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By Andrea Johnson
April 2 (IFR) - The pace of US high-grade issuance isexpected to pick up Tuesday, following the usually slow EasterMonday. Up to USD15bn in volume is expected this week, andsyndicate desks said they heard several names in the market fortoday - at least one of which could be on the large side.
Today's deals will be watched closely for any signs of thesluggish syndication the market experienced last Monday, theweek's only decent supply day. All are hoping that lacklusterdemand was due to end-of-quarter slowness combined with thecrisis in Cyprus.
The strong tone for risk so far on Tuesday seems to besetting up nicely for deals. For now the market looks to haveforgotten Cyprus and Italy - including Monte dei Paschi, whichis limit down this morning - and has shrugged off weak PMInumbers. Dow Futures are up 62, S&P Futures up 7.20, NasdaqFutures up 18.25 as of around 6:40am
CALENDAR
Barclays should announce the structure of its CoCobond in the near future, with pricing expected this week. Therewas some debate about whether it would forge ahead with a 10nc5structure, which the bank and Asia private-banking investorsprefer, or go with a 10yr bullet structure more suited to USinvestors and easy to comp versus the 10yr bullet USD CoCoBarclays printed in November 2012.
Initial price discussions on the 10nc5 were heard in themid-high 7s with a floating rate step-up reset if bonds aren'tcalled. Initial discussion on the 10yr bullet was heard as8.00%-8.25%. That compared with a 7.75% yield on a quotedUSD99.00 price on its existing USD3bn 7.625% CoCo on Thursday.
MANDATES/RUMORS
South Korea is circulating a request for proposals as iteyes its first dollar-denominated bond in four years. Banks wereasked to submit their proposals of fees and expected levels lastThursday and a mandate is expected soon. The sovereign is saidto be looking at a relatively small transaction of about USD1bnwith no specified tenor yet.
South Korea last visited the public offshore market in April2009, with a USD3bn 10-year 144A/Reg S via Citigroup, CreditSuisse, Deutsche Bank, Goldman Sachs, Bank of America MerrillLynch and Samsung Securities.
State Bank of India (Baa2/BBB-), the country'slargest lender, has mandated Citigroup, BNP Paribas, DeutscheBank, HSBC, JP Morgan and SBI Capital Markets for a potentialUSD500m-USD1bn bond sale, sources aware of the deal told IFR.The bank is preparing to meet investors on a roadshow that isexpected to begin April 8.
The tenor of the 144A/Reg S deal will be decided after theroadshow.
MARKETS
When most European market participants were sitting at homeon Good Friday, stock markets across the pond in the US ended Q12013 in fine style, with the S&P 500 closing at a record high of1569, emulating the efforts of the Dow Jones Industrial Averagethrough most of the month of March.
Now if we look back over the last couple of years, a strongfirst quarter performance was swiftly followed by a less thanhealthy Q2. The question is will 2013 be the same - and earlysigns are not that encouraging.
Some may have seen yesterday's ISM Manufacturing print as anApril Fool, but the fact is that it was a bit of shocker, comingin at 51.3 versus consensus of 54.0. And overnight, Chinese PMIManufacturing also missed consensus, as did the Japanese Tankan- which led the Nikkei down by 131 points to 12003.
That had little effect on broader credit, however, and as of6:50am EDT, according to Tradeweb, the Main is 3.75bp tighter onthe day at 121.875 mid, with the Crossover 8.625bp tighter at476bp.
The SenFin index is 7bp tighter at 187bp, with the spread tothe Main back at 65bp. The Subordinated index is 9bp tighter at301bp, having been at 328bp on Thursday morning.
Thursday's service sector PMIs are usually a better guide ofa country's economic health. What this morning's numbers didtell us, though, is that the divergence between the French andGerman economies continues, while even those sovereigns thatappeared to be rising from the mire - such as Ireland - arefeeling the effects of the weakening in the eurozone as a whole.
Senior cash markets are suffering the usual start of theweek ennui, with spreads more or less unchanged in very limitedflow. There is always an exception to the rule, though, and thismorning that exception is Monte Dei Paschi, whose 2012 resultsrevealed that customers deposits has fallen by a "few billion"in the wake of the derivatives scandal. MPS shares have beensuspended limit down, while its senior cash curve is 15-20bpwider for choice.
HEADLINES
COUTTS WARNS CLIENTS OF THREAT FROM DEBT MARKETS -TELEGRAPH: Coutts, the high-end private bank, has warned itsclients against exposing their fortunes to a potential collapseof the high-yield debt market amid growing concerns of a newglobal credit bubble.
VODAFONE BOOSTED BY VERIZON M&A TALK - FTALPHAVILLE/REUTERS: Vodafone shares were up 4% on Tuesdaymorning on renewed market talk about a tie-up with VerizonCommunications.
GLENCORE PUSHES BACK XSTRATA MERGER - REUTERS: Glencore saidon Tuesday it had extended again the date by which it expects toclose its merger with Xstrata to May 2, due to the Chineseinvestigation into the deal.
METROPCS URGES SHAREHOLDERS TO BACK DEUTSCHE TELEKOM MERGER- REUTERS: MetroPCS said in a letter to shareholders on Mondaythat there could be no assurance it would be able to deliverbetter shareholder value as a standalone wireless company.
ASTRAZENECA SUFFERS PATENT SETBACK - REUTERS: AstraZenecahas suffered a fresh patent setback with a US court decisionthat a patent protecting its Pulmicort Repsules asthma treatmentis invalid, clearing the way for a generic copy from Actavis.
COURT SAYS CALIFORNIA CITY OF STOCKTON MAY GO BANKRUPT -REUTERS: A U.S. federal judge on Monday approved the city ofStockton's petition for bankruptcy in a case that sets the stagefor a lengthy battle between bondholders and the Californiapension system.
DATA
07:45 ICSC/GS Chain Store Sales Index (wk March 30)
08:55 Redbook Same Store Sales Index (wk March 30)10:00 Factory Orders (Feb) (mkt +2.9% m/m, prev -2.0% m/m)
10:00 IBD/TIPP Economic Optimism Index (April) (prev 42.2)
n/a Light Vehicle Sales (March) (mkt 15.30 mln, prev 15.38mln)
EVENTS
11:00 Fed outright Treasury coupon purchase (02/15/2036 -02/15/2043); ($1.25 - $1.75 bln)
13:00 FRB Minneapolis's Kocherlakota (non-voter, moderate)on the outlook and monetary policy; Grand Forks, ND
13:30 FRB Atlanta's Lockhart (non-voter, moderate) on theoutlook and monetary policy; Birmingham, AL
19:30 FRB Chicago's Evans (voter, dove) and FRB Richmond'sLacker (non-voter, hawk) on the economy and monetary policy;Richmond, VA
ISSUANCE
n/a Freddie Mac reference note announcement
11:30 Treasury auctions $45 bln 4-week bills and $25 bln in52-week bills
U.S. Treasuries..........
U.S. Treasury outlook...
U.S. corporate bonds....
U.S. agencies...........
U.S. mortgage-backeds...
U.S. asset-backeds......
U.S. municipal bonds... (Reporting by Andrea Johnson; Additional reporting by the IFRteam; Editing by Alex Chambers and Marc Carnegie)
