Sales of corporate bonds in the U.S. dropped 57 percent this week and relative yields narrowed as foreign borrowers dominated dollar-denominated issuance.
Electricite de France SA, the world’s biggest atomic-power producer, issued $3 billion of hybrid securities while Mexico City-based Petroleos Mexicanos raised $2.1 billion of bonds, leading sales of at least $22 billion, according to data compiled by Bloomberg. Offerings fell from $51.1 billion last week and compare with $21 billion in the similar period in 2012.
Domestic issuers largely stayed on the sidelines this week with PNC Financial Services Group Inc. (PNC) serving as the largest U.S.-based issuer, raising $1.75 billion a week after it reported that its fourth-quarter profit rose 46 percent. Foreign borrowers accounted for about 60 percent of sales, increasing from 38 percent last week.
“We have seen more emerging markets names tapping bond issuance, and it’s been pretty well received,” Dorian Garay, a New York-based money manager for an investment-grade debt fund at ING Investment Management, said in a telephone interview. “Funding availability is there for emerging markets, and it has decent pick up over some other names in the same rating category.”
Yields reached a record low 3.516 percent Jan. 23 before increasing to 3.517 percent yesterday, according to Bank of America Merrill Lynch index data. Yields fell from 3.53 percent on Jan. 18, index data show.
The extra yield investors demand to own corporate bonds rather than government debentures narrowed to 216 basis points yesterday from 217 basis points on Jan. 18, the index data show. A basis point is 0.01 percentage point.
State-controlled power producer EDF issued 5.25 percent subordinated perpetual debt, callable in 10 years, Bloomberg data show. The Paris-based company also raised about 4 billion euros ($5.4 billion) in euro- and pound-denominated notes in its debut offering of securities that have characteristics of both debt and equity.
Sales of investment-grade debentures reached at least $13.5 billion, compared with $41.2 billion last week and an average this month of $34.1 billion, Bloomberg data show. Offerings of speculative-grade bonds reached at least $8.5 billion, compared with $9.8 billion last week and an average this month of $6.4 billion.
Pemex, as the state-owned company is known, sold 3.5 percent, 10-year bonds at a relative yield of 170 basis points, Bloomberg data show. The sale was its first dollar issue since October.
Companies planning sales include energy producer Questar Corp. (STR) with $150 million of debt, Bloomberg data show.
To contact the editor responsible for this story: Alan Goldstein at firstname.lastname@example.org