Praxair, Discover Bank sell as supply slows; DuPont notes firm; Goldman Sachs bonds popular

By Aleesia Forni and Andrea Heisinger

New York, Feb. 13 - Praxair Inc. and Discover Bank joined two sovereign issuers in Wednesday's high-grade bond market.

Discover Bank has not been in the U.S. bond market since 2010 when the company was split rated. The unit of Discover Financial Services Inc. priced $750 million of five-year notes on Wednesday in what one source called "an opportunistic deal."

There was roughly $2 billion of demand for the sale, a source close to it said.

Industrial gas maker Praxair sold $900 million of bonds due 2016 and 2023. The trade was upsized from $750 million.

A $600 million sale of five-year floating-rate notes was priced by Norway's Kommunalbanken AS after going overnight from Tuesday.

Meanwhile, Germany's KfW reopened an issue of floaters due 2015 to add $500 million.

There is at least one issue from an industrial name for Thursday's market, but beyond that there should be a small amount of supply, a source who worked on the Discover Bank sale said.

There has been roughly $15 billion of investment-grade bond volume for the week already, hitting the top end of the $10 billion to $15 billion estimate.

The Markit CDX Series 18 North American Investment Grade index tightened 1 basis point to a spread of 87 bps.

The secondary market saw Tuesday's $2 billion two-part deal from E.I. du Pont de Nemours & Co. trade tighter on Wednesday, one market source said.

In other trading activity, Goldman Sachs Group, Inc.'s bonds due 2018 and 2037 were among the day's most actively traded issues, closing the session 4 bps weaker and 9 bps better, respectively.

Investment-grade bank and brokerage credit default swap costs declined on the session.

Bank of America's CDS costs tightened 4 bps to 114 bps bid, 118 bps offered. Citi's CDS costs were also 4 bps tighter at 110 bps bid, 114 bps offered. JPMorgan's CDS costs declined 1 bp to 82 bps bid, 85 bps offered. Wells Fargo's CDS costs tightened 2 bps to 71 bps bid, 74 bps offered.

Merrill Lynch's CDS costs were 4 bps tighter at 116 bps bid, 121 bps offered. Morgan Stanley's CDS costs declined 1 bp to 145 bps bid, 148 bps offered. Goldman Sachs' CDS costs firmed 3 bps to 134 bps bid, 137 bps offered.

Cullen/Frost Bankers Inc.'s new $150 million of 5.375% series A noncumulative perpetual preferred stock was quoted at $24.72 bid, $24.76 offered at midday.

"It probably should move up," a trader said. "It's not a bad deal, but it's small."

The deal priced Tuesday. A market source said that he was "pretty sure" the issue had freed from the syndicate.

Praxair upsizes

Praxair sold $900 million of notes (A2/A/) in two tranches, a market source said.

The size of the trade was increased from $750 million.

There was $400 million of 0.75% three-year notes priced at a spread of Treasuries plus 35 bps. Pricing was in line with talk in the 35 bps area, plus or minus 3 bps.

A $500 million tranche of 2.7% 10-year notes sold at 72 bps over Treasuries. The tranche sold at the tight end of talk in the 75 bps area, plus or minus 3 bps.

The bookrunners were BofA Merrill Lynch, HSBC Securities (USA) Inc. and Mitsubishi UFJ Securities (USA) Inc.

Proceeds are being used for general corporate purposes including to make acquisitions and repurchase shares.

Praxair was last in the market with a $700 million trade of notes in two tranches on Nov. 2. That offering included a 1.05% five-year note sold at 33 bps over Treasuries and a 3.55% 30-year bond priced at 68 bps over Treasuries.

The industrial gas company is based in Danbury, Conn.

Discover Bank prices tight

Discover Bank was in the market with a $750 million trade of 2% five-year notes (Baa3/BBB/BBB) priced to yield Treasuries plus 110 bps, a source close to the offering said.

The sale was done tighter than guidance of Treasuries plus 125 bps, the source said. The size of the trade was increased from benchmark, or $500 million.

The bookrunners were Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBS Securities Inc.

Proceeds are being used for general corporate purposes.

Discover Bank was last in the U.S. bond market with a split-rated $500 million sale of 10-year notes on April 12, 2010. The company was then rated as junk by Moody's.

The issuer of the Discover credit card and unit of Discover Financial Services is based in Chicago.

KBN sells floaters

Norway's Kommunalbanken sold $600 million of five-year floating-rate notes at a coupon of Libor plus 18 bps, an informed source said.

The sale went overnight from Tuesday.

The notes (Aaa/AAA/AAA) were sold at a discount of 99.9 to yield Libor plus 20 bps.

Pricing was done under Rule 144A and Regulation S.

Citigroup, Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the bookrunners.

The government-funded lender to municipalities is based in Oslo.

KfW's reopening

Germany's KfW reopened an issue of floating-rate notes due 2015 to add $500 million, a market source said.

The notes (Aaa/AAA/AAA) were sold at 100.02 and have a coupon of one-month Libor plus 5 bps.

Total issuance is $2 billion including $1.5 billion priced on Jan. 15.

The sale is guaranteed by the Republic of Germany.

Goldman Sachs International and TD Securities were on the books.

The German government-owned development bank is based in Frankfurt.

DuPont bonds trade better

The $1.25 billion issue of 2.8% 10-year notes from DuPont was quoted 4 bps better at 78 bps bid, 76 bps offered early during the session.

The notes were sold with a spread of Treasuries plus 82 bps on Tuesday.

The $750 million of 4.15% 30-year bonds was trading 8 bps better at 89 bps bid, 87 bps offered following Tuesday's pricing with a spread of 97 bps over Treasuries.

Goldman Sachs tighter

Goldman Sachs' bond due 2018 was active in trading during the session, going out 4 bps wider on Wednesday at 165 bps bid.

The bank priced $1.5 billion of the 6.15% 10-year bonds in April 2008 at Treasuries plus 237.5 bps.

In another issue from Goldman Sachs, the bank's 6.75% bond due 2037 closed the session at 263 bps bid, 9 bps tighter than Monday's levels.

Goldman Sachs priced the $2.5 billion bond at 190 bps over Treasuries in September 2007.

Stephanie N. Rotondo contributed to this review

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