AWAS Aviation sells split-rated bonds; coming week's issuance seen lighter; RBC notes widen

By Andrea Heisinger and Cristal Cody

New York, Oct. 1 - The investment-grade bond market was mostly void of new deals to end the week, with only a split-rated sale from AWAS Aviation Capital Ltd.

The company priced $600 million of six-year senior secured notes under Rule 144A at par to yield 7%. The notes (Ba2/BBB-) were priced off the high-grade syndicate desk.

Issuance in the coming week is expected to be "in the $20 billion range," one market source said late on Friday. It's unlikely there will be another massive sale to start the week, like the NBC Universal, Inc. deal, but "we could see something Monday," the source said.

There was a little more than $22 billion sold in the past week, which was in the expected range.

There could be some more deals in the energy sector in the coming week as they have been performing well both in the primary and secondary, a syndicate source said.

BP Capital Markets plc's notes tightened between 10 basis points and 20 bps in trading, with other names in the energy sector also coming in.

"I think that was a boost to the market, so we could see some more oil or gas names coming in," the syndicate source said.

"We have economic data next week, so we're probably going to see things price around that," he said.

October is expected to be "robust" for new deals, though not as good as September's flurry, a trader said.

In the secondary market, Bank of Nova Scotia's new deal was stronger, while Royal Bank of Canada's new paper continued to widen.

The Markit CDX Series 14 North American investment-grade index firmed 3 bps to a spread of 104 bps on Friday after staying flat the previous two days, according to Markit Group Ltd.

The market was "really quiet today," a trader said.

Overall investment-grade Trace volume dropped nearly 30% to less than $10 billion, a source said.

U.S. Treasuries finished the week flat on mixed economic indicators.

Treasuries "opened lower and stocks were higher while internal sources do flag that rate lock activity has suddenly become magnitudes greater than what they've seen in recent weeks. This obviously bodes well for another strong month of corporate supply here in October," strategists at RBS Securities Inc. said Friday in a research note.

The yield on the benchmark 10-year note was unchanged at 2.51%. The 30-year bond yield rose 3 bps to 3.72%.

Bank of Nova Scotia tighter

Bank of Nova Scotia's new benchmark deal firmed in secondary trading on Friday, a source said.

The bank priced $1.25 billion of 2.05% five-year senior notes (Aa1/AA-/AA-) at a spread of Treasuries plus 83 bps on Thursday.

Late Friday, the notes tightened to 79 bps bid, 76 bps offered, the source said.

The financial services company is based in Toronto and Halifax, N.S.

RBC widens

Royal Bank of Canada's new paper sold earlier in the week continued to weaken in Friday's secondary market, a trader said.

The 1.25% notes due 2014 (Aaa/AA-) traded Friday wider at an offer of 55 bps. RBC sold $1 billion of the notes on Wednesday at 53 bps over Treasuries.

The notes were seen trading Thursday afternoon at an offer of 54 bps, a source said.

The financial services company is based in Toronto.

Bank, brokerage CDS costs stronger

The cost of credit default swaps protecting holders of bank paper against events of default tightened 1 bp to 5 bps, according to a source.

Also, the CDS costs for brokerage/investment bank paper tightened 2 bps to 4 bps, the source said.

Stephanie Rotondo contributed to this report

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