The U.S. corporate market was again idle on Friday, as participants either attended bond conferences last week or stayed on the sidelines to study the situation in Europe.
High-yield prices remained unchanged for the most part, and high-grade bonds tracked the Treasury market. The long bond finished Friday up 1/8 point, to yield 7.31%.
A number of corporate syndicate desks said there was little activity in the new-issue sector, with the National Bank of Hungary being the only major deal to come to market.
"It's a Friday and a nice day," said a high-yield trader. But "wait until next week," after the vote in France, he said.
On Sunday, the French will vote on the Maastricht treaty. The treaty would bring European Economic Community nations a step closer to economic and political unity.
If the French vote against the treaty, then there may be a flight to quality by investors, some market participants said.
One trader, however, said. "Only if there is a whole lot of tumult will there be flight to quality."
Secondary Market
In the secondary market, some buyers made forays into the high-grade arena.
The high-grade market "tracked Treasuries," said a trader. "There was selective buying that we haven't seen in a while, all kinds of credits. It was more active than Thursday."
High-grade bonds in 10-years were unchanged to off 1/8 point, while long-term corporate bonds moved in tandem with the 30-year Treasury bond.
In the high-yield sector, a trader said, "Today was a zero, zero day. Our market was very strong."
He noted that the quiet in the market was inspired by concern over the European currency market and the absence of a number of market players who were attending bond conferences last week, including a Prudential Securities Inc. conference in Atlantic City, N.J., and a conference in Florida, hosted by Bankers Trust Co.
New Issues
In the new-issue sector, the National Bank of Hungary debuted its first Yankee debt offering consisting of $200 million of 8.80% bonds due Oct. 1, 2002, at 97.619 to yield 9.17%. Salomon Brothers Inc. served as lead manager of the deal.
The noncallable issue was priced at a spread of 275 basis points above the Treasury 10-year note.
"It's nearly all sold," said a source involved with the deal. There was some concern about the European markets, but the source said he believed the bank decided to go ahead with the deal "to demonstrate their access to the U.S. market.
"If there had been no trouble in Europe," the source said, the syndicate could have shaved "maybe 15 to 25 basis points" off the spread between comparable Treasuries.
The issue is rated Ba 1 by Moody's Investors Service and BB-plus by Standard & Poor's Corp.
This Week
Looking at this week, traders and syndicate heads said they expect issuers and buyers to return once the dust has settled in Europe.
A syndicate led by Merrill Lynch & Co. and J.P. Morgan Securities Inc. is expected to price a $1.5 billion Eurobond issue for the Kingdom of Spain tomorrow, a source involved with the deal said last week.
Fallout from the European market forced the syndicate to postpone the deal last week until this week. Spain decided to wait out the currency crisis before selling the deal to investors because it feared problems with a planned swap of its dollar-based proceeds into the Spanish currency, sources said.
The deal could still be delayed, depending on conditions in European markets after the treaty vote.
Sources said the African Development Bank plans to sell about $300 million of long-term bonds, but the offering is not expected until the Treasury's long-bond yield hits about 7.25%.
This may be the bank's first long-term deal, with maturities in the 20-year and 30-year range. The bank usually sells bonds with about 10-year maturities.
