HeidelbergCement AG (HEI) sold bonds in Europe as borrowing costs for junk-rated companies fell to the lowest in 4 1/2 months.
The third-largest cement maker issued 300 million euros ($410 million) of seven-year notes to yield 3.375 percent, according to data compiled by Bloomberg. The average yield investors demand to hold speculative-grade bonds fell 42 basis points this month to 4.4 percent, the lowest since May 28, Bloomberg bond index data show.
Demand for riskier assets is growing amid speculation the Federal Reserve will hold down borrowing costs to offset the impact of the U.S. government shutdown. The central bank will delay trimming its stimulus program until March after the 16-day stoppage cut fourth-quarter economic growth by 0.3 percentage point, according to a Bloomberg News survey of 40 economists last week.
“Investors are more comfortable in bonds generally and especially in high yield after the government shutdown caused U.S. growth to slow, delaying expectations for tapering,” said Martin Reeves, head of high yield at Legal & General Investment Management, which oversees about $2.45 billion of sub-investment-grade debt. “The fact that tapering isn’t expected to happen imminently is propelling yields lower.”
The average yield investors demand to hold speculative-grade bonds in euros instead of government debt fell 52 basis points this month to 441 basis points, the least since November 2007, Bank of America Merrill Lynch index data show.
The cost of insuring the securities against losses is holding near the lowest since January 2008, with the Markit iTraxx Crossover Index of credit-default swaps on 50 high-yield companies climbing 3 basis points to 346 basis points.
HeidelbergCement was marketing its first bonds in more than a year, according to data compiled by Bloomberg. Proceeds from the 3.25 percent bonds through its HeidelbergCement Finance Luxembourg SA unit will be used for general corporate purposes, according to the person, who asked not to be identified because they’re not authorized to speak about it.
“We had seen the market was receptive to high-yield issuers so we chose to issue now,” Group Treasurer Henner Boettcher said in a telephone interview. “This is a record-low coupon for the company. The bond was oversubscribed and it’s already trading well in the secondary market.”
The Heidelberg, Germany-based cement maker’s four-year bonds sold in March 2012 pay a coupon of 4 percent, Bloomberg data show. Moody’s Investors Service rates the company at Ba1, one level below investment grade.
Also in the new issue market today, UniCredit SpA (UCG), Italy’s biggest bank, is selling 1 billion euros of 12-year lower tier 2 subordinated notes in euros that can be bought back by the company after seven years, according to a person familiar with the matter. The notes will yield 410 basis points more than the mid-swap rate.
Unione di Banche Italiane SCPA, the fourth-largest Italian bank also known as UBI Banca, raised 750 million euros from notes due April 2017 yielding 195 basis points more than swaps.
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