Investment-grade primary tops $30 billion in week; Walgreen, Progress Energy notes hold their gains

By Andrea Heisinger

New York, Jan. 9 - It was a large week of issuance in the investment-grade primary market totaling more than $30 billion, and it ended on a quiet note Friday.

As expected, the primary market was dead Friday due to a variety of factors that included the release of high December unemployment figures in the United States.

The secondary was also understandably quiet due to the lack of pricing in the primary.

Previous issues continued to move around, including Thursday's issues from Walgreen Co. and Progress Energy Carolinas Inc.

Week sees $30 billion

It was a busy week, and start to 2009, in the investment-grade primary. By Friday, the market had seen more than $30 billion in new deals, one-third of which came from a single offering.

Monday saw a return to issues backed by the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program, with an anticipated deal from General Electric Capital Corp. pricing.

The financing arm of General Electric priced $10 billion in four tranches under the FDIC guarantee.

Another large deal from GE Capital took another $4 billion out of the market, but this one wasn't FDIC-backed.

A source said Friday that this smaller sale may have overshadowed the larger one.

"With the success of that one, we may see a couple more [financials] doing unguaranteed demand notes," he said.

Coming week uncertain

The pattern of uncertainty from the last few months remains, and the issuance for the coming week is no exception.

Late Friday, a market source said the coming week was "still up in the air" and that he was unsure from what issuers the next new deals would come from.

"It may or may not be similar to this week," he said. He was referring to the amount of new issues.

The trend of a top-heavy week also seems to have stuck, he said, with most issues coming Monday and Tuesday.

"We're probably not going to see many issues on Fridays," he said.

One thing that is known for the next week is that there will likely be at least one or two FDIC-backed notes, a source said, because that has been the trend in the past couple of weeks after issuance in the program slowed.

"I'm not saying that we know of any specifically right now, or that my desk has any planned, but that's just been the trend," he said.

Jobless numbers worry market

Among the news coming out Friday was unemployment numbers, which were as high as expected, but still caused worry in the primary market, a source said.

In December, claims for unemployment benefits rose to 7.2%, which was a 16-year high. The numbers were expected to be large, a market source said, but that didn't calm worry about ramifications.

"People knew the percentage would be high," he said. "There was more worry about the actual numbers."

There are earnings coming out in the next couple of weeks, which will also likely be bad, he said.

"People are going to be watching for these, but there aren't any predictions out yet," he said.

Walgreen bonds tighten

The new issue of 5.25% notes due 2019 from Walgreen was seen tightening slightly more in the secondary Friday after pricing Thursday, a trader said.

The bonds were seen at 272 bps bid, 269 bps offered late in the afternoon, in from pricing at 287.5 bps. The bonds were seen at a similar 273 bps bid, 267 bps offered shortly after pricing.

Progress Energy bonds waver

The new Progress Energy Carolinas 5.3% bonds due 2019 remained tighter than pricing Friday, but were slightly wider to unchanged to post-pricing levels.

The bonds were seen trading at 270 bps bid, 260 bps offered, a source said. On Thursday they were at 265 bps bid, 260 bps offered.

Both are in nicely from the 285 bps issue price.

High-volume names mixed

Friday saw a break from the recent trend of the highest-traded-bonds list being dominated by financial names.

The top of the list remained a financial, however, from Regions Bank.

The bank's 2.75% notes due 2010 were at the top. An outstanding 1.7% bond due 2010 from Bank of America NA was also seen trading heavily.

On the non-financial end, Verizon Communications' 8.75% notes due 2018 were seen in the number-three spot.

The recent issue of 8.5% notes due 2019 from Tyco International Finance SA was seen actively trading Friday, as well.

A source who worked on the deal said he was happy to see it doing so well in trading.

"It was a large book," he said. "We tried to keep it [the issue] below $1 billion."

The sale was an upsized $750 million, but books were more than $3 billion.

AT&T unit, Lockheed top movers

AT&T Mobility Corp. was seen as one of the day's big movers, with its 6.5% bonds due 2011 tightening nearly 50 bps by late Friday.

The move was likely spurred by two bits of news from the company. It was announced Friday that the company would be partnering with Dell for a $100 laptop. Also announced Friday was the limited release of the iPhone 3G at stores in Vermont.

Having a similarly large swing was US Bank, which saw its 6.375% notes due 2011 come in nearly 50 bps.

Going the other way was aeronautics company Lockheed Martin Corp., which saw its 4.121% bonds due 2013 widen more than 30 bps. News was out Friday that the company had received a $15 million U.S. Navy contract.

Daimler North America's 7.3% bonds due 2012 were also seen widening more than 30 bps after more layoffs were announced for its truck-making division.

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