Issuers expected to flood market in coming week; trading volume drops, bank paper widens

By Andrea Heisinger and Cristal Cody

New York, Sept. 2 - Many syndicate desks got the Labor Day holiday weekend started early on Friday as no deals were expected, and disappointing economic data scared anyone away who may have been considering a bond sale.

Unemployment numbers were released for August and were flat, meaning no net new jobs were added in the past month.

"It's a good thing we weren't expecting anything anyway," said one syndicate source in the morning. "We had a couple of calls for possible deals Tuesday, but we'll see."

If market conditions hold through the long weekend, then issuers are expected to flock to sell bonds on Tuesday and Wednesday, sources said.

"We have a bunch for early next week," a second syndicate source said. "Everyone keeps saying 'Get ready for September,' and I'm hoping that's true. The week after that is supposed to be even busier."

There is roughly $18 billion more in supply expected in September than there was for August.

Overall secondary trading volume hit only about $4.5 billion on Friday, down from $10 billion on Thursday.

"Volumes are a third of a typical day estimate," a bond source said, noting it is "pretty slow out there. Spreads are wider on this morning's disappointing economy news with high-yield and banks showing the greatest sensitivity."

The Markit CDX Series 16 North American high-grade index eased 4 basis points to a spread of 121 bps on Friday.

"My guess is that's probably mostly attributed to financials," a trader said.

Bank paper widened on the day, including Bank of America Corp. and Goldman Sachs Group Inc., on the news that the Federal Housing Finance Agency had filed suit against big banks over mortgage-backed securities.

Praxair, Inc.'s notes edged tighter in the light trading. USAA Capital Corp.'s short-dated notes also were stronger.

"Other sectors are a little bit weaker, but we're talking about a 1 to 2 basis points move in investment-grade, so nothing that dramatic and not a lot of trading volume," a source said.

Treasuries rallied on the weaker payroll report for August. The benchmark 10-year Treasury note yield fell 14 bps to 1.99%. The 30-year bond yield shed 20 bps to end at 3.3%.

Bank of America widens

Bank of America's 3.75% notes due 2016 traded 15 bps wider on Friday. There was a similar move for Bank of America 10-year notes, a source said.

The 5% notes due 2021 (A2/A/A+) widened to 320 bps bid, a source said.

The investment services company is based in Charlotte, N.C.

Goldman weaker

Goldman's 5.25% notes due 2021 also widened on the day by about 10 bps to 305 bps, a source said.

Also in the secondary market, a trader saw Goldman's 6.25% notes due 2017 wider at 360 bps offered.

The bank is based in New York City.

Praxair firms

In other trading, Praxair's new 3% notes due 2021 (A2/A) firmed on Friday to 87 bps offered, a trader said.

The company sold $500 million of the notes to yield 93 bps over Treasuries on Wednesday.

The industrial gas maker is based in Danbury, Conn.

USAA Capital better

USAA Capital's new notes also were stronger. The company sold $250 million of 1.05% three-year notes (Aa1/AA+) to yield Treasuries plus 77 bps on Tuesday.

In trading early Friday, the notes were seen at 70 bps offered, a trader said.

The issuer offers insurance, banking and credit card services through subsidiaries and is based in San Antonio.

© 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.