Morgan Stanley, Goldman Sachs, BNP unit tap market; financials firm by 5 bps; eBay debt widens

By Andrea Heisinger and Cristal Cody

New York, Oct. 26 - Goldman Sachs Group, Inc., Morgan Stanley and BNP Paribas Home Loan Covered Bonds tapped the high-grade bond market on a Tuesday dominated by financial names.

Financial services giant Goldman Sachs priced its $1.3 billion issue of 50-year bonds after it went overnight from Monday. The bonds were priced below guidance.

Another large deal came from Morgan Stanley at about the same time. The investment bank sold $1.5 billion of five-year notes in line with guidance soon after the deal was announced.

BNP Paribas Home Loan announced it would sell five-year covered bonds on Monday, and the deal went overnight before pricing. The size was $2 billion, and the sale was done under Rule 144A.

Earnings announcements continued. UBS AG announced it made an overall profit of $1.7 billion in the third quarter. Its investment banking unit lost $417 million, which caused some worry as it hit headlines at the top of the day.

Big banks had mixed third-quarter earnings this year, with most coming in with disappointing profits or losses.

The UBS news didn't seem to have much impact on the high-grade primary or deter other banking names from pricing deals.

"It wasn't earth-shattering," a syndicate source said, adding that Morgan Stanley tapped the market anyway.

In the secondary market, Morgan Stanley's notes were tighter in afternoon trading, sources said.

The financial sector strengthened on the backdrop of the two new offerings from Morgan Stanley and Goldman Sachs.

"Financials as a whole had a positive tone and are closing in about 5 basis points better on the day," a trader said.

Elsewhere in trading, eBay Inc.'s new high-grade debt was wider, a source said.

Also, the new paper from Wal-Mart Stores Inc. closed 2 bps wider on the day, according to a source. Wal-Mart sold $5 billion of senior notes (Aa2/AA) in four tranches on Oct. 18.

The deal included 0.75% notes due 2013 priced at Treasuries plus 30 bps, 1.5% notes due 2015 priced to yield Treasuries plus 48 bps, 3.25% notes due 2020 priced at a spread of 78 bps over Treasuries and 5% bonds due 2040 sold at Treasuries plus 115 bps.

The discount retailer is based in Bentonville, Ark.

One issuer's bonds stood out in secondary trading in the cable sector on Tuesday. The new debt from CBS Corp. firmed more than 5 bps, a trader said.

Overall investment-grade Trace volume moved up 20% to nearly $15 billion, according to a market source.

The Markit CDX Series 14 North American investment-grade index firmed 1 bp to a spread of 92 bps, according to Markit Group Ltd.

Treasuries were weaker after a government auction of $35 billion of two-year notes, sending yields across the curve higher by more than 7 bps.

The yield on the 10-year note rose 8 bps to 2.64%, the highest since Sept. 21. The yield on the 30-year bond eased 8 bps to 4%.

Goldman sells 50-year bonds

Goldman Sachs priced an upsized $1.3 billion of 50-year notes (A1/A/A+) at par of $25 to yield 6.125%, a market source said in the early afternoon.

The deal was announced Monday at a minimum size of $250 million. The notes priced below talk in the 6.25% yield area.

A source who did not work on the offering said that Goldman Sachs "obviously felt safe enough" in selling a 50-year bond. It's the longest maturity the bank has ever done, he said.

Goldman Sachs & Co. was the active bookrunner. Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities LLC were passive bookrunners.

No activity was seen in the long issue by secondary traders.

"It's got a five-year call and 50-year issuance, so I haven't seen a ton in that one," one trader explained.

The financial services company is based in New York.

Morgan Stanley's $1.5 billion

Morgan Stanley priced $1.5 billion of 3.45% five-year notes (A2/A/A) to yield Treasuries plus 225 bps, a market source away from the deal said.

It was a quick sale, announced around mid-day and priced by early afternoon. The notes were sold in line with guidance in the 225 bps area, the source said.

The bookrunner was Morgan Stanley & Co. Inc.

Morgan Stanley last sold five-year notes as part of a $3 billion sale in two tranches on July 21. They were priced at 245 bps over Treasuries.

The new notes were stronger on release to the secondary market, traders said.

The new debt traded early afternoon at 221 bps bid, 216 bps offered.

Going out, the notes tightened in the secondary to 219 bps bid, 216 bps offered.

The financial services company is based in New York.

Issuance hits bump

New corporate deals have been steadily flowing into the market and will continue to do so for the next couple of days, sources said in the late afternoon.

One syndicate source said his desk's calendar is "not terribly busy" for the remainder of the week.

Another source echoed that, saying there could be a handful of deals to price on Wednesday and Thursday across all desks.

"Today higher beta names were softer," the syndicate source said. "More high-quality names were the same."

The new issue market is experiencing "a little lull now," he said. "A lot of guys are waiting until their Qs are filed. They're getting things lined up."

A lot of big trades already got done the previous week, like those from Wal-Mart and eBay, and others of that caliber are likely putting things in order before they bring deals to the market, he said.

It's also a "big earnings week," meaning some companies are still in blackout.

BNP unit's covered bonds

BNP Paribas Home Loan sold $2 billion of 2.2% five-year covered bonds to yield 96.63 bps over Treasuries, a source close to the deal confirmed.

The bonds (Aaa/AAA/AAA) were sold under Rule 144A.

Bank of America Merrill Lynch, Barclays Capital Inc., BNP Paribas Securities Corp. and RBS Securities Inc. were the bookrunners.

The arm of financial services company BNP Paribas is based in Paris.

eBay wider

The new debt sold the previous week by eBay eased in trading, a source said.

The San Jose, Calif.-based online marketplace sold $1.5 billion of senior notes (A2/A/A) in three parts in its first bond sale on Thursday.

The sale included 0.875% notes due 2013 priced at a spread of Treasuries plus 42 bps, 1.625% notes due 2015 sold at 57 bps over Treasuries and 3.25% notes due 2020 priced at Treasuries plus 77 bps.

"eBay's new deal was actually very, very weak," a trader said.

The 10-year note was seen "closing the day wrapped around 82, 80," the trader said. "They had traded in 3 to 5 basis points and now are widening back out. So it was very well offered at the issue price."

While no headline news was seen, most of the weakening was attributed to the number of new issues hitting the market as well as the fact that eBay "priced the deal too rich," the trader said.

CBS firms

Also in secondary trading, CBS' new debt tightened as much as 5 bps to 7 bps on Tuesday as retail buyers stepped in, a trader said.

"That's pretty much across the curve on CBS," the trader said.

CBS sold $600 million of senior notes (Baa3/BBB-/BBB-) in two tranches on Oct. 4.

The tranche of 4.3% notes due 2021 priced at a spread of Treasuries plus 185 bps. The notes closed on Tuesday at 180 bps bid, 175 bps offered.

The second tranche of 5.9% bonds due 2040 closed tighter at 213 bps bid, 208 bps offered. The bonds priced at 220 bps over Treasuries

The broadcast and media company is based in New York.

Bank/broker CDS prices fall

Bank/broker credit default swap prices declined as a sign of investor confidence in the sector, a trader said.

A trader reported the cost of CDS contracts to protect holders of big-bank paper against default unchanged to 12 bps lower on Tuesday. Bank of America had the biggest decline, with a drop of 12 bps.

The cost of CDSs to protect holders of brokerage house/investment bank paper was 5 bps to 17 bps lower, with Merrill Lynch registering the biggest decline of 17 bps.

Paul Deckelman contributed to this report

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