High-grade primary takes break on Fed news; Seminole Tribe sells notes; secondary quiet

By Andrea Heisinger

New York, Nov. 3 - The end of a two-day meeting of the Federal Reserve Federal Open Market Committee was the main event on Wednesday in both the primary and secondary high-grade markets.

A syndicate source said that "nothing else was going on" in the morning due to the pending announcement in early afternoon.

A $330 million sale of split-rated seven-year bonds from Seminole Tribe of Florida priced after being announced late the previous week.

The Fed did not raise interest rates, and isn't expected to do so for a couple of years, but it did make an announcement of a $600 billion purchase of Treasury bonds. This action wasn't a surprise, but the amount was slightly more than some market participants had expected, a source said.

"Everyone was waiting for the [quantitative easing 2] announcement," a syndicate source said.

New issues are expected to resume on Thursday after a day when "no one was going to touch the market," the source said.

Trading in the high-grade market held steady from the day before at about $9 billion in volume. One trader called this "respectable."

Bonds priced the previous day by Jefferies Group, Inc. and Williams Partners LP each moved tighter or held gains from the previous day, sources said.

The three new notes from Northrop Grumman Corp. had mostly disappeared from trading, a source said. There was only activity seen in the 30-year bond.

After some signs of weakness in financial bonds to start the week, there was virtually no trading in them for the day, a source said.

"I didn't do anything in finance," he said. "I maybe traded a couple of Disney's." Walt Disney Co. was in the news for agreeing to sell two ABC stations.

Several events for the week like elections, the Fed meeting and QE2 have meant a rough start for the month in trading.

"The first three days of November have been brutally quiet," the source said. "Spreads are maybe tighter by 1 bp. There's just nothing going on."

Treasuries take center stage

The Federal Reserve announced it was planning to purchase up to $600 billion of Treasury bonds with average durations of five to six years, which was shorter than expected.

"[It] seems like after the FOMC, long bonds came out of the woodwork," a trader said. Treasuries dropped close to 3 points, so there was a yield grab for long corporate, they added.

"I think most were expecting the Fed to focus on the long end - they were disappointed."

Treasury yields were mixed by day's end as shorter maturities moved tighter and the longer-dated paper was wider in some cases.

A source quoted the five-year note yield down 5 bps from the previous date, at 1.11%. The 30-year bond, on the other hand, was 11 bps wider than Tuesday at 4.04%.

Credit-default swaps on Treasury bonds were up for the day after the Fed announcement, a source said.

New bonds on hiatus

There was a small break in new deals activity for the day, but that is expected to end on Thursday, sources said.

Most of the bond market was unchanged by the Fed announcement, a syndicate source said, other than the "30-year Treasury getting hit."

"Everyone's still absorbing the data," he said.

Bond sales are set to pick up again Thursday, taking advantage of a one-day window ahead of more jobs and economic data coming out Friday.

There are "a couple of large trades" for the coming day, a source said.

Jefferies moves tighter

A new 3.875% bond due 2015 from Jefferies Group was quoted as about 5 bps tighter than late Tuesday after it priced, a source said.

The bond sold at 275 bps over Treasuries and was quoted at 263 bps bid, 260 bps offered.

Another trader said she did not see the Jefferies bonds in the secondary.

Williams Partners holds gains

The 10-year notes priced the previous day by Williams Partners held its ground at a few basis points tighter in next-day trading.

The 4.125% notes due 2020 were quoted at 150 bps bid, 149 bps offered after selling at Treasuries plus 153 bps the previous day. This was about the same levels at which they were quoted in the secondary after pricing.

A second source said later in the day that they had seen "nothing on Williams" and that the last quote they had gotten was a bid of 151 bps late Tuesday.

Familiar names active

There was little in the way of new bonds to trade for the day, and some names that are continually among the most active securities popped up on Wednesday.

A 5.7% note due 2011 from Capital One Financial Corp. was one of the most actively traded for the day and quoted at 76 bps.

The bank was one of 10 that had their ratings cut by Moody's Investors Service earlier this week.

Bonds from Anadarko Petroleum Corp. and Dow Chemical Co. resurfaced and were trading at high volume.

Anadarko's 5.95% bond due 2016 and Dow Chemical's 8.55% notes due 2019 were seeing a lot of activity.

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