Cantor Fitzgerald sells notes; issuers take breather after $10.5 billion day; Shell, HSBC firm

By Andrea Heisinger and Cristal Cody

New York, June 22 - Companies backed off from issuing in the high-grade bond market on Tuesday after a rush of deals the previous day. Only Cantor Fitzgerald LP priced bonds.

The financial services company sold an upsized $300 million of five-year notes under Rule 144A.

There was more than $10.5 billion of investment-grade paper priced on Monday following a week of steady issuance.

"I think people just need to digest," a syndicate source said at the end of the day. "We've had a lot of new stuff come out yesterday and last week."

There's also a Federal Reserve Open Market Committee meeting on Wednesday, and issuers often sit out the day before in case any changes are announced.

Despite the slowdown on Tuesday, sources said they aren't expecting things to remain quiet for long.

"There are still things in the pipeline," the source said. "We're not done yet for the week."

New bonds from Shell International Finance BV, William Wrigley Jr. Co. and HSBC Bank plc all firmed in secondary trading, sources said.

But General Electric Capital Corp.'s new investment-grade debt continued to widen in the secondary market on Tuesday, sources said.

"Weak stocks put pressure on corps," one trader said.

The Dow Jones Industrial Average fell 148.89 points, or 1.43%, to 10,293.52.

The CDX Series 14 North American investment-grade index eased 7 basis points to a spread of 115 bps, a source said.

"Corporate bond spreads aren't as wide as they were, but there's still value there," a source said.

Overall investment-grade Trace volume climbed 23% on Tuesday to nearly $13 billion, a market source said.

Treasuries were improved on strong demand for the sale of the government's two-year notes and the drop in stocks.

Yields on the 10-year Treasury note firmed 7 bps to 3.17%. Yields on two-year debt were 3 bps tighter at 0.68%. Yields on the 30-year bond also firmed, tightening 6 bps to 4.1%.

The Treasury Department auctioned $40 billion of two-year notes on Tuesday at a record-low yield of 0.738% and record-low coupon of 0.625%.

Cantor Fitzgerald prices

Cantor Fitzgerald priced $300 million of 6.375% five-year senior notes (Baa3/BBB/BBB) to yield Treasuries plus 450 bps, a source away from the sale said.

The size was increased by $50 million from $250 million, another source said.

The bookrunners were Deutsche Bank Securities and Cantor Fitzgerald.

The financial services company is based in New York.

Issuance to continue

Cheap spreads may have contributed to Monday's large amount of new issues, but supply is not expected to slow down for at least another month.

"You had a while where no one was touching the market, and they were all three-years, five-years," a source said. "Now you're seeing more of the 10s and 30s."

Spreads "slid wider by the end of the day," a market source said.

He added that "tomorrow should pick up again depending on what happens."

The source also said that he didn't think the upcoming Fed meeting had anything to do with the lack of interest in pricing new deals for the day.

"Honestly, we didn't really have any issuers ready to go," he said.

There has been no more news on a bond issue from BP plc that was floated in news reports last week.

The market source said that "everything we've heard so far is rumors, and no one's heard any facts on a bond issue."

The company is looking to shore up its finances and capital for a $20 billion fund to aid clean-up of the ongoing oil spill in the Gulf of Mexico. A news report from CNBC said that the company could be doing a $5 billion to $10 billion bond sale in addition to bank loans.

Shell firms

Shell International Finance, which sold $1.75 billion of 3.1% notes due 2015 at Treasuries plus 110 bps the previous day, firmed in trading on Tuesday, according to a source.

"Last I saw," the notes were 103 bps bid, 99 bps offered, the source said.

Shell priced a total of $2.75 billion of senior unsecured notes (Aa1/AA/AA+) in two tranches, which also included two-year floating-rate notes sold at par.

The energy and petrochemical company is based in the Hague, the Netherlands.

Wrigley tighter

Wrigley's notes firmed in the secondary market, according to sources.

Wrigley priced a total of $1.8 billion of senior secured notes (Baa2/BBB) late on Monday. The issuance included floating-rate notes due 2011, notes due 2012 and notes due 2013.

The 2.45% notes due 2012, which sold at a spread of Treasuries plus 175 bps, tightened on the bid side to 170 bps, a trader said.

The 3.05% notes due 2013 were sold at Treasuries plus 187.5 bps and were seen stronger on Tuesday at 185 bps bid, 175 bps offered, the trader said.

Wrigley also priced 3.7% notes due 2014 at Treasuries plus 170 bps in the last tranche.

"All the action I saw on this one was early in the day," one source said. "Bids ranging from 162 to 170, and the last I saw was 156 bid. No offers and nothing on the two- and three-year."

Another source saw the four-year notes trading at 160 bps bid, 155 bps offered.

The candy and food products manufacturer is based in Chicago.

GE Capital widens

GE Capital's new investment-grade debt sold on Monday continued to widen in secondary trading on Tuesday, sources said.

GE Capital priced $1 billion of 3.5% senior notes (Aa2/AA+) due 2015 at Treasuries plus 150 bps, and the notes moved out in Monday trading to 154 bps bid, 153 bps offered, a trader said.

The notes were weaker on Tuesday, with sources quoting the five-year notes at 159 bps bid, 156 bps offered.

"I have to say I'm a little bit disappointed their pricing spread has widened a bit. They underperformed Treasuries today," a trader said.

The Fairfield, Conn., company is the funding arm of General Electric Co.

HSBC tighter

HSBC Bank's new 3.5% senior notes (Aa2/AA/AA) due 2015, which were sold on Monday at Treasuries plus 150 bps, were active in the secondary, according to a trader.

"They are better today at a spread of 143 to the five-year," the trader said. "The market likes HSBC a little bit better than they liked GE [Capital]."

The London-based financial services company sold $2 billion of the senior notes under Rule 144A.

Bank/brokerage CDS costs rise

A trader who watches the credit default swaps market said that the cost of protecting holders of bonds issued by major banks like Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. against a possible event of default rose on Tuesday by between 10 bps and 18 bps, reflecting lessened investor confidence in the sector.

He saw the CDS protection cost of bonds of major investment banking houses like Morgan Stanley and Goldman Sachs Group, Inc. likewise 12 bps to 15 bps higher.

Paul Deckelman contributed to this report

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