Novartis, Georgia Power, CME Group, Petrobras sell bonds, Novartis, Georgia Power trade up

By Andrea Heisinger and Paul Deckelman

New York, Feb. 4 - Novartis AG, Petroleo Brasileiro SA, Georgia Power Co. and CME Group Inc. priced bonds Wednesday as the flow of deals remained steady.

Investor demand remained high, a source said, as it has in past weeks. Issues continue to price at or below price talk, with 10-year notes remaining the most popular, he said.

In the secondary sphere on Wednesday, a market source said the widely followed CDX Series 11 North American high-grade index was wider by 2 basis points on the day to a mid bid-asked spread level of 198 bps, versus 196 bps on Tuesday.

Advancing issues continued to lag behind decliners, by a better than eight-to-seven ratio. Overall market activity, reflected in dollar volumes, was up 3% from the levels seen on Tuesday.

Spreads in general were seen tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year issue rose by 5 bps to 2.93%.

Trading in new-deal paper remained the primary focus of the secondary market, where tighter levels were seen on the new Georgia Power and Novartis deals.

Others seen moving up were Tuesday's new issues from Procter & Gamble Co. and Altria Group Inc.

Novartis sells $5 billion

Drug company Novartis AG, selling via two subsidiaries, priced $5 billion of notes in two tranches early Wednesday.

The deal was announced and expected to price Tuesday, but was delayed.

It included a tranche done under Novartis Capital Corp. This $2 billion of 4.125% five-year notes priced at 99.897 to yield 4.148% with a spread of Treasuries plus 225 bps.

A $3 billion tranche priced under Novartis Securities Investment Ltd. These 5.125% 10-year notes priced at 99.822 to yield 5.148% with a spread of Treasuries plus 225 bps.

Bookrunners were Banc of America Securities LLC, Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Goldman Sachs & Co.

It was a "very large trade" a source close to the deal said. Books totaled $16 billion, making it more than three times oversubscribed.

"It was pretty largely in demand," he said. "There were a lot of orders."

The high demand was part of the reason why pricing was delayed overnight, he said. It was the first U.S.-dollar-denominated issue the company has done, which also increased demand, he said.

It was an unusual deal in that it priced early in the day.

"It all happened in the morning," he said. "It was a weird experience having it done so early. There was really no competition because a lot of the other deals hadn't been announced yet."

CME Group prices five-years

The holding company for four futures exchanges, CME Group, priced $750 million of 5.75% five-year notes at 99.839 to yield 5.787% with a spread of Treasuries plus 387.5 bps.

The bonds came at the tight end of talk of 387.5 to 400 bps, a source close to the deal said.

According to a prospectus filed with the Securities and Exchange Commission filing, the issue was to have a floating-rate tranche.

The source said the issue was not changed, but that it was what the company was capable of doing. It was not indicative of the issue, she said.

The company plans to reduce or terminate a bridge facility following the sale.

Banc of America, UBS Investment Bank, Barclays Capital Inc. and Lloyds TSB Corporate Markets ran the books.

Georgia Power prices $500 million

Georgia Power, a unit of Southern Co., priced $500 million of 5.95% 30-year senior notes at 99.628 to yield 5.977% with a spread of Treasuries plus 225 bps.

The deal, part of which will be used to repay maturing floaters, was announced and priced quickly Wednesday.

Barclays Capital Inc., Mitsubishi UFJ Securities, SunTrust Robinson Humphrey and Wachovia Capital Markets ran the books.

Petrobras offers bonds

Brazil's Petrobras priced $1.5 billion of 7.875% 10-year notes at 98.28 to yield 8.125%. They priced in line with talk of 8.125% yield.

Bookrunners were HSBC Securities, J.P. Morgan Securities and Santander Securities.

Altria gives terms

Altria Group Inc. gave terms Wednesday for its $4.225 billion issue of notes in three tranches that priced late Tuesday.

The $525 million of 7.75% five-year notes priced at 99.837 to yield 7.79% with a spread of Treasuries plus 587.5 bps.

The $2.2 billion of 9.25% 10-year notes priced at 99.881 to yield 9.268% with a spread of Treasuries plus 637.5 bps.

The $1.5 billion of 10.2% 30-year notes priced at 99.963 to yield 10.204% with a spread of Treasuries plus 650 bps.

Bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities, HSBC Securities, Santander Securities and Scotia Capital.

The bonds are guaranteed by Philip Morris USA Inc.

Companies sell bonds after earnings

In the last couple of weeks there have been a variety of companies that have issued after earnings announcements, selling bonds as they emerged from a blackout.

"That's pushed up the amounts for February so far," a source said. "We thought January was going to be a huge month, but it wasn't, I think, because of the [earnings] blackouts."

There could be more issuance to come this week, or it could dry up, the source said.

"It's always hard to tell because of a lot of factors," he said. "No one really knows who's going to issue for sure."

Georgia Power, Novartis move up

In contrast to Tuesday's session, when there was a lot of new paper being priced, but none of it was finding its way into secondary due to the relative lateness of the pricing, Wednesday's new deals were seen to have priced earlier and to have made the transition over to the secondary market.

Georgia Power's 5.95% bonds due 2039 were seen by a trader to have firmed to 217 bps bid, 210 bps offered.

The Atlanta-based utility company's $500 million of bonds had priced earlier in the session at a spread over comparable Treasuries of 225 bps.

Meanwhile, Novartis' new 4.125% notes due 2014 were solidly improved to 182 bps bid from the 225 bps level at which the Basel, Switzerland-based pharmaceutical giant had priced its $2 billion of those bonds earlier in the session.

Novartis' $3 billion of 5.125% notes due 2019, which had also priced earlier at 225 bps over, were seen to have tightened to 200 bps bid, 190 bps offered.

Procter & Gamble pushes upward

Among Tuesday's issues, Procter & Gamble's 3.50% notes due 2015 tightened to 162 bps bid, 158 bps offered from the 167.5 bps spread at which the Cincinnati-based consumer products maker had priced the $750 million of the bonds, as part of a $2 billion mega-deal.

The other half of that offering, the $1.25 billion of 4.70% notes due 2019 also improved modestly to 179 bps bid, 176 bps offered, versus the 185 bps pricing spread.

Altria short bonds smokin'

Altria Group's new 7.75% notes due 2014 probably did the best among the new deals on Wednesday. A trader saw those bonds having tightened all the way down to 490 bps bid, 485 bps offered - in sharply from the 587.5 bps level at which the Richmond, Va.-based tobacco products giant priced its $525 million of the bonds, as part of a $4.225 billion three-part mega-deal.

Altria's 9¼% notes due 2019 also firmed impressively, to 599 bps bid, 594 bps offered, from the 637.5 bps level at which the company priced that $2.2 billion of bonds.

And its new 10.20% bonds due 2039 tightened by 30 bps on the bid side, to 620 bps bid, 615 bps offered, from the 650 bps level at which the $1.5 billion of bonds priced.

ConocoPhillips climb continues

A market source saw ConocoPhillips Co.'s 5.75% notes due 2019 continuing to firm, although the mid-afternoon volume of $13 million was just a shadow of the over $120 million of the bonds which had changed hands on Tuesday.

The Houston-based integrated energy company's $2.25 billion of the bonds, which had priced on Jan. 29 at 295 bps over - were seen Wednesday at a spread of 279 bps. That was in modestly from 285 bps on Tuesday, and in further still from the spread at issue.

However, the other two tranches of the $5.5 billion offering - the $1.5 billion of 4.75% notes due 2014 and the $2.25 billion of 6.50% bonds due 2039, both of which had also priced at 295 bps over - were not seen in Wednesday's secondary.

Bank bonds among big losers

With new worries about the health of the banking system - ranging from concern that the new round of bailouts being crafted in Washington will fare no better than the spending which has come before to stanch the bank's financial bleeding, to fears that the increased government role in running the banks will result in their de facto nationalization - bank bonds were seen among the larger losers on the day.

Embattled Citigroup's 5.125% notes due 2014 traded at just under 700 bps, a more than 60 bps widening out.

Other financials seen taking it on the chin included Morgan Stanley's 6.60% notes due 2012, which ballooned outward by 50 bps to the 530 bps mark, and GE Capital Corp., whose 6.125% notes due 2011 were also out almost 50 bps, to the 330 bps mark.

Among recently priced FDIC-backed paper, Bank of America's 2.10% notes due 2012 widened out to 80 bps, versus 69 bps On Tuesday.

Financials' debt-protection costs rise

In the credit-default swaps market, meantime, a trader said the cost of protecting holders of big-bank bonds and major-brokerage paper against a possible default was anywhere from 5 bps to 35 bps wider, building on Tuesday's wider trend.

He saw B of A's costs rise about 15 bps to 195 bps bid, 210 bps offered, calling the troubled Charlotte, N.C.-based banking giant "the bad boy" of the sector.

However, B of A unit Merrill Lynch's CDS contract was out 20 bps to 210 bps bid, 225 bps offered,

While Morgan Stanley's debt-protection costs rose 10 bps to 370 bps bids, 385 bps offered, others were little changed, including JP Morgan Chase & Co., perhaps 3 bps wider, Wells Fargo & Co., 2 bps wider and Goldman Sachs Group - unchanged, at 285 bps bid, 295 bps offered, because, the trader said, "they're going to give the [government bailout] money back."

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