OeKB plans deal; issuers continue to look at bond market; bank paper tightens in secondary

By Aleesia Forni and Andrea Heisinger

New York, June 25 - The investment-grade bond market was stagnant on Monday with a sovereign deal from Oesterreichische Kontrollbank AG announced.

OeKB is planning a deal of three-year notes for Tuesday, as other issuers stood down on further news out of the euro zone.

Spain asked for a further bailout over the weekend, and Cyprus also appealed to the European Union for money as its banks and the country's budget were in distress.

Late in the day, after the close, Moody's Investors Service announced that it had downgraded 15 Spanish banks.

A syndicate source said that eyes would be on the outcome of the auction of Spanish bills on Tuesday morning.

"It will be interesting to see how that plays out," she said.

There are a handful of issuers looking at the market on Tuesday although a quiet week is expected, with about $10 billion of bond deals, sources said.

"You've got to look at [new issue] concessions," a market source said. "There was some compression through the back half of last week in the high-quality names."

The turmoil in the euro zone and other factors continue to somewhat skirt the high-grade market.

"I've been surprised by the number of [issuer] calls we've had," the syndicate source said.

The secondary market saw issuances from Bank of Montreal and J.P. Morgan tighten in the secondary market.

Meanwhile, the Markit CDX Series 18 North American Investment Grade index widened 1 bps from Friday to a spread of 119 bps.

OeKB preps deal

Oesterreichische Kontrollbank announced an offering of three-year notes, a market source said.

The notes (Aaa/AA+/) are expected to be priced on Tuesday.

BNP Paribas Securities Corp., Deutsche Bank Securities Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC are the bookrunners.

The export and financial services company for Austrian businesses is based in Vienna.

S&P looks at IG debt

A report released on Monday looked at the breakdown of outstanding high-grade bonds by type, dollar amount and sector, a source from Standard & Poor's said.

Financial names, other than insurance, made up 25.8% of total debt, while utilities came in second with 8.8%. Utilities came in first among non-financials with total outstanding debt of $367 billion.

The report also showed that non-financials tend to issue bonds around the 10-year maturity or greater than 20 years. High-grade bonds have an average maturity of 17 years.

Companies with ratings of BBB minus or higher make up the majority of U.S. corporate ratings by dollar amount of outstanding debt, according to the S&P report. Of the U.S. corporate debt market as a whole, total outstanding high-grade debt amounted to about $3.85 trillion, or 59.7%.

Bank of Montreal

In the secondary market, Bank of Montreal's 1.3% notes due 2014 tightened 1 bps to 51 bps bid on Monday, according to a market source.

The bank priced $2 billion of notes in October at mid-swaps plus 50 bps.

J.P. Morgan tighter

The secondary also saw the $3 billion 6.3% issue due 2019 from J.P. Morgan tighten 6 bps to 190 bps bid.

J.P. Morgan priced the 10-year bonds on April 16, 2009 at 305 bps over Treasuries.

Nova Scotia tightens

Also in the secondary, Bank of Nova Scotia's 1.85% notes due 2015 tightened 1 bps to 76 bps bid, according to a market source.

The bank priced the $1 billion issue at 147 bps over Treasuries in January.

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