Entergy Louisiana, Morgan Stanley price as Fed meeting slows primary; Lennar firms on earnings

By Andrea Heisinger and Cristal Cody

New York, Sept. 21 - Entergy Louisiana LLC and Morgan Stanley were the only issuers in the high-grade bond market on Tuesday as companies held off on pricing deals on the day of a Federal Reserve Federal Open Market Committee meeting.

Morgan Stanley sold $300 million of 15-year notes in a callable deal.

The subsidiary of Entergy Corp. priced $250 million of mortgage bonds due 2026. The issue did not price until after an announcement from the Fed meeting.

That meeting produced no significant changes to rates or policy but left open the possibility of buying government debt. The last time talk surfaced of the Fed buying Treasury bonds, the tone of the high-grade market was softer for a short period of time.

One source said that the day's slowdown was only temporary and that Wednesday is expected to be busier.

"I would think we're going to have almost as many as yesterday," he said of Monday's roster of deals.

The announcement from the Fed meeting isn't expected to have any impact on the market's tone.

High-grade trading volume remained "strong" on Tuesday, a trader said.

Overall investment-grade Trace volume jumped 57% to nearly $16 billion, according to a market source.

"Secondary continued to lag a little bit," a trader said. "Basically this morning, we started out pretty quiet. The market was strong in general, and then at closing we saw a little bit of weakness."

Corporate bonds in the telecommunications sector, including debt from Sprint Nextel Corp. and AT&T, Inc., were seen "off maybe an eighth," a source said.

Elsewhere in secondary trading, investment-grade debt from Lennar Corp. firmed on better third-quarter profit and revenue, according to a source.

The Markit CDX Series 14 North American investment-grade index eased 1 basis point to a spread of 108 bps, according to Markit Group Ltd.

"The market today is mixed at best," said Scott Shiffman, managing director of Chapdelaine Credit Partners, the fixed income division of New York-based Chapdelaine & Co. CCP. "Market participants are focused on the new issue calendar. Several deals were announced today, and I still think there's an eye on taking advantage of new issue concessions on the primary calendar, and as a result, secondary volumes have dried up."

Because of the surge in new deals over the month, the "market may be going through a little bit of a saturation phase," he said.

"Investors are focused on single-name situations, being more discriminating and they're no longer just broadly investing in new issues," Shiffman said. "The market has gone from post-Labor Day where deals were priced at the tight end and upsized on a very healthy demand. What we've seen lately is more fringe credits access the market with less restrictive covenants and deals pricing at the wider end and not being upsized."

Treasuries rallied on the Federal Reserve's announcement.

"Two-year hit another record low of 0.45%," a trader said early in the morning before the yield fell further to a new low of 0.41% at the end of the day.

The yield on the 10-year note dropped to 2.57% from 2.70%. The 30-year bond yield fell 9 bps to 3.78%.

Entergy unit sells

Entergy Louisiana priced $250 million of 4.44% first mortgage bonds due 2026 (A3/A-) late in the day to yield a spread of 185 bps over Treasuries, said a source who worked on the sale.

Barclays Capital Inc., Credit Agricole CIB, Mizuho Securities and Mitsubishi UFJ Securities ran the books.

Proceeds will be used to repay prior to maturity all of the company's outstanding $100 million 5.56% first mortgage bonds due Sept. 1, 2015, $115 million 5.09% first mortgage bonds due Nov. 1, 2014 and $100 million 5.50% first mortgage bonds due April 1, 2019 at par plus accrued interest.

The electric utility subsidiary of Entergy Corp. is based in New Orleans.

Issuance to pick back up

New deals were mostly absent from the market, but deals are expected to return in the next couple of days.

"We knew it was going to be slower today," a syndicate source said. "We have a couple of calls out for tomorrow."

Another source said they also had "a couple of potential deals" for the coming day or two.

When asked why both of the day's sales had 15-year maturities, the second source said, "I really have no clue. I'm guessing it just fit with their maturity schedules."

Morgan Stanley's 15-years

Morgan Stanley priced $300 million of 6% 15-year global medium-term notes at par to yield 6%, according to a 424B2 filing with the Securities and Exchange Commission.

Morgan Stanley & Co. Inc. was bookrunner.

The financial services company is based in New York.

MetLife gives deal terms

MetLife Institutional Funding II sold $1.35 billion of floating-rate notes (Aa3/AA-) in two tranches, a market source away from the sale said.

The deal was sold late on Monday, he added.

A $1 billion tranche of one-year floaters priced at par to yield Libor plus 15 bps.

The second tranche was $350 million of floaters due 2012 that priced at par to yield Libor plus 40 bps.

They were sold privately under Rule 144A.

Deutsche Bank Securities and UBS Investment Bank ran the books.

The funding subsidiary of MetLife Inc. is based in New York.

Donnelley notes active

R.R. Donnelley & Sons Co.'s new issue was active in trading on Tuesday and has stayed strong since pricing in June, a source said.

The 7.625% senior notes due 2020 were quoted trading at 103.25 bid, 103.75 offered. The notes priced on June 16 at par.

"That's been in a holding zone the last few weeks and is going out unchanged," the source said.

R.R. Donnelley & Sons is a Chicago-based commercial printing company.

Lennar notes stronger on earnings

Homebuilder Lennar's high-grade debt firmed in the secondary market a day after the company reported strong earnings for the third quarter, a trader said.

"The paper's been hard to source," the trader said.

The company's 12.25% benchmark note due 2017 was up 2 points on the day.

"It's basically at 118 bid with no offers," the trader said. "Yesterday it was very, very strong, and today it continued to trade the same way."

Lennar said Monday that third-quarter revenue jumped 14% to $825 million. Earnings improved to $30 million, or 16 cents a share, for the three months ended Aug. 31, compared with a loss of $171.6 million, or 97 cents a share, in the same period a year ago.

The Miami-based company operates as a homebuilder and financial services provider in 14 states.

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