Bond Sales in U.S. Drop 46% to $22 Billion as Spreads Widen

Corporate bond sales in the U.S. dropped 46 percent this week, falling to the least in a month, as relative yields widened.

Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, and Wolfsburg, Germany-based Volkswagen AG (VOW) led offerings of $22 billion, down from $41 billion last week, according to data compiled by Bloomberg. Sales this week, which was shortened by the Veterans Day holiday on Nov. 11, were the least since $17.1 billion in the five days ended Oct. 18 and compare with a 2013 weekly average of $30.2 billion.

In the comparable week of 2012, $38 billion of bonds were sold, down from $48 billion of offerings in the prior period, Bloomberg data show.

The extra yield investors demand to own corporate bonds rather than government debentures rose to 210 basis points yesterday from 209 basis points on Nov. 8, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield index. Yields fell to 3.96 percent from 4.01 percent, and compare with a record low 3.35 percent on May 2.

Shell issued $4 billion of bonds in a four-part offering on Nov. 12 including $750 million of two-year floating-rate notes that pay 7 basis points more than the London interbank offered rate and $1 billion of three-year floaters that yield 21 basis points more than the benchmark, Bloomberg data show. The Hague-based company also sold $1 billion of 0.9 percent, three-year notes paying 32 basis points more than similar-maturity Treasuries and $1.25 billion of 2 percent, five-year bonds with a spread of 55 basis points.

Volkswagen Offering

Volkswagen, Europe’s largest automaker, raised $2.15 billion on Nov. 13 in its largest sale of dollar-denominated bonds in a year, Bloomberg data show. The company sold fixed-and floating-rate debt due from 2015 to 2018 in four parts, with the largest piece being $750 million of three-year, floating-rate securities that priced to yield 44 basis points more than Libor.

Sales of investment-grade debentures reached at least $16.1 billion, compared with $36.7 billion last week and a 2013 weekly average of $22.9 billion, Bloomberg data show. Offerings of speculative-grade bonds were $6.1 billion, compared with $4.2 billion last week and a 2013 weekly average of $7.3 billion.

High-risk, high-yield bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.

Issuers planning sales include U.S. Concrete Inc. with a $200 million offering of seven-year notes, Bloomberg data show.

To contact the reporter on this story: Sarika Gangar in New York at sgangar@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.