The Federal Reserve's biggest discount rate cut in 10 years will not trigger an issuer onslaught before the end of the year market sources said.
"In my mind they really missed it by days," Michael Bassett, a vice president at Stone & McCarthy Research, said. "If this were last Friday it really would have been a very different week."
Despite the discounty rate's full-point plunge to 3 1/2% from 4 1/2%, syndicate desks will have a hard time getting issuers' and buyers' attention at Christmas time, he said.
"If this were not December you'd be barring the doors. I think it's strictly timing," Mr. Bassett said.
Syndicate members interviewed also anticipated a slow issuer pace through year end.
"I think they'll wait till January," one syndicate member said, adding her firm had no new offerings planned for next week. Another added that while no one wants to buy paper at this time of year, if rates hold till the first of the year, "you'll see an avalanche."
Mr. Bassett cited Commercial Credit Co.'s $200 million offering Friday and said it was also possible that some Wall Street firms might take the opportunity to raise funds for themselves during this period.
Though corporate issuance will be slow, it will probably be busier than usual for this time of year, he said. Ordinarily "zilch" gets done during Christmas week, Mr. Bassett said.
"I think somebody will take the bait, but I don't think it's going to be significant," he said.
Gerry Guild, senior vice president and manager of fixed income at Advest Inc., said most institutions are "essentially shut down" for the rest of the year.
Mr Guild added that the last 100 basis point drop occurred Dec. 4, 1981, when the Fed cut the discount rate to 12% from 13%. The last time the rate was at 3.5% was between July 16, 1963, and Nov. 23, 1964, he said.
As for high-yield issues, Kingman Penniman, a senior vice president at Duff & Phelps/MCM Investment Research Co., predicts the cut will make for "a very active calendar in the first quarter."
But the high-yield market will remain a refinancing market instead of an acquisition-related one, he said.
"The focus is on deleveraging and reducing interest costs," he said.
In secondary trading, high-grades closed up 1/2 to 3/4 points in the 10-year area, pushed up by the discount rate news. The high-yield market closed unchanged to up about 1/4 point, traders said.
In the new-issue market, Commercial Credit issued $200 million of 6 3/8% notes due 1996. The non-callable notes were priced at 99.774 to yield 6.44%, or 83 basis points over comparable Treasuries. Moody's rates the offering A2, while Standard & Pool's rates it A. Lehman Brothers was lead manager of the offering.
Standard & Pool's has upgraded Johnston Coca-Cola Bottling Group Inc.'s senior debt to AA-minus from BBB-minus and subordinated debt to A-plus from BB-plus after the completion of the previously announced acquisition of Johnston by AA-minus rated Coca-Cola Enterprises Inc.
The ratings were removed from CreditWatch, where the agency placed them Aug. 30 with positive implications. Standard & Poor's action affects about $550 million of Johnston's debt.
Fitch Investors Service Inc. assigned an AA-plus rating to Republic National Banl of New York's 4.5% bank notes due Jan. 6, 1993. The credit trend is stable, the agency said. The bank is Republic New York Corp.'s principal subsidiary.
"Republic's asset quality measurements, strong reserve coverage of troubled credits, and high risk-adjusted capital ratios remain well above peers," Fitch said, "The outstanding balance sheet strength is well recognized by the market, as evidenced by the reception for this issue."
Republic originally planned a $1 billion offering, but demand pushed the amount to $1.5 billion, the agency said.
