American Investment Grade series 21 index eased 1 basis point to a spread of 82 bps.

Investment-grade bank and brokerage credit default swaps costs widened.

In the secondary market, Ford Motor Credit Co. LLC's 2.875% notes due 2018 traded weaker on the offered side, according to a trader.

BHP Billiton Finance (USA) Ltd.'s new bonds (A1//A+) ended mostly flat, with the 10-year tranche 1 bp wider and the 30-year tranche 1 bp better on the day, according to a trader.

Time Warner Cable Inc.'s bonds traded mostly unchanged over the session after the previous week's volatility, according to market sources.

Caterpillar taps floaters

The session's lone primary deal came from Caterpillar Financial, as the company reopened its issue of series G floating-rate medium-term notes due Feb. 26, 2016 to add $150 million, according to an FWP filing with the Securities and Exchange Commission.

The notes have a coupon of Libor plus 24 bps, and the add-on was priced at 100.056.

Total issuance will be $600 million, including $300 million priced on Feb. 25, 2013 and $150 million priced on June 25.

Bookrunner was U.S. Bancorp Investments Inc.

The funding arm of heavy equipment maker Caterpillar is based in Nashville.

Ford eases on offer side

Light activity was seen on Monday in Ford Motor Credit's 2.875% notes due 2018 (Baa3/BBB-/), which traded at 147 bps offered, a trader said.

"Didn't see a lot of them trading," the trader said late Monday afternoon.

The notes went out on Friday at 147 bps bid, 144 bps offered.

Ford Motor Credit, the financing arm of Dearborn, Mich.-based automaker Ford Motor Co., sold $1 billion of the five-year notes with a spread of Treasuries plus 145 bps on Thursday.

BHP mixed

BHP Billiton Finance's 3.85% senior notes due 2023 eased 1 bp to 116 bps bid, 112 bps offered in Monday's secondary session, a trader said.

The notes traded on Friday at 115 bps bid, 112 bps offered.

BHP Billiton Finance sold $1.5 billion of the notes at Treasuries plus 125 bps on Wednesday.

The company's 5% bonds due 2043 firmed to 119 bps bid, 116 bps offered, tighter than where the notes traded Friday at 120 bps bid, 117 bps offered.

BHP sold $2.5 billion of the bonds at Treasuries plus 130 bps.

The company is a subsidiary of Melbourne, Australia-based natural resources developer BHP Billiton Ltd.

Time Warner Cable flat

Time Warner Cable's bonds saw thin trading over the session, while the 4.5% senior debentures due 2042 were quoted at 274 bps offered early in the day, a trader said.

The bonds traded on Friday at 285 bps bid, 275 bps offered.

Time Warner Cable priced $1.25 billion of the debentures in August 2012 at a spread of Treasuries plus 183 bps.

The broadband communications company is based in New York City.

Bank/brokerage CDS costs widen

Investment-grade bank and brokerage CDS costs widened on Monday, according to a market source.

Bank of America Corp.'s CDS costs widened 2 bps to 106 bps bid, 107 bps offered. Citigroup Inc.'s CDS costs eased 1 bp to 99 bps bid, 103 bps offered. JPMorgan Chase & Co.'s CDS costs rose 1 bp to 92 bps bid, 96 bps offered. Wells Fargo & Co.'s CDS costs ended unchanged at 61 bps bid, 65 bps offered.

Merrill Lynch's CDS costs closed flat at 98 bps bid, 103 bps offered. Morgan Stanley's CDS costs widened 3 bps to 135 bps bid, 140 bps offered. Goldman Sachs Group, Inc.'s CDS costs closed 2 bps wider at 126 bps bid, 130 bps offered.

Paul Deckelman contributed to this review

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