SunTrust, Yum! price following 'lackluster' jobs report; Wells Fargo rises; Citi improves

By Cristal Cody and Aleesia Forni

Virginia Beach, Oct. 22 - SunTrust Banks, Inc., Yum! Brands Inc. and Union Pacific Corp. rushed into the high-grade market on Tuesday on the heels of a "lackluster" jobs report.

The weaker numbers reaffirmed beliefs that the Federal Reserve will delay tapering its stimulus program.

Taking advantage of a positive tone for new issuance, SunTrust hit the market with an upsized $750 million of 2.35% senior notes due 2018 that came at 108 basis points over Treasuries.

There was also a new deal from Yum! Brands, which sold $600 million of senior notes in two tranches, both at the tight end of talk.

Yum! Brands priced $325 million of 3.875% notes due 2023 at Treasuries plus 140 bps and $275 million of 5.35% notes due 2043 at 170 bps over Treasuries.

Union Pacific also hit the primary, selling $500 million of 4.75% notes due 2043 at Treasuries plus 110 bps.

Issuance for the week has already reached more than $10 billion, according to Prospect News data.

"Still have some in [earnings] blackout, but the pace should remain steady," one market source predicted.

Investment-grade bonds firmed on Tuesday after the Labor Department reported that 148,000 jobs were added in September, lower than the forecasted 180,000, market sources said.

The Markit CDX North American Investment Grade series 21 index tightened 3 basis points to a spread of 69 bps.

Aftermarket activity was not immediately seen in new issuance sold late in the day, including Yum! Brands' two-part deal and Union Pacific's 30-year bond offering, according to traders.

"It's kind of slowish," a trader said of the day's activity. "The non-farm [payrolls] sort of took out a lot of the hype. Spreads are a little tighter. We're seeing high-yield trading volumes well above the average, whereas investment-grade is below the average."

PNC Bank NA's two tranches of notes sold earlier in the day traded slightly higher.

Wells Fargo & Co.'s new notes continued to trade better over the session, according to traders.

"Pretty tight bid/ask spreads," one trader said. "The market is good for it."

Citigroup Inc.'s 3.875% senior notes due 2023, wider in the morning session, traded higher late in the day.

SunTrust prices tight

Continuing the recent trend of financial issuers, SunTrust Banks sold an upsized $750 million issue of 2.35% senior notes (Baa1/BBB/BBB+) due Nov. 1, 2018 at 108 basis points over Treasuries, according to an informed source and an FWP filed with the Securities and Exchange Commission on Tuesday.

The notes sold at the tight end of talk.

The company priced the notes at 99.915 to yield 2.368%.

Proceeds will be used for general corporate purposes.

Barclays, Goldman Sachs & Co. and SunTrust Robinson Humphrey Inc. were the bookrunners.

SunTrust is an Atlanta-based financial services company.

Yum! sells $600 million

Yum! Brands came to Tuesday's market with $600 million of senior notes (Baa3/BBB/) in two parts, according to a syndicate source and an FWP filed with the Securities and Exchange Commission.

Both tranches sold at the tight end of talk.

The deal included $325 million of 3.875% senior notes due 2023 that priced at a spread of Treasuries plus 140 bps, or 99.63 to yield 3.92%.

Yum also sold $275 million of 5.35% senior notes due 2043 at 170 bps over Treasuries.

Pricing was at 99.955 to yield 5.353%.

Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were the joint bookrunners.

Proceeds will be used to fund tender offers for up to $525 million of the company's senior notes and to pay premiums in connection with those tender offers.

The fast food chain operator is based in Louisville, Ky.

Union Pacific's new issue

Also on Tuesday, Union Pacific sold $500 million of 4.75% 30-year senior notes (Baa1/A-/) with a spread of Treasuries plus 110 bps, according to a syndicate source and a filing with the Securities and Exchange Commission.

The company sold the issue at the tight end of talk that had been set at Treasuries plus 110 bps to 115 bps.

The notes priced at 99.958 to yield 4.752%.

BofA Merrill Lynch, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were the joint bookrunners.

Proceeds will be used for general corporate purposes.

The railroad transportation company is based in Omaha, Neb.

PNC up

PNC Bank's 1.15% notes due 2016 rose to par bid, 100.2 offered in the secondary market, a trader said on Tuesday afternoon.

The bank (A2/A/A+) sold $750 million of the notes earlier in the day at 99.87 to yield 1.194%.

The other tranche of 4.2% notes due 2025 traded slightly higher at 101 bid, 101.5 offered, the trader said.

PNC Bank sold $500 million of the notes at 99.971 to yield 4.203%.

The Pittsburgh-based bank is a subsidiary of PNC Financial Services Group.

Wells Fargo rises

Wells Fargo's 2.15% notes due 2019 (A2/A+/AA-) rose to 100.5 bid over the afternoon, according to a trader.

Wells Fargo sold $1.5 billion of the notes at 99.781 to yield 2.195% on Monday.

As part of the same offering, Wells Fargo's 5.375% notes due 2043 traded up to the 100.7 to 101.2 area over the day, the trader said.

Wells Fargo sold $2 billion of the long bonds at 99.704 to yield 5.395%.

The financial services company is based in San Francisco.

Citigroup better

Citigroup's 3.875% senior notes due 2023 (Baa2/A-/A) rose to 100.074 bid, 100.356 offered in trading late Tuesday afternoon, a trader said.

"Looks like it's tightened up," the trader said. "It's trading just around par now."

Citigroup sold $2 billion of the notes at 99.77 to yield 3.903% on Monday.

The financial services company is based in New York.

Bank/brokerage CDS costs down

Investment-grade bank and brokerage CDS costs mostly declined on Tuesday, according to a market source.

Bank of America Corp.'s CDS costs firmed 1 bp to 91 bps bid, 95 bps offered. Citigroup's CDS costs firmed 1 bp to 83 bps bid, 87 bps offered. JPMorgan Chase & Co.'s CDS costs tightened 1 bp to 76 bps bid, 79 bps offered. Wells Fargo's CDS costs were unchanged at 53 bps bid, 57 bps offered.

Merrill Lynch's CDS costs eased 2 bps to 91 bps bid, 96 bps offered. Morgan Stanley's CDS costs firmed 1 bp to 111 bps bid, 115 bps offered. Goldman Sachs Group, Inc.'s CDS costs came in 1 bp to 114 bps bid, 118 bps offered.

Paul Deckelman contributed to this review

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