Barclays to Eaton Lead $17.5 Billion of Bond Offerings in U.S.

Barclays Plc (BARC) and Eaton Corp. (ETN) led borrowers in the U.S. selling about $17.5 billion of debt today as firms capitalize on rates at about record lows.

The U.K.’s second-largest lender sold $3 billion of 10-year subordinated notes that can be written off in a crisis, and Cleveland-based Eaton issued $4.9 billion of securities in five parts to fund its $11.8 billion purchase of Cooper Industries Plc, according to data compiled by Bloomberg. Today’s sales were the most since $24.6 billion on Nov. 5 and exceed this year’s daily average of about $6.3 billion.

The offerings are sustaining an unprecedented pace in dollar-denominated bond sales of $1.3 trillion in 2012, which already exceeds the amount issued in all of 2009 when companies borrowed a then-record $1.24 trillion. Investors are accepting almost the lowest yields ever, plowing money into corporate debt securities with returns that are about three times those of U.S. equities since June.

“It’s been very favorable right now and there’s been lots of new issuance,” William Larkin, a fixed-income money manager at Cabot Money Management Inc. in Salem, Massachusetts, said in a telephone interview. “At some point this is going to dry up, as people become more cautious and the demand starts to fall.”

With six weeks left before year-end, today’s offerings boosted fourth-quarter dollar issuance to about $233 billion, beyond the $217 billion of bonds sold in the last three months of 2011, Bloomberg data show.

Bond Returns

Yields on U.S. corporate bonds from the riskiest to the safest reached a record-low 3.58 percent on Oct. 19 before increasing to 3.61 percent yesterday, according to Bank of America Merrill Lynch index data. The extra yield investors demand to own corporate bonds rather than government debentures rose to 243 basis points from 222 basis points on Oct. 18. That compares with an average of 282 this year.

Company debt in the U.S. has returned 5.4 percent since June 30 through yesterday, compared with a 1.8 percent gain in the same period for the S&P 500 index (SPX) of stocks that includes reinvested dividends.

Investor demand has helped allow corporate treasurers to pay less to tap debt markets. Barclays, based in London, issued the dollar-denominated contingent capital notes as it seeks to meet regulators’ demands to bolster capital. The bank sold 7.625 percent notes that yield 603.7 basis points more than similar- maturity Treasuries, Bloomberg data show.

Eaton Sale

Eaton issued $600 million of 0.95 percent, three-year debentures to yield 65 basis points more than similar-maturity Treasuries, $1 billion of 1.5 percent, five-year notes at a relative yield of 90 basis points, $1.6 billion of 2.75 percent, 10-year securities at 120 basis points, $700 million of 4 percent, 20-year debt at 130 and $1 billion of 4.15 percent, 30- year bonds at 145, according to data compiled by Bloomberg.

Other issuers today included General Electric Co. (GE)’s financing arm, which sold $1 billion of 1.6 percent, five-year notes, and Macy’s Inc., the department-store chain with $6.7 billion (M) of bonds outstanding, which issued $750 million of 2.875 percent securities maturing in 2023 and $250 million of 4.3 percent bonds due in 2043. Macy’s will use the debt to help fund a tender offer announced last month and may use it to refinance its $298 million of 5.875 percent notes due in January.

To contact the reporters on this story: Sarika Gangar in New York at sgangar@bloomberg.net; Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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