Citigroup, Emerson Electric sell amid high demand; Citi bonds firm; CenturyLink active

By Aleesia Forni and Andrea Heisinger

New York, Feb. 14 - The investment-grade new issue market remained active on Thursday as Citigroup Inc. and Emerson Electric Co. each priced notes.

Citigroup sold $1.5 billion of 10-year notes in a highly oversubscribed offering. A source said that books showed "roughly $5 billion in investor demand."

Emerson Electric brought a $500 million sale of 10-year notes. It was the first U.S. bond sale for the company since 2009.

Overall the tone was "positive as far as I saw" on Thursday, a source who worked on the Emerson Electric trade said.

There is little to no supply expected for Friday, which is being billed as "an unofficial half day" ahead of the three-day President's Day weekend, a syndicate source said,.

The session saw the Markit CDX Series 18 North American Investment Grade index tighten 1 basis point to a spread of 86 bps.

Citi's notes were trading 5 bps tighter in the gray market, while the bank's existing 6.375% notes due 2014 firmed 2 bps in trading.

In other secondary market action, CenturyLink Inc.'s bonds were among the day's most active names following the company's weak earnings announcement and credit rating downgrade.

CenturyLink's 5.8% notes due 2022 were trading 21 basis points wider on the day.

Meanwhile, the recently issued notes from Praxair Inc. traded unchanged to wider.

Investment-grade bank and brokerage credit default swaps costs declined during the session.

Bank of America's CDS costs tightened 1 bp to 113 bps bid, 117 bid. Citi's CDS costs were also 1 bp tighter at 108 bps bid, 112 bps offered. J.P. Morgan's CDS costs declined 1 bp to 80 bps bid, 83 bps offered. Wells Fargo's CDS costs tightened 1 bp to 70 bps bid, 73 bps offered.

Merrill Lynch's CDS costs were 1 bp tighter at 110 bps bid, 114 bps offered. Morgan Stanley's CDS costs declined 1 bp to 144 bps bid, 148 bps offered. Goldman Sachs' CDS costs declined 1 bps to 132 bps bid, 136 bps offered.

Citi sells $1.5 billion

Citigroup offered $1.5 billion of 3.375% 10-year notes (Baa2/A-/) in Thursday's session at Treasuries plus 142 basis points, an informed source said.

A market source saw the notes trading at 137 bps bid in the gray market.

The sale was done tighter than guidance in the 150 bps area.

The bookrunner was Citigroup Global Markets Inc.

Citi last priced 10-year notes in a $500 million reopening of its bonds due January 2022 on July 31, 2012. Those reopened notes sold at Treasuries plus 235 basis points over Treasuries.

The financial services company is based in New York City.

Emerson Electric's 10-year

Emerson Electric was in the market with a $500 million sale of 2.625%10-year notes (A2/A/) that was priced to yield Treasuries plus 70 bps, an informed source said.

Active bookrunners were Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC.

Proceeds will be direct to general corporate purposes including repayment of commercial paper borrowings.

Emerson was last in the U.S. bond market with a $600 million sale in two maturities on Nov. 10, 2009.

The engineering company is based in Ferguson, Mo.

CenturyLink in focus

CenturyLink's bonds were trading actively during the session following a weak earnings announcement and credit rating downgrade.

The company's bonds initially "gapped wider" early during the session but then recovered that ground and were trading 10 bps tighter from Wednesday's close by late morning.

"Really just short covering," the trader said when asked about the bond's tightening. "That's the only reason I can come up with."

However, the bonds moved wider later during the session, with one market source quoting the issuer's 5.8% bonds due 2022 weaker by 21 bps compared to levels seen Wednesday.

The notes were trading at 362 bps bid, 359 bps offered.

Fitch cut the company's senior unsecured debt to a junk level of BB+ from its previous BBB- level, citing CenturyLink's decision to begin a stock repurchase program, an action that will result in a lower level of debt reduction, the agency said.

Moody's Investors Service put the company's Baa3 debt rating on review for downgrade for the same reason.

Standard & Poor's confirmed CenturyLink's BB corporate credit rating.

Praxair flat, wider

Praxair's new bonds were trading unchanged to wider on Thursday, a trader said.

The company priced $900 million of notes in two tranches on Wednesday.

On Thursday morning, Praxair's $400 million of 0.75% three-year notes was quoted unchanged at 35 bps bid, 32 bps offered.

The company sold the notes with a spread of Treasuries plus 35 basis points on Wednesday.

The $500 million tranche of 2.7% 10-year notes was trading 3 bps wider at 75 bps bid, 72 bps offered at midday following Wednesday's pricing with a spread of 72 bps over Treasuries.

Citi tightens

In other trading, Citigroup's 6.375% notes due 2014 firmed 2 bps to 88 bps bid from Tuesday's levels.

The bank priced $2.5 billion five-year notes at Treasuries plus 380 bps on Aug. 5, 2009.

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