U.S. Bancorp, ABB Finance sell paper as primary volume wanes; bank paper, WellPoint widen

By Andrea Heisinger and Cristal Cody

New York, May 3 - The number of new deals in the high-grade market fell on Thursday, but there was still activity from U.S. Bancorp and ABB Finance (USA) Inc.

U.S. Bank priced $1.25 billion of five-year paper.

The U.S. unit of Swiss company ABB priced $2.5 billion in three tranches. The size of the trade was increased from the $1.5 billion announced in a filing with the Securities and Exchange Commission in the morning.

"That one came pretty late in the day," a source said. "Didn't hear too much about it."

There was a $350 million sale of cumulative perpetual preferred stock from PS Business Parks Inc.

The primary was coming off three days of plentiful issuance, but the calendar was mostly exhausted for the week, a market source said, and the secondary needed some time to absorb the new paper.

"Yesterday was full [of deals], so I think people wanted to see how things performed," the source said.

There has been solid demand for all of the week's deals, and a source away from ABB said that the company's trade was "oversubscribed by a lot." The company hasn't issued in the dollar bond market in recent years.

Friday is set to be quiet, although the coming week could see another round of deals, sources said.

High-grade bonds mostly traded flat to weaker over the day. The Markit CDX Series 18 North American Investment Grade index eased 2 basis points to a spread of 96 bps.

U.S. Bancorp's notes due 2017 traded about 1 bp better.

"It's basically a mixed bag, depending on the credit," a trader said. "Some unchanged, some a tad weaker, some a tad stronger."

The 4.125% notes due 2022 that Sweden's Telefonaktiebolaget LM Ericsson (publ) sold on Wednesday continued to trade stronger than the issue price but eased back 2 bps in secondary trading on Thursday.

WellPoint, Inc.'s new 10-year and 30-year bonds eased 2 bps to 3 bps over the day.

BP Capital Markets plc's two tranches of paper sold on Wednesday firmed 4 bps in the secondary.

Bank and financial paper traded mostly weaker on the day, out about 3 bps, a trader said.

Investment-grade bank and brokerage credit default swaps costs traded higher, a source said.

Bank of America's CDS costs rose 3 bps to 258 bps bid, 263 bps offered. Citi's CDS costs were flat at 218 bps bid, 223 bps offered. JPMorgan's CDS costs rose 4 bps to 104 bps bid, 109 bps offered. Wells Fargo's eased 3 bps to 85 bps bid, 90 bps offered.

Brokers were higher. Merrill Lynch's CDS costs rose 2 bps to 267 bps bid, 277 bps offered. Morgan Stanley's traded 3 bps higher at 354 bps bid, 359 bps offered. Goldman Sachs' widened 3 bps to 261 bps bid, 266 bps offered.

Treasuries ended mostly flat ahead of the Labor Department's key April jobs report on Friday. The benchmark 10-year note yield was unchanged at 1.93%. The 30-year bond yield rose 1 bp to 3.12%.

ABB offers $2.5 billion

ABB Finance (USA) sold $2.5 billion of notes (Aa3/A/) in three tranches, a market source said.

The trade was "always in three tranches" the source said, but the size was increased from the $1.5 billion announced in an SEC filing.

The $500 million of 1.625% five-year notes sold at a spread of 95 bps over Treasuries.

A $1.25 billion tranche of 2.875% 10-year paper priced at Treasuries plus 120 bps.

There was a final $750 million tranche of 4.375% 30-year bonds sold at a spread of Treasuries plus 145 bps.

The bookrunners were Bank of America Merrill Lynch, Goldman Sachs & Co. and Morgan Stanley & Co. LLC.

Proceeds are being used for general corporate purposes including funding a portion of the proposed acquisition of Thomas & Betts Corp.

The deal is guaranteed by Zurich-based ABB Ltd., a power and automation technology company. ABB Finance (USA) is based in Norwalk, Conn.

U.S. Bank's five-year

U.S. Bancorp sold $1.25 billion of 1.65% five-year medium-term notes (Aa3/A/) to yield Treasuries plus 87.5 bps, a syndicate source said.

The deal was sold at the tight end of guidance in the 90 bps area, plus or minus 2.5 bps, the source said.

Barclays Capital Inc., Deutsche Bank Securities Inc. and U.S. Bancorp Investments Inc. ran the books.

In the secondary market, the notes edged tighter to 86 bps bid, 83 bps offered, a trader said.

The bank and financial services company is based in Minneapolis.

PS Business sells preferreds

PS Business Parks priced a $350 million offering of 6% series T cumulative perpetual preferred stock, according to an FWP filing with the SEC. There is a $52.5 million over-allotment option.

The deal was originally expected to be a $100 million issue at 6.125%. Traders later said that the deal was upsized to $200 million and pricing tightened to 6%.

At midday, a trader saw paper offered at $24.70 in the gray market, After the bell, a source saw the preferreds higher than that at $24.88 bid, $24.95 offered.

The preferreds will be issued as depositary shares representing a 1/1,000th interest in a preferred. Each depositary share will have a $25 liquidation preference.

Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo Securities LLC are the joint bookrunners.

The company will apply to list the preferreds on the New York Stock Exchange under the ticker symbol "PSBPT."

Proceeds will be used for general corporate purposes, including the repayment of outstanding debt, the redemption of preferreds and the acquisition of commercial properties.

PS Business Parks is a Glendale, Calif.-based real estate investment trust.

BP tightens

BP Capital Markets' $3 billion of senior notes (A2/A/) firmed about 4 bps in the secondary market, a trader said on Thursday.

The 1.846% notes due 2017 firmed to 99 bps bid, 96 bps offered. BP Capital sold $1.25 billion of the notes at a spread of Treasuries plus 103 bps on Wednesday.

The tranche of 3.245% notes due 2022 traded stronger at 129 bps bid, 126 bps offered. The $1.75 billion tranche priced at Treasuries plus 133 bps.

The unit of oil and gas company BP plc is based in London.

WellPoint weakens

WellPoint's $1.75 billion of notes (Baa1/A-/A-) that priced in two tranches on Wednesday eased in secondary trading, a source said on Thursday.

The 3.125% notes due 2022 widened 2 bps to 129 bps bid, 126 bps offered. WellPoint sold $850 million of the 10-year notes at a spread of Treasuries plus 127 bps.

The tranche of 4.625% 30-year bonds widened to 160 bps bid, 157 bps offered. The $900 million of bonds priced at a spread of 157 bps over Treasuries.

The health benefits company is based in Indianapolis.

Ericsson holds

Telefonaktiebolaget LM Ericsson's 4.125% notes due 2022 traded at 212 bps bid, 210 bps offered, a trader said in the late afternoon.

LM Ericsson sold $1 billion of the 10-year notes (A3/BBB+/) at a spread of 225 bps over Treasuries. The notes had traded late Wednesday as tight at 210 bps bid, 208 bps offered.

The telecommunication and data communications company is based in Stockholm.

Stephanie N. Rotondo contributed to this review

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