Aug. 3 (Bloomberg) -- General Electric Co. sold $2 billion of bonds, a sign that top-rated borrowers can still find demand in a market that shut out at least 36 companies.

General Electric Capital Corp., the finance arm of the world's second-biggest company by market value, sold 30-year bonds yesterday for the first time in about five years. Stamford, Connecticut-based GECC was able to find buyers when companies from investment-grade Tyco Electronics Ltd. to high-yield, high- risk Myers Industries Inc. were forced to cancel sales.

GE, with AAA credit ratings, is benefiting from demand for high-quality assets. Investors piled into safer bonds in the past four weeks, after a slump in the subprime mortgage market sparked concerns about holding risky assets. Companies abandoned or reworked more than $45 billion of sales since the beginning of June and new issues slowed to $39.5 billion in July, the lowest since April 2005, data compiled by Bloomberg show.

``Issuers have funding to do, investors have money to put to work, and one is playing chicken with the other to see who goes first,'' said Arthur Tetyevsky, chief U.S. credit strategist at HSBC Securities USA in New York. ``Investors are not going to use their capital hastily.''

The highest level of defaults in 10 years on subprime mortgages and a record pace of leveraged buyouts sapped investor demand for debt of high risk, high-yield companies. Investment- grade bonds are those rated Baa3 and above by Moody's Investors Service and BBB- by Standard & Poor's. High-yield, or junk, bonds are rated below those levels.

Investors pulled $2.7 billion out of high-yield corporate bond funds in the eight weeks ended Aug. 1, according to Arcata, California-based AMG Data Services.

`Complete Repricing'

As buyers fled, even some investment-grade issuers got caught. Berwyn, Pennsylvania-based Tyco Electronics, rated Baa1 by Moody's, was unable to sell its proposed sale. Polymer products maker Myers, based in Akron, Ohio, was junk-rated company that failed to sell $950 million of debt.

``It was a complete repricing of risk in here and consequently a total flight to quality,'' said Thomas Houghton, who manages $3 billion of bonds at Advantus Capital Management in St. Paul, Minnesota. Any risky ``asset was taken out to the woodshed.''

The rout in the credit markets also caused a worldwide stock market selloff, with the Standard & Poor's 500 Index of stocks posting its biggest monthly decline in three years.

Bonds of companies with top AAA ratings returned 1.19 percent in July, compared with a 0.29 percent return for the average investment-grade bond and a 3.14 percent loss for high- yield securities, junk bonds' worst performance since 2002, according to Merrill Lynch & Co. data.

Spreads Widen

The spread between yields on U.S. investment-grade bonds and high-yield securities reached 1.46 percentage points on June 1, its lowest level since at least 1996, Merrill data show. The differential has since widened to 2.98 percentage points.

``The market is just becoming much more fragmented as opposed to the market moving en masse one way or an other,'' said Brad Lutz, a vice-president of investment research at Declaration Management & Research, which oversees $21 billion in fixed-income assets, in McLean, Virginia. ``Investor demand for bonds of high- quality issuers hasn't waned at all.''

Coca-Cola Enterprises Inc., the world's biggest soft-drink bottler, was the only other company to sell bonds this week as sales fell to the lowest since the week of July 4. The Atlanta- based company, rated A3 by Moody's and A by S&P, increased its sale of two-year floating-rate notes to $450 million from a planned $300 million.

`Confidence Builder'

GE's foray in into the bond market shows investors, who put in orders for about 50 percent more of the bonds than were offered, still have demand for the highest quality corporate bonds, said Thomas Lewis, head of investment-grade syndicate at Morgan Stanley. Morgan Stanley managed the sale with Lehman Brothers Holdings Inc. and JPMorgan Chase & Co. All the banks are based in New York.

``This is a complete confidence builder from the investment- grade market's standpoint,'' Lewis said. ``When you get a leader like GECC to make a statement like this, it is more than anything a testament to the liquidity that's still available.''

GE sold 6.15 percent bonds due in 2037 that were issued at a discount of 99.7 cents on the dollar to yield 6.172 percent. The debt yielded 1.25 percentage points more than similar-maturity Treasuries. The average AAA rated bond maturing in 15 years or more trades at a spread of 1.15 percentage points, Merrill Lynch & Co. index data show.

`Safe Haven'

GE ``with its size and scope and stability, offers investors a safe haven in a market that's been extremely volatile,'' Morgan Stanley's Lewis said. ``Does this reopen the investment-grade market? It does show you that for high-quality borrowers that are going to be opportunistically tapping the market, cash is available.''

Lewis said GE's borrowing costs compared with the three- month London interbank offered rate are not ``substantially different'' from where they would have been three months ago.

GE's bonds were the best performing of the 50 biggest issuers in Merrill Lynch's U.S. investment-grade bond index, returning 1.04 percent on average. The typical investment-grade corporate bond handed investors 0.285 percent in July, Merrill Lynch data show.

``The higher quality, liquid credits outperformed,'' Tetyevsky said. ``Investors are not willing to part with their liquidity right now. Any sort of a structure with a complexity or a little bit of hair to it did really poorly in July. I don't think that changes until investors regain confidence in the market.''

To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.netFabio Alves in New York at Falves3@bloomberg.net

Last Updated: August 3, 2007 08:19 EDT