Feb. 6 (Bloomberg) -- Procter & Gamble Co., the world’s largest consumer products company, and natural-gas pipeline owner El Paso Corp. were among companies benefiting from lower borrowing costs this week as investors bought corporate debt.

P&G sold six-year notes at an interest rate more than a percentage point lower than similar-maturity debt it issued in December, according to data compiled by Bloomberg. Houston-based El Paso raised $500 million of notes that yield 6.2 percentage points less, Bloomberg data show. Companies raised $22.7 billion this week, bringing 2009 bond sales to $170 billion, 39 percent ahead of last year.

Yields over benchmark rates on investment-grade and high- yield debt have dropped to the lowest since October, a sign of a thaw in the credit markets. Most borrowers have easier access to the markets than in the fourth quarter, and companies with higher credit quality found relief on interest payments as well, said David DiNanno, a managing director of Credit Suisse Group AG’s investment-grade syndicate in New York.

“For the majority of the investment-grade market now, it’s not a question of access, it’s a question of price,” DiNanno said in a telephone interview. “As access has increased during 2009, the price for borrowers has decreased.”

‘Encouraging’ Results

The average yield over benchmark rates on U.S. corporate bonds narrowed nine basis points in the week to 714 basis points as of yesterday, according to Merrill Lynch & Co.’s U.S. Corporate & High Yield Master index. A basis point is 0.01 percentage point.

Investment-grade bond sales of $21.9 billion compare with a $15.5 billion weekly average in 2008, and follow $44.4 billion of issuance last week.

The easing turmoil in fixed-income markets in January pointed to improvement during the rest of the year, according to some of the biggest underwriters of corporate debt.

Bank of America Corp. Chief Executive Officer Kenneth Lewis said results in January were “encouraging” for the Charlotte, North Carolina-based lender. Deutsche Bank AG CEO Josef Ackermann said at a news conference in Frankfurt that increased revenue last month gave him “confidence” for 2009.

“The reality is the investment-grade marketplace is one of the few markets that has been functioning,” said James Merli, the head of U.S. investment-grade syndicate at Barclays Capital in New York. “The activity level is going to continue to be robust.”

Cincinnati-based P&G, the maker of Pampers diapers and Crest toothpaste, sold $3 billion of debt in a three-part sale, Bloomberg data show. Its $750 million of six-year, 3.5 percent notes priced to yield 167.5 basis points more than Treasuries of similar maturity. In December, P&G sold $2 billion of 4.6 percent notes due in 2014 at a spread of 310 basis points.

Georgia Power

Georgia Power Co., an electricity company owned by Southern Co., was also able to return to debt markets on more favorable terms. The Atlanta-based company sold $500 million of 5.95 percent, 30-year bonds at a yield over Treasuries of 225 basis points, Bloomberg data show. In November, Georgia Power paid a 6 percent coupon on five-year notes with a 360 basis-point spread.

Georgia Power paid less this time because investors favor the relative stability of utilities as the economic recession deepens, said David Brooks, the head of debt capital markets at Southern Co. in Atlanta.

“Investors are simply getting comfortable, companies like ourselves are not going away anytime soon,” Brooks said in a telephone interview. “Rather than shunning all investments, like you tended to see in December, they’re looking at credits and making a judgment of where to put their money.”

The Georgia Power notes are rated A2 by Moody’s Investors Service, the sixth level of investment grade, and an equivalent A by Standard & Poor’s.

High Yield

Yields over benchmark rates on investment-grade bonds narrowed seven basis points in the week to 528 basis points as of yesterday, according to Merrill’s U.S. Corporate Master index. Spreads on high-yield, high-risk, or junk, debt fell nine basis points to 1,613 basis points, according to Merrill’s U.S. High Yield Master II index. High-yield debt is rated below Baa3 by Moody’s and lower than BBB- by S&P.

El Paso, owner of the largest U.S. network of natural-gas pipelines, and Landry’s Restaurants Inc., the Houston-based owner of the Crab House and Rainforest Café chains, were the only two high-yield companies to sell bonds this week, raising a combined $796 million, Bloomberg data show.

El Paso, which reopened the high-yield bond market with a $500 million sale in December, raised another $500 million selling seven-year, 8.25 percent notes at a yield of 9.125 percent, or 619 basis points less than the December offering, Bloomberg data show. The bonds in the December sale priced to yield 15.314 percent.

Landry’s

Landry’s sold $295.5 million of notes due in August 2011 at a yield of 20.3 percent, Bloomberg data show.

Banks sold $3.4 billion of debt this week through the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee Program, Bloomberg data show. Citigroup Inc., Deutsche Bank, JPMorgan Chase & Co. and Sandler O’Neill & Partners LP helped sell $413.9 million of bonds in the first pooled debt offering of bonds backed by the FDIC.

San Miguel Brewery Inc., the biggest Philippine beer maker, and Colgate-Palmolive Co., the world’s largest maker of toothpaste, are among companies with planned offerings.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

Last Updated: February 6, 2009 15:28 EST