Corporate issuers priced more than $9 billion of debt last week, and this week's volume could be heavy as well.
"I think we could have another busy week," one syndicate official said Friday.
The heavy volume is occurring "because people are afraid we're down near the bottom of this interest rate cycle," he said.
Good news on inflation delivered by the May producer and consumer price indexes in the last couple of weeks triggered a Treasury rally, and issuers saw the lower yield levels as an opportunity that will not be around forever.
Most corporate treasurers believe interest rates over the long term are heading up, he said.
The syndicate official noted that after a busy start to this year, issuance has trailed off in the past month or two. That has created a cash build-up ready to absorb the new deals, he said.
According to Securities Data Co., $8.965 billion of debt was priced through last Thursday.
Though market sources said a number of names are making the rounds, only a few surfaced Friday. Northern Illinois Gas Co. is expected to price $50 million of 30-year first mortgage bonds through competitive bidding tomorrow.
In the high-yield market, IMC Fertilizer is rumored to be pricing a $225 million senior note offering due 2003 today. The deal will be placed privately under Rule 144A, which was enacted in 1990 to enhance secondary trading of privately placed securities.
On the public side, Enviro-source's $200 million of sentor notes due is a late-week possibility.
In other news, a Securities Industry Association report says the year-to-date average value of corporate bond trading by institutions through April shows a 26% increase over 1992's record dally average.
The value of corporate bond trading institutions climbed to $41.3 billion daily in April from $38.9 billion daily in March.
That pushed the year-to-date daily average to $41.2 billion, surpassing 1992's record $32.7 billion daily average, Jeffrey M. Schaefer, senior vice president of research, said in the report.
In secondary trading Friday, high-yield bonds ended quiet and unchanged to up 1/8 point. Asked the reason for Friday's quiet, one high-yield trader replied, "U.S. Open," referring to the golf championship at Baltusrol Golf Club in Springfield, N.J.
The open also thinned ranks on the high-grade side.
One trader there said he would guess that "a large percentage of the investment community is sitting in traffic in Springfield, N.J."
Spreads on corporate bonds were unchanged to slightly tighter despite the heavy amount of new paper, the trader said.
Trump Plaza Funding issued $330 million of 10 7/8% first mortgage bonds due 2001. The bonds were priced at 98.693 to yield 11.13%. The bonds are callable in 1998 at 105. Moody's Investors Service rates the offering B3, while Standard & Poor's Corp. rates it B. Merrill Lynch & Co. managed the offering.
Trump Plaza Holding issued $60 million of 12.5% pay-in-kind notes due 2003 at par. The notes are callable in 1997 at 106.25. Moody's rates the offering Caa, while Standard & Poor's rates it CCC-plus. Merrill Lynch managed the offering.
Federal Home Loan Mortgage Corp. issued $200 million of 6.39% debentures due 2003 at par. Noncallable for three years, the notes were priced to yield 45 basis points over comparable Treasuries. Lehman Brothers managed the offering.
Texas Utilities issued a two-part secured facility bond offering totaling $144.507 million. The first tranche consisted of $24.385 million of 6.620% bonds due 2001 at par. The bonds, which have a seven-year average life, were priced to yield 108 basis points over seven-year Treasuries.
The second piece consisted of $120.122 of 7.460% bonds due 2015 at par. The bonds, which have a 15-year average life, were priced to yield 155 basis points over 30-year Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB-minus. Duff & Phelps Credit Rating Co. rates it BBB. Morgan Stanley & Co. was lead manager of the offering.
Savoy Pictures issued $75 million of convertible subordinated debentures due 2003 at par. Noncallable for three years, the debentures are convertible into common stock at 18.60, a 20% conversion premium. Moody's rates the offering B2, while Standard & Poor's rates it B. Allen & Co. managed the offering.