Glaxo Sells First Pound Bonds in Four Years as Carrefour Issues

GlaxoSmithKline Plc (GSK) sold its first bonds in pounds since 2008, joining French retailer Carrefour SA (CA) and AT&T Inc. in tapping credit markets as the cost to insure corporate debt from default fell to an 11-week low.

Companies raised about 3.7 billion euros ($4.8 billion) from bonds today, extending the busiest start to a December for issuance since 2008. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 17 basis points to 463, the lowest since Sept. 19.

Bond risk eased as German investor confidence rose more than economists estimated and as investors speculated progress is being made on U.S. talks to avert tax increases and spending cuts in January that could lead to a recession. Germany’s ZEW Center for European Economic Research said its index of investor confidence climbed to 6.9 from minus 15.7 in November.

“This is realistically the last week to get anything done before the year-end break,” said Juan Esteban Valencia, a strategist at Societe Generale SA in Paris. “If the U.S. budget talks break down we’ll see risk aversion rise, but I think most people are expecting the news to be positive sooner or later.”

Glaxo, the U.K.’s biggest drugmaker, sold 1.4 billion pounds ($2.3 billion) of bonds in two parts that will be used to fund maturing debt and for general corporate purposes, said Sarah Spencer, a spokeswoman for the company in London.

The pharmaceutical firm raised 600 million pounds from 15- year notes yielding 108 basis points more than benchmark government debt, and 800 million pounds from 33-year bonds at a spread of 103 basis points, data compiled by Bloomberg show.

‘Duration Junkies’

“I expect demand for the Glaxo deal will be well in excess of the total raised, given the recent interest in new issues,” said Daniel McKernan, head of European and U.K. credit at Scottish Widows Investment Partnership in Edinburgh. “The 15- year looks better value but the 33-year will appeal to the duration junkies.”

The yield premium on Glaxo’s existing 700 million pounds ($1.1 billion) of senior 6.375 percent bonds due March 2039 widened 12 basis points to 107, the biggest gap since July 7, data compiled by Bloomberg show.

Carrefour sold 1 billion euros of five-year bonds to fund maturing debt and to finance general corporate purposes, according to people familiar with the transaction.

The retailer’s 3.875 percent notes due 2021 fell 0.4 percent to 109.27 cents on the euro, pushing the yield premium to 165 basis points, the highest since Nov. 15, according to prices compiled by Bloomberg. An official at the Boulogne- Billancourt, France-based company declined to comment.

AT&T, ThyssenKrupp

AT&T Inc. (T), the largest U.S. telephone company, sold 1 billion euros of bonds due 2032 at a yield of 140 basis points more than the benchmark swap rate, according to data compiled by Bloomberg. It’s the Dallas-based company’s second bond sale in euros this year.

ThyssenKrupp AG (TKA)’s bonds led declines among junk-rated debt after Germany’s biggest steelmaker posted a second straight yearly loss. The company’s 4.375 percent bonds due 2017 were the biggest fallers in Bank of America Merrill Lynch’s Euro Non- Financial High-Yield Constrained Index, dropping one percent to 104.06 cents on the euro and pushing the yield to a two-month high of 3.4 percent.

Risk Falls

The Markit iTraxx Financial Index of credit-default swaps on senior debt issued by banks and insurers fell six basis points to 152. The financial subordinated index dropped eight basis points to 262.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined four basis points to 115.

A basis point on a credit-default swap protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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