Primary empties out; coming week predicted active; recent financial bonds hold firm in trading

By Andrea Heisinger

New York, May 22 - There were no new deals in the high-grade market Friday ahead of an early market close for the Memorial Day holiday.

Market sources were mostly looking at the coming week and its likely moderate volume of new deals.

Bonds priced earlier in the week by financial names held their gains, including those from State Street Corp., Barclays Bank plc and Capital One Financial Corp.

Spreads remained tighter by earlier afternoon as Treasury yields remained wider. They were sharply wider at Thursday's market close, some as much as 18 basis points from the previous day.

On Friday the 10-year note was 8 bps wider and the 30-year bond out 7 bps.

Post-Memorial Day to stay busy

There were conflicting predictions at the end of the week of what the coming week, and summer months, would hold in terms of issuance volume.

"It's hard to tell," a market source said, referring to what anything beyond the coming week would look like.

As far as the typical slowdown during the summer, he said, "I think it will happen this year. I don't see why not."

A syndicate source had a different view as far a slowdown: "Not this year," he said. "[Companies] need to get deals in. People need to issue and need to make money. I'm hearing June will be active. Plus, we need to get that logjam out of here. It's good for us."

He was referring to a backlog of deals left over from fears about bank stress tests and earnings blackouts.

The coming week should be "active," he said. "It should be kicking off Tuesday. There are a couple of things in the pipeline for Wednesday. I don't see why people wouldn't kick it off Tuesday, though."

The market source was more cautious, saying "it's hard to say a size" about the coming week. "I think we have two to three deals, not as much as this week and certainly not as much as last [week]."

"It should be pretty mellow. There may be some on Tuesday, but it's hard to tell."

Lorillard deal remains on table

One of the possible new issues for the coming week is from cigarette manufacturer Lorillard, Inc., which announced in a press release Thursday it is planning a debt offering pending market conditions.

No other details for the sale were given.

The company is also doing a common stock sale for up to $250 million.

Barclays Bank bond holds gains

The recent 6.75% bond due 2019 from Barclays Bank had mostly held onto its gains early Friday, a trader said. The bond priced at 355 bps over Treasuries and was quoted at 343 bps bid, 333 bps offered. This was about 3 bps wider than its level on Wednesday but still better than its price.

Capital One bond tightens further

The recent bond from Capital One Financial was at a better level Friday than on Wednesday, a trader said. The 7.375% bond due 2014 was in nicely at 480 bps bid - a vast improvement from its 540 bps price over Treasuries. They were quoted earlier in the week at 490 bps bid, 480 bps offered.

State Street remains better

A bond priced Tuesday by State Street had made a small improvement by early Friday from its level after pricing, a trader said.

The 4.3% due 2014 sold at Treasuries plus 220 bps and was quoted after pricing at 210 bps bid. On Friday the bonds were at 208 bps bid, 200 bps offered.

AmEx bond among top-traded

A bond from American Express Corp. was seen as one of the most heavily traded by early Friday afternoon, a market source said.

The recently priced 7.25% bond due 2014 was at the top, with another tranche of the same deal also remaining popular. That 8.125% bond due 2019 was in the fifth position.

Dow Chemical Co.'s 8.55% bond due 2019 remained among the top-traded as it has since pricing on May 7.

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