Prudential Financial, Charles Schwab, Chevron Phillips sell bonds; financial issues improve

By Andrea Heisinger

New York, June 2 - It was a day of manageable volume in the high-grade bond market, with Charles Schwab Corp., Prudential Financial, Inc., Qtel International Finance and Chevron Phillips Chemical Co. LLC doing deals.

An offering of senior notes from pharmacy benefit company Express Scripts Inc. also was announced.

Most of the day's deals, including those from Charles Schwab, Prudential Financial and Qtel, improved once they hit the secondary market. The previous day's sales from BAE Systems Holdings, Inc. and Enterprise Products Operating LLC held gains in trading a day later, a trader said.

Spreads were slightly wider, in general, as Treasury yields tightened. The 10-year note was down 6 basis points to a yield of 3.61% late Tuesday, a source said. The 30-year bond fared better, coming in 5 bps from the previous day's level to yield 4.48%.

Prudential sells $1 billion

Insurance and financial services company Prudential Financial priced $1 billion of notes in two tranches early Tuesday.

The $250 million of 6.2% notes due 2015 priced at Treasuries plus 370 bps, as did the $750 million of 7.375% 10-year notes.

The deal clocked in at nine times oversubscribed, a source close to it said, with $9 billion on the books.

Price guidance for both tranches was officially at 370 bps, he said. Earlier in the day, it was a bit different.

"We basically were telling people 'not wider than 400 [bps],'" he said. "That was kind of what we're leaning toward. [It was] not official talk."

Citigroup Global Markets Inc. and Goldman Sachs & Co. were tapped as bookrunners by the Newark, N.J.-based company.

Schwab prices five year

Charles Schwab sold $750 million of 4.95% five-year senior notes at 250 bps over Treasuries. The proceeds are being used for general corporate purposes, including repayment of $8.5 billion senior notes due Aug. 13, 2009 and $200 million due March 1, 2010.

The brokerage, banking and financial services provider is based in San Francisco.

J.P. Morgan Securities Inc. and UBS Investment Bank ran the books.

Chevron Phillips offers two tranches

Chevron Phillips Chemical sold $700 million of notes in two tranches late Tuesday, market sources said. The sale was quietly announced and priced by late afternoon.

The $300 million of 7% five-year notes priced at a spread of Treasuries plus 447.1 bps.

The $400 million of 8.25% 10-year notes priced to yield 8.25% with a spread of Treasuries plus 457.1 bps.

Bookrunners were RBS Securities Inc. and Scotia Capital (USA) Inc.

The petrochemical company is based in The Woodlands, Texas.

Qatar company sells bonds

Qtel International Finance sold $1.5 billion of notes in two tranches early in the day via Rule 144A.

The $900 million of 6.5% five-year notes priced at 415 bps over Treasuries, while the $600 million of 7.875% 10-year notes came in at Treasuries plus 435 bps.

Bookrunners were Barclays Capital Inc., BNP Paribas Securities Corp., Deutsche Bank Securities Inc., JPMorgan and RBS Securities.

The issuer is an arm of a telecommunications company based in Qatar.

Express Scripts plans notes

Express Scripts announced in a press release that it plans to issue a benchmark-sized offering of senior notes in the late third or fourth quarter of 2009.

The offering is part of a financing plan, along with a common stock sale, that will be used to pay the $4.675 billion purchase price for the acquisition of WellPoint's pharmacy benefit management business.

Express Scripts, a pharmacy benefit management company, is based in St. Louis.

Rest of week seen steady

As a healthy amount of new deals flowed into the high-grade market Tuesday, two market sources said that level of activity should continue for at least the next couple of days.

"I don't see it stopping until Friday maybe," a source said. "Those have been pretty dead lately."

The market tone was "pretty good today," a second source said. "It was nice. Everything looked pretty solid."

News about possible paybacks to the government by large banks that participated in the federal bailout programs may have helped, at least on the financial side.

"We probably won't see much more on the FDIC stuff from those [banks]," a source said. "I don't know if it did anything, but it was probably not bad."

Schwab bond improves

After it hit the secondary Tuesday, the new 4.95% bond due 2012 from Charles Schwab had come in to 240 bps bid, 235 bps offered, a trader said. This was a 10 to 15 bps improvement from the 250 bps price over Treasuries.

Prudential bonds firm

Both tranches of the new deal from Prudential Financial had gained 20 to 25 bps from their 370 bps over Treasuries price earlier in the afternoon, a trader said late in the day.

The 6.2% due 2015 and 7.375% due 2019 were both quoted at 350 bps bid, 345 bps offered.

Qtel bond up in secondary

One of the new bonds from Qatar's Qtel International had moved up after being freed for secondary trading, a source said.

The 6.5% due 2014 sold at 99.266 and was at 101.5 offered in trading. There was not a level for the 2019 tranche.

BAE Systems mixed in trading

The recently priced tranches from BAE Systems Holdings were unchanged to better in the secondary late Tuesday, a trader said.

The 4.95% tranche due 2014 was unchanged to slightly weaker than Monday's post-sale levels. The paper priced at 250 bps over Treasuries and was at 225 bps bid, 221 bps offered on Tuesday, compared to the previous 225 bps bid, 218 bps offered.

The 6.375% bond due 2019 mostly held its gains, quoted at 238 bps bid, 231 bps offered. It remained tighter than the 275 bps over Treasuries price, although the paper hadn't moved much from its previous trading level of 240 bps bid, 225 bps offered.

Enterprise Products retains gains

The recent 4.6% bond due 2012 from Enterprise Products Operating held its gains late Tuesday, a trader said.

The bonds priced at Treasuries plus 312.5 bps and were seen at 280 bps bid, 250 bps offered. This was mostly even with Monday's level of 277 bps bid, 275 bps offered.

Financials top most-traded

Bonds from financial names took four of the top five spots on the day's most-traded list as of early afternoon, a source said.

None of these bonds were sold with the Federal Deposit Insurance Corp. guarantee.

Seen at the top was a 7.625% bond due 2019 from Bank of America Corp., followed by a 7.3% note due 2019 from Morgan Stanley.

Goldman Sachs Group Inc. and American Express Co. also had popular non-FDIC issues in trading.

This comes a day after the government announced it may give permission to some of the largest banks that received bailout funds to pay those funds back.

JPMorgan Chase & Co. and Goldman Sachs are among those wishing to repay the government.

Bank, broker CDS mixed

By late Tuesday, bank and brokerage credit default swap levels were varied, a trader said.

Brokerage names' CDS were 5 to 20 bps tighter, he said. Banks were more of a mixed bag, coming in at 5 bps tighter to 5 bps wider.

Citi, GE Capital bonds biggest movers

As of late Tuesday, two of the biggest movers in the high-grade secondary were from Citigroup Inc. and General Electric Capital Corp.

Both of these names sold bonds guaranteed by the FDIC, and Citigroup is among those wishing to pay back the government for money lent during the financial crisis.

Perhaps as a result, Citigroup's 5.1% bond due 2011 was nearly 100 bps better than a week ago.

GE Capital's 5% bond due 2011 moved the opposite direction and was about 30 bps wider than the previous week.

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