Morgan Stanley, Comerica issue bonds as market tone weakens; Morgan Stanley, Verizon ease

By Cristal Cody and Aleesia Forni

Virginia Beach, July 17 – The market remained subdued on Thursday, with a pair of financial names bringing new deals to the investment-grade primary.

The market’s tone was weaker during the session following news that the U.S. would begin imposing tougher sanctions against Russia, along with reports of a Malaysia Airlines passenger plane being shot down in Ukraine.

In primary happenings, Morgan Stanley came to market with the week’s largest deal, pricing $3 billion of notes in fixed- and floating-rate tranches due 2019.

The session also saw Comerica Inc. price a $250 million offering of subordinated notes.

This week has seen more than $10 billion of new issuance hit the investment-grade primary market.

With another quiet session expected on Friday, the week’s supply will mostly likely fall short of what sources had predicted to be around a $15 billion to $20 billion week.

Investment-grade corporate bonds widened on a series of negative events over the day that included reports of a Malaysian commercial plane shot down in eastern Ukraine, sources said.

The Markit CDX North American Investment Grade series 22 index was seen ending the session about 3.5 basis points wider at a spread of 60 bps.

“Everything just kind of widened out on all of the negative news going on,” a trader said. “A lot of TV watching today.”

Comerica’s 3.8% notes due 2026 headed out mostly wrapped around issuance, a trader said.

Morgan Stanley’s 2.375% notes due 2019 traded 1 bp wider on the bid side, a trader said.

Morgan Stanley’s new paper and Verizon Communications Inc.’s bonds (Baa1/BBB+/A-) were among the most active issues in the secondary market, according to a trader.

Verizon’s bonds were a “little wider” from Wednesday, the trader said.

Morgan Stanley two-parter

Thursday’s primary market saw Morgan Stanley sell $3 billion of senior notes (Baa2/A-/A) in fixed- and floating-rate tranches due 2019, according to a market source and an FWP filed with the Securities and Exchange Commission.

The sale included $500 million of floating-rate notes sold at par to yield Libor plus 74 bps and $2.5 billion of 2.375% notes priced at 99.565 to yield Treasuries plus 85 bps.

Morgan Stanley’s 2.375% notes due 2019 eased to 86 bps bid, 83 bps offered in aftermarket trading, a trader said.

Morgan Stanley & Co. LLC was the bookrunner.

Morgan Stanley is a New York City-based financial services company.

Comerica brings sub notes

Also on Thursday, Comerica sold a $250 million offering of 3.8% subordinated notes due 2026 with a spread of Treasuries plus 135 bps, according to a market source and an FWP filed with the SEC.

Pricing was at the tight end of talk.

The notes (Baa1/BBB+/A-) sold at 99.78 to yield 3.823%.

Comerica’s 3.8% notes due 2026 headed out in the secondary market at 135 bps bid, 133 bps offered, a trader said.

Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC were the joint bookrunners.

Proceeds will be used for general corporate purposes, which may include working capital, investments in or advances to existing or future subsidiaries, and repurchases, maturities and redemptions of other outstanding securities.

The financial services company is based in Dallas.

Verizon softer

Verizon’s 5.15% notes due 2023 eased to the 110 bps to 112 bps area in the secondary market over the session, a trader said.

The notes traded at the 108 bps area on Wednesday, the trader said.

The issue closed at 112.19 to yield 3.575% from 111.78 to yield 3.625% on Wednesday, according to a market source.

Verizon sold $11 billion of the notes at Treasuries plus 225 bps, or 99.676, to yield 5.192% on Sept. 11.

The company’s 6.55% bonds due 2043 eased to the 160 bps area, the trader said.

The notes were quoted on Wednesday at 156 bps offered.

The bonds ended the day at 125.54 to yield 4.895% from 125.12 to yield 4.918% in the previous session, a source said.

Verizon sold $15 billion of the bonds at Treasuries plus 265 bps, or 99.883, to yield 6.559% in the September offering.

The telecommunications company is based in New York City.

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS prices rose on Thursday, according to a market source.

Bank of America Corp.’s CDS costs widened 5 bps to 69 bps bid, 72 bps offered. Citigroup Inc.’s CDS costs increased 5 bps to 66 bps bid, 69 bps offered. JPMorgan Chase & Co.’s CDS costs widened 3 bps to 56 bps bid, 59 bps offered. Wells Fargo & Co.’s CDS costs also increased 3 bps to 45 bps bid, 50 bps offered.

Merrill Lynch’s CDS costs closed 3 bps higher at 73 bps bid, 77 bps offered. Morgan Stanley’s CDS costs rose 2 bps to 66 bps bid, 71 bps offered. Goldman Sachs Group, Inc.’s CDS costs increased 3 bp to 73 bps bid, 78 bps offered.

Paul Deckelman contributed to this review.

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