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Corporate bonds

post gains

NEW YORK: US high-grade corporate bonds bounced off a weak weekly retail sales report to beat bearish sentiment and close in positive territory.

Spreads to US treasuries were unchanged across most maturities with bank paper tightening one to two basis points after a string of strong first quarter bank earnings.

Chase Manhattan Corp's spread move in a couple basis points on a news net interest income was up by $0.2 billion at $2.2 billion from the first quarter of 1995.

Spreads on Bankers Trust paper tightened by a basis point as well, traders said.

In the utility sector, Texas Utilities Co spreads widened by two to three basis points on news of its merger with natural gas company, Ensearch Corp.

The company said it would buy some of natural gas company's operations, including its local distribution and pipeline companies and Lone Star Gas and Lone Star Pipeline, with about $550 million of Texas Utilities common stock and $1.15 billion in debt and preferred stock.

The junk bond market close unchanged to up an eighth with secondary trading light, dealers said.

Stone Container debt gained about one point on a buy recommendation for the firm's stock by Merrill Lynch.

Southern Pacific Rail Corp bonds have lost about five points recently on rumoured troubles in its merger with Union Pacific Corp. The 9-3/8 percent paper was bid 104-1/2, down from a recent high of about 108, dealers said. Two new issues, one high-grade and one high-yield, priced.

Lehman Brothers Inc issued $275 million in seven-year senior subordinated notes. The issue was increased from $200 million to $275 million because of demand, said market sources.

It has a 7.25 percent coupon and was priced at 99.874 to yield 7.273 percent or 85 basis points over comparable US treasuries. The notes are rated Baa1/single-A.

Intercel Inc, priced $360 million of senior discount notes due May 1, 2006, said lead manager Morgan Stanley & Co.

The notes have a five-year zero coupon and were priced at 55.623 to yield 12.00 percent with proceeds of $200,242,800.

Deal size was increased from $150 in proceeds due to strong demand, syndicate officials close to the deal said. The notes were rated B2/B-minus.-Reuter