In The News

New Supply Hits Soft Mkt; Jobs Data Eyed

NEW YORK (Dow Jones)--The U.S. high-grade corporate bond market saw about $2.5 billion in new issues Tuesday, despite deteriorating investor sentiment.

Philips Electronics offered a benchmark-sized three-part deal, and Praxair sold a $500 million in seven-year bonds at 165 basis points over Treasurys. Other smaller deals came from Cigna, Pitney Bowes, Mattel Inc. and Packaging Corp. of America, according to IFR.

Sales of new investment-grade corporate bonds are expected to rebound in March following a lean February, with supply this month seen doubling to $100 billion, Banc of America Securities analysts said in a daily research note published late Monday. Roughly $49 billion priced in February, compared with about $81 billion in the same month last year, Banc of America said.

In the secondary market, there is "excess supply" of bonds issued by financial firms such as banks and brokers, said Michael Kastner, head of fixed-income at Sterling Stamos Capital Management. "Everyone's afraid to see another wave of write-downs, and they don't want the exposure," he said. Investors are waiting to see banks and brokers' first-quarter results, he said.

Investors will also be evaluating reports to be issued over the rest of the week that provide information on employment and jobless claims. If the data aren't as bad as feared, that could potentially cause spreads on bonds to tighten, he said.

Bond insurers continue to add to the market's volatility, as investors await plans by Ambac Financial Group (ABK) to boost its capital and save its vital triple-A credit rating. "Everything we're hearing is improving news," said Kastner, adding that has led to "incremental improvement in overall investor sentiment."

But in the absence of much good news Tuesday, investors, through credit default swaps, indicated deteriorating confidence in the creditworthiness of high-grade companies. The benchmark U.S. high-grade credit derivatives index, the Markit CDX IG9, was at midpoint 168 basis points, according to Moody's Credit Quotes. That's wider from its Monday close at 164 basis points, according to Markit.