ORIX, Public Storage sell as issuers take step back on tone; CenturyLink, DirecTV widen

By Andrea Heisinger and Cristal Cody

New York, March 6 - The high-grade bond market cooled on Tuesday following a flood of new deals the previous day.

There was a sale of $500 million of five-year notes from Japan's ORIX Corp. The paper priced tighter than initial guidance, a source said.

KfW announced it would sell $1 billion of three-year floating-rate notes. Pricing is expected on Wednesday.

A $425 million issue of perpetual preferred stock shares that had been announced on Monday was sold by Public Storage.

A drop in the equities market and the beat-down of bank bonds had issuers pulling back for the day. The market also needed to absorb all of the new paper priced on Monday.

"We were expecting more, but it wasn't great this morning," a source said of the tone. "I think it was on some news out of Greece. It's usually Greece."

A syndicate source said after the close that it was "hard to pinpoint" the exact cause of unease in the primary at the open, but that a drop in European markets overnight had trickled down to the U.S. market.

Several issuers had go, no-go calls in the morning and pushed back.

"I think they'll be revisiting tomorrow, market dependent," the syndicate source said.

The market was saturated with all of the new bonds from Monday, which were seen trading wider at the open, the source said, adding that didn't help encourage potential issuers to sell paper.

"If they're not desperate, I could see some [issuers] waiting until next week to see if the tone's even better."

The Markit CDX Series 17 North American high-grade index eased 3 basis points to a spread of 98 bps.

CenturyLink, Inc.'s crossover notes sold on Monday traded 20 bps to 30 bps wider in the secondary market, a trader said.

The bonds that DirecTV Holdings LLC and DirecTV Financing Co. Inc. sold traded more than 10 bps wider on the day.

PNC Funding Corp.'s bonds also edged wider.

Masco Corp.'s split-rated notes stayed modestly lower on Tuesday.

Hewlett-Packard Co.'s bonds widened 20 bps on Tuesday along with the technology and telecom sector, a trader said.

Technology and telecom bonds traded "anywhere from 5 to 20 wider," the trader said.

Toronto-Dominion Bank's new covered bonds traded mostly flat on Tuesday.

Bank and financial paper eased 10 bps to 40 bps, led by Morgan Stanley, a trader said.

Investment-grade bank and brokerage credit default swaps costs stayed higher a second day, indicating lessened investor confidence in the financial sector.

Bank CDS costs traded 3 bps to 14 bps higher. Wells Fargo's CDS costs rose 3 bps, while Citi's CDS costs traded 14 bps higher.

Brokerage CDS costs rose 10 bps to 17 bps. Goldman Sachs' CDS costs were seen 10 bps higher and Morgan Stanley's CDS costs traded 17 bps higher.

Treasuries were stronger on Greek debt concerns. The 10-year Treasury note yield dropped to 1.94% from 2.01%. The 30-year bond yield fell 8 bps to 3.07%.

ORIX prices tightly

Tokyo-based financial services company ORIX sold $500 million of 3.75% five-year senior notes (A3/A-/) at a spread of Treasuries plus 295 bps, a market source said.

The paper was sold tighter than guidance in the 312.5 bps area, the source said.

Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC were bookrunners.

Proceed are being used for general corporate purposes.

ORIX was last in the market with a reopening of 5% notes due 2016 to add $400 million on April 20, 2011. Those notes sold at 240 bps over Treasuries.

The financial services company is based in Tokyo.

KfW plans floaters

Germany's KfW announced a $1 billion sale of three-year floating-rate notes, an informed source said.

The notes (Aaa/AAA/AAA) are being talked in the Libor plus 7 bps area. Pricing is expected on Wednesday.

Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC are bookrunners.

The government-owned development bank is based in Frankfurt.

Public Storage preferreds

Public Storage priced a $425 million offering of 5.75% perpetual cumulative preferred shares of beneficial interest, series T, a trader said.

Pricing was in line with talk.

The shares will be issued as depositary shares representing 1/1,000th of an interest in the $25-par preferreds.

Underwriters will have a 2.55 million-share overallotment option, according to an FWP filed with the Securities and Exchange Commission.

The Glendale, Calif.-based real estate investment trust will apply to list the shares on the New York Stock Exchange under the symbol "PSAPT."

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are bookrunners.

Proceeds will be used to redeem all $476.63 million of its 6.625% series M cumulative preferred shares on April 1.

PNC Funding's terms

PNC Funding gave the terms of its $1 billion of 3.3% 10-year senior notes (A3/A-/A+) sold Monday to yield Treasuries plus 137.5 bps.

Bookrunners were J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and PNC Capital Markets LLC.

Proceeds are being used for general corporate purposes including advances to PNC and subsidiaries to finance their activities, to repay debt and for repayment and redemption of securities.

The deal is guaranteed by PNC Financial Services Group, Inc.

In the secondary market, PNC Funding's notes traded wider at 140 bps offered, a trader said.

The financial services company is based in Pittsburgh, Pa.

CenturyLink bonds widen

In the secondary market, CenturyLink's new split-rated senior notes (Baa3/BB/BBB-) moved out in trading over the day, according to a trader.

The 5.8% notes due 2022 widened to 402 bps bid, 397 bps offered. CenturyLink sold $1.4 billion of the notes a spread of Treasuries plus 380 bps.

The second tranche of 7.65% 30-year bonds moved out to 482 bps bid. The bonds priced in a $650 million tranche at a spread of Treasuries plus 450 bps.

The broadband and telecommunications company is based in Monroe, La.

Masco lower

Masco's 5.95% senior notes due 2022 traded on Tuesday at 99.25 bid, 99.75 offered, down the par sale price, a trader said.

Masco priced $400 million of the 10-year notes (Ba2/BBB-) at par to yield 5.95% on Monday.

The Taylor, Mich., building products company plans to use the proceeds for general corporate purposes including the repayment of a portion of its 5.875% notes due 2012.

Morgan Stanley widens

Morgan Stanley's 5.5% notes due 2021 widened 40 bps on the day to 425 bps bid, 415 bps offered, a trader said.

The notes were sold on Oct. 27 in a $1 billion offering at a spread of 335 bps over Treasuries.

The investment bank is based in New York.

TD Bank flat

Toronto-Dominion Bank's 1.5% five-year covered bonds sold on Monday traded going out on Tuesday at 69.5 bps bid, 57.5 bps offered, a trader said.

The bonds were seen earlier in the day at 70 bps bid, 68 bps offered, another trader said.

TD sold $3 billion of the new bonds (Aaa/AAA/) to yield mid-swaps plus 45 bps, or 70.6 bps over Treasuries.

The bank and financial services company is based in Toronto.

Hewlett-Packard trades lower

Hewlett-Packard's 4.65% global notes due 2021 widened 20 bps to 185 bps bid, 177 bps offered, a trader said on Tuesday.

The company sold $1.5 billion of the notes on Dec. 6 at a spread of 260 bps over Treasuries.

Hewlett-Packard is a computer and technology company based in Palo Alto, Calif.

DirecTV trades weaker

The 10-year and 30-year tranches that DirecTV Holdings and DirecTV Financing sold on Monday traded 12 bps to 13 bps wider on Tuesday, a trader said.

The company sold $4 billion of senior notes (Baa2/BBB/BBB-) in five-year, 10-year and 30-year tranches that are guaranteed by parent company DirecTV Group Inc.

The tranche of 3.8% notes due 2022 widened to 192 bps bid, 188 bps offered. The issue priced in a $1.5 billion offering at a spread of 180 bps over Treasuries.

The 5.15% 30-year bonds moved out to 213 bps bid, 209 bps offered. DirecTV sold $1.25 billion of the bonds at a spread of 202 bps over Treasuries.

The satellite TV company is based in El Segundo, Calif.

Stephanie N. Rotondo contributed to this review

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