Ontario prices short-dated issue; Sierra Pacific tightens in quiet secondary; better tone at close

By Andrea Heisinger

New York, Aug. 28 - The Province of Ontario priced a large issue Thursday, and was largely without competition in the market.

The market tone was better than in previous days, but that didn't coax any more issuers out of the woodwork.

The secondary market remained all but shut down as trading remained light ahead of a long weekend.

Ontario prices short-dated issue

Ontario priced $1.5 billion of 3.125% two-year notes at 99.805 to yield 3.266% with a spread of Treasuries plus 85.5 bps.

Underwriters for the issue were HSBC Securities (USA) Inc., Merrill Lynch International, RBC Capital Markets Corp.

EIB announces deal terms

The financier for the European Union, the European Investment Bank, announced the terms for an issue priced Tuesday.

The $4 billion issue of 3.25% three-year notes priced at 99.68 to yield 3.360% with a spread of Treasuries plus 101.5 bps.

Barclay Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. ran the books.

Mood up at close

The tone of the investment-grade market was slightly better at the end of Thursday than it had been in the last couple of days, a source said.

Positive economic news, including GDP numbers that grew more than expected in the second quarter, provided a slight boost to the market. It was hard to tell how much of a boost it might give to new deals, however, because of the low issuance volume, the source said.

The U.S. GDP grew by 3.3% in the second quarter, which was more than economists' predictions, and the government original estimate of 1.9% growth.

Other somewhat positive news came from lower oil prices.

"No one did anything today, so it's hard to get a gauge on whether things are good or bad," a source said. "Everyone's just waiting for next week."

Sierra Pacific tightens slightly

The recent issue of 5.45% five-year notes from Sierra Pacific Power Co. tightened slightly in the secondary market after pricing Wednesday, a source said.

The notes were trading at 245 bps bid, 244 bps offered in the afternoon, in from pricing at 247 bps.

Secondary sees low volume

The secondary market was "all but shut down" Thursday, and is likely to be even worse Friday, a source said.

"No one's doing anything, and I think a lot of traders have been gone this whole week," a source said. "They're gearing up for next week."

There were no notable issuers to watch, he said.

Dell, Inc. released earnings Thursday, but not until after the market close, so there was no noticeable movement on their bonds.

The computer maker reported a drop in earnings in the fiscal second quarter.

Its net income of $616 million was down 17% from the $746 million a year ago.

Bank, broker CDS tighten

The credit-default swaps for major bank were seen 5 to 15 bps tighter Thursday, a trader said mid afternoon.

He called Wachovia "a star" although could not give a level for the investment bank.

The broker CDS spreads were seen 10 to 25 bps tighter, with Lehman Brothers leading the way.

Lehman's credit protection was seen at 330 bps bid, 345 bps offered, the trader said.

Daimler, AmEx day's biggest movers

Daimler North America was seen as Thursday's biggest mover, with its 5.75% notes due 2011 tightening more than 40 bps.

American Express 6.15% notes due 2017 were seen widening more than 20 bps.

The company's subsidiary American Express Credit Corp. made news earlier in the week when it launched an InterNotes program aimed at diversifying its ways to gather capital.

The credit branch's 7.3% notes due 2013 were seen topping the day's highest volume issuers in early afternoon trading.

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