Jefferies Group, Private Export Funding sell bonds; uptick in issuance expected Thursday

By Andrea Heisinger and Cristal Cody

New York, June 23 - Jefferies Group, Inc. and Private Export Funding Corp. priced bonds on Wednesday both before and after the mid-afternoon end of a two-day meeting of the Federal Open Market Committee.

Private Export Funding reopened its issue of 4.3% notes due in 2021 to add $100 million. This was done early in the afternoon around the same time that an announcement of no rate changes came from the Federal Reserve.

Jefferies priced its $400 million sale of 11-year notes later in the afternoon.

The FOMC announced that it would keep short-term interest rate near zero. The rate is likely to stay that way for a while due to the recovering U.S. economy and continuing volatility in Europe.

Issuance is expected to pick up at least slightly on Thursday with some companies geared up to sell bonds either before or after quarterly earnings.

"We could see some more financials," a market source said. "They seem to be into issuing right now around earnings."

In secondary trading, Jefferies' new 6.875% senior notes due 2021 firmed on the offer side, according to a source.

The new 6.375% senior notes from Cantor Fitzgerald LP, which priced on Tuesday, tightened in trading on Wednesday, a source said.

In the financial sector, Goldman Sachs Group Inc. 6.15% notes due 2018 moved out more than 50 bps in trading on Wednesday. The investment bank is expected to stay out of the investment-grade market with new paper until after second-quarter earnings are reported, a source told Prospect News.

The CDX Series 14 North American investment-grade index eased 1 basis point to 116 bps, according to a source.

"Spreads are about 5 bps wider in general today," a source said. "Volume looks decent."

Overall investment-grade Trace volume fell 4% to just over $12 billion, according to a market source.

The Federal Reserve's downgrade of the U.S. economic outlook sent Treasury yields down on Wednesday, while disappointing May sales results for newly built homes and lukewarm demand for government debt also caused an impact, sources said.

Yields on the two-year note firmed 4 bps to 0.64%.

Yields on the benchmark 10-year Treasury note also tightened 5 bps to 3.12%.

The yields on 30-year bonds firmed to 4.06% from 4.1% the previous day.

The Treasury Department's auction of five-year notes on Wednesday met with lukewarm demand and was on the "lowish side of recent five-years" with a "4 bps tail," a trader said.

The Treasury Department sold $38 billion of the five-year notes at a yield of 1.995%.

Jefferies sells $400 million

Jefferies Group sold $400 million of 6.875% 11-year senior unsecured notes (Baa2/BBB) to yield Treasuries plus 390 bps, an informed source said.

They priced in line with both whispered talk of the high 300 bps area, another source said, and also with the revised talk in the 390 bps area.

The source said they weren't sure why the company went with an 11-year maturity.

"I would imagine it had something to do with maturing debt or something," they said.

The notes firmed on the offer side in the secondary market, a trader said. The trader saw the notes offered at 387 bps, but "no bids."

Citigroup Global Markets, Jefferies & Co. and J.P. Morgan Securities Inc. were bookrunners.

The deal comes a day after the company announced second-quarter earnings that jumped 37% from a year ago, partly due to its investment banking segment. Reported income for Q2 was $84.8 million.

Proceeds are going toward general corporate purposes, including further development and diversification of the business.

The global securities and investment bank is based in New York City.

Issuance slated to pick up Thursday

Two days of low new deal volume is expected to come to an end on Thursday after a blackout of sorts due to a two-day Fed meeting.

"We potentially have a deal or two for tomorrow," a syndicate source at a smaller desk said at the end of the day.

He blamed the Fed meeting for the measly offerings of new deals following more than $10 billion of new issues on Monday.

"I think everyone [marked] this off their calendars about a month ago," he said.

Another source at a larger desk said that they, too, had "a deal or two" on tap for Thursday.

There are no issues expected to price on Friday, they said.

Pefco reopens notes due 2021

Private Export Funding reopened its issue of 4.3% notes due in 2021 on Wednesday to add $100 million, a source away from the deal said.

Total issuance is $400 million, including $300 million priced on Nov. 17, 2009, at Treasuries plus 105 basis points.

The reopened notes (Aaa/AA+) priced at 102.162 to yield 4.062% with a spread of Treasuries plus 95 bps.

Bookrunner was Bank of America Merrill Lynch.

The joint effort between the U.S. Treasury and the Export-Import Bank of the U.S. facilitates funding of un-subsidized exports. It is based in New York City.

Cantor tighter

The new senior notes from Cantor Fitzgerald, which was the lone high-grade bond seller on Tuesday, firmed in next-day trading, a source said.

The $300 million of 6.375% senior notes (Baa3/BBB/BBB) due 2015 priced to yield Treasuries plus 450 bps.

The bonds were offered late in the day at Treasuries plus 440 bps, firmer than an early morning quote of 445 bps bid, 435 bps offered, the source said.

The financial services company is based in New York.

Goldman in earnings quiet period

In the secondary on Wednesday, Goldman Sachs' 6.15% notes due 2018 moved out to 290 bps from 237 bps the previous day, while its other notes were mostly unchanged, according to sources.

Goldman sold its newest issuance of 6% senior notes (A1/A/A+) due 2020 on May 26 at Treasuries plus 280 bps. The notes were seen trading late Tuesday at 247 bps.

Goldman is not expected back in the high-grade market with any new notes until July, a trader said.

"Goldman took their regular notes issue out of the market this week," the trader said.

"They had been coming to market every week and those have been pretty well received. But they're in their quiet period for earnings, so I don't expect to see them back in to market until July 15 or so."

The New York-based investment bank said late Wednesday that it will announce second-quarter results on July 20.

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