Headlines, lack of supply leave corporate investment-grade market empty; bank paper firms

By Andrea Heisinger and Cristal Cody

New York, Jan. 25 - The corporate sector of the investment-grade bond market went quiet on Wednesday as market participants awaited an announcement from the two-day Federal Reserve meeting.

The Federal Open Market Committee meeting wrapped by early afternoon, and nothing radical came out of it. The Fed is planning to keep the target range of its Federal Funds rate at between zero and 0.25% until at least late 2014. There was also an announcement of a plan to extend the average maturities of securities holdings.

"That wasn't great news, but it didn't affect issuance [Wednesday]," a source said.

There had been talk that a couple of new deals could possibly be announced and price ahead of the Fed meeting. Those never materialized as supply was light for the week and anyone thinking of tapping the bond market instead opted to wait until Thursday or later.

The word that the Fed had lowered expectations of the economy improving as well as stalled talks over the Greek debt crisis means predictions of light issuance for the week will likely come true.

There was one deal announced in the preferred stock market from Ares Capital Corp. as well as a couple pricing in the emerging markets space, sources said, but no corporate deals.

That drought could continue for the rest of the week.

"There's not really anything coming that I know of," a syndicate source said of Thursday.

"We're hoping it picks up next week, but we'll see."

Overall trading volume was flat at about $15 billion on Wednesday.

Bank paper was seen better on the day.

Bank of America Corp.'s 7.625% notes due 2019 came in to 367 basis points from 400 bps the previous day, a bond source said.

Citigroup Inc.'s 8.5% notes due 2019 also traded in to 319 bps from 324 bps.

The Markit CDX Series 17 North American Investment Grade index tightened 2 bps to a spread of 102 bps on Wednesday.

Treasuries traded higher but ended flat on the longer end of the curve after the Federal Reserve's FOMC statement.

The 10-year note yield dropped below 2% after the FOMC statement before ending at 2.01%. The 30-year bond yield was unchanged at 3.15%.

Ares Capital's preferreds

Ares Capital is planning to sell at least $100 million, or 4 million, of $25-par 10-year senior notes.

Price talk is around 7%, a market source said.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the bookrunners, according to a prospectus filed with the Securities and Exchange Commission.

Proceeds will be used to pay down debt under the firm's revolving credit facility or revolving funding facility. Any leftover proceeds will be used for general corporate purposes, including investing in portfolio companies in accordance with the company's investment objective.

The notes will be listed on the New York Stock Exchange.

Ares, a specialty finance company, is based in New York.

Stephanie N. Rotondo contributed to this review

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