Primary sees slowdown, half of recent volume in coming week; buyers seek homebuilder paper

By Andrea Heisinger and Cristal Cody

New York, Sept. 17 - No new bonds were priced on Friday as the week ended with about $30.18 billion in new bonds issued.

That was a drop from the previous week, when $38.42 billion was sold in four days.

The coming week is seen not as busy, sources said. Issuance levels are expected to drop back to more manageable amounts instead of setting records.

"I think we'll be busy, but with half the trades and half [deal] sizes," said one syndicate source. "We had 31 trades and $32 billion this week."

The end of the month and quarterly earnings may account for some of the slowdown as well as the fact that "a lot of issuers got things done" already, he said.

"The Fed [meeting] is Tuesday, but I don't know if that's a game changer," the source said. "We're closing in on the quarter end too."

He also noted that the recent $70 billion in new deals seemed to have been absorbed and called it a "positive sign."

Another source at a large syndicate desk also said there should be a busy calendar for the week ahead.

"It's not going to be like the last couple of weeks," he said, "maybe $20 billion."

The primary is looking "relatively busy," a market source said, who added that there's "nothing specific yet" in the way of deals and that she wasn't sure if issuance would get going on Monday.

Corporate secondary trading was mostly quiet on Friday as buyers absorbed all the new deals.

Overall investment-grade Trace volume slipped 22% to about $9.5 billion, a market source said.

"It's definitely been a pretty steady amount of buyers of secondary stuff, although it's clearing up with the focus on all the new issuances over the last week or two," a trader said Friday. "There's definitely buyers of higher-quality stuff."

Buyers of high-grade debt in the homebuilding sector are on the lookout, but the bonds are becoming hard to find, one source said.

In secondary trading from deals priced on Thursday, Transocean Inc.'s notes firmed, while the new debt from Weatherford International Ltd. (Bermuda) was unchanged, according to sources.

The Markit CDX Series 14 North American investment-grade index ended the week unchanged for a third day at a spread of 104 basis points, according to Markit Group Ltd.

"The market's still very firm," a trader said.

Treasuries rose on Friday, which sent yields down, on a fresh round of economic data.

The yield on the benchmark 10-year note fell 2 bps to 2.74%. The 30-year bond yield closed down 3 bps at 3.9%.

Homebuilder supply grows scarce

Bonds in the homebuilders sector are becoming hard to find, a trader told Prospect News.

"There's definitely been buyers of that paper, but it's been very hard to find paper," the trader said.

Bonds from D.R. Horton, Inc. and Pulte Homes Inc. both tightened a point on the day, the trader said.

"There's also buyers of front-end paper for D.R. Horton and Pulte Homes."

D.R. Horton's 6% notes due 2011 were seen up a point around 101 to 102.75, the trader said.

"There's no offers. It's all buyers."

Pulte Homes is part of Bloomfield Hills, Mich.-based PulteGroup, Inc., a homebuilding and financing services company.

D.R. Horton is a Fort Worth-based homebuilding and financial services company.

Transocean firms

Transocean's new note firmed in secondary trading on Friday, a source said.

Transocean priced a $2 billion issue of senior unsecured notes (Baa3/BBB/BBB) in two tranches on Thursday.

The $1.1 billion of 4.95% five-year notes priced at a spread of Treasuries plus 359 bps.

A $900 million tranche of 6.5% 10-year notes priced at Treasuries plus 375 bps.

Both tranches "traded about 15 better," the source said.

The offshore drilling contractor is based in Zug, Switzerland.

Weatherford trades flat

Weatherford International's senior unsecured notes (Baa2/BBB) sold on Thursday were flat in secondary trading on Friday, a source said.

The $800 million of 5.125% 10-year notes priced at a spread of 237.5 bps over Treasuries.

A $600 million tranche of 6.75% 30-year bonds sold at Treasuries plus 285 bps.

"They're trading right at unchanged - right on top of the issue price," the source said.

The oil and natural gas well production company is based in Geneva.

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