Primary empty as second week of shutdown begins; Verizon long bonds focus of secondary action

By Cristal Cody and Aleesia Forni

Virginia Beach, Oct. 7 - The high-grade bond market was empty of new issuance, as the U.S. government shutdown entered its second week on Monday.

"Quiet open to our week," one market source said during the session.

Sources had originally expected up to $10 billion of new paper for the week, though the source said that prediction may be slightly high due to concerns over the U.S. debt ceiling.

"Not sure we'll hit that [amount of new issuance] now," the source added.

Secondary action stayed muted over the day, according to market sources.

"Spreads are a little wider," a trader said. "The shutdown has created so much uncertainty, so it's risk-off."

The Markit CDX North American Investment Grade series 21 index eased 3 basis points to a spread of 82 bps.

High-grade secondary activity over the day focused on Verizon Communication Inc.'s bonds, market sources said.

"The long bond is the most active issue today in volume," one trader said.

In the financial sector, Citigroup Inc.'s 6.675% subordinated notes due 2043 rose from Friday.

Ford Motor Credit Co. LLC's 2.875% notes due 2018 traded mostly unchanged on the day.

"They're not too far from where they were trading on Friday," a trader said.

Verizon long bonds ease

Verizon's 6.55% bonds due 2043 (Baa1/BBB+/A-) eased to 184 bps offered on Monday from 184 bps offered on Friday in active trading, according to a trader.

"They're a couple basis points cheaper today than they were on Friday," the trader said. "It's definitely the most active."

Verizon sold $15 billion of the 30-year bonds with a spread of Treasuries plus 265 bps on Sept. 11 as part of its record $49 billion offering.

The telecommunications company is based in New York City.

Citi trades up

Citigroup's 6.675% subordinated notes due 2043 (Baa2/A-/A) traded up on Monday at 109, or a spread of 222 bps offered, a trader said.

The paper was quoted at 108 on Friday.

The New York-based financial services company sold $1 billion of the 30-year notes at par on Sept. 10.

Ford flat

In other trading, Ford Motor Credit's 2.875% notes due 2018 (Baa3/BBB-/) were offered at 133 bps on Monday, according to a trader.

The notes traded on Friday at 136 bps bid, 132 bps offered.

Ford Motor Credit priced $1 billion of the five-year notes with a spread of Treasuries plus 145 bps on Sept. 26.

The company is the financing arm of Dearborn, Mich.-based automaker Ford Motor Co.

Bank/brokerage CDS costs widen

Investment-grade bank and brokerage CDS costs eased on Monday, according to a market source.

Bank of America Corp.'s CDS costs widened 3 bps to 106 bps bid, 111 bps offered. Citigroup Inc.'s CDS costs eased 3 bps to 95 bps bid, 100 bps offered. JPMorgan Chase & Co.'s CDS costs eased 1 bp to 88 bps bid, 93 bps offered. Wells Fargo & Co.'s CDS costs ended 1 bp wider at 60 bps bid, 65 bps offered.

Merrill Lynch's CDS costs eased 1 bp to 98 bps bid, 108 bps offered. Morgan Stanley's CDS costs widened 3 bps to 135 bps bid, 140 bps offered. Goldman Sachs Group, Inc.'s CDS costs eased 2 bps to 126 bps bid, 129 bps offered.

Paul Deckelman contributed to this review

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