JPMorgan Chase prices deal, issuance low for week; telecom names active; spreads ease

By Andrea Heisinger and Cristal Cody

New York, Dec. 21 - JPMorgan Chase & Co. priced a surprise deal to start the week Monday. The sale is expected to be one of the few to get done during the short holiday week.

The financial services company priced $4 billion in notes due initially in 13 months, but extendible to 2015.

Issuance is expected to be "virtually nothing" for the rest of the week, as desks and companies aim to wrap up any deals before the end of the year.

Meanwhile high-grade bond trading continued to slow ahead of the holidays.

"Institutions for the most part that have to buy or sell something are pretty much done for the year. Especially starting this week, a lot of the real decision makers on bonds will be gone for the rest of the year," the trader said.

But secondary trading has picked up in the telecommunications sector.

Verizon Communications Inc.'s 6.35% notes due 2019 widened on Monday to 115 bps over Treasuries from 105 bps on Friday, easing after several days of strong performance although other telecoms continued to gain.

"The telecom sector had some pretty good timing over the past couple of days," one trader said.

However, for the most part, secondary activity stayed light on Monday, and traders expect the market to be even quieter during the short holiday week.

"It's a pretty light volume," one trader said. "The spreads are tightening but some of that is just the light volume exacerbating it."

Volume was quoted at $3.8 billion in afternoon trading.

"It ended up Friday at $5.7 billion. I don't know if we'll get that high today," one trader said.

Spreads in general were wider on Monday as investors sold off U.S. Treasuries on predictions the Federal Reserve will have to raise interest rates more quickly than anticipated.

The benchmark 10-year Treasury note widened to 3.56% on Monday from 3.54% on Friday while the 2-year Treasury note widened to 0.86% from 0.79%.

"It was busy this morning but it's definitely on the lighter side," a trader said. "I got one corporate trade done today, which is pretty light. For someone looking to buy bonds, there were very few offerings."

A source said the mid bid-asked spread level on the CDX Series 13 North American high-grade index declined 3 basis points to 86 bps.

In overall market activity, the dollar-volume total slipped more than 10% on light trading, and declining issues outpaced advancers.

JPMorgan offers extendibles

In primary activity, JPMorgan Chase priced $4 billion of five-year extendible notes on Monday at par to yield Libor flat, an informed source said.

The notes (Aa3/A+) have an initial coupon of three-month Libor, with a step up to Libor plus 4 bps after one year, then plus 12 bps, 20 bps and 26 bps each additional year.

The initial maturity is 13 months after pricing, with the option to extend the maturity to 2015 if they are not called.

The bookrunner was J.P. Morgan Securities.

The financial services company is based in New York City.

Few deals ahead

The large, and somewhat surprising, sale from JPMorgan is thought to be one of the few to price before the end of 2009.

"I don't know anyone doing any [new deals] this week," a syndicate source said, "here or away."

Another source also expressed surprise that the sale was done this week.

"You would think they would have done it last week," the source said of the JPMorgan sale. He added that it was "kind of weird" that the bank chose to do an extendible note sale.

The market remained neutral, although Treasury rates have pushed the cost of selling bonds slightly higher in recent days, a market source said.

"It's getting more expensive to price a deal every day."

Bank of America notes tighten

Meanwhile on Monday, a source said secondary trading in JPMorgan's three-year 2.125% notes widened to 33 bps over Treasuries from 25 bps plus on Friday.

In other secondary financials activity, Bank of America Corp.'s 7.625% notes due 2019 tightened to 176 bps over Treasuries on Monday, according to a source. On Friday, the notes were quoted at 185 bps over.

Other bank debt also showed activity on Monday, according to a source.

Merrill Lynch & Co.'s 6.4% notes due 2017 widened to 187 bps over Treasuries on Monday from 182 bps over on Friday.

A source said Merrill Lynch's 6.875% notes due 2018 tightened on Monday to 192 bps over Treasuries from 200 bps plus on Friday.

Telecom sector finds good timing

Verizon's 6.35% notes due 2019 widened on Monday to 115 bps over Treasuries from 105 bps on Friday. The New York-based telecommunications company's notes in Friday trading had tightened 15 bps to 105 bps over Treasuries.

On Friday, there was "a ton of activity" in Verizon's notes, a trader said.

Looking at secondary trading on Monday in other telecommunication firms, AT&T, Inc.'s 5.80% notes due 2019 tightened to 109 bps over Treasuries from 115 bps plus on Friday, according to a source.

Also, according to one source, British mobile telecommunications company Vodafone Group plc's 5.45% notes due 2019 tightened to 115 bps over Treasuries on Monday. The notes were quoted at 125 bps plus on Friday.

"The whole telecommunications sector has been performing well," a trader said.

Dow Chemical notes tighten

On Monday, Dow Chemical Co.'s 8.55% notes due 2019 tightened to 210 bps over Treasuries, according to one source. The notes were quoted at 220 bps plus on Friday.

Midland, Mich.-based Dow Chemical manufactures and sells chemicals, plastics, agricultural products and other services across the world.

Offerings continue for Dr Pepper

Secondary interest continued into the holiday week in the $850 million of notes sold by Dr Pepper Snapple Group Inc.

The $400 million 1.7% two-year notes priced at 90 bps in the primary market on Dec. 14 and were offered at 70 bps in secondary trading the next day.

"The short one was offered at 69 bps this morning, but traded at 74 bps. That's about where they've been trading," one trader said. "I'm seeing at least some offerings on it. There was just one buy and sell today on their bond."

The company is a Plano, Texas-based beverage maker.

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