Wells Fargo, Schwab, PNC price as earnings in spotlight; new Schwab notes firm in secondary

By Aleesia Forni and Andrea Heisinger

New York, July 22 - Financials made a splash in the high-grade bond market Monday as Wells Fargo & Co. and Wells Fargo Bank NA, PNC Bank NA and Charles Schwab Corp. each priced deals.

Wells Fargo sold $5 billion of notes late in the day in four tranches due 2015 and 2016. This sale has been the largest so far of the big banks emerging from earnings blackout.

Pittsburgh-based PNC Bank priced $750 million of 10-year notes, a syndicate source said. Terms of the trade were not available at press time. PNC reported positive second-quarter earnings on July 17.

Meanwhile, Charles Schwab tapped the market for $275 million of five-year bonds. The Schwab sale was increased slightly from $250 million.

There was also a sale of guaranteed notes in two parts announced by the Japan Bank for International Cooperation. A source said the sale would likely price early Tuesday.

Issuance for the week could include deals from companies coming out of earnings blackout. Some big names are announcing second-quarter numbers, including Apple Inc., which sold a massive $17 billion of bonds in a sale earlier in 2013.

Elsewhere, a syndicate source said there "could be more from the financial space" for the week as names such as Citigroup Inc. and Goldman Sachs Group Inc. priced bonds the previous week in successful trades.

"A lot of it's just opportunistic," the source said. "We haven't been able to [access the debt market] for a while in some cases."

Tuesday is expected to see a strong roster of new issues as earnings have been mostly positive and borrowing rates remain attractive.

"People are thinking [they'll] get in now because who knows what will happen in a couple of months," a source said, referring to possible scaling back of the Federal Reserve's quantitative easing efforts and its impact on the credit market.

This source also noted that "spreads moved in slightly" on Monday but called it "nothing to worry about."

The Markit CDX North American Investment Grade index was 1 basis point tighter at a spread of 76 bps at the day's close.

During a session that saw a positive tone, new issues continued to meet strong demand in the secondary market, traders noted.

Charles Schwab's new notes traded 4 bps better near the day's close, while the new 10-year issue from PNC Bank was quoted at 133 bps bid, 131 bps offered.

The preferred stock calendar continued to heat up as more deals were added.

JPMorgan Chase & Co. sold $1.5 billion of $1,000-par noncumulative perpetual preferreds. Few details had emerged as of midday, and a trader said he had not seen any markets for the paper.

Price talk was 6.125% to 6.25%, the trader said.

Synovus Financial Corp. meantime launched a $130 million sale of series C fixed-to-floating rate noncumulative perpetual preferreds. A trader said he had heard there was no selling group on the deal, seeing a less 12-cent bid in the gray market.

Wells Fargo's $5 billion

Wells Fargo Bank and Wells Fargo & Co. were in the day's session with a $5 billion sale of notes in four parts, an informed source said.

Wells Fargo Bank priced $2 billion of two-year floating-rate senior bank notes (Aa3/AA-/AA-) at par to yield Libor plus 28 bps.

The bank also priced $500 million of 0.75% two-year senior bank notes at a spread of Treasuries plus 47 bps.

Wells Fargo & Co. priced $800 million of three-year floating-rate senior holding company notes (A2/A+/AA-) at par to yield Libor plus 53 bps. This issuer also sold a $1.7 billion tranche of 1.25% three-year senior holding company notes at 70 bps over Treasuries.

Wells Fargo Securities LLC ran the books.

Wells Fargo was last in the U.S. bond market with a $2 billion offering of five-year notes in two tranches on April 16.

The financial services company is based in San Francisco.

Schwab upsizes

Charles Schwab sold an upsized $275 million of 2.2% five-year senior notes (A2/A/A) to yield Treasuries plus 90 bps, a market source said.

The size was increased from $250 million, the source said.

The notes were quoted 4 bps tighter late during the session at 86 bps bid, a trader said.

Bookrunners were Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes.

Schwab, a brokerage and financial services company based in San Francisco, was last in the U.S. bond market with a $350 million sale of three-year notes on Dec. 3, 2012.

Synovus' preferreds

Synovus Financial commenced a sale of $130 million of series C fixed-to-floating noncumulative perpetual preferred stock, the company said in a prospectus filed with the Securities and Exchange Commission.

The deal was originally announced on Thursday, when the Columbus, Ga.-based financial services company said it intended to use proceeds, along with cash on hand and proceeds from an offering of common stock, to redeem $967.87 million of $1,000-par series A fixed-rate cumulative perpetual preferreds.

Those preferreds were issued to the U.S. Treasury Department under the Troubled Asset Relief Program.

JPMorgan is the bookrunner.

Dividends will be fixed until Aug. 1, 2018, and after that the dividend will reset to a floating rate based on Libor plus a spread.

Synovus has filed to list the preferreds on the New York Stock Exchange under the ticker symbol "SNVPC."

Bank, broker CDS costs lower

Investment-grade bank and brokerage credit default swap costs were unchanged to lower on Monday, according to a market source.

Bank of America Corp.'s CDS costs were 1 bp lower at 101 bps bid, 106 bps offered. Citigroup Inc.'s CDS costs also declined 1 bp to 98 bps bid, 103 bps offered. JPMorgan Chase & Co.'s CDS costs were flat at 77 bps bid, 82 bps offered. Wells Fargo & Co.'s CDS costs were also unchanged at 60 bps bid, 65 bps offered.

Merrill Lynch's CDS costs declined 1 bp to 87 bps bid, 97 bps offered. Morgan Stanley's CDS costs fell 1 bp to 133 bps bid, 138 bps offered. Goldman Sachs Group, Inc.'s CDS costs lowered 4 bps to 119 bps bid, 124 bps offered.

Stephanie N. Rotondo contributed to this review.

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