Rabobank sells notes; mix of high-grade issuers ready to price; financials firm in trading

By Andrea Heisinger and Cristal Cody

New York, Jan. 8 - There was one new issue on Friday from Rabobank Nederland to close out a week of big deals in the investment-grade bond market.

The deal caps a week where nearly all of the sales were from foreign banks or financials.

Netherlands-based Rabobank priced $1.75 billion of 10-year medium-term notes via Rule 144A.

The coming week is expected to see more domestic issuers tapping the market prior to earnings season.

Spreads in the secondary high-grade market continued to narrow on Friday.

"They're tightening still," a trader said.

In fact, some traders found the day more active than expected.

"It's been really busy," a source said.

According to one trader, the secondary was busy with "several investment-grade corporates in the 10-years area. Some people are taking profits."

The market stayed "pressured" from $84 billion of coupon debt the Treasury plans to auction in the week ahead, a source said.

On Friday, the 10-year Treasury note's yield eased 1 bp to 3.83%, while the yield on the 30-year bond eased to 4.71% from 4.68%. They had been higher earlier after the weaker than expected jobs report.

"Treasuries rallied not as much as I thought they would," a source said. "But the unemployment numbers kept people on the sidelines a little bit."

A slew of data reports are expected to start trickling in the upcoming week, including retail sales and industrial production.

"I guess now we get ready for next week's auctions," a trader said Friday.

Meanwhile in investment grade, according to one market source, the "index looks flat to maybe a little bit tighter."

For example, the widely followed CDX Series 13 North American high-grade index firmed 1 bp to a mid bid-asked spread level of 78 bps.

Advancing issues kept ahead of decliners. Overall market activity, as reflected in dollar volumes, slipped more than 25% to just under $11 billion.

In secondary trading, new deals from international issuers failed to spark on Friday, including those from Irish Life & Permanent plc and ING Bank NV, a source said.

One deal from Australia's Macquarie Group Ltd. did show up on secondary's radar screen and the 6% 10-year bonds widened on Friday, one trader said.

Looking at other financial issuers, bonds from Morgan Stanley & Co., Bank of America Corp. and Citigroup Inc. tightened by the end of the day, according to a market source.

Rabobank sells 10-year notes

Rabobank Nederland sold $1.75 billion of 4.75% 10-year notes at 95 bps over Treasuries.

They were priced via Rule 144A.

Barclays Capital, Credit Suisse Securities, Goldman Sachs & Co. and Morgan Stanley were bookrunners.

The financing company for the food and agriculture industries is based in Utrecht, the Netherlands.

High-volume week comes to end

The sale from Rabobank ended a week where there was little in the way of sales from industrial or domestic issuers. That is expected to change in the coming week as companies look to raise capital ahead of earnings.

"It was so dead today," a source said. "Everyone's just waiting until next week."

Issuers could jump in on Monday, as two syndicate sources said their desks had "decent dockets" for the coming week.

There are no specific deals set, although a split-rated deal from Icahn Enterprises LP and Icahn Enterprises Finance Corp. is expected to price after its roadshow ends on Jan. 11.

In addition to more deals in the coming week, there is also "a lot more diversity" expected, a source said, instead of the past week's domination by issuers in the financial sector.

International deals lose sizzle in secondary

Recent offerings from overseas financial institutions were hard to find in trading Friday.

Among those missing were the deal sold Thursday by Irish Life & Permanent, which brought $1.75 billion in 3.60% three-year notes at mid-swaps plus 165 bps. The debt is backed by the Irish government.

"The Irish bonds typically do not see much action," one trader said Friday.

The Dublin, Ireland-based company is a financial services and insurance company.

Netherlands-based ING Bank also on Thursday sold $1.75 billion of notes in two short-maturity tranches.

ING sold $750 million of two-year floating-rate notes priced at par to yield three-month Libor plus 63 bps.

The $1 billion of 2.65% three-year notes priced at Treasuries plus 115 bps.

The notes barely made a blip on some traders' screens.

"I've not seen much on this," one source said.

Macquarie widens

Also in the secondary, Macquarie Group's new 6% 10-year bonds widened on Friday, according to a source.

"It was quoted this morning at 215 bps bid, 212 bps offered versus late yesterday at 212 bps bid, 210 bps offered," a trader said.

Macquarie priced the $1 billion in bonds on Thursday at Treasuries plus 220 bps.

The bonds have not attracted much attention.

"I'm surprised I saw as much as I did on the Macquarie Group," a source said.

Financials sector firms

At the close of the week, bonds from several financial issuers narrowed.

"It was busier than I thought it would be. But it's Friday," a trader said.

Charlotte, N.C.-based Bank of America's 6.5% six-year bonds tightened in mid-week trading by 9 bps to 106 bps over Treasuries on Friday, according to a source.

Also on Friday, New York-based bank Citigroup's 6.375% four-year bonds tightened 6 bps to 234 bps over, one source reported.

Meanwhile, a market source quoted that Morgan Stanley's 5.05% one-year note tightened nearly 20 bps to 24 bps over. The New York-based financial services company's 7.25% bonds due 2032 also tightened more than 10 bps to 120 bps over.

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