Foreigners Dexia, Barclays, Lloyds, KfW tap market, GE Capital lone domestic; spreads tighten

By Andrea Heisinger and Cristal Cody

New York, Jan. 5 - General Electric Capital Corp., Dexia Credit Local de France SA, Barclays Bank plc, Lloyds TSB Bank plc and Toyota Motor Credit Corp. were among those issuers pricing bonds on Tuesday as activity increased sharply from Monday.

German financials had two entrants in the high-grade new issue market for the day, as both KfW and Deutsche Bank AG pricing notes.

KfW priced $4 billion of three-year notes, while Deutsche Bank sold $2 billion of three-year notes.

The Dexia sale was held overnight from Monday and totaled $4.5 billion in tranche of two- and four-year notes. It was sold via Rule 144A.

Lloyds TSB Bank priced $5 billion of bonds in two tranches late in the day, making it the session's largest sale. It consisted of $2.25 billion in five-year notes and $2.75 billion of 10-year notes.

GE Capital priced $4 billion of notes in three- and 10-year tranches, split evenly between the two.

Barclays also kept with the day's trend of large issues, with a $3 billion sale of 10-year bank notes.

Motiva Enterprises, LLC announced a two-tranche deal, but then held it overnight to attract more investors. It is expected to price on Wednesday.

Toyota Motor Credit continued its trend of selling short-term floating-rate notes, pricing three different offerings of one-year floating-rate notes.

Foreign issuers overran the investment-grade market, pricing huge deals in optimal conditions, a source said.

"It was just opportunity," he said. "I think a lot of them were taking advantage of an empty market."

Looking at the secondary, one trader said the market woke up on the second trading day of the new year.

"There was definitely more activity. Spreads were tighter by another 5 basis points."

In government debt, by early Tuesday the yield on the benchmark 10-year Treasury note tightened to 3.76% from 3.82% a day earlier. The yield on the 30-year bond also tightened 3 basis points to 4.61%.

"Ten-year T-notes are yielding 3.79%, down 3 bps from yesterday's close," a market observer said early in the day.

Meanwhile, according to a source, the CDX Series 13 North American high-grade index tightened 1 bp to a mid bid-asked spread level of 81 bps.

Advancing issues outpaced decliners, while overall market activity, reflected in dollar volumes, jumped about 52% to end up with more than $15 billion in high-grade trades.

A couple of sectors stood out in trading.

"Banks definitely traded the best and overall pharma had a very good day," a trader said after the markets closed.

For example, according to one source, Pfizer Inc.'s 4.45% 2-year notes tightened to 33 bps over in mid-day trading Tuesday from 70 bps the day before. The New York-based drug maker received European approval late Monday for an intravenous version of its high blood pressure medicine.

Also in the pharmaceutical sector, a market source quoted the 5.75% seven-year bonds from CVS Caremark Corp. at 137 bps over. The Woonsocket, R.I.-based pharmacy company said Tuesday it had expanded its H1N1 flu vaccine availability.

Dexia prices $4.5 billion

Dexia Credit Local de France sold $4.5 billion of notes in two tranches via Rule 144A, a source close to the deal said late in the day.

The deal was announced on Monday but went overnight to take advantage of other investors, an informed source said. It was guaranteed by the governments of France, Belgium and Luxembourg, they said.

The $2.5 billion of two-year floating-rate notes priced at par to yield three-month Libor plus 25 bps. They priced in line with talk of Libor plus 25 bps.

A $2 billion tranche of 2.75% four-year notes priced at a spread of 72.2 bps over Treasuries. They were talked at mid-swaps plus 40 bps.

Barclays Capital, Citigroup Global Markets, J.P. Morgan Securities and Morgan Stanley & Co. were bookrunners.

The issuer provides project financing for the public sector and is based in Paris, France.

GE Capital prices two tranches

General Electric Capital priced $4 billion of notes in two tranches by late afternoon, a source close to the deal said.

The $2 billion of 2.8% three-year notes priced at a spread of Treasuries plus 130 bps.

They priced in line with talk of 130 bps over Treasuries.

The $2 billion tranche of 5.5% 10-year notes priced Treasuries plus 180 bps. They also priced in line with price talk.

Bank of America Merrill Lynch, Citigroup Global Markets, Credit Suisse Securities and Morgan Stanley & Co. ran the books.

The financing arm of General Electric is based in Fairfield, Conn.

Lloyds TSB offers $5 billion

Lloyds TSB Bank priced $5 billion of notes in two tranches, a source away from the deal said late in the day.

The sale was the last to price for the day, the source said.

A $2.25 billion tranche of 4.375% five-year notes priced at a spread of 182 bps over Treasuries.

The $2.75 billion tranche of 5.8%10-year notes priced at Treasuries plus 208 bps.

Both tranches were priced via Rule 144A and Regulation. The deal is guaranteed by Lloyds Banking Group plc.

Bank of America Merrill Lynch, Citigroup Global Markets and Credit Suisse Securities ran the books.

The retail bank is based in London and Edinburgh, Scotland.

Foreigners stack market

Deals from foreign companies were about all there was to be found in the high-grade market on Tuesday. With the exception of GE Capital's sale, all of the issuers were based in Europe.

"I think a lot of them are just pre-funding and thought the time was right," a market source said.

"Spreads are down a lot right now, and they were probably noticing [U.S.] issuers are jumping in."

It was the first busy day of the year, but the coming week is expected to bring more deals from domestic names.

Tuesday's sales are likely to prompt other issuers currently sitting on the fence to price bonds.

"From what I hear, they were all massively oversubscribed, and it sounds like they all did really well," a syndicate source said.

There is a deal from Motiva Enterprises that is set to price on Wednesday and others in the pipeline, sources said.

"We're not done yet [for the week]," a second syndicate source said.

Deutsche offers three-years

Deutsche Bank sold $2 billion of 2.375% three-year notes at Treasuries plus 87.5 bps, with Deutsche Bank Securities on the books.

The financial services company is based in Frankfurt, Germany.

Barclays prices $3 billion

Barclays Bank priced $3 billion of 5.125% 10-year bank notes at 148 bps over Treasuries, an informed source said.

Barclays Capital ran the books for the London-based financial services company.

KfW sells $4 billion

KfW priced $4 billion of 1.875% three-year notes on Tuesday at 99.889, according to an FWP filing with the Securities and Exchange Commission.

Goldman Sachs & Co., Morgan Stanley and UBS Investment Bank ran the books.

The development bank is based in Frankfurt, Germany.

Motiva plans offering

Oil refiner Motiva Enterprises is planning an offering of notes in two tranches for Wednesday, a market source said late in the day.

The deal, made up of 10-year and 30-year notes, was announced early Tuesday but is going overnight to attract a more diverse group of investors, an informed source said.

"I'm not quite sure why that is," a market source said of the delay. "It seems like there's been a lot of that this week."

The last time the company issued was in 2002, the source said.

Credit Suisse Securities and J.P. Morgan Securities are bookrunners.

The deal is being done via Rule 144A and Regulation S.

The business is a joint venture between Shell Oil Co. and Saudi Refining, and is based in Houston.

Toyota Motor Credit prices floaters

Toyota Motor Credit priced three different deals of one-year floating-rate notes, all priced at par to yield one-month Libor flat, according to an FWP filing with the Securities and Exchange Commission.

Toyota Financial Services Securities USA Corp. ran a $500 million sale, while Bank of America Merrill Lynch was agent for a $400 million offering. CastleOak Securities was agent for a $250 million deal.

The U.S. funding arm of Toyota Financial Services Corp. is based in Torrance, Calif.

Financials attraction on rise

Meanwhile, secondary trading in the financials sector picked up after Barclays Bank sold its $3 billion of 5.125% 10-year notes at 148 bps over.

But not even a ripple was seen in secondary trading for Dexia Credit's two- and four-year bonds sold early Tuesday, according to one trader.

"I'm seeing nothing on these."

Meanwhile, GE Capital's $4 billion in three- and 10-year bonds caught the eye of secondary investors on Tuesday.

One trader heard there was more than "$12 billion in orders."

In secondary action, the three-year bonds were being offered at 125 bps over Treasuries after they priced earlier at 130 bps over, a source said.

The 10-year bonds priced at 180 bps over. One trader was "seeing the bonds offered at 170."

Earlier on Tuesday, according to a source, GE Capital's three-year bonds were quoted at 128 bps bid, 122 offered.

The 10-year bonds were quoted at 174 bps bid, 168 bps offered.

Looking at other issuers in the financial services sector, Charlotte, N.C.-based Bank of America Corp.'s 7.625% bonds due 2019 were quoted by one market source early in the day as tightening to 152 bps over from 160 bps over on Monday.

Also on Tuesday, Goldman Sachs Group Inc.'s 7.5% bonds due 2019 were reported to have traded on a volume of $57 million by mid-day. The bonds from the New York-based investment bank, according to a source, widened to 129 bps over from 115 bps on Monday.

Zions trades at healthy discount

A trader noted that Zions Bancorporation's 7.75% notes due 2014 had moved up to around the 90 bid level, which he said was up about a point or so from where the Salt Lake City, Utah-based regional banking company's paper had finished 2009, "even though there's some fear in the commercial loan portfolio, the real estate portfolio - nobody's able to assess it."

The bonds, he said, "are trading at a healthy discount" to par. He said that the bonds had moved up over the last two sessions, fueled by considerable crossover interest in the credit, whose bonds - other than the solidly AAA rated FDIC-backed paper issued last year - are mostly unrated by Moody's Investors Service, are rated BB+, BBB- or not rated by Standard & Poor's and are mostly rated BBB by Fitch Ratings.

"It's a five-B piece of paper, at a discount, and there's not a lot of paper around," making it an attractive buy. He theorized that some of the high-grade accounts "that didn't want to live with it are taking advantage of the price rise to move it out. There are some high yield guys and guys that are retailing the paper out" to small investors. The company priced some $450 million of the notes back in mid-September.

He also said that the company's older pieces of paper, which had been trading in the 60s or lower 70s, "are up a couple of points, so they're bid for without offerings."

A second trader said that on the company's other issues, "you've kind of seen bids popping up," while the 73/4s actually saw two-sided trading, with "north of $15 million" having changed hands on Tuesday. He said that of late, the bonds had been trading around the 861/2-87½ level, and now trade between 89½ and 903/4.

He saw no specific news that might be pushing the bonds up.

"From time to time, Zions Direct will have online auctions for retail investors - they do it every once in a while - but they haven't done it for a couple of weeks, and usually, it's nowhere near the volume we saw trade today; you're lucky if you get a couple of hundred thousand [dollars of bonds] to $1 million trade in those auctions that they do online, and that's more retail-geared."

The latest activity, on the other hand "has been crossover or institutional buying. Somebody's been talking up the name, which is good."

Bank CDS costs rise

A trader who watches the credit-default swaps market said that the cost of insuring a holder of big bank paper against a default using CDS contracts was about unchanged to 5 bps wider on the session, with Citigroup Inc.'s CDS prices 5 bps wider at 150 bps bid, 155 bps offered. He said that JP Morgan Chase was unchanged.

The cost of CDS paper for investment bank bonds was 1 bp to 3 bps wider.

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