Citigroup, Jefferies, Analog Devices, MassMutual, Torchmark sell notes; Merck busy, up again

By Andrea Heisinger and Paul Deckelman

New York, June 25 - It was a somewhat crowded day in the high-grade primary market Thursday, although none of the deals were very exciting, a market source said.

Sales came from two units of Citigroup Inc., Jefferies Group Inc., Analog Devices Inc., MassMutual Global Funding and Torchmark Corp.

With the exception of the deal from Citigroup, which was backed by the Federal Deposit Insurance Corp., none of the offerings came close to topping $1 billion.

The market was odd overall, a market source said, citing differing conditions across bonds and equities.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 12 North American high-grade index narrowed by 2 basis points to a mid bid-asked spread level of 139 bps.

Advancing issues - which on Wednesday had fallen narrowly behind the decliners - regained that lead on Thursday, holding a nine-to-seven edge over decliners.

Overall market activity, reflected in dollar volume, eased about 1% from Wednesday's levels.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year note fell by 15 bps to 3.53%.

Once again, the new Merck & Co. long bonds that came to market earlier in the week were the most heavily traded high grade issue on Thursday, firming solidly from the level where the bonds had priced.

A trader said that the financial segment was bifurcated - unlike the situation earlier in the year when things were either all going up or all going down. He said that while bonds of such companies as Citigroup Inc. and Bank of America Corp. have been losing ground, such sector peers as J.P. Morgan Chase & Co. and Bank of New York Mellon Corp. have been holding their own - and then some - sometimes.

Torchmark sells upsized 10-year

Life and health insurance company Torchmark priced an upsized $300 million of 9.25% 10-year notes at par to yield 9.251%, an informed source said. The deal came at a spread of Treasuries plus 571.7 bps.

Torchmark increased the amount from $250 million.

The deal priced at a yield, the source said, and was talked in the 9.25% area.

It was oversubscribed, the source added, but declined to say how much.

Bookrunners were SunTrust Robinson Humphrey and Wachovia Capital Markets.

The company is based in McKinney, Texas.

Citigroup offers FDIC notes

Two units of Citigroup priced $5 billion of notes in four tranches backed by the FDIC, an informed source said.

The two tranches of two-year notes were issued by Citibank NA, while the two tranches of three-year notes were done by Citigroup Funding Inc., he said.

The $1.75 billion of 1.5% two-year notes priced at a spread of Treasuries plus 41.4 bps.

A $750 million tranche of two-year floating-rate notes priced at par to yield three-month Libor flat.

A $1.75 billion tranche of 2.125% three-year notes priced at a spread of Treasuries plus 55.1 bps.

The final tranche was $750 million of three-year floaters priced at par to yield three-month Libor plus 5 bps.

Citigroup Global Markets ran the books.

The financial services company is based in New York City.

'Ho-hum' day of small deals

Despite five offerings getting priced on Thursday, none of it was very exciting, a market source said late in the day.

"They were all kind of ho-hum," he said. "I guess it's summertime."

The market tone wasn't better or worse than previous days. None of the day's deals were thought to be held from Wednesday, a source said. That day's offerings were all done by mid-afternoon ahead of a Federal Reserve Board meeting conclusion and an auction of five-year Treasury bonds that were thought to potentially affect the market.

"I don't think any of them were leftovers," the source said. "Jefferies filed their shelf this morning and I know Torchmark wasn't. Citigroup probably wasn't either.

Overall "the market was odd" on Thursday, he added. "The cash market was down and equities were up. CDS were down, in a good way."

Analog Devices sells five-years

Analog Devices priced $375 million of 5% five-year notes at Treasuries plus 250 bps.

Credit Suisse Securities and Banc of America Securities were bookrunners.

Proceeds will be used for general corporate purposes.

The analog and signal processing equipment company is based in Norwood, Mass.

"That was kind of a strange one," a source away from the sale said. "I'm not sure we'll even track that one."

MassMutual unit offers $300 million

MassMutual Global Funding sold $300 million 3.625% three-year notes at Treasuries plus 200 bps, a source away from the deal said.

Bookrunners for the Rule 144A transaction were Banc of America Securities and Credit Suisse Securities.

The subsidiary of Massachusetts Mutual Life Insurance Co. is based in Springfield, Mass.

Jefferies sells upsized $400 million

Securities and investment banking firm Jefferies Group sold an upsized $400 million 8.5% 10-year senior notes at Treasuries plus 512.5 bps, a market source said.

The size was increased from $350 million, the source said.

Citigroup Global Markets, Jefferies & Co. and J.P. Morgan Securities ran the books.

Proceeds will be used for general corporate purposes, including further development of the business.

The issuer is based in New York City.

Merck keeps moving up

Among the recently priced issues, a trader saw Merck & Co.'s 5% notes due 2019 as the most actively traded high-grade issue on the day, with turnover approaching $80 million at mid-afternoon.

He quoted the bonds as tight as 89 bid, or a 102.6 dollar price, versus the 137 bps bid, 132 bps offered level at which those bonds had traded earlier in the week, and in further still from the 140 bps level at which the New York-based pharmaceutical company priced its $750 million of the long bonds on Monday, as part of four-part, $4.25 billion mega-deal.

Pharmaceuticals find favor

The secondary market seemed to favor pharmaceuticals, with active trading going on in such Merck sector peer credits as Pfizer Inc. - its 6.20% notes due 2019 trading at 134 bps over and its 5.35% notes due 2015 as tight as 96 bid - Novartis, whose 5.125% notes due 2019 firmed to 100 bps over, and Teva Pharmaceuticals, whose 6.15% notes due 2036 firmed to 159 bps over.

Financial names seen as a mixed bag

A trader said that in the secondary, "things were unchanged, or maybe a little weaker."

He said that in the financial segment of the market, at least, there was "a little bit of a dichotomy coming into play."

Previously, he said, "everything was at one point just going up, generically, or just going down."

As things now stand, "the Citis and the Bank of Americas, and the Cap Ones, have given up some ground. [But] the J.P. Morgans, Bank of New York, State Street, Northern Trust kind of things have held in, or have gotten a little bit tighter.

"So there is a little bit of people shifting things."

One of the day's most actively traded issues, with over $75 million racked up at mid-afternoon, was GMAC LLC's government-backed 2.20% notes due 2012, which had firmed to 44 bps over from prior levels at 51 bps.

That was also well in from the 80 bps level at which the big lender priced its $3/5 billion of bonds on June 3 as part of a $4.5 billion two-part mega-deal

In other notable movements among the financials, Bof A's 4.90% notes due 2013 were seen having tightened some 30 bps on the day to the 270 bps level.

On the downside, General Electric Capital Corp.'s 6.875% bonds due 2039 were 35 bps wider, a market source said, at the 335 bps level.

Bank, brokerage CDS tighten up

A trader who watches the credit-default swaps market said that the cost of insuring a holder of bonds from a major bank, or one of the big investment banking names, was 5 bps tighter, across the board.

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