Ontario sells bonds, volume uptick expected in coming week; Marathon gains; trading subdued

By Andrea Heisinger and Cristal Cody

New York, Jan. 29 - The Province of Ontario was the sole issuer in the high-grade bond market on Friday, ending a slow week for new deals.

The Canadian province sold $3 billion of five-year notes early in the day.

New bonds are expected to be more plentiful in the coming week as company earnings announcements wrap up.

"It was a dull one," a market source said of the week's low volume of offerings. There is a larger calendar expected in the coming week.

Meanwhile secondary markets were basically "dead" on Friday, sources said.

"It was quiet today. The whole week has been a funny week," one trader said. "Spreads are not doing much of anything. People are staying on the sidelines waiting for the new issue market."

Only slight activity was seen in secondary corporate high-grade debt on Friday.

"I was busier. Busy is probably a stretch," a trader said. "I saw a lot of bids but not much getting done."

By the end of the day, overall Trace high-grade trading dollar volume fell 6% to about $12 billion on Friday, according to a source.

Meanwhile, the CDX Series 13 North American high-grade index eased 1 bp to a mid bid-asked spread level of 97 bps, a source reported.

Also on Friday, the yield on the 10-year benchmark Treasury note tightened to 3.58% from 3.64%, while the yield on the 30-year bond firmed 6 bps to 4.49%, according to a source.

While secondary trading was mostly lackluster on Friday, some corporate high-grade bonds such as Marathon Oil Corp. saw activity. The company's notes due 2019 tightened on the day, one source said.

Looking at the financial sector, trading was mostly weaker, notably the recent issue from Morgan Stanley, according to a source.

Ontario sells five-year notes

The Province of Ontario sold $3 billion of 2.95% five-year global notes early in the morning at 57.2 bps over Treasuries, a source away from the sale said.

Bank of America Merrill Lynch, Citigroup Global Markets, HSBC Securities and RBC Capital Markets ran the books.

The issuer is based in Toronto.

New deals on the horizon

There is only one new deal that has been announced for the coming week, but syndicate sources said that issuance should take a turn upward.

Building Materials Corp. of America started a road show on Friday for a $250 million sale of split-rated 10-year senior secured notes. Pricing is expected after the conclusion of the road show on Feb. 2.

Other than that, there is "nothing official out there" in terms of new deals, a source said.

"Everyone always waits until at least Monday to feel things out," he said. The bulk of deals are expected at the top of the week, especially on Tuesday, he said.

"This week there were so many headlines and other stuff that no one really did anything," he said.

The coming week is expected to be at least slightly less volatile, which could lead to higher volume.

"I think everyone's kind of hoping it picks up," the source said.

Marathon Oil firms

Houston-based Marathon Oil's 7.5% notes due 2019 were seen tightening in trading throughout the day, sources said.

The notes were quoted early on Friday at 177 bps and later in the day were "offered at 163," a source said.

Marathon Oil priced the notes in February 2009 at Treasuries plus 487.5 bps.

Morgan Stanley wider

The financial sector was mostly unchanged, though some names weakened Friday, according to sources.

"The financials sector was like everything else - lethargic and not really moving in any direction," one source said.

New York-based Morgan Stanley's notes due 2015 and 2020 priced earlier this month moved out on Friday, according to a trader.

The 4.1% five-year notes were the "most active today" and were last seen widening to 192 bps bid, 188 bps offered on Friday from 187 bps bid, 180 bps offered the day before, the trader said.

The notes priced on Jan. 21 at Treasuries plus 175 bps.

Meanwhile, Morgan Stanley's 10-year 5.5% notes were seen weakening late Friday at 198 bps bid, 194 bps offered from 193 bps offered on Thursday, the trader said.

The notes priced at Treasuries plus 190 bps.

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