U.S. high-grade primary quiet as KfW, EIB price; bond spreads ease; Union Pacific tightens

By Cristal Cody and Aleesia Forni

Virginia Beach, Oct. 23 - The high-grade bond market was mostly quiet on Wednesday, though two new deals from KfW and the European Investment Bank were brought to market.

Germany's KfW sold a $4 billion issue of 0.625% global notes due 2016 during the session at 99.689, according to an FWP filing with the Securities and Exchange Commission.

There was also a $3 billion new issue from European Investment Bank.

The lender sold the 1.625% five-year notes in line with talk to yield mid-swaps plus 20 basis points, according to an informed source.

Meanwhile, Amsterdam's ABN Amro Bank NV brought a $2.5 billion two-part issue to Wednesday's market in a Rule 144A and Regulation S transaction.

Full details were not available at press time.

This week's new issuance has reached roughly $13 billion so far, though the primary is not expected to be empty for the remainder of the week.

"Today was kind of a fluke," one market source said of the lack of U.S. high-grade deals.

The source reaffirmed last week's predictions, saying he continues to expect a $15 billion to $20 billion week.

Investment-grade bonds stayed wider over the day in a risk-off environment, according to market sources.

"It's a little bit softer," one source said. "Not a lot, but it definitely feels softer."

The Markit CDX North American Investment Grade series 21 index eased 2 bps to a spread of 72 bps.

New issues traded mostly unchanged over the afternoon, while Citigroup Inc.'s new 10-year notes tightened during the session, according to traders.

KfW sells global notes

Wednesday's primary saw KfW price $4 billion of 0.625% global notes due Dec. 15, 2016 at 99.689, according to an FWP filing with the Securities and Exchange Commission.

The notes (Aaa/AAA/AAA) are guaranteed by the Federal Republic of Germany.

HSBC Securities, Nomura and RBC Capital Markets managed the sale.

The German government-owned development bank is based in Frankfurt.

EIB new issue

The European Investment Bank priced $3 billion of 1.625% five-year notes on Wednesday to yield mid-swaps plus 20 bps, according to an informed source.

The notes (Aaa/AAA/AAA) priced in line with talk in the mid-swaps plus 20 bps area.

BNP Paribas Securities Corp., Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners.

The lender for the European Union is based in Kirchberg, Luxembourg.

Citigroup firms

Citigroup's 3.875% senior notes due 2023 (Baa2/A-/A) firmed to 135 bps bid going out on Wednesday, a trader said.

The notes were quoted earlier in the day at 137 bps bid, 136 bps offered.

Citigroup sold $2 billion of the notes at a spread of Treasuries plus 130 bps on Monday.

The financial services company is based in New York.

Yum! trades flat

Yum! Brands Inc.'s 3.875% senior notes due 2023 (Baa3/BBB/) traded wrapped around 138 bps bid, a trader said on Wednesday afternoon.

The notes traded earlier in the day at 138 bps bid, 136 bps offered.

The company sold $325 million of the notes at a spread of Treasuries plus 140 bps on Tuesday.

The quick service restaurant operator is based in Louisville, Ky.

Union Pacific better

Union Pacific Corp.'s 4.75% 30-year senior notes (Baa1/A-/) firmed 1 bp late in the session to 110 bps bid, according to a trader.

The bonds were quoted Wednesday morning at 111 bps bid, 109 bps offered.

Union Pacific sold $500 million of the 30-year bonds with a spread of Treasuries plus 110 bps on Tuesday.

The railroad transportation company is based in Omaha.

Bank/brokerage CDS prices up

Investment-grade bank and brokerage CDS prices rose on Wednesday, according to a market source.

Bank of America Corp.'s CDS costs eased 3 bps to 96 bps bid, 100 bps offered. Citigroup's CDS prices widened 2 bps to 89 bps bid, 93 bps offered. JPMorgan Chase & Co.'s CDS costs ended 3 bps wider at 82 bps bid, 87 bps offered. Wells Fargo & Co.'s CDS costs eased 1 bp to 57 bps bid, 61 bps offered.

Merrill Lynch's CDS costs eased 3 bps to 90 bps bid, 100 bps offered. Morgan Stanley's CDS prices widened 3 bps to 115 bps bid, 119 bps offered. Goldman Sachs Group, Inc.'s CDS costs rose 3 bps to 118 bps bid, 121 bps offered.

Paul Deckelman contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.