By DOW JONES NEWSWIRES
Stocks rose and Treasurys faltered Thursday, amid investor
optimism that Greece will complete a EUR200-billion debt
restructuring.
Nine high-grade companies had deals in the corporate bond
market, building on what already has been the busiest week for new
issues since late 2009.
Meanwhile, the muni market largely slumped in price, taking cues
from the Treasury market, as it was also pressured by hefty supply.
While most major muni deals sold earlier this week, the market is
still digesting the largest amount of weekly supply so far this
year, at around $9 billion to $10 billion.
Corporate Bonds
Nine investment-grade companies tapped the corporate-bond market
Thursday, helping to make this week the busiest for new issuance
since late 2009, and there's still another session for companies to
borrow.
At least $6.63 billion of new bonds are expected to get sold, on
top of $30.9 billion priced through Wednesday. That would top the
previous busiest week of the year, in late January, when $28.8
billion were sold, and marks the most volume in a week since late
November 2009, according to data provider Dealogic.
The all-time high of $42.9 billion was set in mid-March 2009,
according to Dealogic data going back to 1995.
Companies big and small, high-grade and low, are coming out of
blackout earnings periods and issuing debt to take advantage of
record-low yields.
Investor demand should remain high as new deals continue to
trade well entering the secondary market. Nine of the top 10 most
actively traded bonds are improving versus Treasurys, including a
0.16 percentage point tightening in the risk premium on
Hewlett-Packard (HPQ) 10-year notes that were issued Wednesday,
according to MarketAxess.
Simon Property Group's (SPG) three-part, $1.5-billion offering
was the largest deal Thursday. It sold 5.5-, 10-, and 30-year notes
at spreads to Treasurys of 1.3 percentage points, 1.4 points, and
1.6 points, respectively.
Mitsui Sumitomo Insurance sold $1.3 billion of 60-year
subordinate bonds after a marketing period Wednesday. The privately
placed notes were sold in the Rule 144A/Reg S market, which is only
open to qualified investors outside the U.S., at a yield of 7%.
Xerox Corp. (XRX) sold $1.1 billion including 18-month
floating-rate notes offering 1.4 percentage points over the three
month London interbank offered rate, or Libor.
URS Corp. (URS), an engineering firm and federal government
contractor, was selling five- and 10-year notes, each at 3 points
over Treasurys.
Companies issuing smaller deals include Genworth Financial Inc.
(GNW), the New York unit of Consolidated Edison Inc. (ED), Edison
International's (EIX) Southern California Edison, and the operating
unit of natural gas company DCP Midstream Partners, LP (DPM).
Mortgage Backed Securities
Investors shifted back into some higher-coupon mortgage-backed
securities just a day after signs of faster refinancing via the
government's Home Affordable Refinance Program dented demand. While
the initial response by borrowers to the HARP was stronger than
some analysts expected, the overall impact over time may still be
as anticipated, a trader said.
Mortgage-backed securities also have underlying demand from the
Federal Reserve and mortgage real-estate investment trusts that
continue to raise capital for MBS investments. MBS prices jumped
late on Wednesday as American Capital Agency (AGNC) raised $1.8
billion.
Fannie Mae 5% MBS rose 3/32 to 107-30/32, helping them outpace
Treasurys by nearly 5/32, according to Credit Suisse's Locus
analytics. Fannie Mae's current coupon lagged Treasurys, however,
with the gap between yields widening by 2 basis points to 87 basis
points. The current coupon-10year Treasury yield spread has mostly
traded between 70 and 95 basis points this year, after dropping
from 1.34 in September.
Municipal Bonds
Muni-bond prices largely slumped Thursday, falling in sympathy
with Treasurys and as supply still pressured the market.
A benchmark scale from Thomson Reuters Municipal Market Data
showed yields on triple-A munis were flat-to-up as much as three
basis points. Bonds maturing around 10 to 20 years suffered the
most. Bond yields and prices move inversely.
MMD's senior market strategist Randy Smolik said weakness in the
Treasury market Thursday didn't help munis, but some dealers, who
have been accumulating debt in recent sales, also needed to sell
inventory.
Most major muni deals sold earlier this week, but the market was
still digesting around $9 billion to $10 billion in new bond sales,
the biggest weekly amount so far this year. Thursday, the only
deals of size in the market were a $251 million bond offering from
Broward County, Fla., water and sewer and a $235-million New York
State highway and bridge deal, according to MMD.
Treasurys
U.S. Treasurys retreated Thursday as optimism about Greece's
debt-swap operation grew through the course of the session.
As of late Thursday, owners of about 80% of the eligible Greek
debt had pledged to take part in the restructuring deal, according
to one government official. A Greek TV station cited sources
claiming more than 90% participation. Meanwhile, another official
said involvement 24-hours ago was already above the 75% threshold
for the deal to move forward.
Official results will be announced at 0600 GMT on Friday.
Worries about this record-size restructuring process that
pervaded markets earlier this week turned into hopes that investors
may finally be able to put this Greece saga behind them -- or at
least on pause for a few months.
As global stock markets rose, the demand for safe-haven assets
declined.
By late-afternoon trading, U.S. Treasury prices danced around
session lows. Benchmark 10-year notes lost 12/32 in price to yield
2.017%. The 30-year bond fell 1 4/32 to yield 3.176%, while
two-year notes shed a fraction in price to yield 0.310%. Debt
prices move inversely to yields.
-By Kelly Nolan, Dow Jones Newswires; 615-679-9299;
kelly.nolan@dowjones.com
--Patrick McGee, Al Yoon and Cynthia Lin contributed to this
article.