One economist forecasts a "subdued" new-issue pace through 1992 as many corporations accelerated offering schedules this year to avoid the uncertainty surrounding the presidential election.
"I think we are going to see a significantly slower pace of new issuance in the month of November, perhaps [through] the end of the year, barring a sharp drop in interest rates," said John Lonski, senior economist at Moody's Investors Service.
While it is still uncertain whether President-elect Bill Clinton's expected fiscal stimulus program will drive up bond yields, fear of that together with historically low 1992 interest rates were compelling reasons not to wait to come to market, Lonksi said.
For now, issuers are probably awaiting Friday's October jobs data and the Treasury Department's $37 billion quarterly refunding scheduled for next week. The Treasury will auction three-year notes on Monday, 10-year notes on Tuesday, and 30-year bonds on Thursday. Corporate issuers generally avoid the market during such refundings, Lonski said.
However, "if a soft employment report sparks a significant Treasury bond rally, I think there is a good chance for a revival in terms of corporate bond issuance," he said.
In the secondary market, the employment number, not Clinton's victory, held the spotlight, according to Phil Kazlowski, head corporate trader at Citicorp Securities Markets Inc.
A report that looks good from an economic standpoint, and therefore bad from a bond standpoint, combined with the Treasury supply on the horizon would likely hurt corporate bond prices, he said.
Investment-grade corporate bond prices moved yesterday with Treasuries, which rallied early on overseas gains. Corporates, however, ended the session quiet and unchanged, traders said.
High-yield bonds ended up 1/8 to 1/4 point over all.
News that American Telephone & Telegraph Co. is contemplating the acquisition of McCaw Cellular Communications Inc. pushed the McCaw bonds up one to two points. The bonds would have moved higher if they were not callable, one trader said. The news helped lift some similar credits, including some Comcast zeros, which gained about five points.
Elsewhere, Some R.H. Macy & Co. and DR Holdings Inc. issues also showed strength.
New Issues
Federal Home Loan Mortgage Corp. issued $150 million of 6.60% debentures due 1999. The noncallable debentures were priced at 99.724% to yield 6.65%, or 21 basis points over comparable Treasuries. Lehman Brothers managed the offering.
Wells Fargo & Co. issued $150 million of floating-rate notes due 1994. The noncallable notes float quarterly at 100 basis points over the London Interbank Offered Rate and pay quarterly. Lehman Brothers lead managed the offering. Moody's rates the offering Baal, while Standard & Poor's Corp. rates it A-minus.
Rating News
Duff & Phelps Credit Rating Co. has listed the securities of AT&T, AT&T Capital Corp., and AT&T Credit Corp on Rating Watch - Unfavorable.
The long-term debt rating for all three is AA-plus.
"This action has been taken as Duff & Phelps reviews the announcement by AT&T to make an investment of about $3.8 billion in common equity securities of McCaw Cellular Communications," Duff & Phelps said in a release. "The acquisition is being made to strengthen AT&T's strategic position in the telecommunications industry."
The agency added, however, that it is uncertain how AT&T will finance the acquisition and how it will affect credit measures.
Standard & Poor's has upgraded senior debt ratings of the Georgia-Pacific Corp. and its Great Northern Nekoosa Corp. and Hudson Pulp & Paper Corp. units to BBB-minus from BB-plus. The agency also raised Georgia-Pacific's commercial paper rating to A-3 from B. The action affects about $6 billion of total debt.
"The upgrades reflects Georgia-Pacific's ability to achieve superior cash flow generation versus many of its peers during the current cyclical downturn in the pulp and paper industry, and expectations for modest debt reduction." a Standard & Poor's release says. "The firm's strong competitive position as the largest U.S. manufacturer of forest products, pulp, and paper enables GP to partially offset the cyclicality of operations and an aggressive financial policy."
Fitch Investors Service has placed General Motors Corp.'s A-plus senior debt as well as General Motors Acceptance Corp.'s A-plus senior debt and Euro medium-term notes on Fitchalert for a possible downgrade. The action also applies to GM's A-plus pass-through certificates, and A rated preferred and preference stock. The credit trend is "declining," Fitch said.
In a release, the agency affirmed GMAC's outstanding $17 billion F-1 commercial paper, including domestic and Euro commercial paper; GMAC demand notes; and programs of General Motors Acceptance Corp. (U.K.) Plc. and General Motors Acceptance Corp. Nederland N.V. Fitch also affirmed all of GMAC's AAA asset-backed securities.
The Fitchalert applies to General Motor's $5.2 billion of senior debt, $500 million of pass-through certificates, $300 million of preferred stock, and $3.8 billion of preference stock. The action also affects $42 billion of GMAC debt.
