Financials make strong showing as JPMorgan, Wachovia, U.S. Bank price new issues

By Andrea Heisinger and Paul Deckelman

Omaha, Jan. 28 - The week started strong for new deals in investment grade with JPMorgan Chase & Co., Wachovia Corp., Oklahoma Gas & Electric Co., U.S. Bancorp and Toyota Motor Credit Corp. pricing issues.

The tone started somewhat weak in the morning, a market source said, but stabilized by later in the day.

In the investment-grade secondary market Monday, advancing issues outnumbered decliners by a not-quite five-to-four ratio, while overall activity, reflected in dollar value, was down about 18% from Friday's levels.

The dominant story in secondary was trading in new or recently priced issues - particularly such megadeals as JP Morgan Chase, Wachovia and Wells Fargo.

Financial issuers emerge

Financials came out as predicted last week after earnings were released.

JPMorgan reopened its 6% 10-year notes to add $2 billion. They were priced at 104.245 to yield 5.44% at a spread of Treasuries plus 185 basis points.

This brought the total issuance to $5 billion, including $3 billion issued Dec. 20, 2007.

J.P. Morgan Securities Inc. was bookrunner.

"It seems like reopening [companies] pay less of a premium than for a new deal," a source said. He noted the company likely paid around 15 to 20 bps.

Wachovia priced $2.5 billion of 5.75% 10-year notes at 99.572 to yield 5.807% at a spread of Treasuries plus 223 bps. This was tighter than price talk of 225 bps area, a source said.

Wachovia Securities LLC ran the books.

U.S. Bank priced $1 billion two-year floating-rate notes at par to yield three-month Libor plus 40 bps.

Lehman Brothers Inc. and Morgan Stanley & Co. Inc. were bookrunners.

Oklahoma G&E prices $200 million

Oklahoma Gas & Electric priced $200 million of 6.45% 30-year senior notes at 99.461 to yield 6.491% at a spread of Treasuries plus 220 bps.

This was at the tight end of price talk that was 220 to 225 bps, a market source said.

RBS Greenwich Capital and BNY Capital Markets were bookrunners.

Toyota Motor Credit priced two issues.

The company priced $434,956,500 in one-year floating-rate notes at the prime rate minus 280 bps.

Agent was Banc of America Securities LLC.

They also priced $150 million two-year floaters at one-month Libor plus 6.5 bps.

Agent was J.P. Morgan Securities Inc.

"This was exactly what I expected for the day," a source said, referring to the amount of financials coming into the market.

This was partly due to the 10-year Treasury notes sitting at 3.60%.

"It's looking pretty attractive," the source said.

With three days left in the January, there has been about $123 billion in new issues so far in the month, a source said.

Good volume expected

The week ahead is predicted to be busy barring any market swings.

"It's not surprising we're seeing all of these banks come out," a source said. "Two big banks just put out their earnings, and both [JPMorgan and U.S. Bank] seem to be trading well in the secondary."

"I think we should be fairly busy in the next few days, but we'll have to see what happens."

Another source said the rest of the week should be busy not only with banks but with opportunistic issuers and some industrials.

Some are part of a backlog created by recent volatility.

New issues tighten slightly

From the secondary viewpoint, a trader said that "the focus is on these new issues," with relatively less activity in established bonds.

He saw JP Morgan's 6% notes due 2018 - actually an add-on to an existing tranche of bonds - get as good as 170 bps bid, 165 bps offered after having priced at 185 bps over Treasuries. But by the end of the day, most of the gains had been surrendered, "after the announcement" of JP Morgan's increased stake in troubled bond-insurer Ambac Financial Group Inc. and the bonds headed home around the 182 bps bid.

He also saw Wachovia's new 5.75% notes due 2018 bid at 221 bps over in the gray market, having not been officially released for aftermarket dealings. The bonds had priced at 223 bps over.

The new Wells Fargo 4.375% bonds due 2013, which had priced on Friday at 167 bps over, had come in to 164 bps bid, 163 bps offered by Monday afternoon.

CDS spreads a bit wider

Another trader said the credit-default swaps spreads on major banking and brokerage names were "unchanged to a little wider, as banks were doing a lot of financing deals." These included JP Morgan, whose CDS costs widened a bit to end at 62 bps bid, 72 bps offered, and Wachovia, whose debt-protection costs rose to 115 bps bid, 125 bps offered.

However, the exception to the rule was Washington Mutual - the big thrift's CDS cost narrowed by 17 bps to 335 bps bid, 345 bps offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.