DTE, Abbey National price as tone improves; PNC trades 2 bps tighter; credit spreads firm

By Cristal Cody and Aleesia Forni

Virginia Beach, Va., Aug. 20 - DTE Electric Co., Abbey National Treasury Services plc, Pricoa Global Funding I and PNC Bank NA all priced new deals on Tuesday as the market's tone was improved compared to Monday's session, market sources said.

Issuers were able to make their way to the primary as Treasuries yield fell back from two-year highs to 2.82% during Tuesday's session, one market source noted.

Abbey National came to Tuesday's market with an upsized $1 billion offering of 3.05% five-year senior notes at a spread of Treasuries plus 155 basis points, according to an informed source.

PNC Bank priced a $750 million issue of 1.3% notes due Oct. 3, 2016 with a spread of Treasuries plus 62 bps, an informed source said.

There was also a $500 million floating-rate issue from Prudential Financial Inc. subsidiary Pricoa Global Funding.

The company priced the floaters due 2015 at par to yield Libor plus 27 bps.

DTE Electric sold $400 million of 3.65% general and refunding mortgage bonds due 2024 on Tuesday with a spread of Treasuries plus 87 bps, according to a market source and a filing with the Securities and Exchange Commission.

Tuesday's session also saw Inter-American Development Bank price $2 billion of 0.875% notes due 2016 to yield mid-swaps minus 3 bps, according to an informed source.

Also on Tuesday, Fannie Mae announced plans to price an offering of benchmark notes due 2018, according to a company news release.

Looking ahead, players are expecting a muted session on Wednesday with the release of the Federal Open Market Committee meeting minutes.

"Focus will be on the Fed," one source predicted of Wednesday's market.

Spreads firm in secondary

In secondary market activity, high-grade bonds firmed on light activity as traders wait for Wednesday's release of minutes from the last Fed meeting. Market participants widely expect the Federal Reserve to taper its $85 billion-a-month asset purchases in September.

The Markit CDX Series 20 North American Investment Grade index ended 2 bps lower at a spread of 82 bps.

Going out on Tuesday, PNC's 1.3% notes due 2016 firmed 2 bps in secondary trading to 60 bps bid, 58 bps offered, a trader said.

No markets were seen late afternoon in the new 3.05% notes due 2018 from Abbey National, according to a trader.

IADB's 0.875% notes due 2016 also stayed quiet in the late afternoon session, a trader said.

IADB prices $2 billion

Tuesday's primary saw IADB sell $2 billion of 0.875% notes due 2016 to yield mid-swaps minus 3 bps, according to an informed source.

Pricing was at 99.722 to yield 0.963%.

BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC were the bookrunners.

The provider of development financing for Latin America and the Caribbean is based in Washington, D.C.

Abbey National upsizes

In other primary action, Abbey National Treasury sold an upsized $1 billion offering of 3.05% five-year senior notes with a spread of Treasuries plus 155 bps, according to an informed source and an FWP with the SEC.

The notes priced at 99.779 to yield 3.098%.

The notes are guaranteed by parent company Santander UK plc.

The deal was upsized from $500 million.

BofA Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, Santander and Wells Fargo Securities LLC were the joint bookrunners.

Proceeds will be used for general corporate purposes.

The financial services companies are based in London.

PNC prices tight

PNC priced a $750 million issue of 1.3% notes due Oct. 3, 2016 with a spread of Treasuries plus 62 bps, an informed source said.

The notes priced at the tight end of talk, which was set in the area of Treasuries plus 65 bps.

Pricing was at 99.908 to yield 1.33%.

The joint bookrunners were PNC Bank, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Proceeds will be used for general corporate purposes.

The subsidiary of PNC Financial Services Group is based in Pittsburgh.

Pricoa sells floaters

Meanwhile, Pricoa Global Funding priced $500 million of floating-rate notes due 2015 at par to yield Libor plus 27 bps, according to a market source.

The sale was done under Rule 144A and Regulation S.

BofA Merrill Lynch, Morgan Stanley & Co. LLC and U.S. Bancorp Investments Inc. were the joint bookrunners.

The unit of financial services company Prudential Financial, Inc. is based in Newark, N.J.

DTE mortgage bonds

DTE Electric sold $400 million 3.65% general and refunding mortgage bonds (A1/A/A) due 2024 on Tuesday with a spread of Treasuries plus 87 bps, according to a market source and an SEC filing.

The notes priced at the tight end of talk.

Pricing was at 99.591 to yield 3.697%.

BNP Paribas Securities Corp., BofA Merrill Lynch, Citigroup Global Markets Inc. and Scotia Capital (USA) Inc. were the joint bookrunners.

Proceeds will be used to repay $250 million of the company's outstanding 6.4% senior notes, which mature Oct. 1, 2013, and for the repayment of short-term borrowings.

The electric utility is based in Detroit.

Fannie Mae plans

Also on Tuesday, Fannie Mae announced plans on Tuesday to price an offering of benchmark notes due Sept. 18, 2018, according to a company news release.

Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are the joint lead managers.

Co-managers are Cabrera Capital Markets LLC, Deutsche Bank Securities Inc., FTN Financial Capital Markets, Great Pacific Securities, Loop Capital Markets and Nomura Securities International, Inc.

The government-backed mortgage lender is based in Washington, D.C.

Bank CDS costs mixed

Investment-grade bank and brokerage CDS costs ended mixed on Tuesday, a market source said.

Bank of America Corp.'s CDS costs eased 1 bp to 116 bps bid, 120 bps offered. Citigroup Inc.'s CDS costs firmed 1 bp to 109 bps bid, 113 bps offered. JPMorgan Chase & Co.'s CDS costs closed flat at 89 bps bid, 93 bps offered. Wells Fargo & Co.'s CDS costs tightened 1 bp to 68 bps bid, 73 bps offered.

Merrill Lynch's CDS costs closed 1 bp wider at 111 bps bid, 118 bps offered. Morgan Stanley's CDS costs eased 4 bps to 146 bps bid, 150 bps offered. Goldman Sachs Group, Inc.'s CDS costs rose 1 bp to 136 bps bid, 140 bps offered.

Paul Deckleman contributed to this review

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