Primary hits new deal lull; week ahead potentially busy; new financial, industrial deals gain

By Andrea Heisinger

New York, May 29 - A recent glut of new issues in the investment-grade bond market came to a sudden halt on Friday, although sources said it had less to do with market conditions and more that it was "just a slow Friday."

The lull is not expected to last, with a potentially busy week ahead.

Recent issues were better in the secondary market, with both Bank of America Corp. and Morgan Stanley seeing their pricings from Thursday improve in trading.

Non-financial sales from the Public Service Co. of Colorado and Travelers Cos. Inc. either held or furthered gains a day after pricing. A split-rated offering from Pride International Inc. also improved.

Spreads were largely wider by late Friday as Treasury yields contracted from the previous day's level. The 10-year note and 30-year bond were each 15 basis points better at a 3.46% yield for the 10 year and a 4.34% yield for the 30 year. The five-year note was 10 bps tighter than the previous day to yield 2.34%.

Issuers, investors take offering time out

It was a reversal from the previous two days' hectic primary on Friday, with an absence of new deals. It was "just a slow Friday," a syndicate source said, adding that nothing horrible had happened in the market.

Another source said people were "taking a break" after the hectic days before.

There was "a lot of Treasury movement Wednesday and Thursday," the syndicate source said. "I think issuers want a more solid sense of the market."

This was reflected in the much tighter Treasury yields on Friday.

The brief lull in new issues will likely not stick around, a source said.

The coming week is "potentially pretty busy," he said.

There are a handful of deals - between three and five - that are for sure, he added, "two of which are big, in the bank space."

When asked if they were non-FDIC deals, he said, "I'd rather not say."

May issuance slower than 2008

As the top underwriter for May, Citigroup handled $20.72 billion of sales in 55 deals. The bank was also No. 1 for the same month a year ago, with more sales, totaling $22.488 billion in 60 deals.

The month saw $111.09 billion, comprised of 124 offerings. This was less than May 2008, which had $133.70 billion of sales in 171 deals.

Syndicate sources are predicting there will not be the traditional summer slowdown this year and that June will remain busy. The days after Memorial Day, when that slowdown normally starts, were anything but slow.

B of A non-FDIC improves

The bonds priced Thursday by Bank of America have been in flux since hitting the secondary. They gained soon after pricing but then gave up those gains by the market close, a trader said.

By late Friday, those gains had returned, with the 7.625% bond due 2019 tightening by 15 to 20 bps to 400 bps bid, 395 bps offered from its price of 410 bps over Treasuries, a trader said.

Morgan Stanley reopening gains

The two-tranche reopening Thursday by Morgan Stanley had made further gains by late Friday from the previous day's levels.

The 6% 2014 and 7.3% 2019 both priced at 360 bps over Treasuries and were at 345 bps bid, 335 bps offered late Friday, a secondary source said.

This was a further improvement from the modest 10 bps tightening soon after pricing Thursday.

Travelers in nicely

The new 5.9% bond due 2019 from insurance provider the Travelers Cos. remained tighter Friday, a trader said, although it had lost some of its gains from Thursday after it priced.

The bond sold at Treasuries plus 225 bps and was quoted Friday at 210 bps bid, 205 bps offered. This was similar, but slightly worse than the 207 bps bid, 205 bps offered quoted Thursday.

Public Service bond tightens

Public Service Co. of Colorado saw its 5.125% bond due 2019 tighten 20 to 25 bps late Friday, a trader said.

The bond, sold Thursday, was quoted at 130 bps bid, 125 bps offered. This was sharply lower than the 150 bps price.

Pride split-rate trades up

Pride International's split-rated 8.5% bond due 2019 was up significantly in the secondary, a source said. The bond, which was sold more on the high-yield side, was quoted at 101.5 bid, 102 offered, he said, which is up from its 99.641 price.

Bank, broker CDS mostly unchanged

The credit-default swaps for bank and broker names were mostly unchanged late Friday, a trader said.

Bank names were unchanged across the board, while among brokers, most were unchanged with Merrill Lynch 3 bps wider, they said.

Barclays Bank, JPMorgan lead movers

Two of the day's biggest bond movements came from Barclays Bank plc and JPMorgan Chase & Co.

Barclays' 5.45% bond due 2012 was about 40 bps better than a week ago, as financial names continue to price bonds that are not government-guaranteed and which perform well in the secondary.

Not doing as well was a 5.9% bond due 2011 from JPMorgan, which was nearly 50 bps wider than the previous week.

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