New deals stalled, Building Materials plans split-rated bond sale; financials ease in trading

By Andrea Heisinger and Cristal Cody

New York, Jan. 28 - The slowdown of the investment-grade bond market was in full effect on Thursday as no new straight high-grade deals were priced.

An upcoming split-rated sale from Building Materials Corp. of America was announced, but is not expected to price until the coming week following a brief roadshow. The deal is expected to be structured as $250 million in 10-year senior secured notes.

New deals are expected to be absent from the market until the coming week. Earnings and some volatility stemming from headlines have mostly kept issuers away from the market in the past week, sources said.

Investment-grader traders saw the financial sector on Thursday give up some of the ground it gained the day before, while overall activity was fairly quiet as the primary market came to a standstill, sources said.

Away from the financial names, secondary trading was "fairly dead today," one trader said, adding that everyone may be "waiting for the new issue calendar to come back."

Despite the lack of excitement, Trace volume rose about 5% to about $13.5 billion.

"Not bad," a trader commented.

The CDX Series 13 North American high-grade index eased 1 basis point to a mid bid-asked spread level of 96 bps.

The yield on the 10-year benchmark Treasury note tightened 1 bp to 3.64%, while and the 30-year bond yield also firmed 1 bps to 4.55%, according to a source.

In the secondary market, traders saw activity in high-grade notes from Canadian Imperial Bank of Commerce and General Electric Capital Corp., while the financial sector overall was weaker.

Primary at standstill

There were no new straight investment-grade deals tossed into the bond market for the day - a fact that surprised no one.

"There's still a little volatility and really no supply," a market source said late in the day.

A syndicate source said that there was "not really any activity to speak of."

Some eyes were glued to headlines to see whether Federal Reserve chief Ben Bernanke would be approved by the Senate for a second term. Little changed in the high-grade market after he was, the source said.

Syndicate desks are mostly on auto-pilot and waiting until deals start flowing again in the coming week.

"It's nice to have a break," a source from one smaller desk said. "It's also nice to be kind of busy."

Building Materials plans split-rated sale

Building Materials Corp. of America is planning a $250 million sale of split-rated 10-year first lien senior secured notes (Ba3/BBB-) following a road show, market sources said on Thursday.

The road show starts Friday and ends on Feb. 2. The notes have initial guidance of a 7.25% yield.

A source close to the sale said it was "too soon to tell" if it would be run off the high-grade or high-yield desk, or a mixture of both.

Deutsche Bank Securities, Citigroup Global Markets and Wells Fargo Securities are bookrunners.

The issuer does business as GAF Materials and deals primarily with roofing and shingles. It is based in Wayne, N.J.

Financial sector 'see-saws'

Secondary trading in financial names was enough to make some traders dizzy on Thursday.

"It was a seesaw today," one trader said. "The market started off very strong with the different earnings between Ford and Procter & Gamble. We seem very tied to how the equity markets are performing."

On Thursday, the investment-grade market was wider.

"It's definitely weaker than where we started today," a source said.

For example, General Electric Capital's 5.5% notes due 2020 traded at 195 bps bid, 193 bps offered at one point before they widened to 204 bps bid, 198 bps offered.

The Fairfield, Conn.-based company, the financing arm of General Electric Co., priced the notes in early January at Treasuries plus 180 bps.

In addition, another trader noted GE Capital's 10-year notes were "pretty active."

"It looks like they traded in the 195-197 area, right around yesterday's levels," the trader said.

Looking at other high-grade corporate bonds, the 7.375% notes 2014 from Charlotte, N.C.-based Bank of America Corp. also weakened Thursday by 11 bps to 161 bps over Treasuries, according to a market source.

In addition, New York-based Citigroup Inc.'s 6.375% notes due 2014 widened 14 bps to 158 bps over.

CIBC firms early

Canadian Imperial Bank of Commerce's 2% notes due 2013 were quoted early Thursday as tightening more than 10 bps to 55 bps bid, 51 bps offered.

The $2 billion of notes priced early Wednesday at Treasuries plus 66 bps.

By late in the day, the Toronto-based chartered bank's notes "didn't see much flow" in secondary trading, one trader said.

Zions keeps pushing higher

For a third consecutive session, bonds of Zions Bancorporation remained well bid for in active dealings, with a market source seeing the Salt Lake City, Utah-based regional banking company's 7.75% senior notes due 2014 having risen to just over 97 bid, up another 1.5 points from around the 95.5-96 area levels at which those bonds traded on Tuesday. Over $16 million of the bonds had traded by late in the afternoon, making the credit one of the more active issues for a third day running.

At a rating of NR/BBB-/BBB, the bonds attract attention from both high-grade and high yield accounts.

The bonds have been firming since Tuesday, in reaction to Zions' announcement after the close on Monday that its fourth-quarter loss shrank to $176.5 million, or $1.26 per share, well down from a loss of $498.1 million, or $4.37 per share, in the year-earlier period, as the bank took considerably less in the way of charges and write downs.

The loss also came in at less than the roughly $1.65 per share which Wall Street had been anticipating.

-Paul Deckelman contributed to this report

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