Europe’s comeback from the brink is extending to the region’s corporate debt market, where borrowers are selling bonds at the fastest pace in two years.
Fiat SpA (F), Italy’s biggest manufacturer, Daimler AG and Electricite de France SA led 6.6 billion euros ($8.7 billion) of offerings in the busiest day of issuance since Jan. 12, 2010, according to data compiled by Bloomberg. Daimler in Stuttgart, Germany raised 750 million euros after boosting the sale from 500 million euros, while EDF (EDF) in Paris sold 1.6 billion euros of bonds and Fiat issued its first benchmark deal since July.
The European Central Bank’s injection of cash into banks through loans and Greece’s debt restructuring is raising optimism that the region’s sovereign crisis will be contained. The cost to borrow for European non-financial companies has fallen at a faster rate this year than for issuers in the U.S., Bank of America Merrill Lynch data show.
“While Europe still faces many obvious challenges, there has been a combined regulatory and political response to euro- area problems,” Edward Marrinan, macro credit strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut, said in a telephone interview. “The follow-on risk appetite has been reflected in robust new issuance.”
Bonds issued by the region’s non-financial borrowers are headed for their best quarter since 2009, returning 3.33 percent since the end of December, according to the Bank of America Merrill Lynch index. Similar securities in the U.S. have gained 0.19 percent, a separate index shows.
The extra yield investors demand to buy euro-region company debt instead of German government securities narrowed 61 basis points since December to 140, or 1.4 percentage points. Spreads in the U.S. have dropped by 45 to 160.
“What we’re seeing right now is a continuation of that positivity after the Greek deal,” said Juan Esteban Valencia, a credit strategist at Societe Generale SA in London. “Spreads are tightening and yields are very low so it’s making it very attractive for issuers to come to the market.”
Elsewhere in credit markets, American Express Co. plans to sell $1.5 billion of five-year notes, according to a person with knowledge of the transaction. The notes may yield 130 basis points more than Treasuries of similar maturity, said the person, who declined to be identified because terms aren’t set.
Noble Group Ltd. (NOBL), Asia’s biggest listed commodities trader by sales, will delay marketing a $1.5 billion loan in general syndication, according to three people familiar with the matter.
The company had planned to start marketing the loan in general syndication today however some lenders approached to be arrangers or senior banks requested more time to prepare, the people said, asking not to be identified because the details are private. The original deadline for potential arrangers to respond to terms sent by Noble was last week. Some banks requested extensions in order to process internal credit approvals, the people said.
“There is no delay in our timetable,” Jeanny Kim, Noble’s Hong Kong-based director of capital markets, said in an e-mail today. A public announcement will be made in due course, she said.
Bonds of Morgan Stanley are the most actively traded U.S. corporate securities by dealers today, with 221 trades of $1 million or more as of 12:20 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
ECB President Mario Draghi gave banks more than 1 trillion euros ($1.31 trillion) of three-year loans in December and February through its Long-Term Refinancing Operation bolstering the financial system.
At the same time, an auction to settle outstanding credit- default swaps tied to Greece debt this week ended more than two years of speculation over whether the derivatives are reliable for insuring sovereign debt after European policy makers sought to prevent payouts on concern they’d worsen the region’s crisis.
“Europe has put in place a multi-pronged effort to buy time and address the core issue of sovereign indebtedness and embedded losses in bank balance sheets,” said Marrinan at Royal Bank of Scotland.
Fiat sold 850 million euros of five-year securities that were priced to yield 7 percent, data compiled by Bloomberg show. Fiat last sold benchmark-sized securities in euros in July, when it raised 1.5 billion euros from a sale that included notes due 2014 currently yielding 5.4 percent and bonds maturing in 2018 that yield 7.4 percent. A benchmark deal in euros is typically at least 500 million euros.
Fiat is rated Ba2 by Moody’s Investors Service, two levels below investment grade, and BB by Standard & Poor’s, which said last month it may lower the rating on the Turin-based company one more level by May.
Banca IMI SpA, Barclays Capital, Credit Agricole CIB, Commerzbank AG, Goldman Sachs Group Inc. Natixis and UniCredit SpA managed the latest sale for Fiat.
Daimler (DAI)’s 750 million euros of 2.625 percent seven-year bonds were priced to yield 65 basis points more than swaps, data compiled by Bloomberg show. The maker of Mercedes Benz cars is rated A3 by Moody’s and A- by S&P.
EDF’s sale included 1 billion euros of 4.125 percent 15- year notes that were priced to yield 145 basis points more than the swap rate, data compiled by Bloomberg show. The utility also sold 500 million pounds ($793 million) of 5.5 percent 25-year bonds that will yield 210 basis points more than U.K. government debt. EDF is rated Aa3 by Moody’s and A+ by S&P. Carole Trivi, a company spokeswoman, declined to comment.
Other issuers yesterday included Anglo American Plc (AAL), the London-based miner, construction group Vinci SA (DG) in Rueil- Malmaison, France and U.K. utility Anglian Water Group Ltd. money managers,” he said.
“Given the extended freeze in European credit issuance, it’s not surprising to see a host of names bursting through the doors, for fear that those doors might close up once again,” Guy LeBas, chief fixed-income strategist at Philadelphia-based Janney Montgomery Scott LLC, wrote in an e-mail.