Financials Dominate Week's Bond Issuance, Secondary Trading
August 06 2010 - 3:45PM
Dow Jones News
Financial institutions have been the most active issuers this
week and were among the most active securities traded in the
secondary market on Friday afternoon, according to MarketAxess.
More than half of the week's 13 deals sized over $1 billion were
issued by financial institutions and insurers, according to data
provider Dealogic, and most priced tighter than where guidance had
been set.
No new issuers sold bonds in the high-grade market Friday, a
lull in the rush of issuance over the past few weeks. But despite
the day's hiatus, the $31.97 billion brought to market overall this
week was the highest weekly volume since the beginning of
January.
The poorly received employment report on Friday--it showed that
the economy lost 131,000 jobs in July--is unlikely to slow the
momentum of U.S. high-grade issuance, said Jonathan Duensing, head
of corporate credit at Smith Breeden Associates, an
asset-management firm based in Durham, N.C.
"We've seen some widening in corporate spreads today, but
overall, the technicals support continued demand," he said.
On Monday, Citigroup Inc. and Credit Suisse issued $3 billion
and $2 billion, respectively, while life insurance giant Metlife
Inc. sold $3 billion in a three-part deal on Tuesday to help pay
for its acquisition of American Life Insurance Co.
Among so-called Yankee-bond issuers--non-domestic borrowers
selling bonds in U.S. dollars--ANZ National (International) Ltd.
sold $1 billion in five-year senior notes on Tuesday, while Italy's
Intesa Sanpaolo SpA (ISP.MI) entered the market Wednesday with $1
billion in five-year notes. On Thursday, two more banks jumped on
the bandwagon, with HSBC selling $3.25 billion and UBS AG (USA)
selling $1.5 billion.
Financial institutions also dominated secondary trading on
Friday. Bonds of the major U.S. investment banks tracked the stock
market lower because of the worse-than-expected payroll numbers and
headlines about Goldman Sachs and others already moving to wind
down or restructure their proprietary trading units amid pending
regulation.
Goldman Sachs' 6% June 2020 bonds traded 0.07 percentage points
wider than Thursday's closing levels to 2.23 percentage points, for
a yield of 5.061% instead of 5.058%; Morgan Stanley's 5.5% July
2020 traded 0.1 wider to 2.63 percentage points; JPMorgan's 4.4%
July 2020s traded 0.1 wider to 1.62; and Citigroup's 6% February
2012 and December 2013 bonds fell 0.2 and 0.12, respectively, to
1.60 and 2.70.
"Whenever the equity market goes down, banks are really
correlated to that," one trader said.
The disappointing jobs data also weighed on the CDX North
American Investment Grade Index, a key measure of credit investor
sentiment. The index deteriorated to 104.5 basis points by 2:30
p.m. EDT, 2.93 basis points worse than Thursday's close, according
to Markit data. It was at 101.11 basis points before the employment
report.
-By Katy Burne, Dow Jones Newswires; 212-416-3084;
katy.burne@dowjones.com