GE gives FDIC deal terms, Build America Bonds catch high-grade interest; Toledo Edison steady

By Andrea Heisinger and Paul Deckelman

New York, April 23 - The lack of investment-grade issuance continued Thursday, with some baffled as to why bank and industrial names alike are not pricing anything.

Issuance appears to be done for the week, a source said. With a lack of corporate deals, some investors and syndicate desks have been watching the new taxable Build America Bonds being issued by state and local governments, a source said.

In the secondary sphere on Thursday, a market source said the CDX Series 12 North American high-grade index was tighter, declining by 5 basis points to a mid bid-asked spread level of 181 bps.

Advancing issues widened their lead over decliners, to around a four-to-three ratio.

Overall market activity, reflected in dollar volumes, was down about 1%from Wednesday's levels.

Spreads in general were seen little changed, in line with generally steady Treasury yields; for instance, the yield on the benchmark 10-year note edged downward by 2 bps to 2.92%.

The new Toledo Edison Co. secured bonds were seen holding onto the firmer levels at which they had traded the previous session.

GE Capital announces FDIC terms

GE Capital sold a new deal and reopened another one Wednesday, releasing the terms on Thursday. Both are backed by the Federal Deposit Insurance Corp.

The financing arm of General Electric issued $750 million of three-year floaters at par to yield three-month Libor plus 7 bps.

Barclays Capital, Goldman Sachs & Co. and Morgan Stanley & Co. were bookrunners.

The company also reopened an issue of 2.25% three-year notes to add $450 million. These notes priced at 100.758 with a spread of Treasuries plus 65 bps.

Total issuance is $1.95 billion, including $1.5 billion issued March 9.

Banc of America Securities was bookrunner.

The issuer is based in Fairfield, Conn.

Deal drought baffles some

A syndicate source said Thursday that it was "strange there isn't anyone issuing."

Like others earlier in the week commenting on the void new deal market, he cited the ongoing release of first quarter earnings and markets waiting for better conditions.

The source also said companies are waiting on the bank stress test data that is set to be revealed by the government.

"The stress test rationale comes out tomorrow," he said. "The data doesn't, but it should be interesting to see how that goes."

The market was "pretty much unchanged" from Wednesday, he said.

And issuance is likely done for the week - what little there was. New deals were limited to a smattering of small sales backed by the FDIC from GE Capital, and a couple of others.

Friday will likely be an unofficial half-day, sources said.

High-grade watches new bonds

Some in the high-grade market are watching the Build America Bonds being issued by state and local governments, a source said Wednesday.

Entities can issue taxable bonds for capital projects and receive a direct Federal subsidy payment from the Treasury Department for a portion of their borrowing costs, according to the Internal Revenue Service Web site.

"It's about a 50/50 split between high-grade and municipals," the source said, referring to which desk the deals are being run off of. "There were a couple run off the high-grade desk."

The sales are attracting some "typical high-grade buyers," he said.

Toledo Edison holds firm

With the new-deal sphere again largely becalmed, investors once more focused on Toledo Edison's recent 7.25% senior secured notes due 2020. A market source saw those bonds hovering at bid levels just under 400 bps.

That is about where the bonds had also traded on Wednesday, which in turn was well in from the 437.5 bps over level at which the Ohio-based utility company priced its $300 million of bonds on Tuesday.

On their way down to 400 bps over, the bonds had firmed when they broke later Tuesday, coming in to about 425 bps bid, 410 bps offered.

GE trades actively, but little changed

Among the financials, General Electric Capital Corp.'s 1.80% FDIC-backed bonds due 2011 were seen by a market source as probably the most heavily traded issue. A market source saw the bonds at 46 bps over, little changed from Wednesday's levels.

Even so, the source said, some 140 million of the notes had changed hands as of mid-afternoon.

Another actively traded financial was JP Morgan Chase & Co.'s 6.30% notes due 2019. Those bonds were seen about 9 or 10 bps tighter on the day, just under the 320 bps level.

Some $65 million of the JP Morgan bonds changed hands.

A trader watching the credit-default swaps market saw the costs of insuring bank bonds against a possible default widening anywhere from 5 bps to 10 bps, while CDS contracts for brokerage-company bond were 5 bps to 15 bps wider.

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