Wells Fargo sells $1 billion; Citigroup prices $500 million; Bank paper, industrials widen

By Cristal Cody and Sheri Kasprzak

New York, Nov. 9 - Primary action tapered off on Wednesday, but floating-rate offerings from banking institutions were the order of the day. Both Wells Fargo & Co. and Citigroup Inc. came to market with new floaters.

The week, however, did feature the second-busiest pricing day year to date, said Jody Lurie, corporate credit analyst with Janney Montgomery Scott LLC.

"With more than $21 billion in bonds pricing in the U.S. market, Monday's market the second-busiest day [year to date] for new issuance volume, while Tuesday came out softer but still strong at $11 billion," wrote Lurie in a report released Wednesday.

"Nevertheless, issuers sought to take advantage of the low-rate environment, with year-end just around the corner, and with companies refinancing debt to extend maturities beforehand."

Lurie noted that the Veterans Day holiday coming up on Friday might have also accelerated issuance.

Bonds were weaker on the day as exposure to European debt continues to worry investors. The Markit CDX Series 17 North American high-grade index eased 9 basis points to a spread of 130 bps on Wednesday.

"All the secondaries are trading weak," a source said.

Overall trading volume fell to about $9 billion on Wednesday from $11 billion on Tuesday.

Bank and financial paper widened 15 bps to 40 bps in trading, "depending on the name," a trader said. "Goldman has the most weakness today."

Goldman Sachs Group, Inc.'s paper traded as much as 35 bps wider on the day.

Bank credit default swaps costs rose, indicating less investor confidence in the sector. Bank CDS costs rose 14 bps to 35 bps. Brokerage CDS costs were 25 bps to 50 bps higher, with Morgan Stanley's CDS costs up 50 bps.

ArcelorMittal's bonds traded 20 bps wider. International Paper Co.'s new bonds ended the day weaker along with other industrial paper.

"There's a bit of weakness out of some of the industrial credits," a trader said.

Debt from Time Warner Cable Inc. and DirecTV Holdings LLC and DirecTV Financing Co., Inc. traded weaker as bonds in the telecom sector widened 5 bps to 8 bps going out, a source said.

Bucking the tone, Philip Morris International Inc.'s bonds traded a "little bit better," a trader said.

Treasuries rallied as investors worried over European debt fallout. The 10-year note yield fell to 1.96% from 2.08%. The 30-year bond yield dropped 10 bps to 3.03%.

Wells Fargo brings notes

Wells Fargo sold $1 billion of series I medium-term floating-rate notes Wednesday, according to a term sheet.

The notes are due Nov. 17, 2016 and initially bear interest at Libor plus 127 bps.

The notes were offered through Wells Fargo Securities LLC.

Proceeds will be used for general corporate purposes.

Citigroup prices floaters

Also during the session, Citigroup Inc. sold up $500 million of floating-rate notes, according to a term sheet.

The notes (A3/A/A+) are due Nov. 21, 2016 and bear interest initially at Libor plus 215 bps.

Citigroup Global Markets Inc. was the bookrunner for the deal. The senior co-managers were Guzman & Co., MFR Securities Inc. and Muriel Siebert & Co. Inc.

Proceeds will be used for general corporate purposes.

Goldman moves out

Goldman Sachs' 3.625% notes due 2016 widened 35 bps to 345 bps bid, 335 bps offered, a trader said Wednesday.

"Not a pretty day," the trader said.

Goldman sold the five-year notes on April 28, 2011 at a spread of 156 bps over Treasuries.

The investment bank is based in New York City.

MF Global/Jefferies drops

A trader said that MF Global Holdings Inc. was among "names that have been down big today."

He saw its bonds, such as the 6¼% notes due 2016, down by 3½ points.

He said there was "a lot of trading" in the bankrupt New York-based broker-dealer's paper around the 35 bid level.

He also said Jefferies & Co. Inc. - which he said had "tied its wagon to it" [MF Global]," by holding a position in some of MF's debt, as well as having also at least dabbled in the type of European bonds which brought MF Global down - was lower on the session, seeing its bonds down between 2¾ and 3¼ points, "across the board," depending on which issue.

While he quoted most of the New York-based investment bank's bonds - still nominally high-grade instruments -as 2 to 3 points lower all around, he said that the 7¾% notes due in March of 2012 eased by a half-point, to 99 bid. But he said that at just four-month duration, that still translated to a spread of "over 1,000" basis points above comparable Treasuries on that piece of paper, the traditional demarcation line for distressed debt.

A market source at another desk saw those short bonds ending down even lower, pegging them going home at 981/4, down 1¼ points on the day, which translates to both a yield and a spread of more than 1,300 bps. Volume was about $35 million.

Another active Jefferies issue was its 6 7/8% notes due 2021, which fell some 2¾ points, to 85 bid, or a yield of 9.2%, and a spread of around 600 bps, on volume of nearly $30 million.

Jefferies' bonds and shares fell in line with a general financial-sector downturn, spurred by the latest wrinkle in the European debt crisis - the ballooning out of yields on Italian government debt, in which the company is a market maker.

Jefferies spent much of last week, after the fall of MF Global due to the latter's massive bad bets on European government bonds, trying to reassure investors that its own exposure to euro zone debt was considerably more limited.

ArcelorMittal widens

ArcelorMittal's 5.5% notes due 2021 traded 20 bps wider to 480 bps bid, 460 bps offered late Wednesday, a trader said.

The company sold the notes on Feb. 28 at 218 bps over Treasuries.

ArcelorMittal is a Luxembourg-based steel maker with U.S. headquarters in Chicago.

International Paper weaker

International Paper's new bonds (Baa3/BBB/) traded wider, particularly the long bonds, on Wednesday along with other industrial names, a trader said.

The company's 4.75% notes due 2022 edged wider on the bid side to 272 bps bid, 267 bps offered. The company sold $900 million of the 10-year notes at Treasuries plus 270 bps on Tuesday.

The 6% bonds due 2041 widened to 301 bps bid, 296 bps offered. International Paper sold $600 million of the bonds at a spread of Treasuries plus 290 bps.

The global paper and packaging company is based in Memphis.

Time Warner Cable off

Time Warner Cable's 5.5% bonds due 2041 widened about 13 bps in trading to 233 bps bid, 223 bps offered, a trader said.

The company sold $1.25 billion of the notes (Baa2/BBB/BBB) on Sept. 7 at 232 bps over Treasuries.

The entertainment company is based in New York City.

DirecTV eases

DirecTV's 6.375% bonds due 2041 widened 15 bps in the secondary on Wednesday to 240 bps bid, 230 bps offered, according to a trader.

The El Segundo, Calif.-based satellite TV company sold $1 billion of the 30-year bonds (Baa2/BBB/BBB-) at a spread of Treasuries plus 175 bps in March.

Philip Morris better

Philip Morris' $1.5 billion of notes traded tighter in standout to the weaker tone on Wednesday, a trader said.

The company's new 2.9% notes due 2021 firmed to 100 bps bid, 95 bps offered. The company sold the notes at Treasuries plus 100 bps.

The second tranche of 4.375% bonds due 2041 also narrowed in trading to 144 bps bid, 140 bps offered. The bonds priced at Treasuries plus 140 bps

The New York City-based company manufactures and distributes cigarettes and other tobacco products.

Paul Deckelman contributed to this review

© 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.