Market tone seen positive heading into holiday; moderate week of industrial, energy issuers expected

By Andrea Heisinger and Paul Deckelman

Omaha, July 3 - A quiet week of issuance wrapped up Thursday with a positive tone going into a long holiday weekend.

Whether that tone will hold until Monday was unclear, a source said, although there's a modest backlog of issuers counting on a solid start to the week.

"It's all about how the long weekend goes," he said. "If there's no issuance Monday, that's going to set things up for the rest of the week, kind of like it did this week."

In the investment-grade secondary market Thursday, advancing issues led decliners by an eight-to-seven ratio, while overall market activity, reflected in dollar volumes, tumbled by 70% from Wednesday's pace, as dealings were curtailed by the shortened session ahead of the holiday weekend, which saw U.S. fixed-income markets officially close at 2 p.m. ET on Thursday - although, realistically, most participants were already long gone by then - followed by the full market shutdown on Friday, July 4.

Spreads in general were mixed, in line with Treasury yields; while the yield on the benchmark 10-year issue, for instance, widened by 2 basis points to 3.98%, the yield on the 5-year issue tightened by 3 bps to 3.27%.

A trader characterized the day as "very quiet, with nobody in." He said he had not seen spreads moving around very much.

Steady but quiet

Jobless numbers totaling 62,000 came out Thursday, but didn't really have much of an impact on the bond market, a source said.

"Markets were OK today," he said. "The jobless [number] was kind of at expectations, so no, it didn't really do anything. It was as positive as 60,000 can be."

There were no new issues to speak of Thursday, sources said, and little for the rest of the week.

Toyota Motor Credit Corp. priced a handful of issues during the week, and Zions Bancorporation priced a small amount of non-cumulative preferred stock.

More details came out about an upcoming issue from Australian bank ANZ. It was expected to price this week just completed, but is still on the table.

The company is planning an issue of five-year senior notes via Goldman Sachs & Co., J.P. Morgan Securities Inc. and Citigroup Global Markets Inc.

Moderate volume expected

The coming week should see moderate issuance of $12 to $15 billion, a market source said.

"We should see some financials issuing in the first half of the week before they go into earnings blackout," he said. "The industrial calendar is modest."

Earnings from General Electric Co. start off next week, followed by some banks the following week, a source said.

Most of the issuers will be from the industrial and energy sectors, he said.

"Hopefully this tone will flow into Monday," a source said. "I think it's going to be about the same as this week where if the tone is bad to start off the week, the rest of it's going to be really slow."

Countrywide plunges

Countrywide Financial Corp.'s bonds were seen among the more relatively active credits in a generally dull market, with its Countrywide Home Loan Inc. 4% notes due 2011 seen having widened out sharply by some 223 bps on the day to about the 585 bps mark, as the name gave up some of the gains it had notched over the previous several sessions upon the completion of its acquisition by Bank of America. On a dollar-price basis, a market source saw those bonds down 3½ points to 89 bid.

CIT weak

Also giving up some recent gains was CIT Group Inc.

Its 5% notes due 2014 were seen nearly 10 bps wider at around the 800 bps level, as CIT continued to give back some of the gains notched on Tuesday, after the New York-based financial company announced that it was unloading its nearly $10 billion portfolio of subprime mortgages and getting out of the troubled mortgage business altogether.

Oracle tighter

One of the biggest gainers, a market source said, was Oracle Corp., whose 5.75% notes due 2017 tightened by 78 bps to about 163 bps, despite a lack of fresh news out about the Silicon Valley powerhouse. On a dollar-price basis, the bonds jumped more than 5 points, to nearly the 101 level, in active dealings.

Another active issue was JP Morgan Chase's 5.375% notes due 2012, which were seen by a market source having widened out by around a dozen bps to the 212 level. Another source saw the bonds even wider, out to the 220 bps mark.

Among recently priced issues, International Paper Corp.'s 7.95% notes due 2018 were seen having widened out about 7 bps on the day to the 415 bps level, well out from the 395 bps level at which the paper and forest products giant priced $1.7 billion of those bonds on May 28, as part of a three-tranche offering.

Kinder Morgan Energy Partners' 5.95% notes due 2018 were trading at 237 bps over, versus the 230 bps spread level at which the company priced $375 million of the bonds on June 3, one tranche of a two-part offering. Among its older bonds, the 5.125% notes due 2014 were seen at 205 bps over, in about 10 bps from prior levels.

In the credit-default swaps market, a trader said that debt-protection costs for big-bank paper were about 3 bps tighter on the day, and for major brokerage bonds it was about 2 bps in.

He saw troubled thrift Washington Mutual's CDS cost 15 bps tighter on the day at 555 bps bid, 570 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.