High-grade bond prices barely budged yesterday, traders said.
"It's like any Saturday in the bond business," one trader said yesterday.
"I didn't do anything at all today, I just twiddled my thumbs," another trader said, adding that he could not blame the slowness on anything in particular.
Commonwealth Edison Co., however, provided a late day wake-up call for the new-issue market with its $500 million four-part offering. Merrill, Lynch & Co. lead managed the offering together with Morgan Stanley & Co., PaineWebber Inc., and Salomon Brothers Inc., a Merrill Lynch spokeswoman said.
The first tranche consisted of $100 million of 4.23% debentures due 1993 at par. The noncallable debentures were priced to yield 70 basis points over comparable Treasuries.
The second piece consisted of $100 million of 5.50% debentures due 1995 at par. The noncallable debentures were priced to yield 75 basis points over comparable Treasuries
The third consisted of $100 million of 6.50% debentures due 1997. The noncallable debentures were priced at 99.533 to yield 6.611%, or 80 basis points over comparable Treasuries.
Moody's Investors Service rates the first three tranches Baal, while Standard & Poor's Corp. rates them BBB-plus.
The fourth tranche consisted of $200 million of 8.50% first mortgage bonds. Noncallable for 10 years, the bonds were priced at 99.329 to yield 8.562%, or 90 basis points over comparable Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it A-minus.
Today, the Tennessee Valley Authority is scheduled to price the first of two offerings totaling $1.25 billion through competitive bidding.
As for high-yield bonds, distressed issues softened slightly in sympathy with the stock market's decline. Better quality junk held firm for the most part despite the Dow Jones Industrial Average's close to 29-point fall.
"The equity market didn't really have any impact," one trader said.
In other news, Standard & Poor's Creditweek yesterday contained a special report that quantified the loss experience of defaulted bonds.
The rating agency commissioned the study, and New York University professors Edward Altman and Kenneth Zekavat conducted it together with Georgetown University's Prof. Allan Eberhart.
The study finds that secured corporate bonds had a mean loss of 0.2%, senior unsecured bonds lost 20.9%, and subordinated debt lost 72.6%.
"Although the rank order of these losses by classification was to be expected, there was a large dispersion of losses in each category," a release describing the report says.
For instance, secured bond's performance ranged from a loss of 62.0% to a gain of 74.1%. The report says those statistics, along with bond default rates that Standard & Poor's published earlier, enable investors to estimate losses for a portfolio of corporate bonds.
"While the correlation between rank and loss is clear, the report said that investors should bear in mind that company fundamentals affect returns," the release says.
New Issues
Federal Home loan Banks issued $104 million 4.77% notes due 1995 at par. The noncallable notes were priced to yield two basis points over comparable Treasuries. Goldman, Sachs & Co. lead managed the offering.
Wisconsin Power & Light issued $55 million of 6.125% first mortgage bonds due 1997 at par. The noncallable bonds were priced to yield 32 basis points over comparable Treasuries. Moody's rates the offering Aa2, while Standard & Poor's rates it AA. Goldman Sachs sole managed the offering.
Yesterday's Ratings
Moody's has given a B1 rating to Continental Homes Holding Corp.'s new senior note issue.
"The rating reflects the company's modest size, substantial leverage, concentration in the Phoenix market, and the risks of expanding in other markets," a Moody's release says. "The rating also reflects an indenture which significantly restricts subsidiary borrowing, and thereby supports the senior status of this issue."
