Bank of New York Mellon, U.S. Bancorp, Morgan Stanley sell FDIC deals; B of A, Merrill widen

By Andrea Heisinger

New York, March 27 - The week came to a relatively quiet end Friday with high-grade bond sales from Bank of New York Mellon, U.S. Bancorp and Morgan Stanley pricing, all of which were backed by the Federal Deposit Insurance Corp.

This followed the trend of the rest of the week, which was heavy on FDIC-backed deals but also had its share of industrial and energy names.

The secondary market was quiet and saw some fluctuations in bank bonds, which were slightly wider. Bank of America Corp. and Merrill Lynch bonds were wider based on comments made early in the day by Bank of America chief executive officer Ken Lewis.

Spreads were seen mixed late Friday afternoon, with some Treasury yields tightening and some widening. The 10-year note, for instance, was up 2 basis points to yield 2.76%. The 30-year bond was 3 bps lower at a 3.61% yield.

U.S. Bancorp sells FDIC bonds

U.S. Bancorp priced $500 million three-year bonds backed by the FDIC. The bonds priced at par to yield one-month Libor plus 40 basis points.

Wachovia Capital Markets LLC was tapped as bookrunner by the Minneapolis-based bank.

Bank of NY prices FDIC deal

The Bank of New York Mellon priced $603.488 million of FDIC-backed notes due 2012 at par to yield three-month Libor plus 16 basis points.

Barclays Capital Inc., Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. were the bookrunners.

Morgan Stanley reopens bond

Morgan Stanley reopened a three-year FDIC-backed bond to add $250 million Friday. The reopened issue priced at 100.048 with a coupon of three-month Libor plus 20 bps.

This brings the issuance total to $3.25 billion, including $3 billion issued March 13.

Morgan Stanley & Co. Inc. ran the books for the New York City-based financial services company.

Coming week 'unclear'

Syndicate desks were mostly quiet Friday, with a smattering of small FDIC-backed sales. Most desks were "ghost towns" by about 5 p.m. ET, a source said, as many left early due to the low volume and nice weather on the East Coast.

"I think everyone was kind of glad for the break," he said. "We were pretty slammed this week."

The coming week is a mystery, a second market source said.

"It's unclear," he said, continuing the trend of those in the primary being hesitant to predict outcomes of coming days. "It's too early to tell."

Market tone Monday will determine a lot, he said. Lately, the top of the week has been heavy with issuance, rather than the previous glut of deals coming in the middle of the week.

"We really don't know," the source said. "We could be really busy, or not, depending on what happens [during the weekend]."

Newell Rubbermaid up

The 10.6% bonds due 2019 from Newell Rubbermaid were seen up in trading late Friday afternoon from their 97.592 pricing level Thursday.

The bonds were seen at 100.5 bid, 100.875 offered, a trader said.

Sunoco bond gains

A new bond from petroleum and chemical company Sunoco gained in trading late Friday, a trader said, after pricing Thursday at 99.429.

The 9.625% bond due 2015 was seen at 102.375 bid, 102.875 offered.

Pfizer remains top traded

A short-dated bond from the multi-tranche $13.5 billion deal from Pfizer Inc. priced the previous week was seen continuing to hold the top spot in trading early Friday afternoon.

The 4.45% tranche due 2012 was at the top of the heap - a spot it has held several times since pricing.

A recent issue of 8.25% bonds due 2019 from Time Warner Cable Inc. was also popular, seen at the No. 3 spot for the day. The bond priced on Monday and has been seen doing well in trading.

Bank CDS worsen

Bank name credit-default swaps were seen 5 to 10 bps wider, a trader said late Friday afternoon. Broker names' CDS were between 10 and 20 bps wider.

This came after morning comments from Bank of America chief executive officer Ken Lewis, who said commercial and investment banking operations should be separated.

He later clarified the comment that he made on the way to a meeting with president Barack Obama and the heads of several other banks. He said in his clarification that he didn't mean a literal splitting of the two entities.

The comments also affected the performance of Merrill Lynch bonds. The investment bank was acquired by Bank of America.

The trader said Merrill Lynch "gapped out because [Bank of America's Lewis] stupidly started talking about separating the two [types of banks] and later said 'Wait, I didn't mean that.' He really put his foot in his mouth."

He saw Bank of America at 360 to 375 bps, while Merrill Lynch legacy CDS cost was 460 to 495 bps.

Another trader outside the financial sector said he saw Bank of America bonds "down at least 10 bps."

JPMorgan, Time Warner big movers

Bonds from JPMorgan Chase & Co. and Time Warner were some of the day's biggest movers, a market source said.

JPMorgan's 5.6% bond due 2011 was about 50 bps lower than the previous week's level while a bond from Wells Fargo & Co. followed it with a tightening of about 50 bps.

In the other camp was Time Warner, whose 6.75% notes due 2011 were around 50 bps wider than the previous week's level.

The company's branch, Time Warner Cable, priced an issue of bonds Tuesday which were seen active in trading. They also saw their corporate credit rating cut a notch by Standard & Poor's, it was announced Friday. They are now rated BBB- by the ratings agency, down from BBB.

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