Caterpillar, IFC price amidst Syria concerns; investment-grade bonds weaker, CDS costs widen

By Cristal Cody and Aleesia Forni

Virginia Beach, Va., Aug. 27 - Activity in the high-grade bond market remained light on Tuesday, though the market did see new issues from Caterpillar Financial Services Corp. and International Financial Corp.

Treasury yields fell to 2.73% during the day's session, one market source noted, as concerns were focused on the possibility of a military strike in Syria.

Meanwhile, International Finance came to Tuesday's primary selling $3.5 billion of 1.75% notes due 2018 with a spread of mid-swaps plus 2 bps, according to an informed source.

Pricing was at 99.952 to yield 1.76%.

The session also saw Caterpillar Financial price a $250 million offering of two-year floating-rate medium-term notes at par to yield Libor plus 15 bps, according to a filing with the Securities and Exchange Commission.

Sources are expecting the rest of the week to remain quiet ahead of the extended Labor Day holiday weekend.

One market source noted that players are "mostly preparing for next week," as the first week of September is expected to see more action with respect to new issuance.

Investment-grade bonds widened in trading on Tuesday as Middle East concerns and worries over the Federal Reserve's early withdrawal from its $85 billion monthly stimulus program weighed on markets, informed sources said.

Activity was light with more than a few traders and market participants out on vacation for the remainder of August, according to sources.

The Markit CDX Series 20 North American Investment Grade index rose nearly 5 basis points to a spread of 84 bps.

Investment-grade bank and brokerage CDS costs widened out on Tuesday, a market source said.

IFC sells $3.5 billion

International Finance priced $3.5 billion of 1.75% notes due 2018 with a spread of mid-swaps plus 2 bps, according to a market source.

Pricing was at 99.952 to yield 1.76%.

Deutsche Bank Securities Inc., TD Securities, HSBC and Daiwa Securities were the banks on the deal.

The World Bank member and lender to the private sector in developing countries is based in Washington, D.C.

Caterpillar prices floaters

In other primary action, Caterpillar Financial Services priced a $250 million offering of two-year floating-rate medium-term notes at par to yield Libor plus 15 bps, according to a FWP filed with the SEC.

Barclays and J.P. Morgan Securities LLC were the bookrunners.

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

Brokerage CDS costs widen

Bank of America Corp.'s CDS costs eased 5 bps to 112 bps bid, 116 bps offered. Citigroup Inc.'s CDS costs rose 5 bps to 105 bps bid, 109 bps offered. JPMorgan Chase & Co.'s CDS costs ended 6 bps wider at 91 bps bid, 96 bps offered. Wells Fargo & Co.'s CDS costs increased 3 bps to 65 bps bid, 69 bps offered.

Merrill Lynch's CDS costs went out 4 bps higher at 106 bps bid, 113 bps offered. Morgan Stanley's CDS costs eased 5 bps to 144 bps bid, 149 bps offered. Goldman Sachs Group, Inc.'s CDS costs widened 6 bps to 136 bps bid, 140 bps offered.

Paul Deckelman contributed to this review

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