--Weekly issuance on track to be most since November 2009
--Investors still enticed despite historic low yields
--Thursday issuance at $6.6 billion from nine high-grade companies
(Adds daily and weekly issuance update in first three paragraphs, investor comments in the 6th, 8th, 9th and 10th paragraphs, Markit data in the 7th paragraph, and issuance pricing updates in the 11th-14th paragraphs.)
By Patrick McGee
Nine investment grade companies tapped the corporate bond market Thursday, helping to make this week the busiest for new-issuance since late 2009, and there's still another session for companies to borrow.
At least $6.6 billion of new bonds are expected to get sold, on top of $30.9 billion priced through Wednesday. That would top the previous busiest week of the year, in late January, when $28.8 billion were sold, and would mark the most volume in a week since late November 2009, according to data provider Dealogic.
The all-time high of $42.9 billion was set in mid-March 2009, according to Dealogic data going back to 1995.
Companies big and small, high-grade and low, are coming out of blackout earnings periods and issuing debt to take advantage of record-low yields.
The Barclays Capital investment-grade corporate bond index finished Wednesday at 3.33%, up 0.06 percentage points from the all-time low reached last week, but still below any rate between 1973, when the index was created, and 2011.
"It's a great opportunity for companies to term out their debt right now," said John Fox, investment research analyst at Fenimore Asset Management.
Investor demand should remain high as new deals continue to trade well entering the secondary market. Nine of the top 10 most actively traded bonds are improving versus Treasurys, including a 0.15 percentage point tightening in the risk premium on Hewlett-Packard (>> Hewlett-Packard Company) 10-year notes that were issued Wednesday, according to MarketAxess.
But market weakness, as seen in the broad selloff early this week, could slow investor demand for new issues, said Tom Farina, head of corporate sector fixed income team at Deutsche Insurance Asset Management.
"Monday was the first day when prices of primary market issues widened out, or weakened in the secondary market" Farina said. "If that's a one-off, we're fine, but if that becomes more consistent, demand for new issues could slow down."
That wasn't a problem Thursday: Markit's CDX North America Investment-Grade Index, a measure of health for the market, improved 1.2% in late-afternoon trading.
Fox said investors see corporate bonds as "one of the better games in town, because your alternatives are so low." He added that triple-B-rated companies, the bottom cusp of investment-grade, can look particularly attractive.
Simon Property Group's three-part, $1.5 billion offering was the largest deal Thursday. It sold 5.5-, 10-, and 30-year notes at spreads to Treasurys of 1.3 percentage points, 1.4 points, and 1.6 points, respectively.
Mitsui Sumitomo Insurance sold $1.3 billion of 60-year subordinate bonds after a marketing period yesterday. The privately placed notes were sold in the Rule 144A/Reg S market, which is only open to qualified investors outside the U.S., at a yield of 7%.
Xerox Corp. (>> Xerox Corporation) sold $1.1 billion, including 18-month floating-rate notes offering 1.4 percentage points over the three month London interbank offered rate, or Libor.
URS Corp. (>> URS Corp), an engineering firm and federal government contractor, was selling five- and 10-year notes, each at 3 points over Treasurys.
Companies issuing smaller deals include Genworth Financial Inc. (>> Genworth Financial Inc), the New York unit of Consolidated Edison Inc. (>> Consolidated Edison, Inc.), Edison International's (>> Edison International) Southern California Edison, and the operating unit of natural gas company DCP Midstream Partners, LP (>> DCP Midstream Partners, LP).
-By Patrick McGee, Dow Jones Newswires; 212-416-2382; [email protected]
Stocks mentioned in the article : Xerox Corporation
, Hewlett-Packard Company
, DCP Midstream Partners, LP
, Consolidated Edison, Inc.
, Edison International
, Genworth Financial Inc
, Simon Property Group, Inc
, URS Corp