Nov. 10 (Bloomberg) -- Fiat SpA, the Italian carmaker that acquired a stake in Chrysler LLC, is raising 1.5 billion euros ($2.25 billion) from its third sale of high-yield bonds this year, tapping investor demand for riskier assets.

The notes due February 2015 will be priced to yield 6.9 percent, according to a banker involved in the transaction, who declined to be identified before the deal is completed. That compares with 7.75 percent on five-year bonds the carmaker issued in September, according to data compiled by Bloomberg.

The extra yield investors demand to buy junk-rated debt instead of government bonds has shrunk more than 14 percentage points since March to 8.64, according to Merrill Lynch & Co. index data. Investors are seeking higher-yielding assets amid signs that government stimulus policies and record-low interest rates are helping drag the global economy out of recession.

“Investors still have money to put to work and are now hunting for higher yielding assets following the sharp drop in investment-grade returns,” said Juan Esteban Valencia, a London-based credit strategist at Societe Generale SA. “Lower- rated issuers, as well as inaugural or non-rated issuers, have an open window at the moment as demand remains robust.”

High-yield, or junk, bonds are graded below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

Fiat Finance

The yield investors currently demand to hold Turin-based Fiat’s outstanding 2014 bonds was quoted at 6.68 percent today, Nomura prices on Bloomberg show. The maker of Ferrari and Maserati sports cars is rated at Ba1 by Moody’s, one level below investment-grade status, and an equivalent BB+ by S&P.

Fiat Finance & Trade SA is issuing the notes as part of its global medium-term note program, Fiat said in a stock-exchange statement today. Banca IMI SpA, Calyon, UBS AG and UniCredit SpA are managing the sale.

Ford’s European finance unit FCE Bank Plc is also selling debt, issuing 500 million euros of high-yield bonds due January 2014, according to a banker involved in the deal. The notes will be priced to yield 9.5 percent, the banker said.

FCE Bank is rated B3 by Moody’s, six ranks below investment grade, and one level higher at B by Standard & Poor’s. High- yield debt is graded below BBB- by S&P and Baa3 by Moody’s.

To contact the reporter on this story: Caroline Hyde in London chyde3@bloomberg.net.

Last Updated: November 10, 2009 09:56 EST