CAT Financial, Toyota Motor Credit tap market opportunistically; bank, telecom bonds widen

By Andrea Heisinger and Cristal Cody

New York, Dec. 12 - Issuers in the high-grade bond market mostly stood down Monday on sober headlines on the euro zone debt and credit-rating reviews of the member countries.

There were deals from Caterpillar Financial Services Corp. and Toyota Motor Credit Corp.

CAT Financial priced $600 million of notes in two parts after the deal size was doubled from $300 million. There was a $200 million tranche of two-year floating-rate notes and $400 million of three-year notes.

Toyota Motor Credit sold $108 million of one-year floating-rate notes. This followed the issuer's $465 million sale of one-year floaters on Friday.

A source noted that a drop in equities from Friday didn't make for many go calls on Monday morning. It was predicted on Friday that high-grade companies would hold off on pricing bonds until Tuesday or later to see how talks progress among the European Union countries following the news that Britain would not sign a treaty on fiscal austerity.

There's a possibility of "a couple of deals" on Tuesday, although it depends on whether the market tone improves overnight.

"It was kind of ugly today, but if people need to get in they might do it," a market source said.

A syndicate source said late in the day that their desk had "nothing specific" for Tuesday.

"Anything that prices is going to be opportunistic," the source said. "That's the way it's going to be for the next week or two until the market shuts down."

Bank and financial paper moved out 5 basis points to 15 bps in the secondary market on Monday.

Citigroup Inc.'s 4.5% notes due 2022 that it reopened the previous week traded 10 bps wider.

Wells Fargo & Co.'s notes that priced a week ago traded more than 10 bps wider.

Investment-grade bank and brokerage credit default swaps costs rose, indicating less investor confidence in the financial sector, a source said.

Bank paper CDS costs traded 5 bps to 15 bps higher. Brokerage company paper CDS costs were 6 bps to 10 bps higher.

"Everything's a little bit weaker today," a trader said.

Telecommunication bonds, including AT&T, Inc., traded 3 bps to 5 bps wider.

The Markit CDX Series 17 North American high-grade index ended Monday at a spread of 126 bps.

The secondary market "definitely had a negative tone all day," a trader said. "Pretty light flows."

Overall trading volume was about $7.5 billion on Monday.

Treasuries traded stronger as stocks fell over renewed euro zone debt fears. The benchmark 10-year Treasury note yield fell 5 bps to 2.01%. The 30-year bond yield dropped to 3.05% from 3.11% on Friday.

CAT doubles deal size

Caterpillar Financial Services sold an upsized $600 million of notes (A2/A/A) in two parts, a market source said.

A $200 million tranche of two-year floating-rate notes priced at par to yield Libor plus 30 bps.

The second tranche was $400 million of 1.125% three-year notes priced at a spread of Treasuries plus 85 bps.

The deal size was doubled from $300 million, the source said.

Bookrunners were Bank of America Merrill Lynch and J.P. Morgan Securities LLC.

The proceeds are being used for general corporate purposes.

The funding arm of heavy equipment maker Caterpillar is based in Nashville, Tenn.

Toyota's floaters

Toyota Motor Credit sold $108 million of one-year floating-rate notes (Aa3/AA-) at par to yield Libor plus 20 bps, according to FWP filings with the Securities and Exchange Commission.

Agents were Jefferies & Co., RBC Capital Markets LLC and Williams Capital Group LP.

The U.S. financing arm of Toyota is based in Torrance, Calif.

Citi widens

In the secondary market on Monday, Citigroup's 4.5% notes due 2022 (A3/A-/A+) widened 10 bps to 310 bps bid, 300 bps offered, according to a high-grade trader.

Citigroup reopened the issue to add $250 million on Dec. 7 at a spread of Treasuries plus 290 bps.

The financial services company is based in New York City.

Wells Fargo paper weaker

Other financial paper also traded weaker with the negative tone. Wells Fargo's 2.625% notes due 2016 widened to 187 bps bid, 182 bps offered, a trader said.

Wells Fargo sold $1.5 billion of the notes (A2/A+) on Dec. 5 at Treasuries plus 175 bps.

The financial services company is based in San Francisco.

AT&T trades

In other trading, AT&T's bonds eased along with the telecom sector, a trader said Monday.

AT&T's 3.875% notes due 2021 traded 2 bps weaker at 145 bps bid, 138 bps offered.

The notes are trading stronger than the Aug. 15 issue price. AT&T sold the issue in a $1.5 billion tranche at a spread of 160 bps over Treasuries.

The telecommunications company is based in Dallas.

Paul Deckelman contributed to this review

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