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CF Industries, ATP Oil Sell Debt as Junk Bond Sales Increase 58 Percent

CF Industries Holdings Inc., the fertilizer maker acquiring Terra Industries Inc., and Houston- based ATP Oil & Gas Corp. issued debt this week as sales of high-yield, high-risk corporate bonds rose 58 percent.

ATP Oil & Gas sold $1.5 billion of five-year notes and CF Industries issued $1.6 billion of debt in a two-part offering as the companies tapped the U.S. corporate bond market for the first time, according to according to data compiled by Bloomberg. They led $10.6 billion of high-yield issuance this week, the seventh straight week above the 2010 average.

Companies sold $24.5 billion of debt, compared with $24 billion last week, as the economic recovery helps profits outpace analysts’ estimates and junk-bond yields touched the lowest since July 2007. Issuers are taking advantage of improving earnings and investor demand to sell high-yield debt, said Richard B. Handler, chief executive officer of Jefferies Group Inc.

“There’s a degree of confidence slowly seeping back to CEOs and senior leaders of companies across the United States and perhaps across the globe,” Handler said in an April 20 conference call with investors. “It’s still on a historical basis a relatively good financing environment.” New York-based Jefferies has helped sell $3.2 billion of high-yield debt this year, according to data compiled by Bloomberg.

Spreads Tighten

The extra yield investors demand to own speculative-grade debt instead of Treasuries fell 13 basis points this week to 544 basis points, according to the Bank of America Merrill Lynch High-Yield Master II Index. Absolute yields fell to 8.27 percent from 8.29 percent.

High-yield debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

This week’s corporate bond sales compare with a 2010 average of $24.2 billion through April 16, according to data compiled by Bloomberg.

ATP Oil & Gas and CF Industries led high-yield bond sales to the highest since the week ending March 26, when companies sold $12.4 billion, Bloomberg data show. Issuance this week compares with a weekly average of $5.54 billion in 2010. Allbritton Communications Co., Agile Property Holdings Ltd. and Dtek Finance BV were also among the 24 high-yield issuers this week.

Apple Inc., the maker of iPods and Macintosh computers, Wells Fargo & Co., the biggest U.S. home lender, and Johnson & Johnson, the world’s largest health-products company, were among companies reporting quarterly earnings that exceeded analysts’ estimates, according to data compiled by Bloomberg.

First-Quarter Earnings

Through yesterday, 116 of the 136 S&P 500 companies that have announced last quarter’s results surpassed analysts’ expectations, Bloomberg data show.

The International Monetary Fund raised its forecast for global growth, predicting the world economy will expand 4.2 percent in 2010, the fastest pace in three years. The IMF had projected 3.9 percent growth in January. The Conference Board’s index of U.S. leading economic indicators rose in March by the most in 10 months.

Spreads on investment-grade debt contracted 2 basis points to 151 basis points, according to the Bank of America Merrill Lynch U.S. Corporate Master II Index. Relative yields on industrial-company bonds narrowed to 129 basis points, the tightest since before credit markets seized up in August 2007, index data show.

Greece, Goldman Sachs

Greece’s struggle to manage its budget deficit, and the U.S. Securities and Exchange Commission’s lawsuit against Goldman Sachs Group Inc. for allegedly misleading collateralized debt obligation investors may overshadow companies’ better-than- expected earnings, said Tim Norman, director of fixed-income trading at Thrivent Financial in Minneapolis.

“There’s a lot of other noise out there besides earnings, like what’s going on in Europe and financial regulation hanging over our heads,” said Norman, who helps manage $64.7 billion. “I question how much of the earnings we’re seeing were already priced in, so maybe people weren’t all that surprised.”

Moody’s cut its rating on Greece’s debt one step to A3 yesterday, citing the EU’s “fractious mobilization” of emergency aid.

Spreads may widen as the prospect of stricter financial regulation looms and Greece’s budget difficulties continue, said Arthur Tetyevsky, chief fixed-income strategist at Broadpoint Gleacher Securities Inc. in New York.

“In the next couple weeks, spreads will potentially drift wider with issues such as Goldman and Greece still weighing on the market,” he said.

Investment-Grade

Dexia Credit Local, a unit of Brussels-based Dexia SA, sold $4.5 billion of notes in a two-part offering and Standard Chartered Plc, the London-based bank that makes most of its profit in emerging markets, sold $2 billion of debt to lead investment-grade issuance of $14 billion, according to data compiled by Bloomberg. That compares with a 2010 weekly average of $18.7 billion, Bloomberg data show.

Levi Strauss & Co., the maker of the namesake jeans and Dockers pants and Cooper-Standard Automotive Inc., the maker of vehicular fluid-handling systems, are among companies marketing at least $8 billion of U.S. corporate bonds, according to data compiled by Bloomberg.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net.

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