Amgen Inc. (AMGN) joined Renault SA and five Spanish borrowers to raise money in the busiest day for European bond issuance in 2 1/2 years amid speculation the region’s recovery is about to hit a number of speed bumps.
Amgen, the world’s largest biotechnology company, offered only its second notes in euros and pounds while French automaker Renault did its eighth public bond issue of the year, according to data compiled by Bloomberg. With deals from Spanish energy companies Iberdrola SA (IBE) and Gas Natural SDG SA (GAS), the market was poised for about 10 billion euros ($12.8 billion) of issuance today, the most since March 11, 2010.
The optimism that followed the European Central Bank’s announcement that it would buy unlimited amounts of government debt to ease the crisis is already evaporating. A court case about whether the euro-region bailout fund breaches Germany’s constitution and Greece’s inability to agree to spending cuts are prompting companies to use their status as haven issuers to raise cash while they can.
“There’s still some uncertainty on the results of the German constitutional court so issuers are running to get deals done,” said Arnaud Colombel, a fund manager at La Banque Postale Asset Management SA in Paris, which oversees about 130 billion euros. “I totally understand the issuers’ hurry while investors are a little euphoric and have a lot of cash.”
Today’s flood of deals continues a busy summer for corporate bond issuance as investors seek relatively safe securities that still provide them with a yield at a time when rates on the highest-quality government bonds have fallen to about zero. Year-to-date sales total 512 billion euros, compared with 505 billion euros in the same period of 2011, according to data compiled by Bloomberg.
Borrowing costs have also tumbled to the lowest in 14 months because of this appetite among fund managers, encouraging companies to raise money.
The extra yield investors demand to hold European corporate notes fell 72 basis points, or 0.72 percentage point, since June 1 to 183 basis points, Bank of America Merrill Lynch’s EMU Corporate index of 1,732 securities shows. The gauge contains bonds sold by companies such as Anglo American Plc (AAL) and Rabobank.
It’s still only the best names that can borrow. Companies from the euro area’s so-called periphery can raise money, though in those countries deals tend to be confined to the safest borrowers such as large banks and utilities.
Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-biggest lender, sold three-year senior, unsecured notes in what Societe Generale SA analysts said was the busiest day for issuance from the country since at least 2009. Italy’s No. 2 bank, Intesa Sanpaolo SpA (ISP), offered four-year senior, unsecured notes, said a person familiar with the transaction, who asked not to be named because the details aren’t public.
From France, the country’s third-biggest lender, Credit Agricole SA (ACA), offered benchmark covered bonds in euros, while property company Klepierre (LI) issued its first benchmark notes since March 2011.
Raluca Barb, a spokeswoman for Renault (RNO) in Paris, said her company’s issue of debt due in 2017 was part of the carmaker’s refinancing program, declining to give further details.
Thousand Oaks, California-based Amgen, which halted trials on a pancreatic cancer drug in August, last sold bonds in euros and pounds in November 2011, according to Bloomberg data. Its new senior, unsecured bonds had a 2019 maturity for the euro tranche and a 2029 lifetime for the pound issue, said a banker on the deal.
Lingering optimism that ECB President Mario Draghi’s bond- buying plan will contain the sovereign crisis is also helping spur issuance, according to analysts at ING Groep NV.
“The start of the week sees a true rush in primary activity following the pledged support by the ECB for peripheral sovereign bonds last week,” Maureen Schuller, a senior credit strategist at ING in Amsterdam, wrote in a note. “In particular Spanish issuers” are taking advantage of “the window of opportunity offered by the sovereign-bond purchase safety net, with issuance activity just as lively in financials -- BBVA and Banesto -- as in corporates -- Gas Natural and Iberdrola.”
The problems that have emerged since Draghi announced his solution to the crisis on Sept. 6 affect the euro region’s richest and poorest members. Germany’s Federal Constitutional Court in Karlsruhe will decide whether to suspend the 500 billion-euro European Stability Mechanism on Sept. 12, while in Athens, Prime Minister Antonis Samaras’s governing partners are balking at budget cuts demanded by the country’s so-called troika of creditors.
“We’re in an environment where the climate can change dramatically in a short while given the fragilities we’re facing,” said Sebastian Paris-Horvitz, the chief market strategist at HSBC Private Bank in Geneva. “There’s no room for euphoria.”
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