Spreads on corporate bonds ended unchanged to a touch wider yesterday despite the Treasury's strong rally, traders said.
"The corporate bond market held in there," one trader said yesterday.
Another trader said the market "had a very bullish feel," noting that he would have expected coporates to lag Treasuries given their sharp rise.
A third trader said he saw a slight widening in some spreads, which he estimated at two to three basis points.
The Treasury's long bond gained nearly a full point yesterday, helped by the September producer price index, which rose 0.2%. Though the increase, matched expectations, the market was buoyed by a flat reading on core PPI and the fact that several components of the report were well behaved, including prices of women's apparel, tobacco, and automobiles.
In specific areas, a narrowing in the spread to Treasuries was again noted in Chrysler Corp. paper with the benchmark 6 5/8% debt of 2000 moving to a range of 106-100 from 108-104 on Wednesday, one trader said. Chrysler paper has been tightening for quite some time, he said, noting that the 6 5/8% debt was trading at 135 a month ago.
Chrysler yesterday announced record third-quarter earnings of $423 million, or $1.13 per primary common share. That more than doubled the $202 million, or 62 cents a share, the company reported for the third quarter of 1992.
Also yesterday, some Bell Atlantic subsidiary issues widened five to 10 basis points in the wake of Wednesday's merger talk with Tele-Communications Inc. and Liberty Media Co., a high-grade trader said.
The high-yield market yesterday gained 1/2 to 1/4 points yesterday amidst a "general sharp upturn," a junk trader said, adding that mutual funds again appear to have money to put to work.
Cable issues were up points as speculation grows that telephone companies are going to buy cable companies for their programming assets. Century Communications debt has gained some three to four points since the news broke, the junk trader said.
In other news, Smith Barney Shearson Holdings yesterday filed a shelf registration with the Securities and Exchange Commission to offer up to $750 million of debt.
The company will use proceeds for general corporate purposes, according to Barbara Yastine, a spokeswoman for Primerica Corp., Smith Barney Shearson's parent.
Smith Barney Shearson was created in the July merger of Primerica's Smith Barney subsidiary with the Shearson Lehman Brothers retail brokerage and asset management businesses formerly owned by American Express Co. In the merger, Smith Barney took on Shearson's net assets, leaving behind its debt load, Yastine said.
The new entity has had a commercial paper program in place since the second quarter, and Smith Barney issued a $300 million private debt placement in connection with the Shearson merger, Yastine said. The private debt is in the process of being publicly registered, she said. The shelf registration marks Smith Barney Shearson's third step into public debt issuance, she said.
Carolina Power & Light Co. also filed a shelf registration with the SEC covering $500 million of mortgage bonds, said Bob Drennan, manager of financial planning and analysis at the utility.
Drennan said the company currently has about $255 million of debt remaining from a shelf filed in March. Of that, $155 million has been earmarked as medium-term notes.
Yesterday's $500 million filing brings to $600 million the amount of debt Carolina P&L has on the shelf for "discretionary large block financing," Drennan said. He emphasized that yesterday's filing was not for a single offering. Carolina typically does competitive offerings of between $100 million and $150 million, Drennan said. "With the current low interest rate environment we want to maintain our financing flexibility," he said.
Associates Corp. sold $300 million of 5.75% notes due 2003. The noncallable notes were priced at 99.758 to yield 5.782% or 56 basis points more than comparable Treasuries. Moody's Investors Service rates the offering A1, while Standard & Poor's Corp. rates it Aa-minus. Lehman Brothers was lead manager of the offering. Fitch Investors Service Inc. rates the notes AA.
Republic New York Corp. issued $250 million of 5 7/8% subordinated notes due 2008. The noncallable notes were priced at 99.558 to yield 5.92% or 70 basis points more than comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it Aa-minus. Fitch Investors Service rates the notes AA-minus. Salomon Brothers Inc. was lead manager.
Federal Home Loan Mortgage Corp. came to market with $200 million of 5.78% notes due 2003 at par. Noncallable for three years, the notes were priced to yield 56 basis points more than comparable Treasuries. Goldman, Sachs & Co. was sole manager.
Arkansas Power & Light Co. issued $175 million of 7% first mortgage bonds due 2023. Noncallable for five years, the bonds were priced at 98.637 to yield 7.11%, or 108 basis points more than comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB. Goldman, Sachs & Co. won competitive bidding to underwrite the offering.
Federal Home Loan Mortgage Corp. issued $150 million of 4.40% step-up debentures due 2003 at par. The debentures were priced to yield 60 basis points more than two-year Treasuries. The debentures are noncallable for two years, after which the coupon steps up to 5.30%. Lehman Brothers was sole manager.
J.P. Morgan & Co. sold $150 million of 5.75% subordinated notes due 2008. The noncallable notes were priced at 99.188 to yield 5.832% or 62 basis points more than 10-year Treasuries. Moody's rates the offering Aa2, while Standard & Poor's rates it Aa-plus. Kidder, Peabody & Co. managed the offering.
Household International Netherlands BV issued $125 million of 5.25% notes due 1998. The noncallable notes were priced at 99.760 to yield 5.305%, or 70 basis points more than comparable Treasuries. Moody's rates the offering Baa1, while Standard & Poor's rates it A. Morgan, Stanley & Co. was lead manager.
Moody's upgraded Fruit of the Loom's long-term debt because of the company's "strong earnings and cash flow, improving balance sheet, and continued commitment to sound financial policies," the agency said in a release.
The rating agency upgraded to Baa2 from Ba1 Fruit of the Loom's 7% debentures due 2011, which were originally issued by Northwest Industries Inc. Moody's also upgraded to Baa2 from Ba2 the company's 7.875% senior notes due 1999. "Although Fruit of the Loom is currently being challenged by the excess capacity in the fleece and screen print industries, Moody's believes its strong brand franchise, low-cost production facilities and good relationships with suppliers and customers will enable it to maintain strong earnings and cash flow, a sound balance sheet and strong debt-protection measures over the long term," Moody's release says.