PSE&G sells $450 million; Devon Energy plans $2.5 billion note sale; U.S. Bancorp, ABB flat

By Sheri Kasprzak and Cristal Cody

New York, May 7 - New high-grade issuance was fairly light to kick off the week, but new offerings, particularly in the natural resources sector, were lining up.

Heading the day's primary activity, Public Service Electric and Gas Co. sold $450 million of series H medium-term secured notes, according to a term sheet.

Looking ahead, Devon Energy Corp. could come to market with $2.5 billion of senior notes in three tranches as early as Tuesday, said market insiders familiar with the offering.

Bonds traded weaker across the board on the day, sources said on Monday.

"Not hugely so, but it's weaker," a trader said.

The Markit CDX Series 18 North American investment-grade index eased 4 basis points to a spread of 100 bps.

Bank and financial paper widened 2 bps to 7 bps.

New issues from U.S. Bancorp and ABB Finance (USA) Inc. priced the previous week traded fairly flat on Monday.

Investment-grade bank and brokerage credit default swaps costs were seen mostly higher, a source said.

Bank of America's CDS costs rose 1 bp to 267 bps bid, 272 bps offered. Citi's CDS costs fell 1 bp to 227 bps bid, 232 bps offered. J.P. Morgan's CDS costs rose 1 bp to 106 bps bid, 110 bps offered. Wells Fargo's CDS costs traded up 1 bp to 93 bps bid, 97 bps offered.

Brokers were flat to higher. Merrill Lynch's CDS costs traded unchanged at 275 bps bid, 285 bps offered. Morgan Stanley's CDS costs eased 7 bps to 372 bps bid, 377 bps offered. Goldman Sachs' CDS costs traded up 3 bps to 273 bps bid, 278 bps offered.

Treasuries ended little changed on Monday in light trading. The benchmark 10-year note yield fell 1 bp to 1.87%. The 30-year bond yield dropped 1 bp to 3.06%.

PSE&G 30-year deal

The Public Service Electric and Gas notes (A1/A-/A) were sold through joint bookrunners BNP Paribas Securities Corp., Mitsubishi UFJ Securities (USA) Inc., Mizuho Securities USA Inc., RBC Capital Markets LLC, Scotia Capital (USA) Inc., TD Securities (USA) LLC, U.S. Bancorp Investments Inc. and Loop Capital Markets LLC.

The notes are due May 1, 2042 and bear interest at 3.95% priced at 99.357.

The notes are callable beginning on Nov. 2, 2041 at par plus accrued interest. There also is a make-whole call prior to Nov. 1, 2041 at 15 basis points over Treasuries.

Proceeds will be used for general corporate purposes.

Based in Newark, N.J., Public Service Electric and Gas is a natural gas and electric utility.

Devon deal ahead

The Devon Energy offering includes $750 million of notes due in 2017, $1 billion of notes due in 2022 and $750 million of notes due in 2042, said a source.

The notes (Baa1/BBB+/) will be sold through joint bookrunning managers Goldman, Sachs & Co. and Morgan Stanley & Co. LLC.

Proceeds from the offering will be used for general corporate purposes, including the repayment of outstanding debt, working capital, capital expenditures and acquisitions.

The offering comes on the heels of the company's earnings report. The company reported on Friday that its earnings dipped in the first quarter. Its first-quarter earnings were $393 million, down from $416 million for the same period in 2011.

Despite the drop in earnings, the company did report that its production increased by 10% for the first quarter to 694,000 barrels per day.

On Monday, the company's stock (DVN: New York) dropped by 68 points to close at $64.35.

The Oklahoma City-based company is an oil and natural gas producer.

U.S. Bank firms ½ bp

In the secondary market, U.S. Bancorp's 1.65% medium-term notes due 2017 edged tighter to 87 bps bid, 84 bps offered, a trader said.

"Pretty marginal," the source said.

U.S. Bancorp sold $1.25 billion of the five-year notes (Aa3/A/) at Treasuries plus 87.5 bps on Thursday.

The bank and financial services company is based in Minneapolis.

ABB flat

In other trading, ABB Finance's 2.875% notes due 2022 went out flat at 120 bps bid, 117 bps offered on Monday, a trader said.

ABB Finance sold $1.25 billion of the 10-year paper to yield Treasuries plus 120 bps on Thursday. The tranche priced as part of a $1.5 billion offering of notes (Aa3/A/) in three tranches.

The Norwalk, Conn.-based company is a unit of Zurich, Switzerland-based power and automation technology company ABB Ltd.

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