| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Corporates March Slowly To Quarter End |
By Kellie Geressy-Nilsen
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--As the second quarter draws to a close, the hectic pace of the first half is expected to slow to a crawl during the summer.
On Monday, the focus was the sentencing of Bernard Madoff, who received 150 years in prison for scamming investors out of billions of dollars in a Ponzi scheme.
In other news, Rochdale Securities analyst Dick Bove said JPMorgan Chase & Co.(JPM) is likely to report a second-quarter loss as a result of the cost incurred to pay back Troubled Asset Relief Program preferred securities, in addition to payment of an Federal Deposit Insurance Corp. assessment.
No movement was recorded in the bank's bonds or credit-default swaps following Bove's statement.
Investment-Grade Corporates
The high-grade corporate-bond sector was quiet Monday, as activity preceding the July 4 holiday in the U.S. is usually limited.
Still, a few deals did price.
France Telecom (FTE) was in the market with a $2.5 billion offering that included five- and 10-year tranches. Both pieces of the deal were launched at a risk premium of 195 basis points over Treasurys, establishing where the market expects them to be priced.
AutoZone (AZO) sold $500 million of 5.5-year notes at a risk premium of 325 basis points over Treasurys. Settlement for that issue is scheduled for July 7.
Many people have opinions on the direction of corporate-bond spreads.
Suki Mann at Societe Generale said there has been much concern about a bubble being created in the corporate-bond market, given that spreads are much tighter than they were at their peak levels in March but still much wider than pre-crisis levels, noting that the pace of tightening has slowed massively in the past two weeks.
"We expect spreads to be tighter (albeit tighten at a slower pace) through the more volatile summer months," Mann said in a note. "This is not the trade of a nervous investor," he added.
Strategists at JPMorgan say corporate-bond spreads are supported by light new issuance but pressured wider by falling yields on Treasurys. JPMorgan predicts supply is likely to remain modest in the near term, because of the shorter week and earnings blackout periods, and is hopeful that its forecast on payroll data is spot on, saying "it could be seen as positive for growth, causing higher (U.S. Treasury) yields, and, therefore, lower bond spreads, by the end of the week."
Trading was anemic in the secondary market.
Dow Chemical's (DOW) 8.55% issue was quoted 11 basis points tighter and was the most actively traded bond of the day, according to MarketAxess.
The Markit CDX North America Investment Grade derivatives IG12 index, which measures the cost of insuring a basket of U.S. investment-grade corporate debt against defaults, improved early Monday and was quoted at 136.5 basis points, according to Phoenix Partners Group. The index remained steady at that level throughout the day.
High-Yield Corporates
Junk bonds had a firm start to the shortened trading week. The benchmark index, the Markit CDX North America High Yield index, was quoted at 83.83/83.99 points going into the close, according to Markit. That's versus 82.89 points at the close Friday.
In the primary market, a host of borrowers announced new deals Monday. Wind Acquisition Finance said it will sell EUR2.7 billion of eight-year senior notes in euros and dollars to repay its payment-in-kind debt, as well as make a one-time dividend payment to its parent company. The bonds could yield about 12%, according to Scott Grzankowski, analyst at KDP Investment Advisors. Official guidance had not been released at the time of writing.
Royal Caribbean and Targa Resources also are in the market with new bond sales, while Real Mex Restaurant's $110 million of bonds are expected to yield around 18%, according to one investor looking at the deal. Jefferies & Co. is the sole lead manager on the bonds. Also, Bill Barrett Corp. released guidance on its $200 million senior notes to yield around 11%. Order books closed at 5 p.m. EDT (2100 GMT) Monday and pricing is expected Tuesday morning.
The market is moving closer to the traditional summer lull, highlighted by a drop in the volume last week. According to Bank Of America strategist Mike Cho, high-yield supply totaled $2 billion in six deals last week and $4.5 billion in nine deals the previous week. This is less than the $6.5 billion per week in May and the first week of June, but still relatively high, Cho said in a report to clients.
It isn't all rosy, however. The performance of new junk bonds in the secondary market is beginning to show increasing signs of "wear and tear," according to Cho. While the majority of new issues still experience an immediate pop of 1 to 3 points after pricing, approximately 20% of new issues year-to-date in 2009 are below their original placement price, or trading underwater, compared to 8% near the end of May, he said.
First Data Corp.'s bonds were up more than 3 points Monday in fairly active trade after it announced an agreement with Bank Of America. According to online-trading platform MarketAxess, the 9.875% bonds due 2015 were up 3.125 points at 69.625 cents Monday afternoon for a yield of 18.214% on the back of 12 trades. The pair has formed a new company that will deliver next-generation payment solutions to merchants ranging from small business to commercial and corporate clients worldwide.
Several lists of debt issued by CLOs are making the rounds Monday, according to two sources who have seen the securities on offer. The securities on the lists total around $240 million and include different loans all rated AAA or A, according to the sources. The biggest list totals $225 million and comprises three names totaling $100 million, $80 million and $55 million, one of the sources said. The smallest list is roughly $3.5 million and includes two loans rated A.
Asset-Backed Securities
Three new TALF-eligible asset-backed deals came to market Monday, according to people familiar with the deals. A $2.5 billion Bank of America Auto Trust BAAT 2009-1 self-led deal is in the market. Tranche A1 is listed at $673.7 million with a 0.31-year weighted average life; A2 is $556 million with a 0.99-year weighted average life; A3 is $926 million with a 1.99-year weighted average life, and A4 is $367 million with a 3.16-year weighted average life. Pricing is expected Tuesday.
A $1 billion Discover Credit Card (DCENT) 2009-A1 deal is in the market via joint leads Deutsche Bank and Barclays Capital. The single-tranche deal has a weighted average life of 2.92 years and will be benchmarked to the one-month London interbank offer rate. Price guidance isn't yet available.
A new $755 million AmeriCredit Auto AMCAR 2009-1 ABS deal also is in the market via Deutsche Bank and Credit Suisse. Price guidance isn't yet available for any of the deal's five tranches.
Mortgages and Agency Debt
Agencies tightened to Treasurys in afternoon trading, led by the long end ahead of Tuesday's purchase by the Federal Reserve.
The only losers were the two-year duration, which saw between 1 and 1.5 basis points of widening. Ten-year paper led the tightening, with Freddie Mac's 4.875% 10-year notes 3.7 basis points tighter.
Many of the notes the Fed intends to purchase Tuesday have been subject to previous passes.
"The Fed has purchased more than 25% of the outstandings for almost half of the issues in tomorrow's pass," Margaret Kerins, of RBS Securities, wrote. "This is the 11th pass of the 7- to 9-year sector and sixth pass of the 30-year sector. The Fed has purchased $18.26 billion, and $69.68 billion remain outstanding in the sector."
Treasurys
Treasurys prices crept higher still Monday, helped by quarter-end demand and reassuring comments from top-customer China.
This latest trade shows last week's powerful rally hasn't exhausted the market's stamina. Buying was heaviest in the 10-year note, pushing this benchmark yield below 3.5%. Yields move inversely to prices.
Traders expect quarter- and month-end pressures will spur demand through Tuesday. Fund managers often need to stock up on Treasurys to match the month-end readjustments in the benchmark indexes. Companies and institutional investors also tend to hold low-risk government debt at the end of the quarter as a way to window-dress their balance sheets.
-By Kellie Geressy-Nilsen, Dow Jones Newswires; 212-416-2225; kellie.geressy@dowjones.com
(Kate Haywood, Michael Aneiro, Andrew Edwards, Emily Barrett and Min Zeng contributed to this report.)
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