By Romy Varghese Of DOW JONES NEWSWIRES
A Portuguese government debt auction eased immediate worries about the euro zone, and investors shifted from safe-haven Treasurys into U.S. stocks Wednesday.
The euro later fell after the auction, however, and observers said a bailout for Portugal may be inevitable.
Investment-Grade Corporates
Banks dominated high-grade supply Wednesday.
Nomura Holdings Inc. sold $1.25 billion of senior unsecured medium-term notes that offered a risk premium of 225 basis points over Treasurys in a self-led deal.
HSBC Bank PLC was in the market with the largest offering of the session, a $4 billion four-part issue which includes three- and 10-year fixed-rate senior unsecured pieces, as well as two- and three-year floating-rate note tranches.
The $900 million two-year floating-rate piece was launched with a risk premium of 40 basis points over the three month London interbank offered rate, while the $1.35 billion three-year floater was launched at 80 basis points over Libor.
The $750 million three-year fixed-rate piece was launched at a spread of 105 basis points over Treasurys and the $1 billion 10-year at 140 basis points. All four tranches were launched at levels directly in line with or tighter than preliminary price guidance had suggested, underscoring strong demand for the issue. Final pricing terms were expected later Wednesday, according to a person familiar with the deal.
BNP Paribas had its $2 billion 10-year senior bank bonds on offer. That issue was launched with a risk premium of 175 basis points over Treasurys, directly in line with preliminary price guidance.
Meanwhile, trading in the secondary market was active.
The new SLM Corp. 6.25% issue that was sold Tuesday was the most actively traded bond of the session and was last quoted at 413 basis points over Treasurys, according to MarketAxess.
Junk Bonds
After pricing more than $6 billion in deals Tuesday, the high-yield market took a bit of a breather on Wednesday, as both primary and secondary market activity were muted due in large part to heavy snowfall on the East Coast.
Traders said the secondary market was firm but somewhat flat. The most actively traded issue was Catalyst Paper Corp.'s 7.375% notes due 2014. Those notes, which carry deeply speculative-grade ratings of Caa2 from Moody's Investors Service and CCC- from Standard & Poor's, gained 3.875 points to 86.25 cents on the dollar, according to MarketAxess.
Catalyst late Tuesday said it will redeem its 8.625% senior notes due June 15, 2011 early, in February, at par value. Those notes were unchanged Wednesday at 100.35 cents on the dollar in light trade, according to MarketAxess.
Laredo Petroleum is slated to sell $300 million of senior eight-year notes later Wednesday via underwriters Bank of America Merrill Lynch, Wells Fargo and J.P. Morgan, with price guidance in the 9.75% area.
The global trailing 12-month high-yield default rate ended 2010 at 3.1%, according to Bank of America Merrill Lynch, the lowest it's been since September 2008. The rate is down from 3.5% in November and 13.1% at the end of 2009. Bank of America forecasts a decline to 2.0% by the end of 2011.
In the U.S., the default rate fell to 3.3% from 3.6% in November, while the European rate fell to 1.9% from 2.0%. Bank of America expects U.S. and European default rates around 2.4% and 3.0%, respectively, by year-end, citing higher vulnerability to regional sovereign risks for European issuers.
Agency Debt
Fannie Mae is tapping the market with a benchmark two-year note due 2013. Guidance is in the area of 22 basis points over comparable Treasurys. Joint leads are Barclays Capital, JP Morgan and UBS. Pricing will be on Thursday.
Agency Mortgages
The agency mortgage-backed securities market is falling "into a range," said Kevin Cavin of Sterne Agee. The 5-10-year blend is quoted at 146 basis points. "There's not a lot of volatility at the long end," he said. "The MBS market is becoming comfortable that prepayment risk has declined. Investors are positioning their portfolios for a range-bound environment."
Asset-Backed Securities
TAL Advantage is in the market with a $174 million asset-backed bond that is to price later this week. Wells Fargo is the lead on the security. A trickle of ABS have emerged this week, with Ally Financial's $500 million floorplan-backed bond the largest so far.
Munis
Tax-exempt munis took a shellacking Wednesday as forced selling continued in the long end and as jitters intensify over negative comments on munis made Tuesday by JP Morgan Chief Executive Jamie Dimon as well as a repeat performance on CNBC Wednesday by Meredith Whitney. Bonds beyond five years were off 3 to 12 basis points, according to latest read of a Municipal Market Data index, but traders said volume was relatively light. Nonetheless, mutual funds continued to sell, accounting for pronounced long-end weakness. New issues were priced at weaker levels.
Treasurys
Treasurys fell Wednesday as concern over euro-zone debt eased, luring many investors into European and U.S. stocks. A strong $21 billion 10-year Treasury note sale helped the market recoup a large part of the losses, but investors are still bracing for a $13 billion 30-year bond auction on Thursday afternoon. In afternoon trade, the benchmark 10-year note was 8/32 lower in price to yield 3.369%. Bond yields move inversely to their prices. The 30-year bond was 17/32 lower to yield 4.520%, and the two-year note was 1/32 lower to yield 0.609%.
-By Romy Varghese, Dow Jones Newswires; 215-656-8263; romy.varghese@dowjones.com
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured site: So, Why is Wikileaks a Good Thing Again?.
No comments:
Post a Comment