Company-Bond Sales Rise as Borrowing Costs Fall to 2007 Levels
By Megan Johnston
Aug. 7 (Bloomberg) -- U.S. corporate-bond sales rose 69 percent this week with investment-grade companies led by Coca-
Cola Enterprises Inc. and
Magellan Midstream Partners LP borrowing at costs comparable to those before the credit crisis began in 2007.
Issuance reached $23.3 billion versus $13.8 billion last week, according to data compiled by Bloomberg. Coca-Cola Enterprises of Atlanta sold $250 million of 10-year notes at its lowest yield ever relative to benchmarks for that maturity. Tulsa, Oklahoma-based Magellan Midstream Partners LP raised $250 million in a reopening of notes at a similar spread to what the fuel transporter paid in 2004.
Investor demand for corporate bonds remains robust, with returns near record levels, said
Paul Spivack, global head of investment-grade syndicate at Morgan Stanley. A strengthening economy has buoyed demand for U.S. investment-grade bonds, which returned 3.9 percent in July, the third-best month on record, according to Merrill Lynch & Co.’s U.S. Corporate Master Index.
“This is definitely a seller’s market,” Spivack, who is based in New York, said in a telephone interview. “I have not seen this type of demand appetite in a very long time.”
Yields on investment-grade corporate bonds relative to benchmark Treasuries tightened 16 basis points this week to 257 basis points as of yesterday, the narrowest since June 23, 2008, based on Merrill Lynch’s U.S. Corporate Master index. A basis point is 0.01 percentage point.
Coca-Cola Enterprises
“For issuers, the tightening in spreads, along with lower Treasury yields, means the cost of borrowing for A rated issuers stands 100 basis points lower than at any point since 2007,” New York-based Bank of America Corp. strategists
Hans Mikkelsen and
Yuriy Shchuchinov wrote in an Aug. 5 report.
Coca-Cola Enterprises sold 4.5 percent notes that priced to yield 4.63 percent, the lowest interest rate ever paid by the world’s largest soft-drink distributor on 10-year debt, according to data compiled by Bloomberg. The yield was 90 basis points above the comparable Treasury note.
Magellan Midstream reopened its 6.55 percent notes due in 2019 at a spread of 185 basis points over benchmarks, or a yield of 6.6 percent, Bloomberg data show. That’s the lowest spread that the company paid on 10-year debt since 2004, when it issued notes that priced to yield 175 basis points more than Treasuries.
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