Offerings of corporate bonds in the U.S. fell 36 percent this week to about $36.5 billion as relative yields widened.
Glencore Xstrata Plc (GLEN), the largest publicly traded commodities supplier, raised $5 billion in a five-part offering and Luxembourg-based Intelsat SA (I) issued $2 billion of 10-year debt, according to data compiled by Bloomberg. Sales declined from last week’s $57.4 billion and compare with a 2013 weekly average of $34.5 billion.
While issuance fell following the busiest week since March 2012, offerings remain poised for a record May as companies race to lock in borrowing costs at about unprecedented lows. Sales have reached $156.7 billion this month, on pace to exceed the $162.6 billion issued in May 2008 and the most since $171 billion in January, Bloomberg data show.
The extra yield investors demand to own corporate bonds rather than government debentures increased to 204 basis points yesterday from 203 basis points on May 17, according to Bank of America Merrill Lynch index data. Spreads have risen after falling to 201 basis points on May 7, the lowest since October 2007.
As sales slowed before the Memorial Day public holiday in the U.S., yields increased to 3.51 percent from 3.46 percent on May 17, and compare with a record low 3.35 percent on May 2, index data show.
Glencore sold $1 billion of 1.7 percent, three-year notes through its Glencore Funding LLC unit to yield 130 basis points more than similar-maturity Treasuries, $1.5 billion of 2.5 percent debt due January 2019 at a 170 basis-point spread and $1.5 billion of 4.125 percent, 10-year securities at 210, Bloomberg data show.
The offering from the Baar, Switzerland-based company also included $500 million of three-year, floating-rate notes to yield 116 basis points more than the three-month London interbank offered rate and an equivalent portion of securities due January 2019 at 136 basis points more than Libor, the data show.
Yields on investment-grade debt rose to 2.83 percent yesterday from 2.79 percent on May 17, and compare with a record low 2.65 percent on May 2, according to the Bank of America Merrill Lynch U.S. Corporate index. Spreads were unchanged at 142 basis points. A basis point is 0.01 percentage point.
Intelsat, the commercial satellite operator, issued 5.5 percent debt due August 2023 to yield 364 basis points more than similar-maturity Treasuries, Bloomberg data show. It also sold $635 million of bonds due December 2022.
Yields on junk debt rose to 6.12 percent yesterday from 6.07 percent on May 17, and compare with a record low 5.98 percent on May 9, according to the Bank of America Merrill Lynch U.S. High Yield index. Spreads widened 5 basis points to 442 basis points.
High-risk, high-yield bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
To contact the editor responsible for this story Alan Goldstein at email@example.com;